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Can Fin Homes Ltd
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Ladies and gentlemen, good day, and welcome to Can Fin Homes Q4 FY '23 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nidhesh Jain from Investor Capital Services. Thank you, and over to you, sir.
Thank you, Aman. Good afternoon, everyone. Welcome to the Q4 FY '23 earnings call of Can Fin Homes Limited to discuss the financial performance of Can Fin Homes and to address your queries, we have with us Mr. Suresh Iyer, CEO; Mr. Amitabh Chatterjee, DMD; Mr. Apurav Agarwal, CFO; Ms. Shamila, Business Head of Can Fin Homes Limited. I would now like to hand over the call to Mr. Iyer for his opening comments. Over to you, sir.
Yes. Good afternoon, and thank you, Nidhesh, and thank you, everyone, for joining this call on the Q4 results of Can Fin. Just to give a brief highlight of the last -- the fourth Q4 performance and the results that were declared yesterday. So the company has had a good disbursement growth of 8% in terms of -- for the entire year and a portfolio growth of 18%. The net NPA has -- I mean the NPA has come down from 0.64% to 0.55% gross everything. And net NPAs also come the collections and recoveries front, the performance has been good.
We have been able to absolute is bring down the NPA. The provisions we have had taken a conservative view, and therefore, the provision coverage ratio has also improved over the last year, which I believe would be a very -- would give a good comfort to all the people. On the NIM front and the spread front, as you all know, the rates have been going up. And therefore, in the earlier quarters, we've had -- on the liability side, the entire interest going up because of the impact of the increase in rate, whereas on the asset side, we had great gradual increase, which is happening because of the reset at different points in time.
And the entire impact of this rate hike in the -- on the asset side has not yet experienced in the books. And in the coming 2 quarters also, we expect the impact of this rate hike because of the interest lease tenures. And therefore, the interest spread will slightly start improving going forward, which you would have seen has already happened in the Q4 as well because a sizable chunk of about INR 10,000 crores has witnessed the impact of a rate hike in this quarter. So that's about it in terms of the performance. The cost-to-income ratio is also down from 18.32% to 16.93%. And I'll leave it to the -- to all of you for open for questions. Thank you.
[Operator Instructions] The first question is from the line of Devansh Nigotia from SIMPL.
General asset liability statement you mentioned for the April to June, but there was a mismatch of I think INR 3,500 crores. Can you just elaborate on that?
Sorry, can you please repeat for a bit on the low side.
Can you hear me?
Yes, yes. It's better.
Yes. Sir, the asset liabilities statement that we share over 3 months, 6 months or there for April to June quarter, there were INR 3 crores, INR 1,500 crores in mismatches just wanted to gain clarity on that?
Yes. So we are carrying sanctioned and disbursed limits from the banks, which takes care of a short-term liquidity management.
And how much is the limit?
The limit is roughly around INR 4,600 crores right now.
So basically, the April to June bucket dispatch will be taken care of with these and draw on lines with the banks.
Yes.
And we were looking to raise capital. So any update on that? Are we still evaluating any thoughts of that you can share?
If the need arises, we will also -- as of now, there is -- I mean there is no immediate step for the raising of capital. As and when the need arises, we will be looking at it.
Okay. So 8x leverage is what we are comfortable with.
Yes, about 8x, I think even then with the rating agencies, I feel there is no issue with the gearing of about it. In fact, the gearing has slightly come down in the last 1 year, now it's 0.
And more salary the customer mix, we share the 50% is government romaine salary. So what prevents them for taking a bit towards banks because they can save 1.5% over there? So why -- what prevents them from going to the banks. If you can just share is there an entry barrier, which is how there is or is there something else?
No, there is as such -- I mean, you can see the fact that they have come to us is also because of the service and the dedicated team because we have a single product company, obviously, the 100% focus is on giving customer service. Second thing is, instead of -- we have a network where the branch manages themselves are directly dealing with the customer. So there's an association of the customer with our staff as well. And for -- actually for Open and all the actual impact on the EMI on an ongoing basis is not much. So the kind of service that we are getting and comfort of coming to us and having a loan sanction and a quick time and the local service that is available is what for that, they are ready to be a little bit of a premium, which converted into EMI terms doesn't become much. So if you can see the prepayment rates are not at all worrying. In fact, it's quite of a steady state business such worry under prepayment rates either.
Okay. And then just on limits, what is the interest rate on that? Sorry, a the onward limits that we have with the banks, what is the interest rate that we pay on.
So these are basically linked to certain benchmarks that would be like the idea at the time that we draw them. So basically, it would be decided on the time of disbursement to down.
So there is no -- in case you are asking us whether you have to pay any charges for holding on to these undisbursed portions No, there are no such charges. It's only a sanction limit, which will start where the metal will start once we draw upon.
I'm confused that if there will be repayments which will be -- I mean, the repayment that will happen will be more than the disbursements a little more than this April to June bucket for we are fulfilling with the banks what -- there is some interest that we'll be paying on that. So that is what my question is.
I'll just explain. So we have a monthly collection, which is approximately a little around INR 500 crores to INR 550 crores. So in the 1 quarter itself, we'll be collecting in terms of the EMI and in terms of whatever collections that come from the customers is the trend that we have observed, including the prepayments, customs to around INR 500 crores a month, which is INR 1,500 crores in the quarter. That, plus, if you look at the undrawn limits that we are having. So we are quite comfortable in terms of the liability or the thing which is coming due for payment... And one more thing that we are not taking into form that SRS statement that is as per norm, sir, we should not take the available CP limit, which is available to that anytime we can grow from a market and to meet our funds. That is not used for as per guidance, it is not used for taking as an inflow of for the computation of FLS statement. Correct.
The next question is from the line of Gaurav Kochar from Mirae Asset.
Congrats on the quarter. Sir, you've made a standard asset provisioning of INR 25 crores in this quarter. Can you explain the reason for creating this? Is this for strengthening the restructured provisions or in general, some tendering of Stage 2 provisions?
So it's not actually for anything. It's just that, as I mentioned at the beginning, itself that we are just strengthening and taking a conservative and strengthening a further improvement in the provision coverage ratio. And it's in the ECL model, whatever is there, that we have taken plus. So beyond that, there is a slight addition that has been carried for -- just to improve on a conservative basis, the PPT.
Okay. So what would be the total quantum of provisions that we are carrying on balance sheet as on 31st March?
312.
And what was it last quarter, if that number is handing.
Yes, 290.
290. All right, all right. And this would be across bucket, stage 1, 2 and 3, depending on the log. Understood. Understood. The second question is with respect to the yield, the jump in the yield, that 8.87% went to 9.8% during the quarter. And earlier in the call, you mentioned that there is some bit of repricing, which is still pending and which will happen over the next couple of quarters. So just wanted to understand in this context and also the cost of fund inching up to 7.5%, where should ideally the NIM settle in FY '24. This quarter, it was at 3.37%. So incrementally, given that spread has improved and spread will continue to improve, can we expect this to move towards 3.5, 3.6 mark over the next few quarters?
Yes. So just to explain in the last quarter, out of the entire book of about INR 30,000 crores, we had about approximately close to some INR 10,000 crores, which came for a reset and where the interest rate was high as at the time of the reset. That has what has helped us in improving the NIM and the yield on the book. Additional to that, in fact, the great impact on the new customers also, we have been charging at the higher rate post the rate hike. So the new customers have all been coming at a higher rate. So both these factors have resulted in the yield improving from 8.1 to 9.88% plus. That is point number one.
In terms of the second part of your question as to what is the quantum of the portfolio, which is yet to experience a rate hike, we still have about INR 18,000 crores, which is yet to receive part or full of the rate hike that has to be passed on. This will come over the next 2 quarters -- next 2 quarters. That is in the April to June quarter, another INR 5,500 crores of book is likely to come up for a little bit of price -- great hike. And in the quarter subsequent to that, that is in the July to September quarter, another about INR 7,500 crores plus is likely to come for a inset. So both these things are -- will help us in further improving the yield. And right now, it's about 3.4%. So yes, we can export around 3.5% or thereabouts are a little better also probably going forward.
The other side, you said about the rate of the cost of 7.51%. So almost the entire liability side, we have already experienced the rate hike on the liability side. So from going forward, unless there is some negative impact or something, the rate is remaining stable as they are as of the moment. Further increase on the cost side is not very likely.
All right. All right. So the yield repricing would continue in the next 2 quarters. Whereas on the cost side, a large part of it is already behind us. Is that a fair sort of statement?
Yes. Not a fair part. Yes, almost 50% of the rate hike on the asset side has been passed on. Another 50% is likely to come up. So around 3.5% kind of a NIM is something we can look at, which is 3.5 a few -- 5 bps improvement in the NIM can be expected.
Sure, sure. So mathematically, that number looks higher because if, let's say, half of your book is going to be repriced, let's say, even by 100 basis points, that would take the yields up by 50 to 75 basis points. And at the same time, on the cost side, if it is largely done or maybe another 15 -- 10, 15 basis point comes up. I think you're talking about 30 basis points of incremental margins over and above the 337 you reported. So mathematically, this looks like a 360, 370 kind of a number. But you're saying it will be more or less in the range of 3.5%.
Yes. So it's not our entire 100 bps kind of increase that we're looking at. So there are some -- because last year, we increased our cost -- our rates on 3 occasions. So part of the portfolio has already experienced the full 3 cycles completely or the 3 rate hikes has been parked down. In some 2 rates, rate revisions are yet to be passed on and in some only one is yet to be passed on. So that way, the -- on the entire remaining 50%, the entire 1% plus is not like you to pass on. There has been 2 parts. Some of it we'll experience about 85 bps. The others will experience about 35 bps. That's the kind of a breakup, yes.
Sure, sure. Perfect. And just lastly on EM growth, whilst the overall EM growth remained healthy at 18%, the disbursement was slightly soft, about 25-odd billion. So going forward, now that you've taken over next year, what would be the disbursement target, maybe, let's say, overall yearly disbursement target? And in that context, what kind of EM growth are we looking at from a medium term, maybe 2, 3 years?
See, as I again explained in the beginning, that the rate hike that has happened. I mean -- or other I've been -- I would like to say, the rate hike that has happened has slightly impacted the demand, as you would also have seen from the commentaries from other rating agencies as well as some banks that these rate hikes have impacted the EMI. And therefore, there is a rethink by some customers and resulting in slight impact on the demand. Even ICRA for that matter has represented about 13% kind of a growth on all.
Having said that, now with the rates being stable, we can look at some improvement in the demand. And so the supply side also are post the CLS being getting over. There was a slight shortage of reduction in the supply, which also should come back in the market. So once that happens, in the coming year, probably in the second half, definitely, we can expect the demand to be really picking up. So on a portfolio basis, we are confident that about 18% to 20% kind of growth in the loan book should be possible.
Okay. Okay. Sure. Great, sir. And just a related question to this. If I look at our average ticket size is around INR 25 lakhs, maybe at ticket sizes were slightly lower, maybe more affordable sort of a segment in growth. Is there a possibility of maybe the share of the lower ticket loans incrementally increasing on removing towards the 10, INR 15 lakh category or the share of 10, 15 lakh category increasing over the next 2, 3 years? Is there a possibility of that?
As of the moment, if you look at the branch network, there's a difference in the branch network that Guru was having and the branch network that here at Can Fin today here, we are having a maximum presence in the metro and urban towns. And the business is coming from the towns as well as from the periphery areas, whereas Guru had a very large portion of branches, which are in the deeper pockets. So obviously, the deeper pocket, the property costs themselves are a little on the lower side.
Whereas here, if you look at the urban towns and the metros, the property cost itself is on the higher side. Like you won't get a property even in the territory of Bangalore or a Pune or places like that at a cost of less than INR 35, INR 40 lakhs, okay? So that being the difference, if that mix has to change, then there has to be a much -- a deeper penetration will have to come, which will be from branch expansion. So that can't happen very quickly or overnight. So as of the moment, the focus will remain in this sweet spot, which is around INR 20 crore to INR 25 lakhs.
The next question is from the line of Ankush Agrawal from Surge Capital.
Firstly, so we saw now that you have joined sensing. So I wanted to know what will be your key priorities and focus here for next coming years, like in terms of, say, branch expansion or adding new product portfolios or in terms of what kind of contracts do you look at Can Fin in terms of spread names, if you can highlight that?
Okay. So in terms of the first part of the question regards expansion yes, in the last 3 years because of this coin, there was a pause in terms of the branch expansion, which we would be looking at. In terms of the presence geographically, we are having a very widespread presence across the country. So within those existing areas of operations, definitely, there are opportunities in large upcoming towns and big cities where we can look at. So we will be looking at it. But it is on a gradual basis, where we'll be looking over 10 to 15 branches a year. That will be something as on a very manageable basis that we can look at, and that's what we'll be looking at. In terms of the business mix, yes, there's a very healthy mix as of the moment of 70% of salaried and incrementally also and SENP of about 30%. It's a very comfortable mix as of the moment, which we would like to continue. And the focus will continue to be on growing the business in the retail segment.
Okay. And in terms of kind of ROA, ROE and leverage that you target?
So the ROA is right now inching up, and it's already 2.17, ROA. And so I think that's a very comfortable kind of ROA that we are looking at. The ROE is also now about 17. It just crossed 17. So I think in terms of this, it's a very healthy ROE, ROA.
Okay. And again, touching on the disbursement side. So you mentioned that for FY '20, you're confident on 15% to 20% growth on the book. But in terms of disbursement, how do you look at it?
I'm sorry, I didn't get your question here. From the disbursement side.
On the loan book, we have guided that you're confident on reaching to 20% growth for FY '24, right? But in terms of disbursement, do you believe that there would be disbursement growth to a company that on book for?
Yes. So about a 20% growth in the loan book will be able to help us achieve or maintain this 20% loan book growth as well.
No. But at the 20% disbursement growth, I believe the loan book growth will be much higher, right?
No, there are -- it won't be very high because you also have to look at the prepayments and the amortization that happens. So if you look at our 20% growth going forward, we are talking about somewhere in the range of about INR 10,000 something crore, INR 1,500-odd kind of crores. And from that, if you look at the prepayments and all, there would be prepayments and amortization happening. So net-net, about INR 600 crore, INR 7,000 crores is the growth that will happen in the book, which will be about 20%.
Next question is from the line of Dhaval from DSP.
Yes. Sir, just on the distribution side. So you highlighted that about 10 to 15 branches that you're looking to add. Just from a medium-term perspective, I think currently, the business is largely sourced from the DSA network. How do you see the sourcing mix and the branch expansion journey? I mean, would it change or why and a you'll just template -- I mean, move in the current template? Any thoughts around sourcing and distribution network?
Yes. So in terms of the present thing, the DSA channel is a very strong source for us for our sourcing channel for us, and that will continue. But yes, there is a lot of opportunities in tapping the existing customer base and getting business from our existing walk-in customers and doing some digital marketing as well. So we'll be exploring that. So that probably could slightly go increase the composition from the direct business also. But the DSA business will continue to constitute a sizable portion of our sourcing.
Understood. And in terms of geographic concentration, I mean, historically, Karnataka, Tamil Nadu used to be a big part over a period of time, while they're still significant today, the share has been coming down over the last few years. I mean just if you take a 3-year view, how do you think about geographic concentration and within that sort of opportunities in Tier 2, 3 year 3? I mean, any thoughts around that would be useful.
Yes. So our present composition of the book is that about close to 65% plus of the book is coming from the southern states and the remaining from the other rest of the country. So yes, going forward, obviously, as -- though the base is lower, the growth can still be on the higher side. But in terms of that, this can incur somewhere in the range of about 60, 40.
Okay. Okay. Got it. And just last couple of things. In terms of gaps, any gaps that you see either on the technology side or any other HR side or anything around any gaps that you believe that needs to be filled in the next 3-, 6-, 9-month period? Any thoughts around that?
As said, there is -- I mean, there is no major kind -- something to be worried about, actually. The normal thing is there, that would obviously be there. I don't see any kind of a challenge in a sense that the team is quite stable. The well experienced. The processes are very much in place. The audit and all these pillars are very much in place, compliance and regulation. So there are always aspects when you look at it. It's a very kind of robust machine which is already in place. So nothing in which I would say is an area of concern.
Got it. And last question is on the hiring of the CRO and the CFO, where are we in that.
It was already on board.
Okay. Great. And CRO.
We do have a gentleman who is presently looking at it. But yes, we will be looking at somebody going forward because we still have people retiring and senior people on board will be. So we'll be looking at something.
The next question is from the line of Rajiv from Yes Securities.
This is Rajiv here. Thanks for taking my question. Sir, the first question is on the BPL quantum in this quarter. What was it? And what was it in the last quarter? And also, if you can tell us what are the movement in stage 2 assets on a sequential basis.
So the BPL out per quarter is roughly INR 100 crores. In a quarter... Yes, in the quarter. Full quarter.
And upward of same number last quarter will be?
Probably, yes. We've not expat seen any change in terms of the BPL, the pressure coming for balance transfer -- what is the regular course of business that is happening. That is what we've been experiencing.
Correct. But what I see is that the absolute portfolio run down in the quarter is lower than the preceding quarter. What would explain that, sir? So we also had a CLSS claim that was received in the -- this quarter, about 30 some -- so total about INR 262 crores is INR 270 crores , 30 crore is the CLS that also was there during the year. So that is also one of the reasons why the -- this is on the higher side. And as you know, the CLSS credit that is received has to straight go to the principal. Okay. Sure. Sir, on cost of funds, you're expecting that the cost of funds may not increase significantly from here on. But I was looking at your marginal cost of funds for the quarter, it is 7.5% and your stock cost of funds is 6.3%. So if the marginal rate is so higher than the existing overall rate, and it has to go up materially.
Yes. So as I said, so on the yield also now we've seen about 8.99. And going forward, we have the 2 tranches totaling up to close about INR 18,000 crores, which is due for reset in the coming 2 quarters. But the incremental business is also happening with an average yield of about 8%, 9.8% plus. So that way, if you look at the math, it will continue to -- the spread will continue to be maintained at the present rate of 2.65%.
Okay. Just last question.
One more thing. This quarter we have raised LPD, the tune of INR 1,000 crores at a rate of 8.45% as a magnet equivalent. So I think that has led to a slight increase in margin cost of fund.
Okay. Okay. All right. And sir, what are your thoughts on tapping the assessed income segment. So while you spoke about the ticket size remaining where it is the composition of salaried and silent remaining where it is. But from a customer profile perspective, informal income, are we thinking on those lines? Or would we be thinking on those lines sometime in the future?
As of now, we are comfortable with the present 70, 30 kind of a mix. And I mean, right now, we look at it as we go forward. But as of the moment, we are quite comfortable with the 70, 30 mix.
Sure. My one question on Stage 2 assets. I was requiring those details.
Yes. So Stage 2 assets have not moved much. But the concern that you had earlier with 35 the region has been like moving into standard that has been partly explained by in the previous discussion just now that basically just after the profit that buffer has been like created -- that's it.
The next question is from the line of [ Onkar Ghugardare ] from Shree Investments.
Yes. Just wanted to know at the planning of the presentation, you have stated that the journey has just started, 35 years and counting, and it's just the beginning. I mean, why do you say like that. Just wanted to know.
Market. It's a very big market, and we are still a small player. So there is a huge scope for growth. And it's a very long run rate. Basically, that's what we look at is -- that's why very positive about this.
Yes. But in terms of the growth rates, if you talk about that, then you have been -- I mean, it has been average, right? I mean other players are growing at much faster rates and with kind of similar NPA?
What I'm trying to say is that it's not from the point of view of our growth or an immediate growth or in that kind of a sport in growth or anything. But from the point of view that as at 35 years also, we are young because we still have a long way to build the organization; and two, that we also have a long runway in terms of the housing market in India. So from that potential, we have from a INR 30,000 INR 31,000 crores, so about a lack of crores still something which is very much in the not so far away dream for us.
Yes. But as far as the addressable market is concerned, it is for each and every player in the housing rate? Housing finance company.
We also are very positive about. So we just shared. I mean, others also share the same view. That's about it. Yes.
And earlier, you used to give certain targets for next year for 2 years, so stop giving that any particular reason for that?
We just shared. So I think there was an earlier question as to what is the loan book growth. So we did mention about the loan book growth in the range of 18% to 20%. That's what we will do.
Correct. But earlier, there was some stated -- it was given in your presentation, you have just removed that. I was asking about that.
No, I mean there's nothing of that sort that. But I think this being the standard things we have been talking about, 18% to 20% is kind of what we have been saying for the last few years, and we continue to have the same. Maybe earlier presentation may have been there this presentation, I think is not there.
Yes. So I was talking about that.
The story will remain the same 18% to 20%. We are quite comfortable. It's a healthy growth rate. At the same time, it is a very manageable growth rate. So that's what we will look at.
Okay. And as far as the debt to equity was saying 8x leverage is comfortable -- you are comfortable with. I mean you just said it's 7.7%. I mean you said that whenever it is required, I mean, is there any particular level in your mind at certain this rate at this point, we will do it at certain gearing, we will do it.
See, as of the moment, looking at the growth trend, if you look at it, the internal accruals and the healthy profit ratio that we are having in the internet should also be able to give us a good amount of growth scope for growth. Plus, if you look at the requirement or the regulatory limit, it's 12x of the network we can borrow. So there is still a good runway that we are having. Correct. But you haven't gone beyond this like for many years now, right?
I think, sir, if you look at the -- maybe 2018, '19, that time, our debt equity was more, it was close to 10%. So from that, it has now been reduced to 8%. So it is comfortable for us and our bankers are quite comfortable at giving a separate at this leverage ratio. So in the near term, there is nothing in the offering you are seeing, right?
See, we have got enabling in AGM about raising of capital. If we find that growth opportunities there are good growth opportunities are there, then we may review our question. And if required, there is always a crore, we can pay the capital.
Okay. As far as the current situation is concerned, how is the situation you are...
I think maybe in coming 2 to 3 quarters, we do not feel any need as such. And with the profits which are being plowed back, we should be able to take through for the year also.
Okay. Just one question on the demand side. Any pressure you are seeing on the housing demand side?
As we said in the beginning, yes, because of the rate, there was a little bit of a slowdown, which we expect will change as the rates have now remaining flat and will hopefully start going down also. So that should also push the demand.
Okay. And as a personal opinion on the rate front going up, say, next 2, 3 years, how much reduction do you see? Your personal opening. Your personal opinion on the rate cut, which we would be expecting, say, next 2, 3 years, not your particular your opinion, not the company's opinion.
I mean, I can talk about wishful thinking, but I guess a qualified opinion can only be given by the RPI determine that. Otherwise, it can only be wishful thinking.
The next question is from the line of Pooja Ahuja from Monarch Networth.
Since you mentioned in this quarter, it's taken higher standard asset and increase the PCR. So for the next 2, 3 years, could you guide in terms of credit cost, what sort of numbers are we building in?
No, it's not because of that. We are expecting any higher credit costs that we have made this provision. As we said that we are quite comfortable with the -- and the collections and recovery position is quite comfortable. But it's just that testing of being on the conservative side and to improve the PCR ratio, we've actually had this additional provision. Otherwise, we are quite comfortable. So we don't expect to see any spike or any increase in the credit cost going forward also.
So is that 10 to 15 bps kind of a sustainable level for our kind of model?
Sorry?
10 to 15 bps, is that a sustainable level of credit cost we can expect?
Incremental credit cost result. I think credit cost should be over around maybe 5 bps or maybe plus 7bps.
Okay. Okay. Thank you for that. And secondly, on the borrowing mix, we've seen that the CP share has gone down. Just wanted your perspective. How do we see this mix going forward?
So CP is used as a core too. And as you experience with the markets, capital markets are not so favorable in the closing quarter of the year. So we analyze whatever is the best possible solution be from the bank side or from the capital markets. Accordingly, we choose the source of funding.
The next question is from the line of [ Jigar Jani ] from B&K Securities. Please go ahead.
A couple of questions. So I'm just looking at your slide on Slide #12. We have seen an increase in spread on a sequential basis, but our NIMs have impressed on a sequential basis. So any one-offs there in the NIM figure?
What was the last part of it? Is there any...
Any one-offs? Because we have seen net interest margin, your reported net interest margin dropped from 3.47% to 3.37 despite spreads increasing by 2.4 to 2.36 billion.
Yes. So there is just a timing difference in this quarter. But on a longer-term basis, if you look at the coming quarters, there is -- there will be a likely improvement or tendered and NIM. Because as I explained earlier, we are expecting the -- on the asset side, the rate was slightly adjusted in the -- as the impact of the reset happens.
Okay. And sir, can you just guide with the -- so when you say 7.5 is the cost in this slide, that is the cost for the entire quarter? Or is it the exit cost that you are giving us -- because there is another slide on Slide 16 where you are giving the quarter 4 cost to be slightly lower. So just wanted to reconcile which is the quarterly cost.
What happens is in this slide, we give the incremental cost of borrowing for the specific quarter. And the next slide, we give the total cost of funds.
Okay. Understood. And right now, what would be the incremental cost of borrowing? Would be similar?
It would be on the lower side than the last quarter because last quarter, we had to raise it as the regulations of the CB, which was on the higher side and the composition of the anti-reverse also on the higher side to comply with the regulations. This quarter, incremental cost of borrowing should be lesser than the last quarter.
Okay. Maybe any figure you could guide towards 10, 20, 50 bps, how much would it be lower?
It is difficult because right... I think it is generally first quarter that is percent generally doesn't happen as it happened in fourth quarter. It depends on the what will be our requirement of funds. At that point of time, we'll see what will be our incremental cost of borrowing for this quarter, maybe if CPs prevailing at low rate and come down. And our ALM supports raising of CP, we may raise CP also that will be at much lower rate than the line borrowing.
Understood. And sir, what was the outstanding restructured book and has some part of the restructured book started paying? And how has been the performance there in terms of connection efficiency and numbers missing bounce rates, if you could guide something?
Yes. So the total restructured book is around INR 695 crores. It has just, in fact, effective February started coming out of it. So it's actually too early to give a prediction or a kind of a listing as to how it will be here. So efforts we have already initiated and the customers are also -- will come back and start paying. So that's the kind of thing. It's not a very large book that is there. And we expect that it will -- the repayments also will start. I guess the next quarter will be a better time to really give you a picture. I will be in a position to give you a picture as to what is the trend of the repayment.
Sure, sure. And sir, last question is on the cost to income ratio. Any guidance in it over around the 16% to 17%?
We are already at a little tag below 17%. And we can expect it in the same range over 16% to 17% kind of a range than corporate.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Firstly, I just wanted to understand, has there been some change in the way we classify bank borrowings and net borrowings. The reason I asked is if I look at the funding mix of the borrowing mix that we give, correct me if I'm wrong but numbers for March '22 has been restated there some reclassification between banks and HPs. Just looking at your Q4 presentation of FY '22 and Q4 presentation of FY '23.
See, Abhijit from the year '21, '22 -- as per we have to raise NCDs to the 25% of the incremental borrowing -- in future, you can find that NCD finding a place of 25% in the borrowing mix in the coming future because an incremental borrowing, whatever we need to recall through the NCD. In that case, our bank borrowing may come down. That is one thing. That is what we envisage in the future. And our CPs have decreased because as told because we find that bank borrowings are cheaper than the CP borrowings. So if -- again, if you find that the bank borrowing a costly MCPs at a low cost, our CP may increase. So that is the major change which has happened and likely to happen.
Understood, sir. So sir, must the way you used to kind of classify basically in the way to report our borrowing mix has not really changed, right?
No. There is no change.
Got it. Sir, secondly, you did touch upon the demand outlook and the fact that most other many institutions have also acknowledged that there was some at least sentimental impact in demand on mortgages, people were maybe customers are delaying their purchases. But I mean, with -- I mean some expectations of stability in interest rates, you are expecting this demand to recover in the second half of this fiscal year. Is that the right way to kind of look at it?
You are right. So if the rates remain steady and or they come down, then the demand, I think, should start coming -- will be back in the market should see an improvement.
Okay. Sir, I mean that's the first thing when I asked, I mean basically, what I was trying to understand is doing an interest rate up cycle, the fact that as a franchise, we do annual reset on interest rates on a rolling basis. There are always merit in, I would say, customers sticking around with us. But now that interest rates are stabilizing and then there are expectations that whenever in the next 6 months, 9 months, whatever interest rates start coming down, the fact that their interest rates will be reset on an annual basis while banks will be very pronged in passing on any report cuts -- is there a risk that customers might want to move on or take balance transfers to other lending institutions. Or I mean, given that you've seen such cycles, what is it that you would typically do in a interest rate down cycle? How do you kind of retain those customers?
First of all, this kind of a 200 bps rate hike in a very short period is kind of unprecedented. Normally, any rate hike or reduction happens in a more gradual manner. And so therefore, this kind of a very high difference between the prevailing rates for new customers and existing customers is not usually there. So if the rates start going down in a gradual manner, the difference between the current and the existing rate for the customer and for the new customer would not be -- will not affect much and the reset will not be much of a problem. However, as regards what we normally do for those kind of things, we look at -- we have an internal rating system, and we look at the customer and based on the rating of the customer, which is on multiple parameters and get as it every year.
We will try to retain the customers who are really good, and we'll look at that. That is an option that we can always think of and look at -- to retain the best customer. But normally, as I said, it's normally not so much of an issue if it's a gradual kind of a reduction over a period of time.
Understood. So then just maybe adding on to that, Hypothetically speaking, given that there has been a very sharp -- I mean, I would say maybe 10, 11 months, very sharp increase of 20 to 50 basis points increase in report rates. And for whatever reasons, again, hypothetically speaking, if there is, let's say, a 50 basis point kind of a rate cut anytime this fiscal year. So I mean, what you're suggesting is while we will continue to have annual resets, just like we have contractually. But there is still that room to retain that customer who kind of comes to us and say that, listen, I'm getting 50 bps, 75 bps lower from another bank. So that flexibility still remains with us is what I understand, right?
Flexibility is there. But as I earlier also said that a small difference in the rate does not make -- would not be too very difficult to convince because in terms of the customer, is to be iterative in the EMI that matters. And the EMI generally doesn't change. The EMI remaining constant, the general impact has given in the balance tenure. So customers generally don't react so much to these kind of things. And the floating interest rate or variable rate thing has been prevalent for more than close to 20 years now. So the customers are also aware of how it operates.
Okay. And sir, last question from my side. I mean you have already kind of suggested that we have increased the provisioning cover on standard loans considerate. So that point is well received. But 2 things that I wanted to understand here, I mean, given that more often than not, when we don't take basically provisions during a particular quarter, we kind of defended by seeing that recent or of this moves in line with the LGDs, PDs? -- and what is the requirement of ECL. And then obviously, I mean, there are quarters where we conservatively take provisions to shore up the provisioning coverage ratio. Basically, are we now kind of comfortable that this kind of provision cover or new thing that there could be quarters going forward where you could see that, I mean, conservatively we might choose to build on to that provisioning cover.
You mean to say, would there be a position of adding to this kind of cover or you are seeing would there be a withdrawal I mean just seeking clarity.
Yes, sir, this clarifies fine. What I mean is, I mean, going forward, will there still be a case of, I mean, adding on to this provisioning to further increase the provisioning cover.
Yes. We would definitely like to have a strong -- definitely adds to the strength of the balance sheet. So a little provisioning would definitely be something we would look at, at opportune times.
Great, I think this is very useful and so congratulations on assuming the role of the CEO at Can Fin.
[Operator Instructions] Our next question is from the line of Pavan Kumar from Ratnatraya Capital.
Sir, can you give us the recovery numbers for this quarter and last quarter? And secondly, in the Stage 2 portion of book on portion where we were not being paid any EMI? So what is the size of that push.
Sorry. What is the...
Industry -- what is the size of that portion right now?
So as I said... Motion of the book... Yes. The restructured book about INR 695 crores, in fact, has just started coming out a bit effective mostly from February. So the major trunk of it is yet to come out of the restructuring. So it's too early a time to actually talk about or give you a picture on the performance of the restructured accounts. Probably, as I said earlier, next quarter would be -- would be a time when we would be able to give you a clearer picture on how the accounts are moving.
Okay. But can you give us roughly how -- what percentage of these accounts would be paying right now? Any amount?
So we have almost -- in terms of the collection, the thing about 78% of the customers have already paid and are regular. I mean our -- has started servicing the payment. Those who have come out of it, which is actually is a very small number.
Okay. Okay. And what would be the recoveries number for this quarter and last quarter for the year, if you could share.
You mean roll forward and roll back?
Yes.
Okay. So... I'll just say quarter-wise, we have the figures, but as just to give you for the year, just to give us a minute or probably we could share it with you. We have about INR 53 crores has been the roll forward and -- about INR 48 crores is the rollback during the current year.
Okay. INR 48 crores rollback.
Just to clarify, in -- see, we have recovered around INR 16 crores of NPA and repaid to the tune of INR 8.62 crores. And this is for Q4. That is in Q4.
This is in Q4. And 53 and 48 was first the entire year.
Just total. I think you will have to give the total, give it to you. So in fact, our recoveries are more than the package.
Okay. Okay. And what would be your pool of recovery, sir? Because I'm assuming the recoveries being slippages will broaden normal condition, right? Or is it.
Normal condition. And see, whatever NPA is there, we have identified around close to INR 70 crores of NPA, which we are targeting to recover depending upon the availability of purchasers of the properties. So these we are targeting. Let us see what happens because these -- I think these are the targeted numbers for it.
Okay. Okay. Okay. And going forward, as one as an earlier participant also asked, is there going to be -- is the provisioning going to be bulky in Q4 as the case right now? Or would it be spread evenly over here on?
We will definitely be maintaining this kind of PCR ratio. And let's see, we will -- whatever is required. If you have a good opportunity comes around, we would also like to add to this.
[Operator Instructions] The next question is from the line of Shreepal Doshi from Equirus.
My question a little bit more on the superannuation of our senior management team because my understanding is that a large number of employees will be from the mining over the next 3 years. So is that a fair understanding of what is..
Your voice is breaking. Please use the Hanscom network area. It is still breaking, sir.
Better now?
Yes, slightly better now.
So my question was with respect to the superannuation of employees who've been part of the organization for quite some time. So what is the thought process to fill in that senior management positions over the next 2 years? And what... Yes. Yes.
So we have a very stable team, not only at the top, but across the brands, various brands. So we have a lot of people even in the second level and a good amount of succession planning that is happening, where we have enough people who can be groomed and can be brought up to the level as and when there are vacancies in the senior teams. So that is not an issue because across the banks, we have enough number of people who have been stable for a long time with the organization.
Okay. So but, so we will be open to the hiring from the open market as well? Or the thought process would be to groom an upscale.
If at all, there is opening and we are -- we require from outside, we will be open to it.
The next question is from the line of Nilesh Jethani from BOI Mutual Fund.
Most of my questions have been answered. Am I audible now?
Yes, Please go ahead.
Yes. I had one question. Historically, pre-COVID our spread when we compare to the banks, et cetera, was typically 1.5% with regards to interest rates, what we charge. And during COVID, we brought it down to 0.75%, the spread between what we as Can Fin charge and what banks typically charge. But now with most of the power, et cetera, behind us and state of economy is largely coming back to normalcy, I just wanted to understand what outlook do we carry with regards to charging clients on interest rates versus what banks are charging today? Thank you.
See, we will be operating in a very competitive scenario wherever it is possible. But at the same time, maintaining a healthy spread and NIM. So a 2.5% kind of a spread and a 3.5% kind of a NIM is something we will be looking at. And within that bid, we will be kind of pricing our loans. That's how it will operate.
Okay. Got it. And to achieve that number, how far are we with regards to incremental yield that we can charge the clients?
So right now, we are almost about anywhere between 50 to 100 bps compared to the market a little on the higher sand compared to the best in the market. And -- but looking to our kind of segment that we are operating in considering the kind of service and everything that we are able to offer, we can -- we are able to manage this kind of a difference in interest rate.
The next question is from the line of Gaurav Jani from Prabhudas Lilladher.
Congrats on a good quarter. Just a few questions. One is can you quantify the total investment income for the Can Fin.
So the total investment income for the year is INR 109 crores.
Understood. And will you right now be at an ICR of 60%?
Much more than that, sir.
Can you quantify that, please?
So we are in the range about 100%. So the requirement is for 60, but we are maintaining close to 100% on an average.
So the point is no further drive basically on the margin because...
No, no. You're talking about the increase from 60 to 70 thing, which is... Correct We are already in a very comfortable position. So we will not be required to add to this portfolio to -- going forward.
Understood. Secondly, sir, the tax rate for the quarter was lower while you have created contingent provisions. So probably there weren't also any write-offs -- so why is the tax rate low.
So the tax rate is based on certain assumptions. And at each year-end, we analyze the actual amount of reduction of exemption that we are eligible to. So that's been audited in the last quarter of the year. And also, we are able to generate the exact amount of provisions that we can have taken an ounce from the income tax. Accordingly, in the current quarter, the exact income tax competition could be arrived at. And accordingly, a little provision was restated actualized to the overall number. If you look at it, our close to 90% plus of the book is purely housing long-term housing. So in fact, on the entire book, practically, you can say we are getting the benefit of 2618. So the 20% of the -- if you look at the corporate tax rate of 25%, effectively, the tax rate should be 20%, considering that almost 100% of our book is eligible for the 360 benefit of long-term housing. So that's the calculation which determines the actual tax rate.
Sure. But I mean, sustainably, we would look at 25%, 26%, I mean that's a fair number to... Sustainable basis, 25, 26 should be looked at, right, as the tax side?
As I said, looking to the 618 benefit is almost our entire book is eligible for long-term housing benefit of 3618. So going back that, considering the 25% taxes, our actual tax -- effective tax rate should be lower. So you can say somewhere in the about 22% or something can be looked at.
So because historically, sir, it was a bit higher. So I just want to reconfirm on that.
No, no, you're right. So the strategic benefit is something which comes at a very large state. So we have just computed it, and that has been what we have taken closer to the actual based on our experience.
Understood. Understood. Just a clarification, sir. Furthering your point on the provision is, I mean, from here on, just to reconfirm, you would like to maintain our sort of 3% right from here on?
We would like to maintain a healthy PCR. That's why we have also increased it from the previous 54% to 62%. So we are kind of strengthening the balance sheet.
Understood. Last question is just a data picture one. If you could just quantify the focus slippages and the recoveries upgrades for the full year?
So as I said, overall, the NPA has... Rolled back is INR 54 crores or INR 52 crores. Yes. Roll forward is INR 52, and it is INR 54, not 48 as it -- so roll forward INR 52 crores during the year and rolled back or the ones which came out of NPA because of full recovery from those accounts and regularization of the accounts is about INR 54 crores.
The next question is from the line of Darshan Shah from Multi-Act.
Thanks for the opportunity. I just have 2 questions. One is, is there any exceptional item or a one-off in fees and commission income for the quarter? And what is the -- what would be the collection efficiency of the restructured book in the month of March and April?
Sorry, what was the second part of the question?
Collection efficiency in the restructured book in the month of March and April?
Yes. So the first point, to answer your first part of the question about any charges. So if you recollect, we had this it period where we were not leaving a lot of charges, which as per the Supreme Court ruling. We were not laying a lot of charges, which were regular as per the fees and charge structure of the company. So now that the court is beyond us, we have those kind of targets which are there have been -- are being levered to the customer like whatever for delayed payment and things like that. And so that is one of the reasons. And as for the second portion, as to this, I still say it is too early to predict the kind of a recovery ratio or collection efficiency from the restructured book because a very small component has come out of restructuring. However, on whatever it is there, about 78% is a portfolio which is now servicing. The small portfolio that has come out of restructuring.
So what's the proportion of the portfolio which is still not out of moratorium?
So we still have about 75% is yet to come out. And whatever come has come out only in February and March, mostly in March.
Okay. So by when will the 75% come out of the morat?
So this entire INR 695 crores will be out of restructuring by November 23 -- end of November 23.
Okay. And so this -- on the fees and commission income. So is this a new normal now in terms of the quarterly run rate or...
Annually, you can say this will be the kind of a new norm, this kind of a piece.
The next question is from the line of [ Jaskirat ] from IIFL.
Hello, Hi. I'm I audible?
Yes. Yes, go ahead.
Yes. Congratulations for the question of numbers. So one of my questions has already been answered about expansion of branches. So my next question is that how much time does it take for you guys if you open a branch in the new city -- and how much time does the branch gets to breakeven point.
See, there are 3 parts to it. One is we already have satellite centers where we have an experienced crab. We already have a customer base. And once we upgrade these stuff, there will be almost minimal or mill breakeven time because these -- we already have a customer base which is servicing. 2, if it is on the geographies where we are already operating and near to the existing centers from where we are operating, again, it will again be a very short period of about 1.5 years. And if it is absolutely new geography, then in that case, it would probably cost about 2 years.
And in the coming 1 or 2 years, what will be your trajectory of the geographical expansion? Like will it be more focused on the north or it will continue towards the south area only?
No, it will be balanced because right now, also, we have about 65% of the book in the South, but we still have a good penetration and presence in the other rest of the country as well. So it will all be almost mix, you can say. But overall, in terms of the overall book, as I mentioned earlier, we would like to move from a 65% plus to -- which is in the south to close to 60% in the South and 40% in the near future is what we are targeting. 60% to 40%.
The next question is from the line of Sanket from DAM Capital.
Just one thing on credit cost, you told earlier that it would be 5 to 7 bps going ahead. Is that right? Was it an annual guidance or quarterly month.
See, going forward, it's not that it's a new normal. But as of now, that's the kind of total credit cost that is being experienced. And I guess that should be max about 10 bps is what we can look at.
For the full year, right? Okay. That was the only question.
The next question is from the line of Palak Shah from Prabhudas Lilladher. [Operator Instructions] We will move to the next question. That is from the line of Nischint Chawathe from Kotak.
Of your total borrowings, I think around 54-odd-percent are linked are bank loans. Are these loans linked to MCLR or are they need to excel benchmark rates?
So it's a mix of all. So broadly, if I say 23% -- 43% of our bank borrowing is trained to repo. And like other rates like some especially are trade to the banks. So broadly, like half of it is linked to repo and other.
Sure. Got it. And on the asset side, I believe your weighted average yield has kind of gone up almost 50, 55 basis points over the last 4 quarters. Is that the rate hike that you have passed on to your customers? Or have you kind of fine rates higher?
So there has been a rate hike in 3 branches, which we did last year, which of which about INR 10,000 crores of the book, which is about 1/3 of the book has already experienced the entire 3 rate hikes. And then the remaining portfolio of about INR 18,000 crores is yet to experience either 2 or 1 rate hike depending on the time when the recent loss happens. So that is one part of it. And second, the yield has also gone up because the incremental book, that is the entire incremental lending that has happened has also happened at a higher rate of interest. Today, the incremental yield in the last quarter is around 9.8. So that's the kind of -- these are the 2 reasons why the unit has gone up.
Okay. And in terms of resets, your book is reset like 1 in 6 months? Or how is the growth?
It's annual.
Okay. So the book is -- in the rates to your customers are reset once in a year?
Once a year, yes.
And if you could put a number in terms of over the last 4 quarters, cumulatively, how much have you raised for your customers? How much have we -- how much... Yes, for the existing partner?
We've reached 135 bps in 3 branches of 50, 50 and another last is 35%. So the INR 12,000 crores, which has experienced a full 135 bps rate hike, then there is a sunk which has experienced one of it already because they were booked after the -- or they have already come for recent post the first they are yet to happen for 2 branches and then comp which is let to experience the third time.
And the third branch was done in the third quarter... Fourth quarter.
Third branch was done in the third quarter. You're right in November.
Next question is from the line of Amit Ganatra from Invesco AMC.
Sir. I joined the call late, so I don't know whether this question was asked, but I heard you talking about 18% to 20% kind of loan growth. Now if your disbursement growth this year is only 8% and sanction growth is only 5% for the full year. Don't you think you need at least 14%, 15% kind of a disbursement growth on a sustainable basis to achieve this 18%, 20% kind of loan growth.
Yes. So we did mention that we will be looking around close to 20% growth in the disbursement to achieve or maintain this 18% to 20% loan book. So currently, we have done close to INR 9,000 crores disbursement. So with a 20% growth, we'll be somewhere around INR 10,800 crores. And then considering the repayment amortization and prepayments and BT-out, the net growth would be around INR 600 crores INR 7,000 crores, which would become a 20% growth in the loan book. So it will require about 20% growth in the disbursements.
And this 20% growth that you are talking about, will it be more consistent across quarters or it will be back ended? So normally, the industry is talking about works in the 45% to 55% or 40% to 60% but close to 45% in the first half and 55% business in the second half. That's how it normally operates. Okay. And have you done any specific changes to the way you do business to achieve this kind of a growth? Because I mean 20% is quite high as compared to what you achieved this year, right?
Yes, considering what has happened in the current year, yes. But as I mentioned earlier, the rates are stable and it's the rates are coming down even better. Then there is the demand also which is there because there's quite a bit of latent demand, but because of the supply light reduction in supply post closure of the CLSS and this rate hike, there is a kind of a postponement of decision by the customer. So I guess that should kind of change once the rates stabilize.
The next question is from the line of Dhaval from DSP. We'll move to the next question, that is from the line of Ankush Agrawal from Surge Capital.
So can you highlight the incremental astounds or difference over boring banks, NHB, CP and NGs.
It's like a cumulative day, it has increased by 97 bps. But exact quantum, like painting...
No, I'm not saying by nature of bonding the contra, but the incremental cost of funds, the bank is like 7% end CPs at 5% incremental cost of funds for defense.
Yes, on the NHP book, we can say that as of the moment, they are growing somewhere in the range of -- because we also have a sizable chunk of funds coming from the affordable -- the low-cost housing kind of a project -- refinance them. So that's somewhere around about 6% kind of range. And CPs, of course, will vary depending on the timing and everything that we look at it. NPD last, we borrowed was at a higher cost. But again, that will all depend on the rates in the market because these are all market even. And if the rates are coming down, even the most of the -- as we just responded about 3% or close to half of it is linked to repo. So that should also start coming down.
Okay. But in terms of the year, so say source would be NHP I'm assuming right from that end.
Energy, yes. And it is very -- it's quite low cost for us to...
So after that, it will be banks and then on the higher end, it would be NCDs, right? Sorry? After NHB, the cheapest cost of fund second cheapest cost of fund would be, say, a bank borrowing and the last highest cost of borrowing those should be NCDs in a normal scenario? Giving aside the CPs, which are obviously short term in nature around the long-term front, you are right, NHB followed by banks and then NPDs. Right. So now with this rule of incremental borrowings for 25% should come from NCDs, so that would structurally increase the cost of funds for us, right? Because now we are at about 17%, 18% share from NCC, which would eventually 25%?
Correct. That's what we said that, that was the reason why in Q4 also, our incremental cost was slightly on the higher side because we did raise at a higher rate, which was a regulatory requirement. 25% of the long-term borrowing has to be some market sourcing.
So this would be applicable across the industry for all housing financial simulation? Large corporate costs -- so this requirement is specific to the large corporate borrowers as per CB. So those who have got listed securities are having a net capital of more than INR 100 crores, there a requirement of the eligibility or agility, which is quantified as a large corporate borrower for which this regulation apply.
Okay. But that was good, thanks.
We take the next question from the line of [ Sneha Ganatra from Sky Union ].
Is there talk going on with the rating agency.
As in they should now any time come for an annual review that it otherwise nothing -- any particular reason you're asking this question?
I mean. I would cope for the rating upgrade. That is the only question I wanted to ask.
Yes. Obviously, we will be pushing them to look at the fresh financials. But any such thing will -- they will obviously would require the fresh financials. Otherwise, they will not be able to look at it. So now that we have the annual results ready, we will be definitely talking with them. And anyway, at this time that they will also be approaching us for the review.
Next question is from the line of Ritika from Ocean Dial.
Just on that 25% incremental borrowing on the a-long-term basis, which we have to do as per regulation, where does it settle out as a percentage of the overall liability?
Right now, if I say, the total NCD stands at roughly 17% of the total borrowing as of now March. No, no. I think... See, whatever is the incremental borrowing, we have to raise -- of incremental borrowing, 25% has to be raised through NCDs. So right now, whatever the old bank borrowings, they are slowly replaced by the LCD. So it will finally second at 25%.
So the stock should also eventually should be 25% is just a clarification I wanted.
Yes, close to 25% because we have a very small component of short-term borrowings...
Right. And sir, obviously, there was this regulation that obviously -- I'm sorry, obviously, I think we obviously have also been hearing the serviceman we obviously being a little more stricter on this because I think this particular norm was not being -- was there, but not being met. So what are the penalties there if one does not meet this? And when is like that you necessarily have to meet this by now?
No. Generally, we have to raise in the same year. Further, it can be extended to next year at least. But what we are doing, we are doing the same year.
And sir, by when do -- so obviously, this 25, it has to be reached only like is mathematically. It's not that it is over the next 2 to 3 years, you necessarily have to be 25%. So I was trying to just understand that.
Whatever borrowing we raised now very slight change, whatever borrowing we raise this year, long-term borrowing, incremental long-term borrowing, 25% has to be raised through NCD. It can be extended to next 2 years. That is 1 plus 2.
Understood, sir.
And this is only talking about the incremental borrowings. So if you have the borrowings prior to the implement or prior to this particular circular coming, those borrowings will not apply. So only when this come for repricing or when we have to replace them with fresh borrowings, then on that component, we'll have to maintain 25%.
Sir, could you please repeat that, please? So prior to the circular coming in place, whatever were the borrowings, which are still continuing, they will not obviously come for renewals for replacement. So this is only for the incremental and not the stock is what you're taking.
So if our book is INR 30,000 crores, entire, doesn't come for a repricing or a part of it will come this year on that 25% will have to be there. So over a period, all the entire borrow book will come for repayment and replacement. At that time, this particular norm will have to be implemented. So this could run over the next 3 to 5 or 7 years also because there are long-term borrowings from NHB refinance and everything, which we are already there, which are long term in nature of up to 7 years.
And also, just to add, because we have been very conservative for the statutory compliances. So on those and now the product like within a block of 3 years to be managed. But as a conservative net thing, we have been doing it year-on-year. We have not been able, like taking it to the next year also, although it is available to us.
Yes. So that's why I asked because it's the -- I mean I don't know how to put it, but if because it's a fixed rate and currently the rate cycle where we were, if we could have postponed it next year, I think that's the kind of question I wanted to understand that if choice, was it allowed to be push next year assuming that maybe rates might have been a little better. So I understand you're saying you're being conservative and you want to comply the very same year.
So next year is uncertain. So why -- what do we think that if it is supporting our -- what margin we foresee, then we will, so that's why we have raised to. And secondly is NCDs also if you look at it, what we've been raising our tenure of about 39 months. So because of that impact, even if that happens, it will be over a period of the next 3 or 3 years it will come for fresh replacement. At that time, the rates are coming down, they can always be replaced at that time. So it's not a very long-term kind of NCD that we are raising.
Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Suresh Iyer, MD and CEO, for closing comments. Thank you, and over to you, sir.
Yes. Thank you, everyone. It was a great pleasure interacting with all of you and I appreciate that you've all taken so much time to discuss the results with us. We are open to any discussion. Thank you so much. Thank you for joining us today.
Thank you very much. Ladies and gentlemen, on behalf of Investec Capital Services, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
Thank you.