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Home First Finance Company India Ltd
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Ladies and gentlemen, good day, and welcome to the Home First Finance Company India Limited Q2 and H1 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Manish Kayal, Investor Relations Head. Thank you, and over to you, sir.
Thank you, Mike. Good morning, everyone. I hope that all of you and your families are safe and healthy. I am Manish Kayal and I look after Investor Relations for Home First Finance. I extend a very warm welcome to all the participants on our quarter 2, FY '23 financial results con call.
As usual, management has represented by our MD and CEO, Mr. Manoj Viswanathan; and CFO, Ms. Nutan Gaba Patwari. I hope everybody had an opportunity to go through our investor deck and press release uploaded on exchanges and our website yesterday. We will start this call with an opening remark by Manoj and then Nutan, and then we will have a Q&A session.
With this introduction, I hand over the call to Manoj. Over to you, Manoj.
Thank you, Manish. Good afternoon, everyone. I am pleased to showcase the strong business momentum that we're seeing in our business. Talking about quarter 2 financial performance, the momentum is continuing on disbursals. We disbursed INR 702 crores in quarter 2, which is our highest till date, with a growth of 6.2% on quarter-on-quarter basis and 36.3% on a year-on-year basis. AUM is at INR 6,275 crores. It grew by 7.6% on QoQ and 35.9% on a year-on-year basis.
Portfolio health has improved further. 1+ DPD reduced to 4.7% from 5%, and 30+ DPD has reduced to 3.3% from 3.5%. GNPA has reduced to 1.9% from 2.1%. Profit after tax at INR 54 crores, so a growth of 25.9% on a year-on-year basis. ROE has improved by 30 basis points to 13.1% over quarter 1 FY '22.
We will now focus on some of the key drivers and metrics of the business. Technology; during this quarter, digital adoption has further improved. Usage of the customer app for various activities has increased. 87% of our customers are registered on our app as of September, compared to 84% in June. And unique user logins have also seen an increase to 57% from 54% in the last quarter.
New enhanced lead management system has been deployed to drive efficient lead flows from various origination channels. We have a digital approach for all our customer services, Connector engagement and loan management with employees. We continue to be at the forefront of technology usage in the industry and adoption of tech tools to enhance the customer experience and improve our operating efficiency.
Coming to distribution; we now have 101 physical branches taking the total touchpoints to 249. We continue to focus our expansion in the states of Gujarat, Maharashtra, AP, Telangana, Karnataka and Tamil Nadu. We are very market share focused. Currently, our origination market share ranges between 1% to 3% across various states. Our intention is to take this to 5% along with the expansion.
So our growth will come from a mix of increasing distribution and increasing market share. We will remain branch-light and will continue to service markets through a combination of physical and digital presence. Physical branches will reach about 150 in 2 years. Over the medium-term, growth will mainly come from 6 core states; Gujarat, Maharashtra, Tamil Nadu, Andhra Pradesh, Telangana and Karnataka.
Competition; housing finance in general and affordable housing in particular have gained reputation as secure and profitable business segment. Multiple banks and HFCs are present in different segments and niches of the industry. We have built our presence in urbanized market with heavy competition, and hence we are accustomed to intense competition. Also, affordable housing finance is a business that requires nuanced understanding of markets and properties.
And, in addition, the customers in this segment need constant handholding, in order to build up a strong portfolio. Our deep understanding of this segment and expertise in collections developed over the last 12 years, combined with our focus on transparency, technology and speed of service to our customers, will enable us to expand our competitive edge.
Coming to yields and cost of borrowing and spreads, the increase in lending rates over higher ticket formal customers has an indirect impact on affordable segment as well. The increase in headline rates makes affordable housing customers less sensitive to the rates they have to pay, and reduces the negotiations with customers at the time of origination.
Spreads continue at 5.8% due to slow transmission of increasing interest rates. As rates rise, spreads will move towards 5.25%. We have repriced the back book by 25 basis points effective July 22. On borrowing, we continue to focus on diversifying our funding sources with a competitive cost of borrowing.
Coming to asset quality, the bounce rates during the quarter have inched up a bit. As per our understanding, there are 2 reasons for this increase. One is increase in preference of customers for UPI-based payments, which translates to customers bouncing the NACH payment and then paying through UPI immediately within 2 to 3 days bouncing. If we take this into account, the numbers come back to the original figures that we have been reporting. Slight increase in overall industry bounce rates in August and September. As per NPCI data, industry bounce rates have also increased from 29.1% in July to 29.5% in August and 29.3% in September.
However, there is improvement across all buckets. In quarter 2, 1+ DPD has improved further. 1+ DPD reduced from 4.7% from 5% and 30+ DPD has reduced to 3.3% from 3.5%. Our Gross Stage 3 GNPA as per RBI circular dated 12th November 2021 has reduced to 1.9% from 2.1%. This includes INR 442 million, which is currently in buckets which are less than 90 DPD, but included in NPA due to asset classification norms as per RBI notification, dated last November. Adjusted for this, the number stands at 1.1% in September and this is down from 1.2% in June, which is an improvement of 10 basis points.
With this, I would like to hand over the call to Nutan to take you through the financials. Nutan, over to you.
Good morning, all. I will take you through the performance in Q2 FY '23. Starting with financials, we continue to stay focused on our key operating metrics, with an intention to deliver mid-teen ROE in a couple of years. Our net interest margin stable at 6.5%, even in the increasing rate interest (sic) [ interest rate ] environment. Spreads have stayed flat as we've increased our [ NIMs ] effective 1st July by 25 basis points and book cost of borrowing increase has been on similar lines.
Net interest income has gone up by 51% on a YoY basis and 9.8% a Q-on-Q basis. We did direct assignment of INR 69 crores during the quarter as a liquidity strategy. We continue to have a robust demand for our portfolio of assets.
OpEx to assets stands at 3.1% for the quarter. As guided, we expect this ratio to remain in the range of 3% to 3.2% going ahead, as we focus on expansion. Cost to income at 37.4% in Q2 FY '23, about 160 basis point increase on a Q-on-Q basis. Q2 FY '23 PPOP stands at INR 74 crores, a growth of 6% on-Q-on-Q and 24.3% on a YoY basis. Credit cost at 0.3% is within our expected range. Our ECL provision stands at 1% of the total principal outstanding. We continue to be conservative of the [ debt ] provisions. Total provision coverage ratio stands at 50.8%. Prior to NPA reclassification, as per RBI circular, PCR stands at 91% versus 81% in Q1 FY '23. Adjusted PAT is at INR 54 crores, which grew by 5.9% on a QoQ basis and 25.9% on YoY basis.
Moving to liquidity and borrowings, the company continues to have diversified and cost effective long-term financing sources. During the quarter, we included Karnataka Bank and Yes Bank as our new banking partners and we continue to work towards further diversification. We have a healthy borrowing mix with 52% of our borrowings from Banks, public sector Banks at 20%, Private sector Bank at 32%, 21% from NHP refinance and 21% from Direct Assignment. We continue to have zero borrowing through Commercial paper. Our cost of borrowing is competitive at 7.1%, increase of 20 basis points from 6.9% on a QoQ basis. Our marginal cost of borrowing for Q2 FY '23 was at 8%. During first half we have not availed any new NHB borrowing.
Moving to capital, our total capital adequacy is 50.7%, in [ Tier 1 is 50.2% ]. At September '22 net worth stands at [ INR 1,586 crores ] vis-a-vis INR 1,574 crores as of March, our quarter ROE is at 3.8% and our annualized ROE is at 13.1% on Q2 number. Our book value per share stands at 192.1 at September '22.
With this I open the floor for questions and answers. Thank you.
[Operator Instructions] We have the first question from the line of Abhijit Tibrewal from Motilal Oswal.
Congratulations on a healthy quarter, and thanks for hosting this earnings call in the first half today. I had a few questions. Most of them were around the impact of the rising interest rates, on the bounce rates, delinquencies and your spreads and margins.
While, Manoj, you did kind of give out reasons why we saw an increase in the bounce rates during the quarter, just wanted to understand, I mean, can there be some other reasons to this as well. What I'm trying to understand here is, given that you have just increased your PLR by 25 basis points until now, was the bounces in the nature of those customers where you have to increase the EMI of the customer, because there was no further room to increase the tenure for the customer? And a related question here, given that you would need to take further PLR increases in the coming months and quarters, what impact could that have on the delinquencies and demand for housing loans?
So, Abhijit -- I mean, the interest rates that was passed on till now, has been passed on in the form of an EMI increase -- I mean, sorry, in the form of a tenure increase, not an EMI increase. So we cannot really corelate the bounce rate to that. I mean, so practically no customer has had an EMI increase. So which is why I mean -- so we have analyzed the bounce rate across various metrics like bureau, bureau scores, the product category, and so on and so forth. So we're not really seeing any pattern there and it kind of seems to be an across the board phenomenon, and which is why we then went back and looked at customers who cleared the payment in July, which was the lowest bounce month and who have subsequently bounced in, say, September or October.
When we spoke to these customers, what came out was that, most of these customers have cleared their payments already through UPI. I mean, immediately after they bounced the payment and when we inquired about it, they just felt that they missed the payment and it's quite convenient now to pay through UPI. So they did not give it too much thought. And when you actually add up the figures of customers who have cleared the payments in the first, say, 2, 3 days after the bounce, the figure actually comes back to the original bounce rate, in a sense. So looks like more of a customer behavior, which is changing. And if you also look at the 1 DPD and the collection efficiency, again, we are not seeing any impact of the bounce rate on that. So it does not seem to be a phenomenon, which is -- I mean, or a behavior which is -- because of difficulty in payment, it seems to be some other underlying change in behavior from the customer's perspective.
Got it. And Manoj, do you think that, given that we will now be required to take further PLR increases in the coming months that would have any impact on the demand for housing loans?
Demand -- see, the customer actually comes to a point, where he or she decides to purchase or build a house, after many other decisions are taken, right? So most customers, I mean, 40% to 50% of our customers are actually building houses on plots. So they need to arrange for a plot first. I mean they would have probably bought a plot earlier or they would arrange to buy the plot. And even if it is a purchase of a flat or apartment, there is the down payment that they have to arrange and so on and so forth.
So there is a lot of decision-making that goes into the final decision or the final execution of the transaction. And the interest rate is only one out of many things that a customer has to tackle before they purchase the house. So we feel that interest rate is not something that will deter the customer. Customers tend to recalibrate their requirements or tenure according to the interest rates. Because the decision to purchase or build the house is something that has actually been triggered once much before. So when they come to a point -- when they're ready to buy the house, then the interest rate is not -- I mean, does not really change the decision for them.
The participant has left the queue.
Okay. Maybe we can move on to the next.
Sure. We have the next question from the line of Kunal Khudania from DSP Investment Managers.
Just to take this question on the bounce rate forward. In terms of cushions, in terms of an EMI to income ratio and so on, are those comfortable as -- the way you see it? Because at some point of time, you'll move from tenure to higher EMI, right?
Tenure to EMI, there is sufficient headroom, because we -- as a company, we have not really offered very high tenures to customers. Most of our customers have taken a maximum of 20 years. So we don't generally offer 25 or 30 or 10 years to customers. So we have some headroom to go before there is -- before an EMI increase needs to be triggered off. Plus, we also had a very high penetration of the subsidy, the Pradhan Mantri Awas Yojana credit linked subsidy. So almost 30,000 customers out of 70,000 have actually availed that. And so all those customers anyway have a headroom on the EMI also, because the EMI would have reduced by INR 2,000 to INR 3,000 for each customer.
So as a portfolio, we have a lot of cushion, where we can increase the tenure also and beyond that, we can also increase the EMI without hurting the customer. So which is why, at this point, we are feeling fairly comfortable.
Okay. So basically, what do you think the customer health is pretty good, it's this banking behavior that's caused some wobbles? And that you have sufficient cushion, that would be a summary, right?
Yes, that's right. And we are also tracking, as I mentioned, the number of customers who are clearing their payments with within 3 days of bouncing, and that number is actually going up. So which is why we said that, if we add that to the number of customers who have cleared their payment through NACH. The numbers kind of -- more or less comes back to the original clearance rate.
[Operator Instructions] We have the next question from the line of Bhavik Dave from Nippon India Mutual Fund. This is the operator, Mr. Bhavik Dave, can you hear us?
Hello?
Yes, please go ahead with your question.
Yes. So my question is twofold. One is on the growth front, when I see last 8 quarters, our mix has shifted from like home loans to now LAP. Obviously, the mix is still towards [ them ]. Remember, the incremental growth seems to be coming from LAP and also that leads to self-employed category being higher, which is logical. But even the ticket size has been going up, like INR 5 lakh to INR 25 lakh ticket size is increasing. Just wanted to understand that, what is reason for like home loans growing slower than LAP, over the last 2 years. Any thoughts on this?
No. The LAP is actually growing on a much smaller base. So when we started out, we were practically at very low levels of LAP penetration. So it's more of a base effect, nothing else other than that.
Sir, you have a proportionate shifting, right, like being -- the 92% home loans have become 89% home loans. So there are reasonable -- and 5% LAP becoming 10% LAP. So just want to understand, like why is the home loan growth not maybe in line with LAP in some time, because we have been growing our -- like our distribution is growing very well. Just want to understand, like what is your comfortable mix in your sense on home loan versus LAP? Like where do we want to...
Sorry, go ahead.
Sorry, industry like some of the peers are at 20%-25% LAP. So these were like on the lower end. Are we inching towards their industry, or what is your thought process? Just want to understand that.
Yes. So I think a couple of years back, we were at very low levels of LAP. So on the portfolio itself, on the AUM, while we were at about 6%, 7%, our origination was also in the region of about 6%, 7%. LAP contribution as a percentage of origination. So which we -- at that point also, we had mentioned that this is likely to go up in the medium term to maybe 10% to 15%. And which is where we are currently. I mean, so we are at about 15% on new origination. And that catch-up is now happening on the portfolio as well. So you are seeing a kind of a -- some slight increase every quarter on the AUM as well. So we were at about 7%, 8% a couple of quarters back, and that's gone up to about 9%.
So that's the -- so that's likely to -- over a period of time, catch up to the 15%, which is the new origination contribution of LAP. So we have always maintained that we want to keep the portfolio at that level, the ratio at that level. So 85%-15% is the kind of comfortable ratio that we are looking at.
Understood. And what is the [ EEV ] for LAP, just to understand what is the difference between a customer segments when it comes to LAP versus home loans?
Segment is largely the same. It's a similar type of customers. And -- but because it's a LAP product, customers pay between 100 to 200 basis points higher than what they would pay for a similar housing loan.
And the ticket sizes are larger, right? I guess this...
Ticket size will be in the same range, again, INR 10 lakhs to INR 15 lakhs.
Understood. And also on the sourcing bit, I see that the Connector proportion is increasing. So just to understand how does this work, and like what are the kind of payouts to our Connector? We understand -- like have we seen any adverse behavior in terms of bounces or the AUM generated or originated by Connector? How do this Connector segment help us in the efficiency or quality of the book? Anything on that?
Yes. On the so Connectors are paid about 20 to 50 basis points, depending upon the consistency and volumes they are bringing in and so on. So it's only on success. So we really don't pay them anything for leads and so on. Connectors over a period of time, we have seen that loans originated through Connectors have a similar or slightly better quality than loans originated from the market. because there are some filters with the Connectors themselves [ applying ]. They've been in the business. Many of them have been in the real estate related businesses for a long period of time. So they know the market, they know our customers. So there is a certain credit obviously which is applied at their end as well. So the quality generally tends to be good and on par, if not better than the rest of the portfolio.
Understood. And last question, sir, is on the demand outlook. We see that with interest rates going up, what is the kind of demand that is visible for you, because we've, like, clocked a [ INR 700 crores ] in disbursement this quarter. Is the momentum being visible, because really these customers might get impacted, many have been impacted by COVID -- actually in COVID it remained stable for the entire industry. But when we look at the yield rates now inching up, do you think that there will be any, maybe, decision on postponement for these customers' amount or do you think that that is not yet visible at this point in time on the ground?
No, the increasing interest rates is not really impacting demand. We are seeing very, very strong demand on the ground. And we actually say we are seeing lesser resistance from customers who are also -- from an interest rate perspective. I think interest rates will only get impacted because of competition. So there are lots of players in the business at various price points and with various priorities. So that is -- that can be the only thing that impacts interest rates.
Otherwise, customers do not generally -- in this segment and especially people who are constructing the homes, et cetera, do not look at interest rates as a big driver of their decision. They are happy to pay premium rates, as long as they get the loan. And most customers are not even thinking of keeping this loan for 20 years. So they look at it as something that they need to immediately construct the house, and then they look at paying it off in a few years.
So interest rate is not a big concern for our customers. But there are other market forces, which tend to push the interest rates down. Otherwise, the rising interest rate phenomenon is not something that we think will affect demand.
We have the next question from the line of Karthik Chellappa from Buena Vista Fund Management.
Congrats on the quarter. So I have 3 questions. The first one is on OpEx. If I were to look at the absolute OpEx, right, in other OpEx, the INR 150 million plus is the highest single quarter absolute OpEx that we have had, and is significantly higher than what we saw in previous quarters. We also see salary costs going up quite a bit. Now I know that we have accelerated our branch count. Apart from that, what are the other big ticket OpEx items that got reflected this quarter? And what is the medium-term target for branch additions, at least for the next 2 years.
Hi, Karthik. So, you're right. The OpEx has gone up INR 44 crores. If you see the other cost line, it's gone up by INR 4 crores. Largely, this is an impact of expansion that we've been doing. So that particular line, what gets booked is travel, we've had more travel through the quarter, more administrative spends on opening branches that we have added. So you are familiar that we've front-loaded the branches. So you do see some kind of cost cuts come upfront as well. So higher legal and professional fees coming from higher amount of sanctions and originations that we're doing. On the salary line also, we've added new people. So that's the reason why you see more costs sitting there.
Coming to the branch additions, we are at 101 right now. We look to get to about 150 in about, let's say, 8 quarters' time, and that will be largely gradual. So for this year probably another 8 or 9 branches for this balance year. So, let's take the number to 110.
Coming to the overall cost, we've been guiding at 3.0% to 3.2% OpEx to AUM. So that's broadly where we will be, for the rest of the year as well.
Got it. Just to recollect. So, Nutan, I think at the time of the IPO, our original thought process was about 120 to 130 branches, when we reach, let's say, an AUM of somewhere around INR 10,000 crores or INR 12,000 crores. Has that has been upped to 150 branches by any chance simply because of competitive reasons or you actually think there is more potential? I'm just curious as to what was the reason for the slight change in stance. It's not material, but then still, I am just curious? I think, Karthik, we were basically at that -- I mean, that was about 18 months back and we were talking about 120 number probably in a 2 to 3 year timeframe.
Now -- I mean, now that timeframe has actually moved to 4 years, right. So -- because 18 months have already passed. So, it's just a corresponding number, that's all. I mean, if we look at it, say, same time next year, we'll probably be at the 120 number that you're talking about, which is 24 months from the -- 24 to 30 months from the IPO. I mean, since we are looking at a longer time horizon, maybe another -- we are adding another 2 years to it, that is why we are talking about 150 number. Got it. Second question is on the bounce rates for which you did allude to UPI-related payments.
Now given that UPI adoption will continue to rise or so, do you think there might be some tweaks required in our own payment mechanisms, simply because we presenting the check, that getting bounced and then communicating to the borrower and then 3 days, that also involves some level of productivity administrative expenses, et cetera. But if our customers are moving towards UPI, do you think you need to tweak at least on your payment mix, at least to save some time at least on productivity, as well as these kind of related ratios? Do you think that's necessary at this point?
Yes, Karthik. So we are contemplating. I mean, of course, the change has been only about 1% in the bounce rates, so 1%, 1.5%, so we have still not triggered off any actions, but we are contemplating. I mean, there are now new payment methods available, where you can actually give the customer an option to make the payment at his choice rather than going through the regular NACH debit. But we will have -- still, we will have to observe this phenomenon for a few more months, a few more quarters to see if there is really serious requirement on those lines. So we will kind of watch this space, and see if the more and more customers are changing their behavior and then, accordingly, we will press the trigger. But we are already exploring those options, payment options, side by side.
Excellent. My last question is basically on our borrowing mix. So, this quarter, if I look at the private sector banks at 32%, it's actually at the highest that it's ever been and there has been a very sharp increase even quarter-on-quarter. So was there any chunky one-time borrowings that we were able to drawdown from these banks? And when we look at the rates that we get from private sector banks vis-a-vis, let's say, even public sector banks, is there any significant differential at this point?
So, Karthik, the higher increase in private sector banks, as I mentioned, that we've added 2 banks, Karnataka Bank, Yes Bank, both of them fall in the private sector category. We've also had a new line from our existing lenders and a large chunkier line, so that's adding to that. The other thing also is that the whole private bank comes in slightly early in the year, and when the PSU banks sanctions come, let's say, towards quarter 3, NHB comes a little bit towards mid of quarter 3. So there is a little bit of phasing of that. So you will see this number getting more towards the 20s probably in quarter 3.
Coming to the second part, which is around rates, very comparable. Say, for example, if you look at HDFC Bank, we will be -- [ of this ] 1 year MCLR. So a very comparable rates when it comes to PSU banks and private sector banks.
Got it. Just one last clarification point to the question on the LAP. In the past, when the LAP used to be about 5% to 6%, one of our stance was that we are slightly more cautious from an underwriting point of view given where the market is, given right now that on an incremental sourcing basis it's up to 15%, can we say that our risk appetite and risk comfort level has improved at the margin?
So we're still cautious on LAP and we have always maintained that there will be some uptick in LAP, as we increase our distribution and presence in the market, and we had mentioned that we would probably reach a 15% kind of number on flow, so which is where we are at this point of time. But we continue to remain cautious on that product.
We have the next question from the line of Kunal Shah from ICICI Securities.
Yes. So, few questions. Firstly, with respect to -- when we look at it in terms of the stock of maybe the loans, which are, say, for the apartment purpose as well as for the self-construction, what would be the proportion and how is the flow, if we have to look at it, say, in the last 12 months? How would have been the concentration over there?
Yes. So flow of loans broadly falls in 3 to 4 categories. So the self-construction is about 40% of our current flow of business. Then there is an additional about 15% to 20% which is resale transactions, which also largely are individual homes, pure apartments there. There is about 15% that is LAP. So if you add this, it comes to about 70%. And then there is a 30%, which is a combination of -- you can say it -- I mean, which is overall developer-led, but it is a combination of high-rise apartments and row houses. So probably about 15%, 15% each. Broadly that is a breakup of incoming loans at this point.
Okay. And in terms of the outstanding, if we have to look at it in terms of this developer-led, then how much would that be?
Historically, developer-led was high. So on the book the developer-led would be probably about 50% now.
It would be 50%. Okay. Okay. And -- yes, sorry.
I was just adding, Kunal, that the historical number is all in the EMI book. So there is no under-construction, anything there.
Okay. Okay. And, secondly, in terms of the assignments, so in terms of when we look at it as a proportion of disbursements that's coming off, so what would be the stance out there? Would we catch-up towards the second half as you highlighted in the opening commentary, that demand is still there, but when we look at it compared to that of last year, it is still low. And maybe the related income which is there in P&L, how should we look at it getting into H2 and the next year?
So, Kunal, assignment -- the first purpose for assignment is liquidity. Now you see that the liquidity is already close to INR 1,200 crores at the end of September quarter and we've been able to do that at a very competitive cost of borrowing at 8% on a marginal basis. So, essentially, that's the reason why assignment is low. We also understand the impact on the P&L, so we will look to do probably closer to what we've guided earlier, which is around INR 100 crores a quarter, so our guidance has been INR 100 crores a quarter plus/minus INR 20 crores. So we'll try and get closer to INR 100 crores perhaps on this number.
Sure. And in terms of collection efficiency as well as the bounce rates, reading into that, maybe collection efficiency largely being stable over the last 6 months and bounce rates also going up a bit, even though it's technically due to UPI, but what is the kind of improvement we can see from here on with respect to our 30+ DPD buckets? Do we see it? Because, I think, otherwise collection efficiency is more or less stable as such? 1+ and 30+ should it broadly settle over here or we see it getting down to maybe 2%, 2.5% level in terms of 30+? Yes.
So the improvement will come from this yellow bar, which you are seeing in our charts, which are customers who got impacted by COVID and who are now stuck in buckets between 0 to 89, right. So that is where the improvement can come, because we are working with those customers to kind of get them regularized and get them back to zero, because they are also reflecting in NPA at this point of time, so this is not good for them and for us. So those customers, we are fairly confident they will get regularized and so that number is what will also drive down the 30-day past due. I mean, as it moves out of NPA, it will also move out of the 30-day past due.
Sure. Sure. So, that's what may be -- and how long do we think it will take to normalize?
It could take long, because it could take -- I mean, because customers are generally paying probably 1/3 of an installment every month, 1/3 to half in installment every month. So this could take good 2, 3 quarters.
Oh, okay. And last question with respect to Dharmvir Singh, so on the CTO side. So are we in the process of hiring or we have already hired the CTO out there? And what could have been the rationale maybe for him leaving, because, I think, he as just joined last year, so how should we read into this?.
Yes. We have some discussions going on with prospective people and, yes, it's a -- the market is very hot for technology people. So, I think, the -- our CTO wanted to start something on his own, which is why he left.
We have the next question from the line of Nidhesh Jain from Investec.
I got 2, 3 questions. First is, on the co-lending arrangement, how is the traction in this quarter? How much disbursement we have done under co-lending?
Co-lending, as you can see, we have disbursed slightly higher than the previous quarter. So, I think, we did a transaction of about INR 20 crores this quarter, of which about INR 16 crores is reflecting in the -- so that's the portion that comes back to us. So momentum is picking up. So monthly originations have started going up. So this quarter you should see further rise in -- further increase in co-lending.
Sure. Secondly, on the spreads, can you guide how the incremental spreads are playing out? We have been able to maintain the spreads quite well, despite increase in cost of funds in this quarter. How are the incremental spreads playing out and how should we think about spreads going forward?
So we have passed -- I mean, the increase in cost of borrowing we have passed on to customers, which is where the spreads were maintained. So we will -- we are also -- we are contemplating one more round of increase. So next quarter also, to some extent, we should be able to maintain, but we have always been guiding that there will be some compression there. So we are looking at a 5.5%, 5.6% kind of a number. We are at 5.8% right now.
And lastly, can you share the concentration in the Connector channel, let's say? So what is the number of active Connectors as of now, as of September end, and what is the concentration of business coming from, let's say, top 10% of Connectors?
Yes. So it's a very diversified channel. So we have about close to about 1,800 to -- 1,800 or 2,000 -- about 2,000 Connectors who were active in the quarter. And so if you look at, let us say, about 6,000 originations coming from them. That's just about 2 to 3 loans per Connector in a quarter. So it's very, very diversified. Top 5% -- sorry, top 10% of Connectors would be contributing -- top 10% of Connectors would be contributing about, say, 30% of the loans.
Sure. And this active Connector number has not increased Q-on-Q? Last quarter, I think, also, the number was around 2,000, right?
Yes. It has not increased much. At last quarter, it was about 1,800 -- 1,900 and it's gone up to about to 2,000 now.
We have the next question from the line of Abhijit Tibrewal from Motilal Oswal.
Yes. Thank you for allowing me a follow-up question. Looking -- I mean, well, you've already partly answered this question, just wanted to understand that given that we have, until now, resisted picking any significant PLR increases, but, I mean, having said that, it has started reflecting in moderation, your incremental spreads, while during the opening remarks you also suggested that during the first half of this fiscal year we have not taken any borrowings from the NHB. And assuming that they will be there in the second half, it will obviously aid your incremental as well as portfolio cost of borrowings. But typically, going ahead, given that, I mean, I believe that we have maintained a very fine balance between growth and the trade-off between spreads and margins, how would you kind of look at spreads and margins over the next 1 year?
So Abhijit, we are very, very focused on the topic of spreads and margin. So we have to deal with the book spread and the incremental spread separately. On the book spread, we are at 5.8% of NHB's refinance program, to that extent the book spread keeps on changing. So we've done models at our end, and we will need to do another repricing either in quarter 3 or quarter 4. So we will do that, let's say, about 50 basis points.
Cost of borrowing will also increase slightly higher than that, so a portion of that cost of borrowing increase will be absorbed by us and 50 basis points would be passed on. So, let's say, by end of March, we will be closer to 5.5% kind of a spread, though our guidance, long-term guidance, remains at 5.25%. Moving to the marginal or incremental spread, we're at 5.40%, we have to be focused on the market from a competitive perspective, from growth perspective and we feel that this is a reasonably healthy spread, which is also ahead of our guided -- long-term guidance of 5.25%. So it will be very comfortable with this number. So that's how we are looking at this overall chapter of spreads.
And last data keeping question, was there any PMAY subsidy that you've received during the quarter? And now what is the quantum of outstanding PMAY subsidy, which is due to you but not yet dispersed from the Ministry?
So we received about INR 50 crores in quarter 2. We still have receivable of close to INR 250 odd crores.
We have the next question from the line of Chandra from Fidelity.
Just a question from my side. You seem to have spoken quite a few times, I heard you using the word competition and also at the same time mentioning that passing on yields, I mean interest rate is not a factor. It seems that the up -- your -- the limits is now being determined because of more competitive intensity rather than the ability of the customer to borrow. Would that be a fair assumption? And, I mean, just given the background that you've only taken a 25 bps PLR hike?
Yes. So less of competitive pressure on the back book. The competitive pressure is more for new originations, is a way we would put it, because various players are operating in the segment at various price points, there tends to be competitive pressure at the time of origination. On the back book, we would not say that the competition is a big driver. I mean, I guess, from the perspective of balance transfers, et cetera. So we would not say that that is a big driver, because when there is an increase in prices -- by increase in pricing or increase in rates overall, then the balance transfer pressure actually comes down a little bit, because customers get attracted by headline rates, which were there, for example, a couple of quarters back. Now there are no headline rates and generally everybody is at least in the ballpark of 9% for new customers, so the competitive pressure on back book is not that high.
And this is because you did allude to this -- some people have their own P&L pressures or working towards a certain -- I'm just trying to understand that theoretically for some reason if our cost of funds were to go up by another 100 basis points, say, over the next 12 to 18 months, just for some reason it were to happen, are we are at the upper bounds of -- on the yields, or we sort of play this by increasing, as the flow of LAP keeps increasing that we manage the spreads that way and that sort of -- the lower bound on spreads is possibly 5.5%?
Yes. So on -- I mean, we have some headroom, like you said, in LAP and even in terms of our distribution, because we are entering smaller markets, et cetera. So some headroom is there. But, yes, we will have to balance that competitive pressure in the market and maintain our growth. We'll have to see how it plays out. Plus, we also have the co-lending and so on. So we're trying to balance all the tools that we have at our disposal to maintain our growth.
We have the next question from the line of Shreepal Doshi from Equirus.
Sir, firstly, the question was with respect to the bounce rates. So it has gone up, but why is it not getting not getting reflected in the 1+ DPD number. So I just want to understand the linkage there?
Yes. So most of the customers, if you see, like, for example, let us take October, so if you take the differential of customers who have bounced in October, but who pay -- for example, cleared their payments in July through NACH, that difference is about 2% of customers, right, so which is the difference in the bounce rate. But those 2% of customers who have made their payments through UPI within the first 3 days of bouncing the payment. So if you take the -- take 0 to 3 days from bounce. Majority of these 2% of these customers have already made their payments. So which is why this number is not translating into higher delinquency.
Sir, second question was with respect to our branch expansion strategy. So what -- I wanted to understand what are the indicators or timelines for converting the touchpoint into a branch? So while we -- because we have got like 2 decent number of touchpoints also. So what are the indicators that we sort of review, in order to convert the touchpoint into a branch?
So we look at business momentum -- business potential in the market and also the momentum. So generally a lot -- most of the touchpoints will remain touchpoints. Some of them will have the potential to become branches. And so we look at -- I mean, a branch for us means that, in a 4 to 5-year timeframe, the portfolio should reach about INR 100 crores. So we estimate whether that potential exist in that location -- in that touchpoint, and then accordingly take a decision to put up a branch. So we evaluate this, say, about between 6 to 12 months into the journey of a touchpoint.
Sir, these touchpoints 249, also means that these are 249 employees, right?
No, there will be more employees. So, 249, let me just break it up, so 249 also includes a 101 branches, right. I mean, so these 101 branches itself would have probably anywhere between 600 to 650 employees. And then you have another 150 touchpoints, which are more thinly manned, which would translate to maybe another 100 employees, 150 employees. So at least one employee per touchpoint is the way we would look at it.
One observation. So if we look at the ticket -- the more than 1.5 ticket size AUM in -- AUM share has increased to 60% from 50%, 2 years back and also the new to credit customers both in terms of loan accounts and AUM has also been coming off, if you look at in the last 2 years. So while this would have given us some momentum on the growth side, do you think this also keeps us exposed to higher BT Out cases going ahead? And if yes, then what is the strategy that we have, sort of, in mind to control it?
Yes. So on the ticket size, see, ticket size is more of a secular increase and we are seeing that in more affluent markets, especially southern markets, where per capita incomes are increasing, the ticket sizes are also increasing. So a customer who probably 5 years ago used to build a house worth INR 10 lakhs or INR 12 lakhs is now building a house worth INR 15 lakh or INR 20 lakhs. It's a natural increase. I mean, the customer segment is the same, the profile is the same that we used to book. But ticket sizes are increasing, keeping pace with income and so on, in some of the markets.
And as far as the bureau score is concerned, that's a natural transition that is happening in the country. Every quarter it's reducing by 1%, the number of customers who don't have the bureau score and eventually it has to vanish, I mean that segment will have to vanish, because anybody who has got a decent income will probably have a bureau score, because they have some small loans or credit cards, et cetera. But that does not necessarily enable the customer -- or qualify the customer to get a housing loan. Most of these customers who have a bureau score, would have small loans, like consumer durable loans, et cetera, which they've borrowed. But when it comes to housing loan, they face the same challenges that they used to face earlier.
Okay. Got it. So just last 2 data keeping questions. What is the pricing differential for a salaried versus self-employed customer? Maybe you can give us indication based on the lower band or on the upper end of the range or the interested range? And, also, the differential with respect to home loan and LAP?
Yes. So salaried and self-employed generally our breakup is 70% -- 70%, 30%; 70% is salaried and 30% is self-employed. And in terms of the pricing, self-employed generally, I mean, commands -- I mean, if we get pricing of about 1 to 1.5 basis points -- 1.5% higher on the self-employed segment. But there again, it is -- we are talking about the informal self-employed segment, who don't have documentation, et cetera. If it's a formal self-employed segment, then the pricing is nearly similar to salaried segment. So that's the breakup.
And for HL and LAP, like?
HL and LAP, again, the difference is about 150 to 200 basis points or 100 to 200 basis points.
Got it. And sir, how is the -- like, if you could just give us some color on the average ticket size for both HL and LAP, because we do give the overall ticket size, which is INR 1.09 million, but if you could give us segment wise as on 2Q and as on and as on [ 4Q FY '21 ]? Yes.
Ticket sizes would be similar. I mean, I'm just trying to look for the figures. The ticket size that LAP and home loans would be fairly similar. So LAP is in the region of about 10 LAPs, that's a trend that we're seeing. In home loans, like I said, in some segments where there are people are doing -- constructing their own homes, et cetera, it has inched up a little bit. But broadly in the INR 10 lakh to INR 15 lakh range is where we are.
Yes. The one point I wanted to add to your earlier question on the ticket size, is also that gradually the -- I mean, co-lending piece will also -- I mean, the co-lending piece as of now is reflecting as part of the overall book. So that also contributes a little bit to the ticket size increase, because that's an adjacent segment, it's a slightly higher ticket segment that we are attacking through co-lending. So that also contributes a little bit to the higher ticket size.
It's been -- co-lending we are looking at like INR 20 lakh to INR 35 lakh ticket size, right, if I'm not wrong?
That's right. That's right. That's right.
We have the next question from the line of Nilesh Jethani from BOI Mutual Fund.
My first question was, from a...
Mr. Nilesh, we request you to kindly come a little more closer to the mic, we cannot hear you well.
Yes. Am I audible now?
Yes, you are. Thank you.
Yes. My first question was on the AUM side, say, considering next 2 to 3 years, say, by Q1 or Q2 of FY '25, this 100 to 150 branches would be over. In the similar phase, our -- most of our branches which are less than INR 100 crores AUM, would try and be mature by that time period. So what is the aspirational AUM, say, from a next 3 to 4-year perspective, where we plan to get considering a strong 50% growth in the branch count, as well as maturing of the existing branches also?
In 3 to 4 years -- I mean, we are basically looking at a 30% kind of growth on AUM year-on-year. So it should get us to probably INR 12,000 crores to INR 15,000 crores -- INR 12,000 crores to INR 15,000 crores.
Overall, it's around INR 15,000 crores.
Okay. And my second question was on the RM side. So today, most of the work that is sourcing, essay writing, collection, et cetera, is done by the single RM. But as we mature, say, over the next 3 to 4 years, do we plan to segregate this work or will continue to work with a similar business model?
No, we have -- I mean, actually a lot of our differentiation in the market comes because of that business process, which a single point of contact, the speed of execution, the collection expertise, and connect that the RM brings to the table, et cetera. So we intend to continue these, because these are our core competitive advantages in the market and we don't -- and we have passed through a very stressful period in COVID with the same model -- where it was questioned a lot, because that was a time when there was much more collection load, maybe 2x, 3x of collection load than normal. But even in those circumstances, this model kind of stood the test. So we are now fairly confident that in a regular BIU situation, this model works very well.
Okay. Got it. And one last question on the yield side, so when I see our yields, I guess, correct me if I'm wrong, we took a 25 basis hike last quarter and 25 basis hike again in this quarter, that's what the press release mentions, but when we see competitive...
We have taken only one 25 basis point hike as of now.
Okay. But when you see the competition, the hikes have been significantly higher. So despite us claiming that our customer profile is not interest rate sensitive, what is stopping us? I understand we want to maintain the yields. But in a scenario, can we go ahead? Can we push the yields little higher, maybe earn little slightly higher spreads? Our thought process always remain competitive in the market, what's the thought process basically, I wanted to understand?
Thought process was just, like, fair transmission of the rate to customer, because we have basically contracted a certain rate to the customer, a certain spread to the customer, when we on-boarded the customer. So we are transmitting the rates as and when it gets transmitted to us. So we don't want to do it ahead of time and gain something or earn something from it. So that's really is the thinking.
Got it. And then next -- last question from my side. So in next 2 to 3-year timeline, what comfort percentage as an overall AUM we carry from LAP to be? So, today, we are at X number, what comfortable numbers we would be?
15% is something that we are comfortable with. 15% is the incoming flow and that is the number we are comfortable with.
We have the next question from the line of Shubhranshu Mishra from PhillipCapital.
A couple of questions. The first one is on the borrowing. What's the proportion of the borrowings could be on MCLR versus EBLR? And...
Mr. Shubhranshu, please come closer to the mic a bit.
Yes. Can you hear me?
Yes. We can hear you better now. Thank you.
Right. So first one is on the borrowings. So what proportion of the borrowings on MCLR versus EBLR? And what is the average duration right now versus -- on a YoY basis and on QoQ basis? The second question is on OpEx. If we have to split the OpEx into cost of acquisition, cost of collections and business as usual expenses, what is the split as of now? Third is, dwelling on LAP itself. So what proportion would be on residential properties, and what would be -- what will be the proportion on commercial properties and how do we source that? These are my 3 questions.
Yes. So I start with borrowings. So out of the 100%, the way we break our borrowings is 20% broadly NHB, 20% assignment. The balance, out of 60%, 50% is on MCLR and 10% is on external, whether it is repo or [ TPL ], so that's the broad breakup. So that was your question on borrowings. Was there anything else in borrowings? Otherwise, I can move to OpEx.
What is the average duration right now versus YoY, versus QoQ?
Average duration as in average tenure of borrowings?
Right.
7 years. So our asset as well as our liability, our tenure is around 7 years and hence that's the reason the ALM looks robust. So that's the second part on borrowings. Moving to OpEx, the question is cost of acquisition, cost of collection and BAU, the broad split that we do internally is cost of acquisition and because our RMs only do the collection, so we bucket it in one place and then we do essentially the BAU, so broadly it will be 70-30 in terms of the borrowing.
So 70% would be BAU and 30% is cost of acquisition and cost of collections, right?
No, the other way around. So cost of acquisition, we also include entire disbursal, the entire collection, basically the entire branch operation.
Right.
Moving onto LAP, I think, your question is around breakup between residential and commercial. It's significantly residential.
Yes. So LAP is largely all residential. I mean, there may be one-off commercial, but largely it's residential, 90% plus.
I mean, how do we source it?
Through the same format. I mean, either our branches or the Connectors would be the source.
Okay. We also do external sourcing then -- right?
External as in, sorry?
As in through Connectors -- not through own employees, but through Connectors as well?
No, mix of both. I mean, the 70-30 mix that you see in the overall product, which is the same in LAP as well. So 70% through Connectors and 30% through other channels.
Right. And if I'm allowed to speak, then just one last question, what would be the concentration of top 20 or top 30 accounts in LAP?
There is no concentration.
No concentration at all. I mean, the ticket size would be in the region of INR 10 lakhs to INR 15 lakhs generally speaking.
We have the next question from the line of Franklin Moraes from Equentis Wealth Advisory.
So when you say 73% of Connectors, would this be in terms of volume or value of the loans?
Both will be similar, because it's all very granular. I mean, we don't really sell very high-ticket loans. We generally go only as high as INR 40 lakhs, so -- and the Connector sourcing is very similar to normal sourcing that we get from other channels. So whether you see value or volume, it will be similar.
And in terms of the process, could you explain a little bit? How do we exactly source these Connectors? What are the kind of key attributes that we look into while sourcing these Connectors? And, also, over the last 3, 4 years, what has been the growth of the Connectors?
So attributes that we look for is basically, there -- it has to be somebody who is embedded in the local ecosystem, so they know customers and they come to know who in that ecosystem is interested in purchasing or building a house. So that is the main criteria. And it's -- we look for people who have some other business which they are running, which is also kind of a credit check. Because if somebody is running an existing business, like maybe a real estate brokership or insurance agency or any other kind of local ticketing agency, et cetera, it gives them some credibility in that local market as well, and plus it also reflects in the credit quality. So that's really what we look for and there has to be some ability to source on a consistent basis. So we don't generally appoint people who source like one loan and who come across one customer in a very long time kind of a thing.
So there has to be -- they should be in a business which has a regular flow of customers of their own, so that at any point of time, some of those customers would be looking for a home, and then this connector can refer them to us. So these are the criteria we employ. And then some hard criteria like bureau scores, et cetera, so the Connector himself or herself should have a good bureau score, which is again a kind of credit check that we employ.
And, like, how do we access these kind of Connectors? Do they come to the branch, or do we have some mechanism for kind of accessing these Connectors?
So, primarily, we are all connect -- I mean, once we appoint them or once we kind of, what you call it, convince them that this is a good business that they can get into, most of the further interaction happens on an app. So there is an app they can download from the Play Store and enroll themselves, and plus they can also keep referring customers on that app, and get the status updates and payment updates, payout updates, et cetera, on the app itself. So once the initial tie-up happens and primarily the engagement is through the app. But our relationship managers also keep interacting with them to kind of give them some updates on the product and more as a relationship management exercise. So that interaction happens from our branches quite frequently, maybe every week, et cetera. So that's the interaction model.
Okay. And, lastly, on the AUM growth, we've guided for about probably 30% of growth for the next 2 2 years, but just in the near term, in case interest rates continue to rise, even from current levels, would we be able to kind of deliver the similar kind of growth, or would there be some bit of slowdown in the near term?
As of now, we are seeing a strong demand on the ground and we don't anticipate any impact at the moment.
We have the next question from the line of Jigar Jani from Edelweiss.
A couple of questions. So on the co-lending side, you said that you have initiated INR 20 crores in this quarter, out of which INR 16 crores is on your book. So is it probably that you keep 80% of whatever initiation you do and 20% is funded by the banks, or this is just a one-off in the quarter?
The other way around. The other way around. So this -- because this is -- what you're seeing is the inflow of funds, right, INR 16.6 crores. So the total loan value would be about INR 20 crores, out of which INR 4 crores remains on our books and INR 16 crores is taken on the banks' books. So whatever the bank has taken on their books, they've refunded the money to us.
Okay, understood. So it's funding that you're showing basically then?
Yes. We have shown it as -- yes, funding. Yes.
Yes. Yes. Okay. And, so, -- and the other question was, most of this co-lending is in the same mix that you have right now, which is 70% housing, or it is pure housing, what's the kind of -- it's pure housing?
It's pure housing at this point of time.
Okay. And, thirdly, which is not related to co-lending, but there were been news articles about Warburg Pincus looking to exit their stake in the company. Do you have any updates on that or if you could...
Yes. That's all purely rumor. And we have confirmation from Warburg that there was no such thing being contemplated and they are here for the long haul.
We have the next question from the line of Nidhesh Jain from Investec.
Thanks for the follow-up. There is one data point, after third years of operation -- branch, what sort of -- what annual disbursement level that branch reaches?
After the third year?
After the third year of opening of a branch, what is the range of annual disbursements?
See, third year -- yes, it depends. See, the throughput -- the output depends on the location and so on, but so broadly I can give you a range. So generally, it would be in the range of say INR 2 crores to INR 5 crores per month kind of disbursal level in a 3-year timeframe.
We have the next question from the line of Mayank from InCred.
So my basic question is, for branches we have opened last 2 quarters, how is the connector addition going on there, and how is the disbursements going on if we compare -- and when are we expecting the disbursement level to reach our -- level of our matured branches? And my second question is, on the bounce, what kind of charges does customer have to incur if an ECS bounces, both on the banking front and what -- if anything you also charge there? And, going forward, are we expecting the bounce rate to normalize or they might increase, given more customer might opt for the UPI? Yes, that's 2 questions of mine.
So first question if I understood right, you were asking about movement of Connectors, right? I mean, how the number of Connectors is [indiscernible]. So, generally, addition is around 100 to 200 numbers of active Connectors per quarter. So we are currently at about 2,000 range of active Connectors per quarter. And so that's the number we are at. And as far as the NACH -- I mean, the bounces are concerned, yes, the banks do charge. I mean, some banks, they charge fairly hefty bounce charges to customers.
So probably it could range between INR 100 to INR 500 as a bounce charge for the customer at the bank's end. And, in our case, we charge the customer a bounce charge only if the customer delays beyond a certain point. So, for example, these kind of customers who are now bouncing and paying within 1 or 2 days or 2, 3 days, actually, they all pay through the app or through UPI, through a link. So, in reality, we really -- I mean, for the first 3, 4 days, we really don't charge any bounce charge to the customer.
Okay. Okay. Are we going -- this trend to continue, more customers might get -- opting for UPI or it would normalize from here?
We'll have to watch this space actually, because, I mean, we are talking to customers to understand what is driving this behavior, et cetera. We'll have to really watch this space very closely to understand what is driving this behavior.
Thank you. We have the next question from the line of [ Abhishek Agarwal from Naredi Investments ].
Question first, where you are looking net interest margin in FY '23 and FY '24 as a whole? Second question, how much amount do you write-off as NPA during the quarter and in 6 months? And, also, how much amount did you receive from selling assets that went into NPA? And last question, at what rate will you issue bond of INR 500 crore and for what minimum time?
Yes. So, I'll take those questions one by one. The net interest margin that we're looking is around 6% for next year. Your second question was on write-off, so in quarter 2, we have -- we don't have any technical write-off. We have some shorter recoveries of about INR 1 crore. The amount that we've written back, is around INR 40 lakhs. This is the NPAs that we had written-off earlier, so those are the recoveries that have come. The bond that is there, it's -- these requirements -- legal requirement is that, we have to refresh the Board approval every 6 months. So we have refreshed that. We are hopeful that we should be able to do this within this year. I hope I have addressed all the questions. If there is anything, please let me know.
We have the next question from the line of Karthik Chellappa from Buena Vista Fund Management.
Yes. I just have one more follow-up question. What was the attrition at the field level this quarter?
Attrition amongst RMs was about 40%, Karthik.
So this used to be something like about 35%, I think, from the annual report, right, for the full year last year. So it looks like it's sticky and possibly at the margin or even risen?
Yes, Karthik. It is slightly higher than previous quarters.
And I know in the past you've talked about some measures that you're taking, in the form of giving ESOPs earlier and so on and so forth. Any other initiatives that you have in mind to improve this, because I think this is also putting some pressure on your wage costs?
I'm not sure about wage costs, because this would be largely attrition which happened within first year. There would not be really any difference in the wages. It would probably -- it probably puts pressure on just the hiring cost, because you have to hire more people and so on. But, at this level, at an RM level, it's difficult for us to provide ESOPs. I mean, we have provided ESOPs from the next level onwards, that is branch manager or unit head level. And, at an RM level, the steps that we have taken last time, which I had mentioned was to have an internship program and which is now picking up momentum. So we actually taken people who -- as interns and see whether they have the ability to kind of deliver and whether they themselves have the interest in continuing this job and then we will take them on as full-time employees.
That will take some time to have impact on the attrition levels. As more and more interns join us then the -- and it should have an impact on the attrition levels. However, I mean, 40% is the overall attrition, but then it would -- the -- it is about -- 10%, 15% would be -- decide attrition, which falls in multiple buckets, people who don't perform, people who are -- had to be terminated because of some reason, et cetera. So, yes -- but, effectively, yes, the attrition pre-COVID -- not pre-COVID, but desired -- from the desired attrition is little higher than what we wanted to be. So 5% to 10% higher than what we wanted to be. That's something which we think will adjust in the medium term.
We have the next question from the line of [ Siddharth Jain ], an Individual Investor.
Just one question. We have invested heavily in the distribution capacity and we see the impact of that on the P&L with OpEx going up by about INR 12 crores Y-on-Y. How does this translate into the disbursals and the demand with -- we have moved up from about INR 515 crores in same time last year to about INR 700 crores, is this a bit low as compared to the competition? And where do we see this going in H2?
This is on track with what we have planned. And so we have -- as we increase the distribution and the number of people, we also have certain benchmarks in productivity, et cetera, which are all being met. So we are kind of happy with the progress and this is the pace at which we think we will keep growing.
And any guidance for H2?
In terms of the disbursals you're talking about or?
Yes.
Yes. So we are at about, INR 700 crores, this quarter, I mean, and we are at a run rate of about INR 225 crores -- I mean, sorry, INR 250 crores -- INR 225 crores to INR 250 crores per month. And so, yes, maybe, I mean, we should be growing by about 5% or so on the disbursal quarter-on-quarter.
Okay. Got it. And just one more question, on the P&L, we see the net gain on DA about INR 99.3 crores (sic) [ INR 93.3 crores ] this quarter, can you just split this into gross gain and any reversals that we have taken during the quarter?
No, we haven't had to take any reversals this year as of now.
Okay.
The reversal will start only when our blended cost of borrowing plus 8%.
That was the last question. I would now like to hand the conference over to Mr. Manoj Viswanathan for the closing comments.
Thank you, everyone, for joining on the call, and wish you all a very Happy Diwali. I hope we have been able to answer all your questions. In case you require any further details, you can get in touch with Manish, who Heads the Investor Relations function or get in touch with Orient Capital, who is our external Investor Relations Advisors. Thank you so much.
Thank you. On behalf of Home First Finance Company Limited, that concludes this conference. In case of any further queries, please contact -- please connect with Orient Capital. Thank you for joining us, and you may now disconnect your lines.