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IndoStar Capital Finance Ltd
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Good day, ladies and gentlemen, and a very warm welcome to the IndoStar Capital Finance Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] I now hand the conference over to Mr. Piran Engineer from Motilal Oswal Financial Services Limited. Thank you, and over to you, Piran.
Yes. Thank you, Adi, and thank you everyone. Welcome to this call. With us, we have the entire management team of IndoStar Capital Finance led by Mr. Raj Sridhar, Executive Vice Chairman and CEO. Without further ado, I would like to handover to management for opening comments, post which we can take Q&A. Over to you, sir.
Good morning to all of you, and thank you for joining the Q2 conference call. Let me give an overview first, and then we would be happy to answer your specific questions.So I consider this quarter to be very good and strong for IndoStar. So let me start with disbursements. Disbursements as you all are aware for this financial year, the entire 9 months out of 5 months have under moratorium. And there were large NBFCs which have even started disbursements during the moratorium period. But as far as IndoStar is concerned, we decided to focus on 2 things, cost reduction as well as asset quality. And in terms of restarting the disbursements, we felt unless and until we achieve the 100% collections, we would not commence disbursements. So we achieved 100% collection during the first month of this quarter, that's October, and naturally we started our disbursements in November and December. And this quarter, we have doubled the disbursements compared to what we have achieved in Q2. It is only in retail. So in Q2 we did about INR 200-odd crores. And we have done more than INR 400 crores in the Q3. And we are very confident that the run rate we are achieving in the Q4, we are definitely going to be more than 50% on disbursements compared to Q3. So the disbursements have been a very good product. We have done everything to increase our retail business in the coming quarters. The indications from the environment is very positive. As we all know the lockdown has completely now crossed and now unlocking has now started and in fact, the manufacturers are reporting good sales numbers. If you have observed during the month of January all the major truck manufacturers have reported more than 20% growth M&HCV and LCV sales. So that's a good indicator. IndoStar's focus is used commercial vehicle. As we all know, there are only very few companies present in this and gaining market share is not going to be a problem. The fillip we got is the announcement led in the budget by the Finance Minister, a long pending scrappage policy. So as we have been articulating for a really long time that the scrappage policy is now pending and the government will open it any time. So as we anticipated, from a mandatory ban, now it has been changed to voluntary and commercial vehicle which has been made for 15 years. So more than 15 years, there is a huge population, more than 1 million vehicles are there. And this is going to trigger a huge replacement demand. So from all respects, I think this is a fantastic time for IndoStar next 5 years, to gain a very huge market share in both new and used vehicle. And particularly in the used vehicles where we are going to focus, the demand -- the waste demand as well as the scrappage demand is going be phenomenal. So we have been preparing the organization to take advantage of such a potential, which is unfolding. So what we have been doing is we created first -- a top management team, as I have announced in our call, we have gotten Mr. Deep Jaggi, as Chief Business Officer, who had a very long experience and impeccable track record in building large commercial vehicle finance business in very reputed organizations like Chola and HDB. He has joined in October, and he has done a lot of work in the last 3 months. And we have created an infrastructure, and we have aspirational expansion plan. So the expansion is going to come in 3 areas. One is the geographical expansion. As you're all aware, we originally started from South. And with the acquisition of India Infolines, a commercial vehicle finance business, we gained some foothold in the market there. But considering our aspiration, we felt that we need to be an all India network company, and where we are moving towards now. So we have created a hub and spoke model. So geographical expansion is going to be one expansion, which we are going to do, and the second expansion is going to be on the product. So apart from commercial vehicle, we're also going to focus on passenger vehicles, farm equipment like tractors, construction equipment. The customer segment also, we are going to expand by not only focusing on 2 or 3 vehicle owners, but we are going to focus on up to 5 vehicle owners. So with this expansion, our potential is going to increase substantially. So we look forward to fantastic growth in our assets in the next financial year of FY '22. So coming to the collection efficiency and asset quality, we have given clearly in our investor deck, how our collections have progressed in the last 9 months. So gradually, during the moratorium, we climbed up and then reached 100% in October and our asset quality in terms of nonperforming loans have been stable. And I would say that they come down compared to the March 31. The restructuring loans are less than 5%, which is considered to be fantastic. And our -- there are some slight bucket movements are there, but we are addressing all that. With the economy opening up, most of our customers who are carrying the freight activity of essential commodities are not impacted. But there are some segments like the heavy commercial vehicle, fleet owners who are carrying industrial goods, passenger, commercial vehicles have been impacted. So apart from that everything is doing well. So we look forward to improving the collection efficiency going forward. That would be our focus. And the 2 important things, which is going to help us strategically is our partnership with ICICI Bank. We articulated in our earlier calls that we would like to put the new vehicle business in the ICICI Bank's balance sheet, so we have renegotiated the commercial terms. It has been agreed, and we have signed an agreement. So our partnership with ICICI Bank has strengthened, and it has been a fantastic strategy initiative we have taken. So with this partnership and combined with the building of our huge infrastructure over the next 5 years aspirational plan, we at one stroke have removed any uncertainty with regard to liquidity. So while we build this aspirational plan, we are also taking 2 major initiatives. One is the branch network. So we are focusing on building smart branches, which are going to be lower in size with the reduced operational expenses. So that is one which we are planning. With the insight, we have brought during the lockdown by working from home, we felt that large branches are not required. And we are also spending a lot of time and energy with digitization initiatives. So we have mandated a global consultant. And by first quarter, our complete digitization will be complete. And these 2 things, smart branches and digitization, is going to help us in enhancing the productivity as well as reducing the operating expenses. So these are all few initiatives, which we're going to strengthen our retail aspirational plan. While we grow our retail business in the next 5 years and particularly in the next 1 year, we are also simultaneously focusing on reducing our corporate lending business.As you all know, we had more than INR 5,000 crores about 2 years back time. And consciously, during the challenging time of the last 2 years, we have been able to bring it down to around INR 2,300 crores, INR 2,400 crores by actually collecting the money from our customers. And we are confident that this INR 2,300 crores also can go down to less than 10% by March 2022. So our effort continues in reducing the corporate book. So today, the mix of retail at corporate, which is some of 70-30, will come down to 90-10. So that's going to be one major initiative, which we are doing, also strengthened by the recent affirmation of AA- rating by CRISIL with a stable asset quality, which has been obtained during the most challenging time of lockdown. It helps us with the Brookfield Investment, where we have a very comfortable net capital adequacy of 35% with a very strong ALM.The liquidity pipeline is also very strong. We are actually sitting on a huge liquidity, which will get exhausted with our growth in retail business by June. But still, the liquidity pipeline has been fantastic. We have been able to generate resources from banks and institutions even during this period. And with the kind of response we are making from the banks and the institutions, we don't foresee any problem in liquidity. And as far as the cost is concerned, the cost is going down, and we have been accessing incremental borrowings below 9%, and that is pushing down our average cost. And with the transmission likely to happen during this quarter, when banks are transporting their reduced cost to us. I do feel that the gap between our average cost of funding as well as our marginal cost of funding will narrow, and it will. Today, we are slightly above 10%, but it will go down to 9% is what I see in the next 6 months. So with all these things, we do feel that overall, whatever we have been planning, like reduction of corporate book, focusing on the retail business with CV being the engine, the focus on the SME and affordable intact collection and asset quality, smart branches and digitization to enhance productivity and reducing operating, expansion in geographic product and customer segment is going to make IndoStar an emerging, strong company in the retail business going forward. So we have a very aspirational plan for the next 5 years, and we are very confident, the management team is very confident that we will be able to achieve with the environment supporting, we are very confident that our performance in the next, particularly in the next 5 quarters, is going to be fantastic. So with these initial remarks, I would request specific questions, and me and my colleagues would be very happy to answer.
[Operator Instructions] The first question is from the line of [ Radhika N ] from Mirae Asset.
I have 2 questions. If you can just give me breakup of Stage 1 and Stage 2 assets?
Amol, can you take this?
Sorry. Stage 1 and Stage 2 assets.
Yes. My colleague, Amol, will give you that.
Yes, Amol here. Radhika, around 74% of our book is in Stage 1. And the balance other than 2.8% of gross NPAs that we have, the balance is in stage 2.
In stage 1 and 2, sorry, can you just repeat?
Yes. So, stage 1 is around 74% of our book.
74%?
Yes. Another 24% will be in stage 2.
Okay. Great. Next question…
And just to add more to it. Is that we, by default, keep the restructuring book at Stage 2 as a prudent measure with an equal amount of elevated provisioning done against it.
Okay. Right. Okay. And just to clarify. So the 2.8% GNPA is the pro forma which you're expecting without the stand still, right?
Yes. We are reporting numbers without taking the Supreme Court judgment. With that, the number will be 2.1%.
So without the standstill, it would have been 2.1%?
With the standstill, it will be a lower number, which is 2.1%.
2.1%. And without that, it's 2.8%?
Correct.
Okay. And also, if you can give me the write-off amount, like there has been a decline in the GNPA numbers. So what is the reason for it?
So you will see the decline only between Q1 and Q2. That was articulated in the Q2 call because of an ARC sale. There's no write-off that we have really taken barring a few specific cases that -- which is a business as usual goal in the retail business, there's no key write-off between Q2 and Q3.
The next question is from the line of Aakash Dattani from HDFC Securities Limited.
My first question is, have we taken any interest reversals?
Yes. Amol?
I can't see any interest reversals. Due to what reason are you looking for interest reversal?
So if I look at, say, your interest income, just wanted to confirm that -- so there's no interest reversal on any potential stress that you see?
No. We haven't taken any interest reversal on any account.
Okay. And is there a one-off in your other income this quarter?
Yes, Aakash. We have done a direct assignment in our HFC of INR 100 crores. And there's a one-off income of INR 30 crores booked in the noninterest line.
All right. And what kind of, say, AUM growth are we looking at in FY '22 and beyond? Is there any -- would you look at it any differently?
As I mentioned in my initial speech, since our base is small and the potential and liquidity capital is so high, so in the initial year, at least in FY '22, you can expect that, percentage-wise, we will grow, because FY '22 is going to be a launch year for us. Using the lockdown work from home phase, we have done a lot of strategic things, as I had outlined. So this lockdown disappearing, unlocking happening, commercial vehicle cycle changing, all feel good factors are there in the environment. So we feel that all our 3 businesses, vehicles, as well as the SME and affordable housing, in terms of potential is looking up. So we are fully geared up to take advantage. So if you look at this year, we would have done about INR 1,000 crores of disbursement because majority of the period, we have not done anything. And even before March, we should exit more than the pre-COVID levels. So the next year, it could be 3x to 4x of FY '21, could be our growth in terms of retail. So in terms of percentage, one, because of very less business in '21, '22 will look very big in terms of percentage. But in our case, even in absolute terms, it will be very high.
All right. And if I may just ask a few very quick questions on the corporate book. The entire reduction in corporate GNPAs this quarter, is it because of -- is there anything written-off there?
Amol?
Aakash, as we had mentioned earlier, we are working on resolving the single NPA that we had in the corporate book. This is towards the repayments that we have received as part of the arrangement that we have worked out with a real estate developer. There's no write-off in that.
Okay. And is there any restructured corporate portfolio?
Zero restructuring in the corporate portfolio
[Operator Instructions] The next question is from the line of Jainis Chheda from Dimensional Securities.
My question is with regards to Slide #21 of your presentation, where in you have given the restructured -- restructuring snapshot. So in that, you have said that only in vehicle finance, 1.86% of accounts have restructured, but in terms of AUM, it is 4%. Similar with SME, it's 2.6%; and the AUM restructured is 4.8%. So is it like, bigger clients have restructured?
In any situation number and amount will vary.
Yes. But the difference is huge. So I just wanted to understand why such a huge difference.
See, this is -- yes, bound to be different, but there is no reason for it. It is that because of that number and amount will be different.
Yes, I agree that. So that is what, are those bigger customers, like the bigger AUM, bigger borrowers, who have been restructured?
Then what is big, I don't understand.
In terms of…
See INR 5 lakhs could be big, INR 10 lakhs could be big. When you are doing a commercial vehicle finance from small commercial vehicle to heavy commercial vehicle the amount will vary. So it is a mix. It's not that only small. It's not only big. It's a mix. But it is divided by the cost of the amount restructured divided by the total. So that is why it is. I don't think it is only because of big accounts. Some big accounts could be there.
[Operator Instructions] The next question is from the line of Prasheel Shah from CapGrow Capital.
So my first question is regarding the NIM pressure that we are seeing. So the spread, if you look at the spread, it's gone down by 170 basis points year-on-year. So I understand it will be because of the excess liquidity that we're carrying. So could you just give an indication of how much pressure would be there because of this excess liquidity?
Yes. See, we have been carrying excess liquidity due to the environment, as well as because we raised capital. So another INR 1,225 crores at cap. So we are conscious about that fact. But we are also conscious about our expansion plan. So as we are looking to grow our book in a big way in the next 5 quarters, moving to March ‘22, this will become normalized. We'll be carrying a minimum balance, which is required regulatorily as well as for the comfort of the rating agency. So that is what we would carry. So you will find that going forward, the impact of excess liquidity on our net interest margin will completely disappear. That's one. Second is, strategically, we are going to present in used vehicle financing as far as our balance sheet is concerned. So the other 2 businesses, which would be lower yielding which is new vehicle, we are going partner with ICICI and put it there. And the SME, another slightly lower yielding asset, they will be sourcing. And then that is also we'll find a way to the bank's balance sheet. So you will find that the net interest margin would be comfortable, and we are in a full growth year, like FY '22, which we are anticipating. They should be comfortable. So we are -- we should be in the range of around 7% to 8% and initially, because we have a huge capital of 35%, our net interest margins would be very, very high, initially. As and when we start using the capital, it will come and settle down around 8% is what we are looking at, and that is where it would be. But in the year, FY '21, this could be impact. And in the first quarter, we are confident that the excess liquidity impact will go.
Okay. And so like you mentioned that we are flushed with capital. So in the next few years, what's the best way we can make use of this capital adequacy that we have? Are we looking at any inorganic opportunities? Or is it just plain organic, which you are mentioning in your expansion plan?
See, we are looking to use that capital. So we have raised it with an intent that we feel there is a huge potential to grow these businesses. That's why Brookfield has partnered with us. So Brookfield had multiple options to partner with anyone. But they chose IndoStar because they felt that there is a high growth possibility here with the proven management team. So that is what they have -- so what we are trying to do is we are focusing primarily on organic growth. So that itself is going to be very, very high as I outlined earlier that because our base is low in terms of percentage, as well as quantum, it's going to be very, very high. At the same time, because of the pandemic and with the liquidity constraints, new regulation regime, which is coming in from RBI, all these things are putting pressure on moving NBFCs and housing finance companies. So there are multiple inorganic opportunities in portfolio as well as in the company. So we are looking at it, and we are open to these opportunities. If it's rectified, that would absorb our capital completely. Even if it is not, the growth will consume the capital very quickly.
And in your -- just coming to your branches, new smart branches that you are opening. So in the previous con call, you had mentioned that the new branches are much smaller and they break even in about 9 months. And earlier, it was about 18 months. So it's exactly half. So just wanted to get a sense of what exactly are these branches. Are they just smaller, which is why you were able to break even much quicker? Or is there -- and what exactly are these digitization efforts which you're taking? But just wanted to get a sense of how will that benefit us in the coming years in terms of cost-to-income and efficiency?
Yes. See, the incremental branches are going to be smart branches. So yes, we have had 700, 800 square foot branch earlier. Because of the insights we have learned from work from home in the last 7, 8 months, we have realized that there is no need for creating a big office. So moderately furnished, low cost, small-sized branches we are going to create with the digitization, which we are now underway, which will be ready by first quarter. The combination of these smart branches as well as digitalization is going to enhance the productivity. So the moment the productivity is enhanced as well as, your yield is going to be focused on used vehicles. The breakeven, as you rightly mentioned is going to be around 9 months. So that is going to push down your cost-to-income substantially. So one side, we increase the income, the other side, we reduced the operating expenses. The margin improves. So that's all outstanding.
And just a data keeping question, what's the COVID overlay as of now?
Amol?
The COVID provisions that you have over and above the standard asset provisions.
Yes, we have...
Amol, yes.
So we have around INR 255 crores of management overlay beyond our resale model, hence you find our Phase III PCR coverage at 150%.
Okay. Okay. And one last question. So if you look at the competitors in this quarter, they have shown good growth in disbursements. They have, in fact, breached pre-COVID levels. And we have not yet gone out and landed in a similar manner. So was it a conscious effort? Or what exactly is happening? Because -- and what I'm also looking at is the number of customers that you have in your CV finance. So they have been falling over the last 6 quarters, maybe even more. So what exactly is happening over there in terms of disbursement? Because they've constantly reduced customer count from right from Q1 of FY '20 to Q3 of FY '21. So what exactly is happening in there?
Even though we are in the same business, it is not appropriate to compare IndoStar with the large finance companies, because they are all 40, 50 years old. We are a new entrant. But as you said, we are competitive in the same. So there are only large 3 companies, which have meaningful presence in the commercial vehicle. And IndoStar is the fourth one which is entering. And definitely, we will gain a lot of market share going forward. But in the last 1 year, you know that we have not lent money. So there is a runoff. Apart from some customers who have short moratorium, there is a runoff. That is why you will find that, there is a runoff, which is reducing our AUM in the commercial vehicle. It is a conscious effort because some companies felt that even during lockdown they should go on and lend. It's their lookout. But as far as we are concerned, we said that once we achieve collection efficiency, then only we should go out and lend. And also, we have done a few strategic things. Like digitization initiatives, smart branch concept, bringing Deep Jaggi as Chief Business Officer, creating a hub-and-spoke model. A lot of strategic things we have done to prepare ourselves before the launch. For established companies, all these things are not there. They are just looking at the environment. They had liquidity and did it. But as far as we are concerned, we are emerging company, we are a new entrant. So we took our own time to strategize and now we are fully prepared. So now you will find from this quarter, we will be competing with the clients in all the areas in commercial vehicle. And we have also gained good market share. You will find that number of customers will increase. The AUM will also go up. Asset quality will improve substantially.
[Operator Instructions] The next question is from the line of [ Kunal ] from Mirae Asset.
So sir, my question is on the Stage 2 assets, like you mentioned, around 22%, 23% of the book is in Stage 2. And I do understand that out of that, around 3% is in the restructuring. So which are the segments from which the majority portion of this Stage 2 assets is coming?
Amol, would you like to take?
Sure, sure. So Stage 2 is a pool which keeps moving. So the intention is obviously to pull the customer back from Stage 2 to Stage 1, and 1 or 2 EMIs help us achieve that. So we don't see any particular pattern in that. Our largest book is CV. Obviously, if I look at the breakup, CV assets will be the largest component, followed by SME.
So corporate book also accounts for any Stage 2 assets within this?
A very miniscule portion and those in Jan itself, have sort of either got prepaid or pulled back in Stage 1. So nothing particular to mention on the corporate.
Okay. And my last question would be, sir, what has been the historical pattern in the Stage 2 book? And how you are seeing the current book coming out of Stage 2, maybe adhering to Stage 1 kind of book?
So Kunal, what has happened with IndoStar is that our history has been a bit checkered. So if I go product wise, you will see in the CV, we had a great organic book, and then we did an acquisition. So during that acquisition, plus COVID, there's no set pattern, we're just coming out as to how much percentage would be a Stage 2. Beyond that, for SME and HF, credit quality overall has been quite good. HFC book, is quite impeccable quality. On SME, the team has been very successful in managing the Stage 2 growth, even if a roll forward has happened, they have managed to pull it back. So overall, there's no specific pattern around it. Going forward, what we are very conscious of with a lot of efforts being on collection, and you've seen the collection efficiency numbers. This is a separate vertical that we are going to set up for collections and very confident that overall Stage 2 numbers will be far below the numbers that I told you earlier.
Okay. So you don't see any major slippages coming in from the Stage 2 going forward, right?
Yes. So right now, coming out of a pandemic, this is what the numbers are. Very confident that this will only upside as we go.
The next question is from the line of [ Abhijit ] from Sundaram Mutual Fund.
Sir, my question is also on Stage 2. What was the Stage 2 pre-COVID on a non-business or visual basis?
Yes, [ Abhijit ], I don't have the numbers immediately in front of me. But be assured that pre-COVID, the stage numbers are far lower than what I've told you at 24%.
Okay. My question, also what I was trying to understand what, see your Stage 3 -- next stage is about INR 140 crores, plus your restructuring is about INR 250-odd crores. Your management overlay provision seem to be far higher than what is actually Stage 3 plus provision requirement for restructuring. So will there be any reversals or reduction of this management overlay in Q4? Or will you continue to carry this management overlay into the next couple of quarters?
[ Abhijit ], thank you for asking the question. I just wanted to give a background. So we did this overlay when we are at Q4 of last year. At that point of time, RBI also allowed us to split that into Q4 of FY '20 and Q1 of FY '21. But we took the stance that considering the uncertainty, we took the full provision in Q4 itself. As you would have seen that provision has stayed with us over the last 9 months. Today, we are in position where we actually talked about relief. We, as a management team believe that taking a write-back will not be the best possible outcome for IndoStar. We will rather -- as the business goes, we would rather use this provision to further strengthen our positioning ratios where required. As of now, for Q4, I'm not looking at the write-back at all.
In that case, will your credit costs or provisioning requirement be lower than what we have seen in the recent past, the charge-off to the P&L so quarterly charge-off to the P&L, will it be lower than what you have seen in the recent past?
You've seen the Q3 numbers. There's no major blip there. I expect the same trend to continue in Q4 as well. Where required, if there's any specific action to be taken, where I have to dip into the management overlay, we will do that. But I don't see that coming in the retail portfolio in this quarter.
So actually, I'm confused. Under what conditions will you dip into management overlay? And what conditions will you continue to charge-off to P&L? Because INR 40, INR 50 crores of quarterly charge-offs is still on the higher side, even though you're carrying some management overlay. So my question is, why is the management so conservative? Do they continue to charge-off good amounts when they have sufficient cushion on the overlay portion. I wanted to understand specifically what is holding back the management and being so conservative?
Sure. [ Abhijit ], I'll try to answer it or happy to take it offline because it might need some deep diving for really -- to take you through the numbers. Just a quick update on Q3. When you see INR 46 crores of credit cost. One is, I wouldn't call it charge-offs because there's still provisions that we are doing, there's no major component of write-off there. Of that, you're aware that we're also resolving the corporate asset and whatever that corporate loan asset that we are resolving, any provision that was required to resolve it has already been taken in Q2. So there's no new hits coming on under Q4 on the cash credit asset side, especially on resolving that NPA. Second is the management overlay, as you're aware, has -- is to be used under strict IND AS guidance, which says that there are specific conditions that are to be met before a write-back happens. Even while creating it, there are certain amounts of strictures which are applied. It is not a number which goes without scrutiny. So the auditors and the Board also reviews this overlay. Similarly, at what point will we actually utilize it will depend on the underlying conditions that we are facing to really take that call.
The next question is from the line of Jainis Chheda from Dimensional Securities.
Yes. Just 2 quick questions. Number one, as you said, there's a new partnership agreement with ICICI Bank. So just we wanted to understand what is the whole thing? And what are the terms that have changed? And number two, the promoter holding is currently very high because of the Brookfield investment, which has to come down to 75%. So what is any guidance or comments over there?
Amol, would you like to take?
Sure, Sridhar. We -- when we said that we renegotiated terms with ICICI Bank on the lender rate, what we meant were the 2 key commercial parameters with that arrangement? One is the lending rate at which ICICI Bank charges fee for every loan that we book. That has been renegotiated downwards from the existing 10.4% to 8.6%. The second piece of the commercial agreement is the FLDG, First Loss Deposit Guarantee, that we keep with ICICI Bank. That stands at 8% today. That will move to 5%.
So 8% to 5%, that will be on the total portfolio or per account?
Incremental.
Yes.
Incremental from 1st of April 2021.
But as the lending rate is effective February 1, '21.
So no, again, on 5% incremental margin, it will be per account or on the total portfolio?
So it is always maintained at a total portfolio level. And when we say incrementally, what will happen as of March 31, if the book is 100%, we keep 8% as FLDG. Going forward, any new book that we create, it will be only 5% of the book will be kept as FLDG.
Okay. And in terms of promoter holding?
So in terms of promoter holding, a question, which is there in front of all of us. I think active steps are being taken to explore opportunities to see how best we can do it. The shareholders, obviously, are very concerned and are working towards it. But be assured that as the market improves, we'll find a way out of this. We have time till end of June to resolve this.
The next question is from the line of Prashanth Sridhar from SBI Mutual Funds.
Just got a bit confused on the provision. So what would be the total provisions you carry as on day, it's like Stage 1, 2 and 3 together?
Yes, Amol. Hello? Amol?
Sorry, my line was on mute and I kept talking. So all full provision put together, will be around – so you have to look at year 1 the full provision in terms of Stage 1, 2 and 3 together, right? You're not looking only at the Stage provisioning that we carry?
Right.
Can you hear me?
Your voice is breaking a bit, but yes.
Okay. So now I think this should be better. So it's around INR 550 crores, Prashanth.
Okay. And this includes the management overlay or the INR 255 crores over and above it?
No, it includes the management overlay.
Okay. So okay. Okay. Got it. And just another clarification. So I'm just seeing the collection, where you're saying, for the month of December, this total of INR 2,800 crores collected. How much of this would be amount not related to the billing of INR 2,000 crores?
Sridhar, you want to take this?
No, I don't mind. I don’t understand the question. Can you repeat it, please?
So I'm just looking at the December collection, where you said there's a billing of INR 2,050 crores and collection of INR 2,809 crores. So just wondering, out of the INR 2,809 crores, how much is the amount not related to the billing for that month?
See, billing is one, plus you have the overdue also, you get collected. So those take into account there are some closures will there. There could be some foreclosures are there in all the 3 businesses. That's why it's higher. So if you adjust it, it would be between billing to -- that could be around 85% to 90%.
The next question is from the line of Prasheel Shah from CapGrow Capital.
Yes. So the ICICI change that has happened. So the reduction in lending rate and the first. So that would be related to the fact that you guys moved to giving our new vehicle loans to ICICI, right?
Yes. There is nothing preventing us from doing used vehicle also.
Sorry?
We can do all the vehicle. Our intent is to do more new vehicles there and get used vehicles on the balance sheet. But they can also do used vehicle in their balance sheet.
And the reduction in the lending rate, how does that affect our spread that you are making?
It's less than our average cost. See today, 8.6%, you see a rate which ICICI is going to charge. Anything beyond that in the yield goes plus. So the spread will actually increase. That's one. Second is you have -- we are going to provide only 5%, which will be the capital we do for this. So you have an ability to leverage more. So that's why this arrangement is ROE accretive.
We will take the last question from the line of Piran Engineer from Motilal Oswal Financial Services.
Yes. So most of my questions have been answered. I just have one question. How much of ECLGs has been done so far?
Yes, you have the figure, Amol?
Yes. So most of our Q2-related disbursements, Piran, has been through ECLGs because we have not gone ahead and increased our disbursement during that period. For the number you see for Q2 for retail is predominantly the ECLGs, excluding the HFCT.
So how much that would add up to, roughly INR 200 crores?
Around INR 210 crores is what -- so we did a portion of it in October as well, around INR 225 crores will be the overall lending under that scheme.
I now hand the conference over to Mr. R Sridhar for closing comments.
So thank you, everyone, for very active participation. I hope that we have answered all your queries. If you have any more queries, you can always contact my colleagues there. Amol, CFO; as well as Salil Bawa, the Head of our IR. But as I mentioned in my initial remarks that we are fully geared up and prepared to take advantage of a huge potential which is unfolding from now. So we are excited, and we are very confident that our growth in business, as well as our asset quality, will be fantastic in the next coming quarters. Thank you very much.
Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect.