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LIC Housing Finance Ltd
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Good day, ladies and gentlemen, and a very warm welcome to the LIC Housing Finance Q2 FY '20 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference call will be for 60 minutes.I now hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you and over to you, sir.
Thank you, Ali. Hello, everybody, and welcome to this earnings call of LIC Housing Finance. From the management team, we have Mr. Siddhartha Mohanty, MD and CEO; and Mr. Sudipto Sil, CFO. I would request Mr. Mohanty to share his initial thoughts on the result, post which we'll open the floor for Q&A.Over to you, sir.
Good afternoon, and welcome to the post earnings conference call of LIC Housing Finance Limited. As you'd be knowing, LICHFL declared its Q2 FY '20 results on Saturday, 19th October. The key highlights of the results are: Revenue from operations INR 4,973 crore as against INR 4,202 crore for the corresponding quarter of the previous year, with a growth of 18%. Outstanding loan portfolio is at INR 2,03,037 crore against INR 1,77,393 crore as on September 2018, reflecting a growth of 14%. And out of this, individual loan portfolio stood at INR 1,89,351 crore as against INR 1,66,457 crore with a growth of 14%.Within the individual loan portfolio, home loan portfolio stood at INR 1,54,059 crore against INR 1,36,350 crore with a growth of 13%. Disbursements during the quarter were INR 12,173 crore as against INR 14,295 crore (sic) [ INR 14,294 crore ] for the same period in the previous year. Disbursements in the home loan segment clocked a healthy growth of 16% during the quarter and stood at INR 10,136 crore. Disbursements in the project loan, construction segments were lower at INR 445 crore against INR 2,970 crore.Net interest income for the Q2 was INR 1,213 crore against INR 1,047 crore, up by 16%. Net interest margin for the quarter were at 2.42% as against 2.41% for quarter FY '19. Profit before tax clocked a growth of 15% to INR 856.06 crore from INR 745.35 crore. Profit after tax for the quarter stood at INR 772.20 crore as against INR 573.16 crore, with a growth of 35%.Environment during the second quarter of financial year 2019-'20 continued to be quite challenging. However, considering the situation, company performed fairly on the business front, recording an overall disbursement of INR 12,173 crore, out of which individual loans disbursed was INR 10,136 crore against INR 8,739 crore for the corresponding quarter in the previous year, recording a growth of 16%.Among the regions, our Central, Southeastern and Northern regions registered good growth. On affordable housing front, under PMAY CLSS scheme, company continued to perform exceedingly well. For the half year, the company disbursed nearly 25,000 accounts, totaling INR 5,000 crore under this scheme, accounting for nearly 26% of retail disbursements in volume terms and 24% in value terms and has received a subsidy of more than INR 400 crore for the beneficiaries. In terms of growth, this segment has shown 68% growth in volume and 77% growth in value terms on a year-on-year comparison basis. Looking at this, we are very confident of significantly improving upon our last year's performance.Considering the overall market conditions, we have done lower disbursements in the project loan, construction finance, which is INR 445 crore against INR 2,970 crore. Disbursements in LAP and other non-housing has also come in lower by almost INR 1,000 crore. On the portfolio growth front, the total portfolio recorded a stable and consistent growth of 14%. Growth in the individual home loan segment registered 13% year-on-year. Pursuant to the introduction of Indian Accounting Standard, companies are required to report expected credit loss, ECL, on their loan assets and provision thereon.In terms of asset quality, there has been an increase in Stage 3 exposure at default, which has increased by 40 basis points from June '19 from 1.98% to 2.38%. This is a matter of highest priority and concern for us, and we are taking necessary action. However, we are also receiving some part payments in several accounts and are confident of recovery since the value of the underlying security is quite higher than our loan exposure. Many of the projects are either complete or nearing completion, which gives us confidence that the recovery will improve as the sales increase. As mentioned, we are [ according ] highest priority to this area across the company.Provisions under ECL has also increased from INR 1,559 crore to INR 2,195 crore (sic) [ INR 2,194 crore ] out of which Stage 3 ECL provisions has increased from INR 1,170 crore to INR 2,083 crore.On the cost of fund side, margins have remained largely stable at 2.42% as against 2.41% over the previous year and against 2.35% over June 2019. We have witnessed a reduction in incremental cost of funds by 20 basis points from 8.24% in Q1 FY '20 to 8.04% for Q2 FY '20. The funding environment and liquidity conditions remain quite favorable. During the quarter, under review, we have raised INR 10,000 crore through NCDs, INR 3,600 crore through CPs and INR 3,000 crore through public deposits in addition to bank loans.With this brief introduction, I would like to invite you for your queries. Thank you.
[Operator Instructions] The first question is from the line of Aditya Srinath from Quantum Asset Management.
There were just a couple of questions that I had. First off, in terms of the pure floating rate loans, I noticed it fell between the first and second quarter from 93% to 82%. I was just wondering what drove that? Secondly, I would like -- in terms of the INR 13,685 crore split, the project loan that we have reported, I just wanted to know what is the split between the corporate and builder book over there and the split in disbursements over there, if that would be available?
Yes. Aditya, yes, actually, in -- I mean, for the second question, mostly there's the builder loans only, builder and project finance. And disbursement figures, we have already shared -- on the opening comments that it was for the quarter INR 2,907 crores -- as against INR 2,970 crore for the previous quarter, we have only INR [ 45 ] crores.
And for the first question, sir?
See, actually, the first is, this is basically some new product which we had launched. We had an initial period, which was fixed, that is the only difference.
Okay. And would we be -- and just lastly, would we be looking at a capital raise as well within this year?
That will be taken care of -- whenever we require, our Board will take care.
The next question is from the line of Aakash Dattani from HDFC Securities.
So my first question. Could you give us the split of GNPAs between individual home loans, LAP and other products and the construction/developer finance book?
Yes. See, individual loan NPA is 1.2 -- 1.20%.
Okay. And sir, is this for home loans only?
This is individual retail home loan. And our total average under individual, it comes to 1.66%, including individual LAP and commercial, all those things if you take together, so it is 1.66%. But including project finance construction loan, it is coming to 2.38%.
Okay. That's great. Sir, and secondly, do you see also over the past couple of quarters, there has been a significant buildup in stress. While not too alarming, do you see this trend continuing?
You see, actually, now I believe since government has taken so many initiatives on both sides, on the side of supply-side of credit as well as boosting consumption demand in retail side, so I believe there will be some improvement, some positive indication will be there in coming quarters. Even during the quarter also, out of the NPA, because our NPA has gone up, you have seen. Despite that, we have recovered from the -- during the quarter some INR 40 crore from those accounts, INR 28 crore for part principal payment and INR 12 crore for interest payment. Even if we have received, but that -- those accounts still continue to be NPA as per norms That indicates builders, our borrowers, they demonstrate their intention to pay. They are making part payment means their intention is to pay.
Okay. And this is from the developer finance book you're saying, right?
It is from all. The retail and the developer is also there. If you take a developer and retail both, amount will go up. Principal will be nearly INR 38 crore and interest will be something INR 27.50 crore or INR 28 crore, total, retail and developer total together, INR 38 crore and INR 28 crore. But these are part payment. These are from NPA accounts only we have received this much amount.
Sir, and with banks now offering a lot of external benchmark linked loans, how do you see -- how will LIC Housing Finance compete? What is the outlook or strategy there?
You see actually external linking your rate to external benchmark, actually that is for banks, not yet for HFCs. But in any case, we are -- we have to operate in the ecosystem, unless my rate is competitive, I cannot compete with banks, okay? Whether linking to external benchmark or not, our rate will be competitive and looking to cost of fund being stable or going down, you'll find that we'll be there. We'll have a competitive rate. And today also, we have the most competitive rate in the market.
Okay. And sir, on cost of funds, when -- how -- could you see -- shed some light on the repricing of your borrowing in the coming year? How -- when -- how would you see that happening?
See in the next 6 months -- this is Sudipto here. From the next 6 months, that is October to March, about INR 17,500 crores of bonds are going to get redeemed, getting matured. And they are currently carrying a coupon of around 8.3. And looking at the blend, we expect that we should be able to fund them at least by 35 to 40 basis points lower.
Okay. And my last question is...
Yes. Okay. Please carry on.
Yes. Sorry. My last question was, sir, on the previous con call, there was a mention of this task force that was constituted to adjust asset quality matters in the developer book. So any progress or any insight that you all would like to share on that?
Yes, yes. We have formed a dedicated team to follow up with the builder loans, dedicated team is there. They are monitoring, and they are advised to take all action, including legal action. And they are negotiating with the builders. Even last moment, we could not get some big loan amount that which I expect in the coming days. That's why it has gone up. So dedicated team is closely monitoring each account, and our objective is to ensure that there is no further slippage at least. Whatever has been done that has to be recovered. Further slippage, how to arrest that, so they are looking into that.
The next question is from the line of Dhaval Gada from DSP Mutual Fund.
A couple of questions. First, on asset quality. Could you just give the split between gross NPA for salaried and self-employed segment? And also, gross NPAs in the top 7 cities and rest of India. Just wanted to understand what -- where is the problem.
Actually, we don't maintain that salaried or like that. But salaried class, as such, it is very negligible. Salaried class, we don't have any bad experience. Overall, you see, retail and construction finance, so there is gap. Obviously, our builder percentage is higher than individual retail. So looking to both sides, average it comes to 2.38% and -- but salaried class, there is no such -- we don't maintain such type of thing, but the experience is good.
Okay. And sir, between geographies, top 7 versus rest of India, any color there?
It is spread across.
Okay. Okay. And just, sir, one data point on asset quality. Could you give individual home loan GNPA for 2Q FY '19, the same number, 1.2 number that you gave. What was the number same period last year?
That's -- last September, the individual housing loan was 0.76.
Okay. And overall individual was 0.81.
Overall was 0.81. And now it is 1.05 for Q2, individual housing.
Sir, is it 1.2 or 1.05, sir?
1.05 is only individual. If you tell total, that will come because in individual housing loan, nonhousing individual loan, nonhousing commercial, we segregate to 3 categories under individual, then -- that is the total retail. Retail constitutes individual housing loan, nonindividual loan and nonindividual commercial.
And individual housing is 1.05.
Individual hosing is 1.05.
Okay. Understood. Understood. And just one last thing. On LAP disbursement, I missed, I joined the call late, but what was the number for this quarter, LAP disbursement?
1,592.
LAP, INR 1,000 to INR 590 crore, I think, INR 90, 92 crore -- INR 1,592 crores.
Yes. And Sudipto, just one question on number restated for the base year. What is the reason, if you have mentioned that ever?
This is which line item? Can I please...
So no -- so the loan figures for the base...
For the loan figure, there is no restatement.
No restatement.
Loan figure, outstanding loan?
Yes, yes, yes. So between...
See outstanding loan, the only restatement could be the impact of Ind AS. As you would be knowing that the outstanding loan as per Ind AS and the outstanding loan as per IGAAP, there is a slight difference. But the difference is not even 1%.
Understood. Okay. Perfect.
And now it is at par, I mean, both are comparables.
Yes.
The next question is from the line of Hardik Shah from Max Life Insurance.
Sir, a couple of questions. Sir, builder book NPAs last quarter, I believe, was around 11%. What would be that for now?
That has gone, I think, another 3% gone up.
So around 14%?
Yes. Yes. Yes.
In terms of recovery measures, have you enforced SARFAESI in any properties and...
Oh, no, no, no. [ All action ] -- some are -- we are deciding and some are ready -- SARFAESI action is already in place.
What would be the quantum of that?
Quantum, exact quantum is 50 -- 60% of the NPA amount already under SARFAESI.
Okay. And sir, what is the capital adequacy for the -- for your second quarter?
Yes. Capital adequacy, approximately, should be in the range of 12.3 to 12.5.
Okay. So is your ...
Tier 1.
Tier 1.
Tier 1. Okay. And overall?
Overall will be more than 14%.
14%. [indiscernible]
And sir, finally, in terms of ALM, how would your less than 1 year profile look like?
Sorry, can you please repeat?
ALM profile for less than 1 year?
Less than 1 year within limit, within limit, within NHB limit of 15%.
And what would be the mismatch as a percentage?
Sorry?
What would be the mismatch?
No mismatch will be -- maximum permissible is 15%, ours will be around 13-odd thereabouts.
Within 14%.
And unutilized lines for you guys?
Unutilized lines will be more than 15,000 -- INR 10,000 crores to INR 15,000 crores.
The next question is from the line of Pranay Rajani from B&K Securities.
Sir, just a few data-keeping points. If you could just provide the interest income breakup for individual and for project, I mean, the total split between individual and project?
Yes. I'll -- the interest income?
Yes.
Okay. I'll just give you the data.
Apart from this, what would be our incremental yields, I mean, product-wise, I mean, on overall basis, home loans, non...
See total interest income on individual will be, that is there in the presentation Page -- I mean, Slide #14, but I'll just repeat for your convenience. The -- just one minute -- 4,530 that is for the individual, that is for the quarter. Project will be around 380.
All right, sir. And also on the incremental yield basis, if you could share the data for product-wise, segment-wise?
Incremental yield-wise, I'm just giving you the non-annualized numbers. You can annualize them that the impact will be around 40 basis points. Separately, it is, say, for the individual retail home loans, only for pure home loans, incremental, this is around 8.84. So you can annualize that will add about 40 basis points. And for the non-home loan retail, that will be 10.5%. Builder loans will be 12.7%. Blended will be 9 point...
All right, sir. And one last question...
Blended will be 9.3.
Yes.
I'm sorry, sir?
Blended will be 9.3.
Blended will be 9.3. And also, if you could just share the net NPA number for the quarter?
Net NPA, actually, if you look at it, as of now, the net NPA figures for the NHB purpose only, we are calculating. We are not -- I mean for the provisioning purpose, it is always the figure for the ECL. The net NPL, as for the ECL Stage 3 is concerned, it is INR 2,083 crores.
The next question is from the line of Udit Kariwala from AMBIT Capital.
Sir, I had 2 questions. First is that we've seen that the corporate tax rate has gone down. And as per my understanding or as per the regulations, HFC's earning certain profits on the individual book can be parked in the -- as reserves and you don't need to pay tax on that. So what is the reason for a drastic decrease in the tax in the current quarter? And has that been done in consultation with the IT department or it's an internal call which the management has taken?
No. See, it is actually as per the [ change. I'll give you the difference. ] The tax rate which was applied in the first quarter, you're probably referring to that. The first quarter tax rates has been applied at the -- almost the full rates because it is to be prepared on the basis of the amount of anticipated profit and the rate of taxation, which comes out of that. So that was the reason for preparing the tax provision as -- on the Q1. Now in the Q2, what has happened is that there has obviously been a change in the taxation structure in terms of lower tax rate on the corporates. We will continue to get the benefit of a particular section 36(1)(viii) because that apparently is a rebate. That is what we are interpreting it. So the overall tax rate has come down and will stabilize by and large at around 21%, 22%, plus whatever surcharge is applicable.
Sir, so -- sir, correct me if I'm wrong. Sir, what we are trying to say is that...
So whatever impact has to be taken for the extra taxation, which was provided for the first quarter has already been absorbed in the second quarter.
Which is fine. But what I'm trying to understand is that for -- without the benefit of the section 36, which you mentioned, the rate has to be 33 -- around 33%. But taking the benefit, it comes to around 28%, broadly, right?
Right.
Now after the corporate taxes now reducing to 25%, the benefit will still continue or -- on the -- on that section 31?
Yes, section 36.
Earlier we are not taking this.
Or Section 36, not 31.
Yes, sorry, so that benefit continues.
That is a rebate.
Okay. Okay. And hence, you're saying, for this quarter, the tax rate is currently around 10%, right, which is because of Q1...
See that is because the 10% rate is not the applicable tax rate. 10% is because there was some extra...
Yes, 1Q you have factored it in...
Yes.
Okay. And sir, you already spelled out the delinquency numbers, but I got a little confused between the 3 numbers which were given. So if you could just give out the NPA number...
So I'll first explain. I'll just first explain, sir will give you the numbers. There are 3 different categories of loans. One is the builder loans as you are aware. The second is your home loans. And the third one is within the retail segment, there is also a segment, which is the non-home loan segment. So that is the reason 3 numbers were given. Now sir will tell you the number.
No, actually, as I told earlier, home loan total, it is coming to 1.05% NPA. And nonhousing individual, it is 2.36.
Nonhousing individual?
Individual. So overall retail coming to 1.52%, but project construction, that comes to 14.8%. So overall comes to 2.38%. That is the breakup of our NPA segment-wise.
Okay. Okay. So the housing loan you're saying is around 1 point...
[ 1.105, ] yes, yes.
Okay, which is the core housing book, there is...
Core housing [ fee ] or pure housing, yes.
Yes.
And within that also, if you see, our experience in, particularly affordable, Pradhan Mantri Awas Yojana, NPA is almost nil, 0.07%. So that is the area we are focusing now.
Okay. And just one follow-up on this. So if I just break the numbers, then the delinquency in the LAP book has gone up in this quarter, right?
No, it has not gone up significantly. It was around 2.2-ish in Q2. From there, it has gone up to 2.36.
The next question is from the line of Kunal Shah from Edelweiss.
Yes. Again, coming up on tax. So was there any DTA markdown during the quarter? Or because we had DTA in our books and most of the financial companies have marked it down, so has there been any adjustment on that count?
See there was also a provision of DTL in our book, deferred tax liability.
No, on a net basis -- on a net basis, there were still deferred tax asset impact.
Yes. That has -- that impact has been absorbed already.
No, sir, that should have been round about INR 150-odd crores. So how much was the impact in this quarter?
No, what I understand is that the full impact has been already absorbed.
It's already taken.
No, if you can quantify the amount.
The amount, exactly, I'm not having right now, but the full impact has been already absorbed.
Okay. So entire...
Because we have to also see from the DTL, deferred tax liability, which was there. So the -- further creation of deferred tax liability under ECL is not required. So you have to also compute -- you have to also compare that aspect.
Okay. But whatever was around, it is largely taken care of in this quarter?
Yes.
Yes.
Okay. And secondly, in terms of Stage 2, so despite the Stage 3 moving up, we have seen Stage 2 being there at 4.74-odd percent. So going forward, do we see similar kind of run rate even in the Stage 3 because finally it flows largely from Stage 2 and there is no change as such. So maybe 30, 40 bps kind of an increase, should that be the expectation going forward as well? Or how different is this Stage 2 from what it was there in the Q1?
Actually, I see some improvement will be there. There won't be much NPAs from Stage 2 to Stage 3. But let us see because there are some cases where we were to get at the last moment we could not get, some of these accounts that could have been out of NPA, but somehow that could not materialize. But as I told earlier, we have received a good amount, principal INR 37.5 crore and interest INR 27.5 crore from this NPA accounts. So there, I don't think there will be much NPAs from Stage 2 to Stage 3.
Some payment is still coming. Even in the NPA accounts, we have just captured the NPA account details about whatever accounts were NPA as on 30th of June. Within that also, within -- during the last 90 days, we have received about INR 64 crores total, including INR 37 crores of principal plus interest of around INR 27 crores. That is only for the quarter. Similarly, whatever has been categorized in Stage 2 also there are some payments which are coming. It may not be full payment, but part payment is coming. So that gives some confidence that at least the payment cycle has not completely got stopped. In fact, in the retail segment, we can share that about 2,000 accounts which were NPA as on -- out of total number of retail accounts, which were NPA as on 30th of June, there were 2,000 accounts which have made payments.
Out of?
Out of the NPAs, which was there in the -- as of 30th of June, so roughly around 20%, 25% of the accounts have started making payments also.
Okay, okay. And overall, when we look at the deterioration which is there, maybe almost like 15% of the developer pool, 1.5% of the individual side, definitely, it seems to be much...
1.05.
Individual.
No, overall individual...
[indiscernible]
[indiscernible] loan and the non-home loan that is 1.52%. And in fact, like when I look at given like the pure home loan that is also upwards of 1-odd percent. So what is the reason? Maybe I think is it -- so maybe when we look at most of the other players, in fact, they are at a much lower level. So was it like the conservative approach, upfronting of most of the stress in the book, and we are more or less done with, wherein say the other players will catch up? Or maybe this was largely because of the underwriting or specific geographies wherein we were present, which is leading to this kind of maybe higher GNPLs compared to the peers?
No, you can see current business pattern, actually, this builder book has gone down. There is significant degrowth in builder loan in the current year. These are loans which were given earlier. And looking to overall scenario, sales has gone slow. So some of the projects, they are at final stage of construction, but they are not able to complete and hand over the projects. Some of the projects are 80%, 90% complete. So overall, if you see, these are the problems. But looking to present initiatives by the system, government, banks and everything now credit flow is there, so I am hopeful at least that will help in easing out the present position. And festive season sale will also increase. So let us see in the coming third quarter some improvement will be there.
No, sir, main question is on the retail side, which is much higher than...
Retail is -- retail particularly, within retail affordable segment, we are focusing in retail not high end or premium, we are focusing on affordable. So that is doing very well.
No, but something like under construction, wherein we are seeing more GNPLs flowing for us compared to the peers? Is it largely because of that even on the LAP side or maybe the non-housing, there has been increase. So what is leading to overall rise and being much higher than the industry average?
See we cannot comment about that as far as the other competitors, et cetera, what you just mentioned some time back. But if you see the whole retail home loans, if you look at the quality and the, I would say, the nature of the loans with a very low LTV, this is mostly in the nature of delays as far as the home loans are concerned. Under construction does not impact LAP.
Yes, but on retail home loan, it would.
It does to some extent, but it is not such a problem because at the end of the day for a retail home loan customer what is more important is his individual CIBIL score, which will get impacted if he stops payment for whatever reason.
No, but what would be the proportion for us to under construction on the retail side home loan?
No, the exact -- it is not immediately available, but generally, over the last 3, 4 years what we have seen, the share of under construction has been coming down because of some kind of uncertainty related to completion of projects. And steadily, the customers' preference towards occupying readymade or ready-to-move-in, that has increased steadily, and it has not happened a couple of quarters, it has been happening for the last 3 to 4 years. So the share of customers opting for ready-to-move-in has increased significantly in the last 3 to 4 years. And if you see in the last couple of years, the rate of new launches have also been coming down.
Okay. And lastly, in terms of the rise in the corporate or maybe the developer book. If you can just give some color on it in terms of the number of accounts, whether this has flown purely from the Stage 2 to Stage 3? And how has been the behavior of this portfolio maybe? Was it like over last 3 months, wherein we saw this deterioration or it was maybe the stress over last 6, 9 months?
See actually, it was the movement from Stage 2 to Stage 3. So Stage 2 means that already, probably they were in the 30 to 90 days basket already. So that 30 to 90 days has now moved on to a Stage 3, which is more than 90 days. And in the interim period, maybe a couple of months have added. So it's last 3 to 4 months. Number of accounts would have been around 4 to 5, which would have contributed predominantly.
Okay, okay. And any specific region or it is in general everywhere?
No. It is across.
[Operator Instructions] The next question is from the line of Hardik Shah from Max Life insurance.
Sir, what portion of the builder book would be under moratorium today?
4 -- I think, 4...
30 to 40.
Yes, 30 to 40 accounts.
30 to 40...
In terms of percentage of the book.
Percentage, 30 -- 35%, 36%, within 40%.
And this moratorium would be over how much period?
Generally, between 12 to 18 months.
So for that 12 to 18 months?
Yes.
12 to 18 months, generally.
The next question is from the line of Mohit Mangal from CRISIL.
Sir, I was just looking at your presentation and I found that the bank in the overall borrowing mix has increased from 13.65% to 15.46%, and there is also a benefit in terms of weighted average cost on it for about 20, 25 basis point. So do we see this trend going forward, wherein we use bank as a major funding source for the company?
Yes, it will be one of the important sources. And certainly, what we will be focusing upon is to see wherever we can get the best...
Best rate.
pricing and within the ALM requirement. So bank funding incrementally has been increased, but the rate of -- the cost of funds there also will be coming down, as you would be knowing that most of the banks have been reducing their NPLs. So that presents us a slight opportunity in reduction of cost also.
The next question is from the line of [ Sagar Shah ] from [ Alphaline Wealth. ]
My questions have been answered. There's just one actually...
Sagar, you're not audible.
Can you please speak louder?
Yes. Hello, can you hear me now?
Yes. Yes. Yes.
Yes.
Yes. My first question is, can you give me a geographic diversification of your loans, please, sir?
Yes. You can refer to one of the presentations, where we have mentioned in one of the slides that we -- there are -- the definitions we have given is metro versus nonmetro. If you look at the metro versus nonmetro, that is on Page -- Slide #9.
Yes, in top 7 cities...
Top 7, that is basically metro. Top 7 cities is Mumbai MMR region, NCR, Bangalore, Chennai, Hyderabad, Pune and Kolkata. That contributes 44% current year's disbursements and the balance 56% from all other cities.
From the non others, okay. My second question is a follow-up for the -- actually the Phase 1. The Stage 2, as you're referring to 4.74% of your total loans actually, the Stage 2 loans exposure at default. So what -- how confident are you on that percentage of your portfolio to not to slip to the Stage 3.
No, as we mentioned, see, payments are coming. Payments are coming, but the fact is that, as far as the builder loan is concerned, which comprises a major portion of the incremental NPLs in the last maybe 1 year or so, there the sales have been coming down, sales have reported slower. So we expect that once the sales position improves, there is an improvement not only in the stage 2 but also in the stage 3. Whatever sales are happening, the money comes to us. But the sales which were happening at a particular rate per month, that has come down significantly in the last maybe 2 to 3 quarters.
So how much percentage of the builder loans is from stage 2?
Stage 2 -- let me just -- stage 2, about maybe INR 400 crores will be stage 2.
INR 400 crores?
Yes, INR 400 crores to INR 500 crores.
Okay. And from the developer loans of the total developer book, how much percentage is actually kind of a project loans? How much percentage of that projects is 50% or below constructed actual in your total book?
Around 50% completed.
Can you please repeat your query?
These are all of the 50%, 70%...
Of your total project loans, what percentage is 50% of less construction is being done?
More than 50%, 60%.
More than -- [Foreign Language] it will be more than 50%, 60%, when the construction is ahead of 50%. Whatever disbursement you would have made in the last maybe 1 year or so, obviously, the -- for those projects, the -- our exposure will also be at the stage of this construction.
[ Consequently our ] construction mix.
Our disbursement in the stage of construction mix. And there, obviously, whatever we have disbursed recently, the stage of construction will be initial.
Okay. So currently, you're focusing more as subsidies, you are focusing more on the affordable housing [ party PMAY Yojana. ]
Yes, yes.
So going ahead, are we going to see disbursements more in that field itself because for the last 1 year LIC Housing Finance the gross NPAs have been inching more -- have been inching up, moving up actually every quarter-over-quarter and building loans only, that's why. So it doesn't make any sense for the company to move ahead in that segment, especially in this kind of environment.
When you're talking about affordable, obviously we'll focus on affordable and the PMAY because there you see asset quality is far, far better, superior, experience is good. But that does not mean [Foreign Language] if good projects come, particularly projects which cater to this segment, projects which cater to affordable housing, projects which are under PMAY, those also we'll be definitely funding those projects, good projects because more [indiscernible].
But that won't be in the -- okay. But that won't be in the -- those PMAY projects, I guess, they won't be in the metro cities, right?
No. Those are in metro cities only. Yes, yes, yes, we are, in fact, metro cities, PMAYs are there, outskirt of metropolis, those are there. And they get also some incentive. Developer also get some incentive from the government, some tax rebates, those things are there if that is registered under PMAY.
So if that is the case, can we expect at least the ECL [ statutory ] from 2.38% to at least below 2% in FY '20 or maybe in FY '21?
Yes, definitely. Definitely, that position will improve.
The next question is from the line of Rakhi Prasad from Alder Capital.
I wanted to get a sense more about the builder book in terms of the split between metro and nonmetro cities, and also how the NPA for the builder book has split between metro and nonmetro cities.
Actually, internal builder book is spread across the 7 cities, 7 top cities. And our experience is across all the cities. We cannot say the particular region has more NPA or particular region has less NPA. Our experience is mixed across.
So any -- and Bombay, Mumbai and Delhi, would that proportion be larger amongst the top 7?
Yes. Proportionally, everywhere it is there.
It's equally spread across the...
Yes, yes, yes.
Okay. So then all these NPAs are sitting in these top 7 cities then?
Yes, yes, yes.
Equally spread?
Equally I cannot say. There will be variation but it is spread.
The next question is from the line of [ Gaurav Kochar ] from Mirae Asset.
Hello? Can you hear me?
Yes. Yes, please.
Yes. Just one question on your stage 2 assets, which was disclosed in June, which was around 4.74% of the book and still stands at 4.74% of the book. And you said, sir, correct me if I'm wrong, about INR 500 crores of the project loans form part of this. So if I deduct that amount, then the remaining would come from individual home and LAP side, if I'm not wrong.
Yes.
So -- which means that roughly around 4.5% sort of stage 2 assets come from your individual home loans and LAP.
Yes.
Around 4 point something, yes.
That's a very high number if you consider the NPA. NPA stage 3 is only 1%, 1.5%. Your Stage 2 asset, it's 4.5% of the total.
So that is okay. Then there is nothing wrong in that because, obviously, as we mentioned, majority of the accounts in the retail, especially in the home loans, are in the nature of dealers, and that has always been the case. Right now we are disclosing stage 1, stage 2, stage 3 separately because this account, this segment, which was more than 30 days and less than 90 days, that has always been in this.
Okay. Because if I look at the previous, right, in June 2018, that number was 3.83%.
Yes.
It was 4.16% in the last September.
Yes. Yes, that number...
Total.
And that included the project loans also.
Right. So you're saying the individual home loan experience has been similar?
Yes.
We do.
Why are you confident that this number would not...
Just in consistence. We didn't say it's similar, but it is consistent.
Okay. So you're reasonably confident that this won't slip into stage 3 assets in the near future?
Yes. For example, in December 2018, the Stage 2 asset overall was 4.93%. So today, if you see, as compared to December, the stage 2 has actually come down to 4.73%. So it has been in that range.
Okay. And any reason for your provision? ECL provision on stage 2 assets has gone down from INR 129-odd crore in last quarter to INR 82 crores in the quarter...
The ECL provision is a formula designed kind of a number which comes out depending upon the expected credit loss in a specific segment. So when a particular asset has been considered, so for example, in the stage 3, to get moved from stage -- that particular lumpy asset has moved from stage 2 to stage 3, then obviously it will not be required in stage 2.
The next question is from the line of Nischint Chawathe from Kotak Securities.
Am I audible?
Yes.
So just one question, and this pertains to really the disbursement figure. I guess your retail disbursement or retail individual home loan disbursement was in single digits. I think my math was up around [ 3%, 7% ]. So I'm just curious as to what is -- what are your thoughts or your -- when does it really pick up?
No, no. Individual home loan disbursement is not in single-digit, Nischint. Individual home loans disbursement for the quarter, if you're asking, INR 10,136 crore as against INR 8,739 crores, and it is 15.9%, around 16%. Maybe you are looking at including the LAP.Including the LAP, obviously, as we mentioned in our opening comments, what our MD mentioned in the opening comments, the LAP disbursements are almost INR 1,000 crores lower as compared to Q2 of last year. So if you add these 2, then yes, what you're saying is right. But I'm talking only home loans. Home loans, there is a 16% growth.
The next question is from the line of Piran Engineer from Motilal Oswal. As there is no response, we move to the next question from the line of Devesh Kayal from Carnelian Capital.
Yes. What is your provision -- cumulative provision you have provided May till now on the loan book?
So the total is INR 2,083 crores.
The next question is from the line of Umang Shah from HSBC Securities.
Just wanted to know, so if you look at our bank borrowing weighted average cost, we have seen quite a bit reduction in the weighted average cost of fund, but the similar fall doesn't reflect in our NCD borrowings. Has it to do something with our older borrowings?
Obviously, these are old...
Yes. Obviously, [ where ] the bank borrowing is a floating borrowing.
It is obvious.
So as and when the MCLRs have reduced or whenever we have been able to negotiate, it has come down. But NCDs are fixed-rate borrowings. So NCD overall borrowing cost will come down as and when [ view ] in future of funds come in at a lower rate and also the existing book, which matures, the number which we have shared a few minutes back. When that runs off and that gets replaced, you will see a benefit there also.
So basically, over the next 2 to 3 quarters, we should see some sort of -- some meaningful reduction in the NCD borrowing cost?
Yes, yes, yes.
Definitely.
It is happening even as we speak. It is happening even further -- just to give you an example of the movement which has happened since last year around this time, that is October 2018, say, a 10-year paper would have been placed at upside of 9%. Today, if we do it, it will be around 8%. Similarly, for a shorter-end paper, maybe 2-years paper, would have been placed at -- in the ballpark of 9.2% to 9.6%, that was an inverted yield curve. Today, it will be almost 200 basis points cheaper.
Okay. Understood. That's helpful. Second question was regarding one of the result notes mentions about inspection report for 2017-'18 received from NHB. Any specific observations? Or it's just business as usual?
It's a general inspection. Every...
No. It is a normal inspection, normal. Every year, it happens.
Every year, they do inspection, and they have their observations maybe.
Okay. Just last data point which I wanted to confirm. So LAP disbursements were at about INR 1,590-odd crores this quarter versus INR 2,500-odd crores in the previous year?
Correct.
Okay. And our steady-state tax rate should be now closer to about 25%, so 22% plus the surcharge?
Yes, surcharge.
The next question is from the line of Abhijit Tibrewal from ICICI Securities.
Just had a couple of questions. So one thing is, I'm seeing our intangible assets have gone up materially. Is it because of that Ind AS 116...
Yes.
Right-to-use asset?
Yes.
Yes.
Okay. All right. Sir, something that you talk about on the secured floating rate loans coming down to 82% because of the new product that we have. I'm guessing it's a semi-fixed kind of a product, right?
Yes. Correct.
So for how many years is it fixed? And...
So it's a short period, 6 months.
6 months.
Okay. All right. And sir, I mean, what I'm noticing is, I mean, our processing fees, which includes the fee and commission income, they've been coming down. So I mean, what I'm seeing on your website as well, we've been raising up the processing fees, right?
No, not necessarily. See actually, the processing fee waivers only may be for specific sales promotion activities like a festival of our often exhibition, et cetera. Fee collection has increased, but the accounting of the fees post the introduction of Ind AS changed. Now it will -- it's only the unamortized portion of the fees will be reflected as fees and commission, everything else will be categorized along with the -- for the assets in an effective interest rate methodology.
Okay. And sir, sorry to bother you again on the taxation bit, I just wanted to understand. I mean if we look at H1, our blended tax rate comes to about 18.5%. And when I look at your balance sheet, there are no...
Reflecting on what?
I mean if I take your PBT and the tax rate.
For the PBT, you have to add back the provision.
Right. Okay. All right. So I mean just -- okay. I mean even if I were to add that back, this another thing that I had is, we had no DTLs as on March 31, right, in the balance sheet?
DT?
DTLs. There were no DTLS as on 31st March in the balance sheet.
DTL?
DTL, right. So I mean -- so whatever DTAs that we had on the balance sheet, they were supposed to be, in fact, down, I mean, after the new taxation comes in. So how is it that we got a benefit? I mean what I'm trying to understand here is if that was...
[ That benefit was because ] of different issues. There are 2 different issues. One thing is that the benefit, what benefit -- I mean the benefit actually is the reduced tax rate. You should not look at it as a benefit. It is only because of the reduced tax rate and also because we had actually provided much higher and much higher tax rate in the first quarter. So that is what is getting set off. And whatever impact of DTA had to be taken has been taken. So it is net of that. It is not that the DTA impact has not been passed [indiscernible].
Okay. So you mean the entire DTA impact has been done away with in Q2? There will be no further impact in the rest of the financial year?
Yes.
We will take the last 2 questions. The next question will be from the line of Deepak Poddar from Sapphire Capital.
So sir, in your remarks, you had mentioned that your NCD borrowing cost was going down. Even your cost of fund, you expect to come down. So do you expect your NIMs to improve? If yes, at around what levels? And given your NPL levels are elevated, and -- so any sort of credit cost outlook you want to share?
So as far as the margin visibility is concerned, we are at -- in the previous call also we had said that margins will be stable with a slight positive bias. We would, by and large, like to maintain the same outlook, of course, assuming that the overall interest rate scenario in the economy remains wherever it is today. If there is any major change, then, obviously, to that extent, we stand corrected. As far as the credit cost is concerned, there also -- there is some stability. First 2 quarters, we have seen more or less in the same trajectory.
So I think this quarter, it was about 0.6%, 0.53% around?
Yes. And Q1 also, it was by and large similar.
So this is what we might be -- going forward, we might be expecting.
Yes.
Understood. And then my second question is related to your AUM. Now you mentioned that you do expect some business environment to kind of ease out. So in spite of challenging environment, we are seeing a 15% kind of a growth on a Y-o-Y basis. So do we expect that to kind of accelerate as you go into second half, and you expect the environment to...
Yes, yes, yes. We are very much hopeful.
So around...
There will be growth. Our effort will be to continue the growth rate which you are seeing today. Our effort will be to continue that growth rate for the year.
We will take the last question from the line of Jignesh Shial from Emkay Global.
Hello?
Jignesh, you are not audible.
Yes. Sorry. Is it better now?
Yes.
Just -- most of the things have already been answered. But just reconfirming it on one, on this individual interest income, you say it is INR 4,530 crores, is it correct for the quarter?
Yes.
And what will be the same amount for the last year, same quarter, Q2 FY '19?
Just hold on. For the Q1 of -- Q2 of last year, it's INR 3,917 crores.
INR 3,917 crores, right?
Yes.
Okay. And secondly, there were a lot of confusions around -- with your -- with the individual gross NPA numbers and all, but just total summing up, the right now number would be 1.52%, the gross NPA individual, combined, altogether? Is it correct?
Yes. NPA combined.
Combined altogether. Yes.
Which was 1.25% last quarter?
Yes. 1.26%, I think.
Yes. And 0.81% in Q2 FY '19, am I saying that number correct?
Yes.
And your -- by that calculation, your corporate or your developer book NPA goes to 14.28%.
Correct.
Is that correct, against 11.8% last quarter?
Yes.
Is my calculations correct, yes?
Yes, yes.
Okay. And just the spread for this quarter would have improved by around 10 bps. So it should be around 10 -- 2.28% to 2.29%. Is my calculation roughly correct?
Yes. Sequentially, there's been an improvement.
Approximately 10 bps sort of, and this will continue, as you already mentioned, close to INR 15,000 crores with inflation.
Even better.
Will maintain.
With INR 17,500 crores getting -- bonds getting matured at a coupon of 8.3%, this should improve further.
Some improvement is there.
That was the last question. I now hand the conference over to the management for their closing comments.
So I thank all the participants. And I'm very much hopeful in the coming quarter, company will definitely improve in all parameters and whatever challenges are there. I can assure we are meeting the challenges very, very effectively, and there will be improvement on certain fronts which is now visible. So with that, I assure all my investors to have confidence in the company. Thank you. Happy Diwali to all.
Thank you. Ladies and gentlemen, on behalf of Axis Capital, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.