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IIFL Finance Ltd
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Ladies and gentlemen, good day, and welcome to the IIFL Finance Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you, sir.
Good afternoon, everyone. On behalf of Team IIFL Finance, I thank all of you for joining us on this call. I am Rajesh Rajak, CFO; accompanied by Mr. Nirmal Jain, our Chairman; Mr. R. Venkataraman, Managing Director; and Mr. Anujeet Kudva, our Chief Risk Officer. I'll hand over to our Chairman to comment on the group's strategy and plans.Over to Mr. Jain.
Thank you, Rajesh, and welcome to all on the call -- on this call. So as all of us know, COVID times continue and COVID had affected, life is still not back to full normalcy and really unfortunate for the humanity as a whole that such a huge loss of lives and health has been caused. And we pray for the fastest recovery and conquering of this disease. However, having said that, COVID also has shown us many opportunities for the business. And for IIFL Finance, we see opportunities in a couple of ways. One is significant saving in operating costs and two is completely digitizing and accelerating the digital journey for the customer as well as our back-end processes. And the 2 factors that have driven significant cost savings or can drive potentially going forward, one is discovery that working from home is very easy, convenient and can be very efficient as well. And that allows many other organizational and workflow changes, including delayering of the organization with the largest span of control and also centralization of many processes which were hitherto decentralized, and obviously, and you'll have a lot more scaled economies as we centralize the processes. And the second is, now there's acceleration of digital and e-everything and acceptance of the same. So the paperless, presenceless mode is working very well now and is getting traction. Technology was always there, but I think adoption has increased significantly, and that is what probably can drive or can change the way business is done. And this, coupled with cloud and mobile technology is going to change the operating metrics as we go forward. So in IIFL Finance, we have moved all our software applications and all servers to the cloud. And in fact, almost all our key people can operate on mobile devices or tablet, which provides significant mobility and flexibility without compromising on security.Now as this will require re-imagination and redefinition of most of the processes and what we are doing to start with for business loan is a complete end-to-end digital process. So we work more like a fintech company. And this can be followed by -- we already have Insta home loan product, but all our home loan products or all our lending offices can be fully digitized, which will allow us to centralize many functions, as I said, and save operating costs. In terms of strategy, what we articulated last time, just to update and look at 2 aspects, which is growth and asset quality. So in terms of growth, there were always concerns about, at least in last 18 to 25 months, about liquidity. I'm happy to say that liquidity is easing now. And as far as we are concerned, we got about INR 1,800 crores of cash and bank balance as of June end and another INR 1,900 crores, INR 2,000 crores of undrawn line, which is sufficient to meet all our debt obligations, contractual obligations till, at least, say, February 2021. And we also don't want to carry more than this kind of liquidity because that has a significant cost. You borrow at 9% and if you have to put your money in liquid or bank at 3%, obviously, the cost is pretty significant. So given that the liquidity is there, but the business environment is improving, and we have seen that the disbursement improved significantly in gold loan as the branches opened in the month of June and, in fact, out of our 1,750, 1,800 branches, only 18, 20 branches are closed because they are in containment zone, but most of -- almost all other branches are open, and we are seeing that the footfall in business is increasing month after month.What we have -- in terms of -- the way we look at asset growth going forward is, we want to originate assets which are all eligible for being taken over by banks. So in a way, we complement the banking -- bank by originating loans that they would like to have on their balance sheet, but they are not able to do on their own at the terms that we do. And so all our loan origination credit processes, we have revamped them, tried to make it eligible for banks. We are talking to quite a few bank alliances and partnerships for co-lending as well as -- co-lending and co-origination. Obviously, in a COVID-affected times, things are not moving as quickly as we would have liked them to. But as soon as things become normal, we are very -- we are hopeful that a few alliances will kick off and that basically will be the model that we wanted to work on. And coming to asset quality, assets under moratorium had come down from 60% to 31% from May to June. And maybe in this quarter, we'll see further improvement there. I mean, the moratorium assets will further fall, which is good because when we exit from moratorium, these are the assets where one will have a question mark whether those borrowers will be able to pay or not. We are working systematically on that. And in fact, things are getting to normal, maybe a little better than what we expected. And in terms of asset quality, also, we have a portfolio of CRE, which is not core, where we have not been originating new loans, and we want to taper off or we have to reduce this portfolio. We have been in talks with a few funds or investors where we can bundle the entire portfolio and be the sponsor or contribute the sponsor capital and have external investors. Even these stocks are not progressing at a very -- at a quick pace because of physical limitations of people to visit and do the division, but I think in the next few weeks we should see good traction there. So with this, I'll hand over to Rajesh again to take you through the financial details and then we'll open up for questions and answers.Thank you.
Thank you, Mr. Jain. I'll give you all a brief update on our business. IIFL Finance net profit was INR 228.2 crores in the first quarter of FY '21, up 5% quarter-on-quarter and 26% year-on-year, excluding exceptional items of INR 194 crores of COVID provisions and INR 70 crores of MTM loss on ForEx borrowings and forward hedge. Our loan AUM grew by 10% year-on-year and 1% quarter-on-quarter to INR 38,335 crores. Our core segments grew faster at 12% year-on-year to INR 33,194 crores. Our retail loans, including consumer loans and small business finance, constituted 88% of our loan book. Our Tier 1 capital adequacy stands at 15.3% and total capital adequacy at 19.3%.A strong characteristic of our loan book is a large proportion of loans that are compliant with RBI PSL norms. About 63% of our home loans, 48% of business loans and 91% of our microfinance loans are PSL compliant. In aggregate, nearly 43% of our loans are PSL compliant. The large share of retail and PSL-compliant loans are of significant value in the current environment where we can sell down these loans to raise long-term resources. Our average cost of borrowing remained flat year-on-year and declined by 10 basis points quarter-on-quarter and stands at 9.3%.Consolidated GNPA and NNPA stood at 1.95% and 0.86% of loans, respectively. This is as compared to 2.31% and 0.97% in the previous quarter, that is in the March quarter. Provision coverage, including standard asset provision, under Ind AS norms, on stage 3 assets was 183% for the quarter. Even after excluding additional provisions made for COVID, this stands at 101% of total stage 3 assets. Return on assets for the year was 2.7% and return on equity was 19.5%, excluding impact of one-off items. A brief update on our liquidity situation. During the quarter, we raised INR 1,005 crores through term loans and refinance from bank. In addition, loans of INR 877 crores were securitized or assigned during the quarter. Cash and cash equivalents and committed credit lines from the banks and institutions of INR 3,745 crores were available as of 30th June 2020. We continue to have nil exposure to commercial paper. Our funding mix is well diversified, including 25% from NCDs, including subordinated debt and MTN; 35% from bank loans, working capital finance; 7% from NHB refinance; and 33% from securitization and assignment. We have a positive ALM whereby inflows cover or exceed expected outflows across all buckets.A brief update on COVID impact. As at the end of the quarter, 31% of our consolidated book was under moratorium. This is down from 60% as at the end of May that is a previous update to you. An additional provision of INR 194 crores was made during the quarter for possible impact due to COVID-19.Digitization and analytics. We continue to focus on digitization and analytics to improve customer experience and enable a convenient one-stop shop for customers' credit and investment needs. In addition to the one-click digital personal loans launched last quarter, we launched a one-click online top-up module for gold loans this quarter and are seeing good traction in the same. IIFL Loans app is being increasingly used for various transactions by customers and has been especially beneficial since the lockdown giving customers ease and convenience of access. We have about 1,50,000 average active users on the app for the month of June. That brings an end to the update. We will now open the floor for any questions.
[Operator Instructions] The first question is from the line of Anitha Rangan from HSBC Asset Management.
I just wanted to know if you can, first is that, give some color on, like, liquidity. In that sense, like, what is your discussions with the banks or like some market participants in terms of, like, getting, like, more financing and so on? And secondly, in terms of the, like, prospectively, asset quality, how do you see it go post moratorium? Like, we are at the end of July and perhaps at the end of August, moratorium will be withdrawn, so how do you see the situation panning out after that for each of your business segments?
So in terms of liquidity, we are -- all the banks have been more constructive, more positive after June, and now multiple windows for liquidity have opened up. Under government partial credit guarantee scheme, banks have subscribed to bonds. So we had about INR 200 crores of bond issued last week. Then, under liquidity, which is for a short duration, that window has just been opened up. There, I think proposals will be taken up this week or next week. For term loan also, we have started discussions and negotiations with the banks. For the loan assignment, I think we did one transition for about INR 800 crores. We got another through principal approval. So I think liquidity is -- as all of us know, that system -- the liquidity in the system is quite easy at this point in time. Just the flow to NBFCs is now opening up, maybe the selectively banks are opening up. I don't think that they will probably open up for all the NBFCs, but they're still -- they started discussing, they started taking our proposals and discussing the applications and looking very constructive, very positive. So I have a -- my assessment would be that liquidity has eased and will continue to ease from here on. We also have to look at interest costs going down. As of now, the divergence in AAA and AA and other papers has widened to historic highs, so the divergence has to narrow. So one has to look at reducing the interest cost as well. Secondly, asset quality. As far as we are concerned, we don't have any concern on gold loan and home loan. And if you look at -- in the month of June, our collection efficiency for home loan and microfinance both has gone up more to, beyond 75% and for gold loan, it is nearly 100%. So the only segment that one is a little cautious about is business loan, but there also there is a government scheme where you can have a top-up loan of 20% to ease the liquidity pain. And we really have to wait and watch how long the moratorium lasts. Will there be another renewal or more, and when we exit from moratorium how things are. But as I said in my opening remarks that we've been able to bring down the loan assets and the moratorium from 60% to 30% and I would think that in the next 2 to 3 months before we fully exit from moratorium, they may be further brought down to anywhere between 15% to 20%. And that is the asset where there's a risk of exiting for a moratorium and looking at quality. I don't think there will be a significant impact, it should be manageable. And we have taken a lot -- additional COVID provision in this quarter and last quarter. So that should be -- that should more than suffice.
Okay. And just one more question, if I may. Why has your AUM, like, increased in this quarter? Like, has there been, like, some additional disbursement in some sections or...
Yes, there has been disbursements. So in gold loan and home loan, both we have disbursements are picking up. They are gathering momentum. And the gold loan AUM has grown by 4% quarter-over-quarter. Home Loan AUM has grown by 1% quarter-over-quarter. Business loan has been flat, where the new disbursements are some equal to, say, what has been, run down. So -- and even within the quarter, if you look at our disbursements during the month of June, they were almost twice that of the month of May and April was almost shut, so there wasn't any disbursement in April. But I think disbursements are already -- we are seeing that they are picking up.
The next question is from the line of Love Sharma from Lombard Odier.
A few questions on the -- if you can help me understand on the first quarter, what has been the cash movement in terms of disbursements which we have done during the entire first quarter? And on the debt repayment side, scheduled and unscheduled debt repayment, which have been done? And any moratorium which was availed during this first quarter on your borrowing?
Any moratorium -- sorry, I didn't get the last part. Any moratorium?
Moratorium on your borrowing from banks, et cetera. So was there any interest that was availed this quarter?
All right. So in terms of moratorium, we had requested all the banks. So those who did not give, we are paying them on time. Almost all the public sector banks have more or less accepted the moratorium on principal. Interest is something that we are paying on time. And the other private sector banks have not accepted moratorium. That also -- whenever the installments fall due, we pay them as and when in time. So it will be Slide 17 in our presentation that basically adjust -- that is the debt payment schedule based on moratorium given or not given. So now at least picture is clear that there are certain banks that have given moratorium, some lenders have not given. Based on that, if you look at the debt obligation scenario, then -- and with the cash and bank balance that we have, an undrawn line, we have covered till February. And the Slide 18 is the ALM 2, which is based on RBI's submission that we do, but RBI, we do for standalone companies. This is a consolidated picture, which basically take a static situation that we are not going to disburse further. But -- and we are going to collect only the standard part of it and only a fixed deposit, which are encumbrance-free, we can take as liquid. So based on that also, we have a positive surplus till 5 years, and that is what we attract. So that is about the moratorium and the liquidity part of it. And in terms of fresh disbursements, what happens in gold loans -- as we have the branches opened, so people have -- many loans have been repaid and taken. So if you look at only disbursements in last quarter, they are to the tune of almost around INR 2,500 crores. But if you see the loan book, it is flat because many of these are, like you know, they are rotational actually, because in gold loan it happens a lot because typically gold loan is for 3 months, so people keep paying the loan back and there are new borrowers who take the loan. So businesses, except for Mumbai and Delhi, most other parts of the country, we are seeing that in the month of June and July things are pretty much getting back to normal. I won't call them pre-COVID level, but at least 60%, 70% of that level is happening. Like, in home loan, we had a disbursement of INR 185 crores in the month of June. And in our normal month, we'll look at INR 300 crores.
Understood. And would you be able to share what collections have you been -- have you received, let's say, in the June month? And how is the...
Our collection efficacy is what we want to collect and what we end up collecting on an aggregate basis in microfinance, which is a good news, because that is something where we were worried. In the month of June, collection efficiency was 75%. In home loan also, it's more than 75%, 76%. In gold loan, as I said, it's close to 100%. It is more than 100%, but then that covers the earlier month also. So collection efficiency in these 3 core segments has improved. And it's like -- in business loan, it's about 52%. So this is how is the collection efficiency has been. I have given you the number not for the quarter but for the month of June.
Sure. Understood. Understood. So -- okay. So is this efficiency based on the amount which is due to be collected from the customer as of that particular time or it has been adjusted for the moratorium?
No, this is a good question. Amount which was due in that month but it does not include the amount collected for previous month, but adjusted for moratorium. Thus, so whatever we bill, so supposing that your amount is due in the -- so if I include the overdues, then it may be more than 100%. But I look at it whatever is due to be paid in the month of June, out of that how much I cover -- how much I recover. So normally, what happens, this is what nonrecovery gets into 0% to 30% and that gets collected over a period of next couple of months.This is actually -- this amount what I'm telling you is not considering moratorium. So it's the -- from the total billing.
Okay. It's from the total billing. I understand. So okay. So that reflects...
So from the total billings in the month of June, our aggregate collection efficiency was 65%, which is in home loan we are 76%; business loan 53%; and microfinance 75%; CRE, which is construction and development, was lower at 30%; gold loan is 89%, but as I said that included the previous month also.
Okay. But just to be clear again so that I don't mix it up. So basically, what you mean is, let's say, for business loan, 52% efficiency would mean that if the...
No, business loan 53% efficiency would mean all the business loans how much we are collecting.
Understand. So that's basically more in comparison to the, let's say, pre-COVID level, correct?
No -- yes. Yes. So business loans we collected 53%, but because of moratorium collection is low. Pre-COVID level, if you look at the month of January, our collection in business loans was around 86%. But in all other segments, it is moving pretty close to pre-COVID level. But like in the home loan, typical efficiency would be 95% plus. But right now, we have 75% because 20%, 22% of customers would be under moratorium. But non-moratorium, it would be pretty close to pre-COVID level.
Okay. Okay. Just one last question from me. So on the moratorium you mentioned. So if I compare your slides, the liquidity table which you have on Slide 70 versus the previous quarter slide which you had shared with us, it seems like that there has not been much of a moratorium availed from banks, in total. Would you be able to share the exact amount how much has been availed?
No. Actually, a good amount has been availed in moratorium because in the previous last quarter slide, there was a blue and orange portion, which is -- so if you look at in the month of July the total due was INR 920 crores in the previous slide with -- or say in the month of July it was INR 1271 crores which is [indiscernible]. In the month of August, if you see, it was INR 1,564 crores, out of which is INR 454 crores was -- if we -- assuming that all banks give moratorium that instead of INR 454 crores, we're having INR 456 crores now. So most of the PSU banks what we had expected, they have given moratorium. There are very a few banks that have not given moratorium. But what you are seeing currently is the picture is not clear because if the moratorium is given, then the scheduling is done based on moratorium. If not, then we have taken as due on whatever day it falls due.
The next question is from the line of Amit Mantri from 2Point2.
Can you explain what is the reason for the NIM expansion that we are seeing on a quarter-on-quarter basis? Is that because of the rising share of gold loans?
Yes, because see the incremental loans are only gold loans. So if you see in the last quarter, the growth has been -- the incremental loans are only gold loan only and other components, like, have reduced a little bit. So that's the reason you see that the NIM has expanded.
Okay. And in gold loans, are the yields likely to go up further as your lending rate highest is now around 1.83%, which would be around 24% annualized? So would you continue to go up in gold loan segment?
No, no. I don't think our lending rate is at 24%. I don't know where have you got the data from.
At the branches basically when we check. They say the highest rate is 1.8%.
No, no. I think what happens in gold loan is the customer, basically based on their credit and track record they get a lower rate also. So supposing you are a gold loan customer and you've been always paying in time, then the rates can go down to 12%, 14% also. On a weighted average basis, we have 19.4%. So it will remain in this range only.
Okay. Understood. And in -- what is the outlook on the cost of funds? Has the new corporate capital that you've been raising over the last quarter and also in July coming at a lower rate than your current cost of borrowing?
So we have seen 10 basis points fall last quarter, but we expect cost to further go down. So what happened when the liquidity crisis has been there, people -- I mean, many NBFCs, like -- and we also were not really haggling or negotiating too much with the banks on interest rate. But as we go forward, I think we should be able to negotiate and bring it further down.
Okay. And what is the aggregate loan loss provisions that you are now carrying on the balance sheet, including the COVID provision?
It's 182% including COVID and without COVID it's 101%. So even if we exclude COVID, we are covering all our GNPAs with provisions other than COVID, but including the standard asset provision which is as per RBI norms.
So in rupee terms, that will be around INR 1,300 crore plus of provisions that we would have, right?
No. In rupees terms, we have about INR 700 crores -- INR 730 crores or INR 750 crores odd in that range.Okay. One second. What you're saying is right actually because INR 454 crores is our COVID provision. So put together, I think the number is right, it will be INR 1,100 crores, INR 1,200 crores, yes.
The next question is from the line of SivaKumar, K. from Unifi Capital.
Sir, you were giving the collection efficiency segment-wise. I just didn't get the number for business loans and MFI loans.
Business loan is 53% in the month of June. MFI loan is 75% in the month of June. But MFI was 0% in April, 3% in May, but June numbers are these that MFI was 75% and business loan was 53%.
Okay. But in the business loans almost 50% is under moratorium, right?
Yes. So May, the collection efficiency was only 37%. It's improved to 53% in the month of June.
No, in this sense, if already 52% of the loans are under moratorium, how can you have 55% collection efficiency?Are some of the customers under moratorium paying up?
No. So customers under moratorium, we can collect the earlier dues. So what happens is that if they were 30 60 DPD earlier, so those dues are being collected. And some of these people are also eligible for top-up loan under government guarantee scheme. So the earlier dues can be collected there. So supposing you are a customer under moratorium, you opted for moratorium this month. But supposing you had some overdue of Feb, March, you can pay that. Now that is what we try to collect.
Okay. And how much of the AUM has got to the government-related support, SME segment support?
Very -- as of now, we have not done much. It's not significant amount at all. I mean, we have about -- in terms of eligibility, we can disburse up to INR 500 crores, INR 600 crores, but that process has just started.
Okay. And would you go the full distance? You will reach INR 500 crores or the number would be very low?
Okay. The thing is that even the borrower has to agree. We can't force it. And so this is a contractual thing, both have to agree. And we should also be -- so probably maybe only a small part of that will be utilized. We'll not be able to disburse the entire thing. Some of the borrowers are not asking for it. Some of the borrowers, we may not be comfortable in giving them.
Yes, I was just wondering why would the borrower object to that because he's in the moratorium, and he definitely needs some cash flow to start the business again. And there's a government money which is coming in. Everything is favorable from a borrower point of view. Why would any borrower object to this?
So what is happening is that some of the borrowers have been paying, they have not taken moratorium also. And some of the borrowers have -- they don't want to increase their debt burden for 2 reasons, one is either they have a good liquidity or, two, they are not very confident of their business environment. So what has happened, and this is another counterintuitive phenomena, but supposing a customer says that my business is shut, it is not doing, why do I take more money at this point in time. So let it reopen, let me see how things are, then only I'll take a call on that. Because borrowers know that at the end of the day, he has to repay that money, sooner or later, along with interest. So where the businesses has not started fully, there also they don’t need money.
Got it. Got it. Sir, and among the segments, this business loan itself looks to be a very sticky one. In the sense, the decline in moratorium is the least in this particular segment. Are you approaching collections differently in this segment? What are the initiatives you have taken at your end because this seems to be the key to recover -- to improve the recoveries going forward. Any particular initiatives that you have taken at your end to address this?
No, I think it's a very good question and a valid point. So we have intensified our collection effort and we are in touch with all the borrowers. And at least, we think that it's just question of time. Most of them basically as soon as things get normal -- and maybe in this quarter, we'll see a good number of those customers coming out of moratorium or opting out of moratorium. So we have -- at this point in time, in business loans, we are not disbursing new loans much. So our sales and collections, both the teams are engaging with the customer, tracking them very carefully and trying to see that how quickly we can get them out of moratorium.
Right. Sir, and in the business loans, can you give out some sense as to how much is agriculture-related AUM? How much is dairy related, which can give us more comfort as to the recoverability of those moratorium-related loans?
Agriculture related, we don't have much of this thing. In the business loan part, sorry? Agriculture maybe rural area, maybe in part of MFI and some part of gold loans. But in business loan is all -- there is no agriculture or rural exposure there.
Okay. Someone indulging in agri-related, say, trader -- wholesale trader, who does agricultural...?
Okay. Maybe more -- the 70% plus of those loans will be secured by a property. They are LAP loans. So -- and the collateral there is basically covers us. And if you look at our -- the loan-to-value, the collateral, is at least twice. So 49% is the LTV. So there, I think we'll have support because in case of a default you can purchase -- you can get the property and recover the money. And typically, we have seen historically, when you have a loan, the collateral of property which is the good margin of safety, then your probability of loss is very low. In unsecured, we have been fairly -- and last year, more than a year, we have tightened our credit underwriting policy. So typically, we are very careful in terms of what is the debt burden ratio and what is the credit score. So if you ask me, as I said, the more than 2/3 of book is with the collateral of property and 1/3 also -- I don't expect any significant risk there.
Right. And sir, would you continue to take COVID-specific provisions in the coming quarters also? You've already built a provision of around INR 470 crores, right? So would you continue to do that over the next few quarters?
No, we don't have to. This is as per RBI guidelines. So what RBI said is that for your moratorium assets, you have to take 10% provision, 5% in March, 5% in June. So I think it's done now. So I don’t think COVID provision will be required unless RBI comes back and they extend the moratorium and they ask us. But otherwise, it will not be needed.
And from your own internal assessment, sir, this 31%, what do you think will be the final NPA that one would expect in Q2?
I think the COVID provision that we are carrying, based on RBI guidelines plus the ECL assessment, is far higher than what we will actually need. So I don't think our losses will be anywhere close to this.
Right. Sir, and my last question on the management transition...
because of COVID and -- so I think we are carrying a fairly conservative in terms of provisions. So we have very high provision coverage.
Right, sir. Sir, on the management transition, with the exit of Mr. Bali, are you looking to hire someone in the CEO role? Or would you continue in the interim?
No. I think we are not looking at hiring, so I'm continuing. As of know, I'm there in the job.
The next question is from the line of Abhiram Iyer from Deutsche CIB Center. As there is no response from the current participant, I have muted the line. The next question is from the line of Vihag Mishra from Kotak Mutual Fund. [Operator Instructions]
Congratulations, first of all, for reporting a reasonable set of numbers in this tough time. I only have 2 questions. One, I think the part that you have just highlighted about the credit cost, the cost should not be beyond the provisions that you already carry, is that understanding correct?
Yes.
Okay. And the second question is on the wholesale book. I think you just mentioned that a large proportion of this -- you are trying to put it in a fund format in which you will only invest a part of the capital. I think, initially, about 2 quarters ago, there was a timeline given. By end of December you expect this book to be moved out. Has that time line changed? And if you can throw some light on that time line that will be great?
You're saying December 2020? Okay, no, what is the timeline you're talking about?
Yes, sir, same time line. This was given about December 2020 where initial timeline was given.
So I think whatever has to be done will happen before December 2020. And -- so there are a couple of things. One is the process has been a little slow, but still for this -- I mean, we have adequate time till December 2020, but we are still engaging with funds and talking to them. But the second point which is important is that as far as our loan book is concerned, the CRE, in particular, what is happening is that the stress in real estate is not something where you can paint the entire sector with one brush because our exposure is mostly in affordable segment. And actually, contrary to normal or popular belief, the -- because people are getting conservative, so we are seeing good traction in some of the projects in the affordable segment. So like some project in Thane, even during this lockdown period, there have been good number of bookings as well as inquiries. So we are not in a desperate situation to agree to any terms and get this book out. But at the same time, given the fact that strategically we are not doing any new loans in this sector and we want to emerge as a 100% retail-oriented NBFC, we are working on this. The time lines remain the same. It depends now because the way -- so there are 2 things. One is getting terms which are fair to both sides. And secondly, as soon as things resume normalcy then people should be able to do divisions because most of these investors would like to physically see the projects or at least maybe some sample of it and negotiate the terms. Hopefully, that should get done before December 2020.
The next question is from the line of Chirag Sureka from DSP Mutual Fund.
This is Vivek here. Just a couple of questions. One around the home loan portfolio. When you say home loan, you said all retail home loans or do they include LAP also? And because of the costs, I mean, other lenders are able to reduce costs depending on the ratings and so on. Are you seeing any churn of your portfolio to other lenders, which is happening where the customer gets acquired by other NBFCs or banks?
Home loan and LAP, we report separately. If we did home loan, then it's pure home loan. Average ticket size is at INR 18.6 lakhs and that's about 1/3 of our portfolio. And the LAP is included in business loans. As I said, there are almost 2/3 of business loan will be LAP. I don't have the precise number but we can share that also. And so they are completely different. The average ticket size in LAP also is not very significant because maybe business loan is combined there. So home loan and LAP are separate. Now to the second part of your question, in COVID, we have not seen significant request for balance transfer to banks. But normally, we are competitive because our boarding yield -- I mean, as of now, our portfolio home loan is around 10%, but that comprises of mix, including the segment where we are lending at a slightly higher rate. And normally, we are fairly competitive via the banks and housing finance, although this may sound a little bit of a surprise to many analysts. But what happens in home loan, we get refinanced by NHB and we get refinanced depending on the type of loan even at at 7% or less than that also. So we can compete based on the segment. So there are home loans where we give loan at 9% or sub-9% also and there are segments where we charge 11% also. But some balance transfers happen, but there's nothing -- no extraordinary traction there. So no extraordinary movement there.
Okay. Great. Sir, one related question is that the moratorium in the home loan segment, is it like more self-employed or employed? Or is there any characteristic that emerges out of that segment?
Yes. So you're right. More self-employed people relatively have taken moratorium more as compared to salaried people. And although the self-employed percentage in total AUM has gone down to 42%, but -- and some salaried people also have taken moratorium. But relatively, it may be slightly higher in self-employed.
Okay, sir. Sir, one other question, which I have is the last question, is that are you going to be defocusing a little on your SME business going forward, in terms of -- is a more secured gold -- higher-yielding gold loan and microfinance loans and defocusing on the SME loan part? That's my last question.
I'm happy that you asked this. So I don't -- we are not defocused. But in the near term, till environment becomes very clear about the business loan -- see, today, what has happened is that everybody is uncertain about -- nobody knows what businesses will face what kind of cash flow problems and then become fully normal. So we are committed to this segment from a longer-term perspective, but there are 2 things. In the short term, the disbursement should be slow because we are cautious. And as of now, we are seeing much greater opportunity to expand gold loan followed by home loans in the affordable segment. But as things become normal, we want to do this business completely digitally, and that is what we are building our system, our back-end, our processes. But given that we have gold loan branches, and in the nearby area we have great opportunity to do this business where in a smaller ticket, INR 5 lakhs to INR 10 lakhs, we can get 18%, 19% yield and your incremental operating costs may not be significant because you use your net worth. So it's a great business from a longer-term perspective. Next 3 to 6 months, we may not do much till we are very clear on the economy and the environment.
The next question is from the line of Abhiram Iyer from Deutsche CIB Center Private Limited.
Yes, can you hear me now? Hello?
Please go ahead.
Yes. So first question that I had was on the number of employees. If you see that this is reduced by around 700 employees over the last quarter. So is this drop more permanent or is this more of a reaction to the lockdown? And how much of these would be in collections -- in the collections department?
Yes. So 700 people are comprising of all kind of people. But collection department people, I don't think we have reduced much. So what happens in our normal attrition itself is 3% to 4% in the quarter, but what we have done is that we are not hiring more. And the -- I don't think we have reduced the number of people in collection department. So that remains more or less intact. But as we digitize, I mean there are some redundancies that happen in various departments, but this is normal. So even if you see our cost -- operating cost, including manpower, has gone down by INR 45 crores in this quarter, and we are targeting INR 200 crores of cost savings in this year without impacting our capacity to lend, but this has been achieved without reducing manpower significantly. So the senior level people have taken a salary cut and that's how you see INR 17 crore reduction in the total manpower cost. And 3%, 4% is a normal attrition in the quarter. Only thing is that we have not replaced them.
Got it. Got it. The other question that I wanted to ask was with respect to the CRE loans. The average loan amount has actually increased by a lot, like from INR 28 crores in March to like INR 37 crores right now. Is that a rationale for the same? I mean is this because interest have started being capitalized -- or could you let me know why?
Sorry, come again?
So the portfolio average size -- the ticket size for CRE loans has increased from INR 28 crores to close to, like, INR 37 crores, right now, in 1 quarter. So could you let me know the rationale for that?
So I think some of the loans have got consolidated, and I don't have a precise breakup data, but I can check that. So I don't have the breakup, but I can check this, but I think some of the loans could have got consolidated.
That's okay. It's a result of consolidation. Okay.
The next question is from the line of Prasheel Shah from CapGrow Capital.
Sir, the moratorium book has, more or less, halved. So could you share if how many of your borrowers would have paid the entire -- all the installments for the past 3 months?
In terms of -- so those who have not paid 3 installments, they come as our GNPA. So if they wait for 30 days, then we will qualify them as loss nonperforming assets.
No, no, I'm saying from the moratorium book, so people who have exited the moratorium book, how many of those guys would have paid all their installments? How many would have paid partially?
So -- okay. People opting out of moratorium that's there, but there is not very significant number. I don't have the data, but I can check that out. I don't have the data at this point in time. But I know that people opting out of moratorium and paying all 3 installments, there are a few but not too many.
Okay. All right. And on Slide, basically, 17 and 18, so you said, Slide 18 was consolidated and Slide 17 was standalone. What's the difference between the 2 when it comes to the outflow?
Slide 17 is consolidated and Slide 18 is also consolidated. Slide 18 is done in the format of the ALM 2 what we submit to RBI. But when we submit to RBI, we submit for 3 entities separately. So Slide 18 is based on ALM format, ALM 2 what goes to RBI is based on that. So they have given some guidelines on how to prepare the asset/liability mismatch or matching. So there, what they say that you take a static balance sheet as if you are not going to disburse any more. And we are going to recover only the standard loans and not anything else or other recoveries are beyond 5 years. That's how you are to prepare that.And you're going to take only fixed deposit which are encumbrance-free, which are freely encashable. And then basically, you would take care of all your operating cost and operating current liabilities also. So that is how Slide 18 is done. Slide 17 is nothing but what we've done -- forget about everything else, what is our obligation, month after month after month, what we have to pay to the banks or any other lender. And based on that, what is the cash we have in hand at this point in time. So in Slide 17, we don't take any other current liabilities like rent, electricity or salaries. And at the same time, we don't take any cash flow which we will receive from even standard assets.
Okay. And then coming back to the moratorium part, so you said that home loans 76% collection efficiency was there in month of June, right?
Yes. You're right.
So if the collection efficiency -- sir, that 76% is from -- sir, does include people in moratorium or does that not include people in moratorium?
No, that's all the people, including moratorium and non-moratorium. So what is not received in mostly moratorium people.
The next question is from the line of Lakshmi Iyer from Smartkarma Network.
I have 2 questions. My first question is about Slide 6. When I compare with your previous presentation, I think that your investments have reduced by about INR 500 crores. What have you sold? That is my first question? Secondly, on the Slide 17, again, when I compare it with the previous -- with Slide 17 equivalent, I see that your liabilities have gone down by almost INR 1,000 crores, like, for example, I can understand in August you get a moratorium from the bank, so your liabilities are down by INR 700 crores, INR 800 crores. But that should not be the case for like December and November because there's not going to be any moratorium. So roughly, what you have to say, whether it was -- whether you look at it in March or whether you look at it now, should be the same? These are my 2 questions.
No -- can you repeat your first question on the Slide 6, what was it about the balance sheet?
Your investments were about INR 700 crores in March, and now they are about INR 200-odd crores. So what has gone down by about INR 500 crores?
So we had government securities which we sold off in this quarter. So in March quarter, that INR 700 crores had almost INR 500 crores of GSEC what we're holding on our balance sheet, that were liquidated.Now coming to Slide 17. When these banks are giving loan on the PCGS, they are asking us to prepay their loan for next 6 months. So what they say is that, okay, we will give you money for 3 years, but whatever is due in the next 6 months, you pay us in advance. So that is one thing that happens in this environment. And secondly, wherever, I mean, there's a moratorium that is also factored into this.
Okay. The moratorium, I can understand for August and September...
Also, what we do is sometimes our bonds -- I understand what you're saying is that, why for the Jan, Feb month. So our -- sometimes we also buyback our bonds from the open market and we extinguish them. I don't have the breakup of all the numbers, but this could be possible reasons.PSU banks when they are giving you money for 3 years, they say, next 6 months whatever is due, you pay us back immediately.
The next question is from the line of Pulkit Anand from Silverdale Capital.
So my question is about the loan loss -- sorry, not the loan loss, about the write-offs, about INR 88 crores you have written in the statement. Can you give a color on that?
Sorry, INR 88 crores is?
INR 88 crores.
Yes, yes. In the -- so -- see what happens when we do the accounting as per Ind AS, the interest stripping is netted off from the provision. So out of INR 107 crores or whatever provision that we have, INR 18 crore is the interest stripping part which gets knocked off when you see those reports, which are the results, which are as per Ind AS format submitted to Exchange. In the presentation, we include this INR INR 18 crores interest stripping in other income. This is interest strip on the secured -- assigned assets. But the only difference between other income and provisions in the results that we see as sent out to exchanges in the format and the presentation that we have.
Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.
Thank you so much. I really appreciate your time, and stay safe. And if you have any information requirement now, you can be in touch with Anup Varghese, who is the Investor Relations Manager. Thank you so much.
Thank you. On behalf of IIFL Finance Limited, that concludes today's conference. Thank you for joining us, and you may now disconnect your lines.