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LIC Housing Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Q2 FY '22 Earnings Conference Call of LIC Housing Finance hosted by Axis Capital Limited. [Operator Instructions] There will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Mr. Praveen Agarwal from Axis Capital. Thank you and over to you sir.
Thank you, Stephen. Good morning, everyone, and we welcome the management of LIC Housing on this call. We have with us Mr. Y. Viswanatha Gowd, MD and CEO; and Mr. Sudipto Sil, CFO, to take us over through the results. Mr. Gowd, we'll request you to share your key highlights for the quarter gone by. And thereafter, we'll open the floor for Q&A. Over to you, Mr. Gowd.
Thank you. Thank you, Praveen. Thank you. Thank you. Very, very good morning to every one of you, and I welcome to this post earnings investor call of LIC Housing Finance Limited. As you are aware, LICHFL declared the Q2 FY '22 results yesterday. Before beginning, I wish you and your near and dear ones a very, very good health and safety. With gradual improvement in the pandemic situation and increased pace of vaccinations, it is heartening to note that normalcy is returning to our lives, which is also reflective of the pickup in business activities and the economic growth. With the greater relaxation of restrictions, sentiments have also improved very significantly.It is in this backdrop that our business was conducted in the Q2 of FY '22. The key highlights of this quarterly results are as follows. The total revenue from operations, INR 4,700 crores against INR 4,969 crores for the corresponding quarter of the previous year, with a decline of 5.25%. Outstanding loan portfolio stood at INR 2 lakhs 37,660 crores against INR 2 lakhs 13,349 crores as on 30th September 2020. It is reflecting a growth of 11%, out of which Individual Home Loans have reported a growth of 15%. And now it comprises a little more than 79% of the total portfolio. It is up from 76% a year ago.The total disbursement for the quarter was INR 16,110 crores. Out of that, the disbursements in the Individual Home Loans were INR 14,330 crores against INR 10,373 crores with a growth of 38%. Disbursements in Project loans were INR 353 crores.The net interest income for the quarter was at INR 1,173 crores as against INR 1,238 crores. Net interest margins for the Q2 FY '22 stood at 2% as against 2.2% for the Q1 of FY '22.Profit before tax for the quarter stood at INR 308.95 crores as against INR 1,009.26 crores. Profit after tax for the quarter stood at INR 247.86 crores as against INR 790.90 crore for the same period previous year.Loan disbursements during the quarter was extremely robust with total disbursement at INR 16,110 crores, recording a growth of 29%. Individual Home Loans too continued its strong growth and posted INR 14,330 crores against INR 10,373 crores in the Q2 of FY '21, a growth of 38%. Growth was uniformly spread across all geographies and across both large and smaller centers, especially Tier 2, Tier 3. It is extremely encouraging to note that we have achieved 132% of the pre COVID levels in terms of our Q2 disbursements when we compare it with Q2 of '19-'20.On the portfolio growth front, the total portfolio record a growth of 11%, and now it stands at INR 2 lakhs 37,660 crores. With increased focus on the home loan segment, the growth recorded in the home loan portfolio was at 15% for the quarter.In terms of asset quality, Stage 3 exposure at default as on 30th September 2021, stood at 5.14% as against 5.93% as on 30th June 2021. In our earlier interaction with you after Q1 results, we had assured our stakeholders that we strongly believe that the peak has been marked and subsequently asset quality would improve. It is very much heartening to note that Stage 3 assets have declined by over INR 1,500 crores from Q1 of FY '22 levels on account of strong effort put in by all the concerned. We have now a very strong confidence and conviction that the coming quarters will show greater improvements. This quarter, despite a reduction in Stage 3 assets, the provisions have been increased to reflect higher PCR. Total provisions as on 30th September 2021 stood at INR 5,354.9 crores, reflecting a provisioning covering ratio of 43.72 on Stage 3. It is up almost by 9.72% as of June 2021. OTR during this quarter stood at INR 2,141 crores, lower than Q1 figure of INR 2,350 crores. We have been very closely focusing on the collection efficiency. That has also shown improvement and now stands at 99% for regular accounts, the highest since the pandemic broke out in March 2020.On the funding side, we have witnessed a reduction in the overall cost of funds by 12 basis points during the Q2 FY '22 despite a hardening in the bond yields during the same period. Incremental cost of funds has come down by 13 basis points and stood at 4.9% for Q2 of FY '22. Net interest margins for the quarter stood at 2% as against 2.2% over the last quarter, the decline being attributable due to income reversals on OTR accounts.Then incremental spreads continued to remain at healthy levels and stood at over 230 basis points during the 6 months ended 30th September. During this quarter, the company completed the peripheral ratio of equity to its promoters, LIC of India, amounting to INR 2,335 crores. This will add to the Tier 1 capital of the company. During the quarter, the company also tied up to the India Post and Payments Bank for distribution of its home loan products.With this brief introduction, I would like to invite you for your queries. Thank you very much.
[Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal.
Sir, I have 2 questions. The first one is on your NIMs. So you reported a 20 basis point Q-o-Q decline and, sir, also suggested that these were income reversals on OTR accounts. So if you can kind of briefly explain why these income reversals on OTR accounts, what was the nature of this restructuring which warrant income reversals? And what was the quantum of income reversals that we have taken during the quarter?
Can you come up with the second query, so we can address both them together?
Yes, sir. Sir, maybe in the next two weeks, I mean, now, I mean I understand we kind of discussed during the last earnings call as well that I mean, employee expenses will go up. But what is the nature or what is the run rate of employee expenses that we can kind of expect going ahead?And lastly, on your provisions during the quarter, while we highlight that our Stage 3 numbers have actually kind of improved on a Q-o-Q basis. But what is it that kind of warrants increase in provision covered? I understand we used to run a high provision cover during the past quarter. But sir, why I asked this question is, I mean, during every earnings call, when we kind of ask you, I mean, we typically get to understand that based on your assessment at that point in time, the provisions were adequate. But what has changed, I mean, during this quarter that, I mean, you think that, I mean, there is a need to improve the PCR while, I mean, asset quality has actually improved? Or should we think of it like base that because we are still working on that preferential equity capital base, we were not able to kind of take provisions and which we've taken during this quarter?
No. One thing just I would like to -- I think your questions were -- 2, 3 questions were there. As far as the provisioning is concerned, I'd like to clarify you that every quarter, of course, last year -- last quarter, if you see the provisions were higher side, maybe around more than INR 800 crores. This quarter, it is slightly less to INR 600 crores. Here, what happened, the OTRs especially, where our OTR is nearly 3.5%, almost 4%, it is more than 3% of our loan book side if you look into that. And mostly now in this quarter, it has happened on the retail segment.So nearly INR 2,000 crores were added this year actually this quarter compared to earlier quarters. It has come down, but overall, the provisioning of even 3% and 10% minimum required to be made on the whole OTR thing. And moreover, the Stage 3 OTR were taken care of full. So that what happened, we are adequately provided for, so no need to have any what we call future any some sort of what we call uncertainty.So our now -- NPAs now, we're very comfortable that compared to last quarter, the -- actually, what we call the NPA amounts have come down by more than INR 1,500 crores if you look at it in the retail segment itself. And in the project -- in the -- mainly, in the developer side, our loan book is only 6% and odd. So there what happened more or less not much of addition to the NPAs up there.So we are very comfortable now as far as the -- what we call the asset quality is concerned. Last time also, we told you very clearly that the worst was behind us. The -- similarly now it has been proved that, yes, the recovery now we have improved. And then our teams are still under what we call improvising our -- even all the levels at our collection efficiency also.Now if you look at the regular cases where our collection efficiency is more than 99% also. So I'm very sure that the provisions what we have made are adequate enough so that what happened the provision covering ratio also will be more than 43% now. And then as far as the other 2 items are concerned, I think CFO will tell you.
Yes. Yes, Abhishek (sic) [ Abhijit ], actually, 2 things. Of course, what our MD sir mentioned about the provisioning also, if you see, there has been a secular improvement in the GNPA, but of course, there has been an increase in the provisioning cover. So as a result of that, around INR 600 crores of provision has happened.The other thing is that your query was regarding the margins. See, actually, margins, if you look at it, there has been a reversal of interest. Now what happened I'll explain to you. This -- at the end of September, the total amount of loans under onetime restructuring 1 and onetime restructuring 2, put together is around INR 7,300 crores. Now for that INR 7,300 crores OTR, because of the OTR given, there is a recalculation of the IRR and the effective interest rate, because of which there has to be an interest reversal which happened. This is a notional entry that has happened because of the OTR impact, and that is the reason why -- and the impact of it to the tune of around INR 250 crores for the quarter ended September.The corresponding figure as of end of June with INR 5,300 crores of OTR was around INR 116 crores. So around INR 135-odd crores of extra reversal of interest has happened in the Q2 itself.Now what is the impact of it on the margins? For every INR 100 crores of loss of net interest income, the impact on NIM is to the tune of around 16 to 17 basis points. So for INR 135 crores of such reversal, the impact on the net interest margin in terms of basis points will be clearly in the range of around 22, 23 basis points.What is also to be noted, a very important thing is that, sequentially, there has been an improvement in spreads. As our MD mentioned at the beginning of the discussion that there has been a reduction in the cost of funds, both on the incremental side and both on the cumulative side, by around 12 to 13 basis points between 1st July and 30th of September despite the fact that interest rates have been hardening in the system.Sequentially, there is a drop in the interest cost which has resulted in an improvement in spreads. But because of this reversal of interest income, that is the reason why there is a drop in the reported net interest margins.Third question regarding expenses -- your third question was regarding the expenses? I think expenses, there has been a couple of onetime which has happened in Q1 last quarter that we had explained because of the payment of arrears. This time also, there is an impact of actuarial valuation on retirement benefits to the tune of around INR 45 crores, INR 46 crores. So if you net it off, then the normal increment in the other expenses should be in the range of around 15% to 20%. That should be an ideal run rate.
Okay sir, this is useful. And sir, because this interest income reversal on the OTR book is notional in nature, would you say that because interest kind of continues to accrue, you will maybe see some interest income write-back in the coming quarters?
As and when these accounts come out of OTR.
Right, sir. And sir, lastly, if you could just...
And more important to note is that now the OTR has ended.
Yes, yes. So when these accounts come out of OTR, we can expect some interest income write-back from these OTR accounts.
Correct. Correct.
And sir, lastly, if you could share some color on the segmental asset quality which you kind of typically shared during the earnings call? The Individual Home loans...
Yes. Segmental asset quality -- yes, I will just -- I will read out the comparatives. Our MD will just give the comparatives. We'll request everybody to note so that we don't have to repeat it again.
Yes. As far as the vision at the end of September is concerned IHL segment, Stage 3 comes to 2.25%. And in the nonhousing commercial, it is 14.83%. The nonhousing individual, it is 9.76%. So this is as far as Individual total is concerned. Then in the project, that is the developer book side, there the NPA levels -- sorry, the Stage 3 is at 23.94. Then overall, if you see, our total NPA, gross NPA compared to last quarter, from 5.93%, it has come down to 5.14% now.
Sir, this is it to suggest there are -- there were no resolutions during the quarter in your developer book?
Developer book, resolutions were not there. Because developer book, maybe a small 1 or 2, they did not have much impact.
The next question is from the line of Aditya Jain from Citigroup.
Could you tell us the current classification of the restructured loan? So the total outstanding restructured loan is about INR 7,300 crores. Where are they classified now in Stage 1, 2 or 3?
See most of it is either in Stage 1 or Stage 2 because when we are doing OTR, when -- the condition of OTR is that they have to be standard assets.
Got it. And is it okay to assume that it's largely in Phase 1, as you had said in the last quarter? Or is it a sizable amount in Stage 2?
Yes. Yes.
Got it. Okay. And so like you've done in this quarter in Stage 3, increasing the coverage, is there a view on the Stage 2 assets that the coverage there, is it enough? Or would you take another chance to beef that up also to create more security cushion?
No, there the -- in the Stage 2 this -- the provisioning coverage is adequate -- considering the underlying valuation, it is adequate.
The next question is from the line of Juan from Point72.
Just on the new part, it seems like Q-on-Q decline is -- I imagine is right about 35 bps. So the increase in interest reversal this quarter is INR 185 crores, right, which accounts to about 20 bps of that decline. So why -- any -- is that in my calculation? And also what accounts for the remaining 15 bps or so of decline Q-on-Q?
No, I think, Juan, what I understand from your observation, this quarter, the NIM is 2%. What it was in June was around 2.20%. And what I mentioned in my earlier discussion is that for INR 135 crores of interest income reversal, the impact is around 22 to 23 basis points. So that actually takes us notionally adding back to more than last -- what it was in the June quarter. Now what is to be also noted is that the total impact of reversals in totality is INR 250 crores. The increment is INR 135 crores. So if you add back INR 250 crores notionally, then the number actually is much higher.
Right. Got it. Understood. Right. And just on the home loan yield side, can you now give us some color on what's our current average home loan yield versus -- because I think our new rate is at 6.6% or something. Just want to understand how much repricing is potentially in the future? Or is that more soon to?
No. As far as the rate is concerned now, the 6.6% is the entry-level what we're offering really going on well. I think even the volumes are picking up very well in the last quarter, you can see good growth rate is there. In the disbursements also, I think we have shown more than nearly -- already we have reached the pre COVID levels as far as the quarter is concerned. And that way, good traction is there across. And then the 6.6% is also we'll give because it is linked to the, what we call, CIBIL scoring. So our actually selection will be very, very sound enough to take care of 6.6 -- 6.6% is what we are offering only to the selected customers. That too, the best customers based on the credit score.
Okay. So -- got it. I understand. So lastly is on this coverage -- provision coverage. Do you think -- are we comfortable with the current level of coverage? Or we are -- given the categories, we are more comfortable to continue to increase that coverage going forward? And if that's the case, do you have like a target of what that number is now?
This coverage, I think now it is very much adequate what are these level going by the valuations. It is, I think, earlier was only 34% like that. Now it has come to 43%, almost a 9% increase is there. And mainly, it will take care fully what do I know at this level. I think we -- from our side, it is almost all fully provided for. But the NPS also, you see now they have reduced. Another favorable point is over the last quarter, the volume of even nonperforming assets also have come down by nearly INR 1,500 crores. That also added to this. This is very good positive trend. So further provisioning may not be much on the higher side.
I understand. So I think we'll cover. Sorry. Just a follow-up, sorry to come back to that main question. Maybe I'm missing something. I don't really understand as well. But if I look at the increase in OTR, so last quarter, I think 1 percentage point or so of the book. And this quarter, we have about 80 bps of increase in OTR. We have nicely -- that would be just this quarter. Why would the income reversal this quarter be higher than the last quarter?
The reason is that the total -- the income reversal is on the total outstanding OTR, which was -- which has increased by 50%. So earlier, the interest was only for 3 months on INR 5,300 crores. Now it is for the 6 months. And for the 6 months, it is INR 7,300 crores.
I see. Got it. So that means that pressure of the income reserve may not increase quarter-on-quarter going forward since we are already kind of -- our restructuring is peak. But the income results are excellent now, it will still be there going forward. Is that the right way to understand it?
No, the OTR scheme has now ended.
No more additions will be there, one thing. Secondly, the OTR things also may be coming out of that. What we call we are after these all the borrowers so that what happened, people can avail. Who are now actually the income levels are better off, now what you call people are getting salaries in time. So definitely, when our book is -- actually, our portfolio is mostly on the salaried structure. We are very, very sure that many borrowers will come out of the OTR in this quarter certainly because there are in that Stage 2, even Stage 3 also definitely come to Stage 1. That way, there'll be an improvement. I think we don't see much of the, what you call, requirement of the reversal on the higher side.
Got it. Understand. So just to understand perfectly, so as far as the account is in the OTR, it would still has income disbursement going forward. But once they start to come out with OTR, i.e. OTR start to decline, then the income is also, during that quarter, starting to decline. Is that the right way to understand it?
Yes, I think, see, what we mentioned is that there will be no further addition to the OTR pool. It is actually coming down.
The next question is from the line of Shubhranshu Mishra from Systematix.
My understanding is that...
Mr. Mishra, sorry to interrupt. Your voice is breaking up, sir.
Am I audible?
Now, you are.
Yes. So I just wanted to understand the interest result. I think we can only do interest as per Ind AS in Stage 3. If most of our OTR is in Stage 1 and Stage 2 how...
No, no, no, that is not correct. That is not correct. Whenever there is a restructuring which happens, it changes the term, the total tenor. So the moment that happens, the EIR, effective interest rate and the IRR also changes. And when that happens, obviously, there is a derecognition of the income which has to happen to reflect that change.
Right, sir. But as per Ind AS...
That is Ind AS only. I'm talking of Ind AS only.
Okay. Okay.
This has happened not because of a Stage 3 impact, but it has happened because of the fact that the effective interest rate has changed because of the elongation of the term.
Got it. Got it, sir. And sir, what is the split of the book between the top 7 cities and other cities, sir?
See if you look at the -- our portfolio, also mostly even in the traction now where we have seen in the last quarter, nearly 50% -- more than 50% is coming from the Tier 2, Tier 3. So if you look at the metro cities and all top 7 cities, it's around 58% of the portfolio.
So the number of offices and this split of the book is similar?
That you will find in the presentation. If you want, I can just repeat the number. You want the number of offices?
No, not number of offices. Split of the book...
Yes. Your voice is not very clear, just giving you there are 85 offices in the top 7 cities and 197 offices in the other cities. Top 7 cities are the Mumbai Metropolitan, then NCR, Mumbai, so Pune, Chennai, Hyderabad, Kolkata.
And add to that, our recent tie-up with IPPB also will make our reach far, far better in Tier 2, Tier 3 especially.
Sir, what I'm trying to understand is what is the split of the book, not the offices in top 7 cities and the other, sir? That really...
It is coming to 50 -- see, our book size, if you look at geographically also, top 7 cities account for nearly 58%.
58%. Okay. Sir, 58% is the...
I mean if you look at the present year, what happened now 43% of the business has come from top 7 cities, and 53% has come from the others.
Sure, sir. And just one clarification from the notes that there are 248 accounts which come from -- which are from OTR 1, which have been -- they'll register of course in the OTR 2. If I calculate the average ticket size there, it's roughly around 72 lakhs, which means that the average ticket size in OTR 2 would be around 35 lakhs. What is the difference there, sir? Why is the ticket size higher in OTR 1, why is it lower in OTR 2, sir?
See, actually, if you look at the way the OTR has happened, majority of the corporate account OTRs have happened in the fourth quarter of last year and the first quarter of this year. Whereas in the second quarter, the large ticket project loan cases were very, very small. Hardly some 4, 5 cases had come. Where as good amount of retail loans had come for OTR in Q2 in the -- under the OTR 2.
The next question is from the line of Kunal Mehra from MLP.
One question. Given the step-up in OTR 2, would you be willing to share with us how the OTR 2 and 1 book split between the individual housing, commercial loan, individual loan housing?
See I have -- we have got the details of the individual and the project. I do not have the Individual Home Loans, nonhousing corporates and others breakout -- the breakdown. Just to give you, if you want quarter wise, I can give you quarter wise. First quarter, about INR 2,070 crores was under the builder loan category, and about INR 275 crores was under the retail category, which comprised mostly of the nonhousing corporate and the nonhousing individual and home loans. These are the 3 categories there. In the second quarter, the project loan was only INR 62 crores, whereas INR 2,078 crores, that is INR 2,078 crores, was in the individual category comprised of all the 3 subsegments. That is NHC, nonhousing commercial; NHI, nonhousing individual; and IHL, which is individual home loans.
That's really helpful. And if I were to qualitatively ask you about this INR 2,078 crores split in the individuals between the nonhousing commercial, nonhousing individual and individual housing; directionally, which one would be the largest contributor? And the reason -- I'll be transparent, the reason I'm asking is I'm trying to handicap the odds that roll forward, and we have another one of these slip on account of the nature of the underlying asset versus the stress experiencing in the real economy.
This is mainly due to the retail only. All our INR 2,078 crores what you have mentioned now, the OTR 2 in the last quarter is only from the retail segment. The ticket side maybe around 25 to 30 lakhs size, or look at their average size.
Got it. And therefore, given that the dominant account share is retail, it is 25 lakhs, it is arguably nonsalaried retail. When you restructure...
It is nonsalary what I mean to say...
It is to the salary retail also.
Our loan book if you see in the individual housing loan also more than 75% of our individual house loans are all salaried class only because all our civil base, all things up there. So -- and then moreover, our teams are working to bring out these people also out of OTR. So with the facility of this, some concessions given. And then going forward, actually, these numbers will come out of the OTR. Certainly, will give you a lot of feeling. If you look into the collection efficiency also now, for the regular accounts, salaried is 99%, the best we have seen in the, I think, even pre COVID level like that.
Sir I like -- and just to give some -- a little bit more color there, your query was that probably you would like to know why there has been so much of people going in for OTR 2. Now let us look at the backdrop on which the OTR 2 was announced. It was at the time of the second surge, second wave of the COVID. At that point in time, it is something which we have shared earlier, also at certain times, it is from the customer -- individual customer or even for the commercial customers, what is more important at that point in time is to reserve cash. So as and when an OTR offer has come from the government that -- through the regulator, they opted for it. Now what is the probability that they will come out? If you look at the earlier year -- last year, the moratorium, now 80% plus of people who had opted for moratorium at that point in time have come back on full recovery, I mean, on full updated mode. So as and when the external situation improves, and it has already started improving, more and more people generally come out of these kind of OTRs or...
Even if you look at the Q1, Q2 movement also, the -- actually, those accounts which were there in moratorium in Q1, they have come out, some of them have come out and upgraded even full years. That is also positive.
Got it. And of those accounts that came out between Q1, Q2 from the OTR, was there any accompanying write-back of the notional income reversal or due to...
As of now, this is the -- if you look at the statutory disclosures that we have made, total amount of exposure there was out of 7,398, right now because the OTR 2 was mostly invoked towards the end of the quarter, there has not been much scope for people to come out of the OTR 2.As of 30th September, only the implementation was going on. Now progressively, we will see the outstanding as compared to the invocation coming down.
It happened mostly -- in the individual segment it will happen. Definitely, there is a positive on that.
[Operator Instructions] The next question is from the line of Kunal Shah from ICICI Securities.
So the question is with respect to the Stage 2 breakup, last time you highlighted in the corporate developer, it was INR 2,400-odd crores out of INR 12,000 crores. So how has been the moment in Stage 2 between the corporate and the noncorporate? And also, if you can share the nonindividual nonhousing breakup of INR 37,000 crores, how it has moved this quarter?
See, first of all, the nonhousing individual and nonhousing commercial, in June, the nonhousing commercial total was INR 14,300 crores, and nonhousing individual was INR 20,501 crores. So it was around INR 35,000 crores, INR 34,800 crores. As of September, the nonhousing commercial is INR 13,600 crores. So it has come down by INR 700 crores, whereas the nonhousing individual has remained more or less at that level, a slight increase of INR 200 crores, INR 20,500 crores to INR 20,700 crores. And total, if you see, there has been a decline in the nonhousing commercial and nonhousing individual between June and September.
Yes. And Stage 2 break up?
Stage 2 breakup for -- I'll give you comparables. First of all is that in Stage 1 in the nonhousing commercial models, it has remained the same. In Stage 3, there has been a decline, as we mentioned in the beginning. And Stage 2 also, there has been a decline. From INR 13,000 -- sorry, INR 1,362 crores it has come down to INR 1,292 crores in Stage 2. I'm talking June to September figure. And from INR 1,927 crores, it has come down to INR 1,507 crores. So there is a INR 400 crore reduction in the Stage 2 also and consequent increase in Stage 1.
Sorry. Sorry? Stage 2, there was a decrease?
Has come down. Yes, it was decreased by INR 400 crores in the nonhousing individuals.
Nonhousing individual?
Yes.
Okay. Okay. And the corporate housing...
Nonhousing corporate also, There has been a reduction by almost INR 70 crores, INR 80 crores in Stage 2 itself.
Okay. So that's it. Only INR 70 crores, INR 80-odd crores.
Yes. So Stage 3 and Stage 2, both have come down in both these categories.
Okay. And just again to clarify in terms of this restructuring, so now the provisioning on this restructuring, we haven't looked at the impairment?
I missed out on the Project. Project, also Stage 2 has been reduced. Stage 3, as we mentioned, has come down marginally. Stage 2 has come down from INR 2,490 crores to INR 1,553 crores and Stage 1 decreased to INR 9,500 crores to a little more than INR 10,000 crores.
Perfect. So INR 2,490 crores is becoming INR 1,500 crores in Stage 2 on the corporate developer?
Yes.
Okay. Okay. And overall provisioning on the restructure is rooted through impairment allowance even in this quarter.
Yes, as you -- their disclosure...
Yes, yes. Okay.
It is that, as we mentioned the last couple of times, it is an appropriation so you now know that...
The next question is from the line Dhaval Gada from DSP Mutual Fund.
Sorry, 2 questions. One, Sudipto, can you just give the absolute Stage 3 for NHC, NHI and IHL? I just wanted to reconcile the number. And...
Sir, we have given in the beginning of the call itself.
Sir in percentage. Absolutely, if possible.
You want us to repeat the same numbers?
No, no, the absolute number. I think you gave the percentage. I'm just trying to reconcile the absolute for the nonhousing individual, nonhousing commercial and individual home loans.
Stage 3, from 2.6, it has come down to 2.25.
Absolutely. Absolutely, if possible. I'll take it offline, if that's okay.
Yes. Yes. Better because we have already given all these numbers so many times.
Yes. And the second question was regarding margins. So just to sort of summarize, you're saying that the next quarter, I think most of the accounts are out of OTR, we should on a underlying basis...
So we didn't say it is out of OTR. We said that there is no further OTR scheme available.
Okay. Okay. So on margins from next quarter -- so this quarter underlying margins was...
Yes, it will still be modest.
About 2.22, 2.23 based on the interest income reversal. So how should one think about underlying margins next quarter?
Yes, underlying margins, what is more important is to see the trend in the spreads because that is what will be reflective of the overall efficiency in profitability. Spreads have increased sequentially. There could be some notional entries of reversal of interest. But if you see the operating spreads have improved sequentially.
Right. So my question is when should we see margins to normalize to like pre 4Q '21 levels, if you do?
Pre, sorry?
Pre-March '21 level. So when should margins normalize the underlying question. So we've seen a couple of quarters where OTR has impacted the...
Correct. Correct. Before that, whatever was the margins, say, around -- in the range of around 2.25 to 2.35 that was the ballpark range which we had been holding before this implementation of the OTR. So we should in a couple of quarters certainly see those levels come back. And there will be stability in spreads and improvement in spreads to the extent of the interest rate movements. But overall, there will be stability of spreads.
The next question is from the line of Nischint Chawathe from Kotak Securities.
So just to take it up from the earlier question, what you are saying is that this INR 250 crores is going to be an ongoing impact till these loans come out of OTR?
No, it will come down, see, because the outstanding loan of the OTRs are also going to come down slowly.
No further additional will not be there. OTR is closed now. OTR is now...
And that's why, so INR 250 crores is the base impact that we can see this quarter. This is the highest. Probably next quarter, it goes down to 255 or...
It will start reducing.
Yes. That's all. And when do you think this kind of completely gets over?
Maybe in a couple of quarters. It will significantly recede over the next couple of quarters.
On the expenses side of the staff expenses of around INR 147 crores, is there a one-off over there?
There is a one-off around INR 47 crores, which has happened because of the actuarial evaluation of the retiral benefits. Total of INR 47 crores is the amount which is there.
And the INR 100-odd crores establishment expenses, I think that sort of will remain.
Between INR 90 crores to INR 100 crores will be the ballpark.
The next question is from the line of Viral Shah from Credit Suisse.
So just a follow-up on the previous question, in fact, actually more of a clarification. So you are saying this reversal impact in the P&L which is impacting the margin is something which will continue every quarter, but this quantum will give you?
It will keep on coming down, yes.
Okay. Okay. Understood. All other questions are answered.
The next question is from the line of Piran Engineer from CLSA.
I just wanted to understand why would the effective yield change because of the elongation of the term of the loan in restructuring?
Because of the change in IRR.
No, no, but sir, if you're extending by say 6 months, wouldn't you charge the same IRR for that acquisition?
IRR impact will be completely different. Ind AS reporting is based on effective interest rate.
No, I get that. But in that sense, if you are extending let's say, for 3 months for an OTR, it would not be an interest-free extension of 3 months, would it?
No, it is not interest free, but there is no cash flow, and there is an expansion of term. So the term which was 17 years will become 19 years. The term which was 5 years will become 7 years, like that.
So sort of a loss of interest on interest in a way because of there is no cash flow.
Correct. Correct. Correct.
Okay. And just to clarify, I know this has been asked many times. We reversed INR 135 crores this quarter. INR 115 crores was the sum of 4Q and 1Q?
1Q, there was nothing almost because the OTR started actually towards the end of 1Q.
Okay. Okay. What about then the interest write-back from the reduction in NPL? That would have actually positively helped our interest income lifeline.
In Ind AS, it doesn't matter. No, sir. Sir, we will not get into so much of a technical discussion. If there is any specific, you can...
Okay. Okay. That's fine. That was all I had.
The next question is from the line of Saurabh from JPMorgan.
Yes. Sir, basically just one clarification on this note with corporate restructuring of INR 5,000 crores, that's entirely developer loan or...
No, no. It is developer plus the IHL plus NHC.
Okay. So of that developer is about INR 2,078 crores, as you pointed out earlier.
Sorry?
Yes. Of this, developer loans is INR 2,078 crores, of this INR 5,000 crores.
INR 2,078 crores was in the...
Earlier. Q1.
Q2 itself, only Q2.
Okay. And in Q1, it was very low, right? So the total is about 20 million.
INR 2, 078 crores was the retail in Q2. INR 2,074 crores was Q1.
Yes. So of this, the total developer...
I gave out all the numbers.
He want the project? He want project.
No, sir. There's a total developer book restructured will be about INR 2,100 crores is my question on this side or not.
So INR 2,100 crores, where you got? The INR 2,100 crores is the OTR done in the Q2 under OTR 2.Now they are INR 141 crores.
Okay. Okay. All right. Okay, fine.
You will find that disclosure given in the print -- in the published numbers. Very clearly it is mentioned the category-wise. It is there in notes to the results, Slide #60, full table is given.
The next question is from the line of Umang Shah from Kotak Mutual Fund.
Yes, all my questions have been answered. Thank you.
Thank you.
Next question is from the line of Susmit Patodia from Motilal Oswal Asset Management.
Sir if you can speak a little bit about the competitive...
I request you to please stay connected while we reconnect the management, sir. Ladies and gentlemen, the line for the management is reconnected. Mr. Patodia, you may please proceed with your question?
I wanted to know the competitive scenario and are you seeing balance transfer out. I just wanted to understand how is it looking? Is there a lot of BT out that's happening or vis-a-vis the earlier trend?
Yes. Now because this quarter, you -- as said our traction is very good especially in the disbursements in the Individual Home Loan segment. We have seen growth, nearly INR 16,000 crores have been the disbursement in this quarter itself. I'm showing a growth rate of almost 132% over the, what you call, last one. We have already reached the pre- COVID level there also. And again, if you look at the portfolio also, there is a 15% addition. That growth is very good, especially in the Indian Housing Loan segment. On the way forward actually, now the rates are at the lowest level, 6.63%. And even the offers given by some builders here and there in some states, add to that even the property rates also more or less maintained. And then with all these things now, the initiative by the government for vaccination drive really has helped us a lot. So people are now in a position to move out very freely then select the properties after visiting them, especially on weekends and all. So we are having a lot of what we call positive mood, also we are highly hopeful that the next quarter will be the best one, or far, far better than this quarter. Of course, the last quarter also has been the best in the pay for company that also was there as far the disbursements are concerned.
Sir, how much balance transfer have you had in the last 6 months, if I may ask?
From our side, I think must be not more than -- maybe within 1 to 1.5% range, maybe they're not more than that. All the rates have come down every year. We also see got rating facility and all. So that is kindly mostly there.
Okay. And sir, any progress on the Swami resolutions? It's now been nearly 3 to 4 quarters. Where is it -- what is the status?
They are more or less same stage only. There is not much of a traction we have seen there.
The next question is from the line of Kushan Parikh from HSBC Securities.
I had one question. Just wanted to understand what the outstanding provisions are there currently on the restructuring of INR 7,000 crores? And what would be the incremental provisions coming over there as well as what -- how are we looking at overall credit costs going forward?
See overall credit cost last year was around 60 basis points. Year before that, it was around 48 basis points. Current year, it is more than 100 basis points. But what we believe is that with the further reduction in -- expected reduction in the NPLs going forward in the next 2 quarters, it should again rationalize, and we should reach somewhere where we were towards the end of -- I mean, towards the end of this year to whoever it was, by and large, last year and as far as the credit cost outlook is concerned. As far as the provisioning is concerned, this provisioning is on the IGAAP as per the IRAC norms of the reserve bank. 10% has to be provided on the restructured book. Fully it has been made.
And for that provision on the restructuring book, we should assume will not come in unless the asset slips into lower bucket?
As of now, since there is no change in the NPA position, there will not be any further restructuring required on that book.
Overall, OTR is now ended. We did not operate it.
Okay. Okay. Understood. And if you could just let us know, is there an increased level of prepayment on the LAP book in this quarter? And any particular reason for that?
No, there is no such any pronounced trend only in the LAP book or anything of that sort. That particular line of business is -- disbursement is not happening as it was -- as it used to happen earlier.
Okay. Okay. Understood. Understood. And are we looking at any -- so any further improvement in incremental cost of borrowing from coming -- in future quarters? Or this would be the bottom pretty much, the current quarter?
See, overall, if you look at the interest rate scenario in the country, then you will note that the yields have already started bottoming out and bond yield cycle has actually gone up. But despite that, we have been able to show some improvement. Some little bit of elbow room is still left. And of course, it depends upon the stance taken by the Central Bank on the interest rate scenario.
The next question is from the line of Hitesh Gulati from Haitong Securities.
Sir, on the OTR book 3.5% that you mentioned, so is there any overlap with the Stage 3 assets?
First of all, it is not 3.5%. It is INR 7,300 crores, so it will be around 3.1%, number one. Number two is that there could be some overlaps, but it is generally on the lower side. Most of it will be in Stage 1 or 2.
Okay. And sir, last quarter, the results time you had mentioned that there was some resolution of INR 100 crores in July in some developer book. So has that been taken care of and you mentioned there are some small distributions? Or what is the state of it?
Yes.
So that was INR 100 crores has happened.
Yes. Right, it is committed.
It has come -- INR 100 crores come but that is not from the developer, that is the nonhousing commercial.
Okay. Okay. So in Developer, there is no major?
Very small, very small accounts are there, very insignificant. Very small 2-digit account -- 2-digit amount will be resolution.
The next question is from the line of Kunal Shah from Carnelian.
The most questions have been answered. Just one question, sir. With the kind of capital adequacy ratio we have, and I understand you're looking at good momentum on the growth aspect. How do we see any requirement of capital? Or how should one look at that?
As of now, capital is adequate after the promoter infusion. As of now, the capital is adequate.
Okay. So we don't believe there's going to be any further need for capital.
That we have not said. We have said that at this point in time, it is adequate.
Okay. Okay. And just one additional question on the employee expense part, right? So you said there is some actuarial impact of INR 45 crores, INR 46 crores that is there in this quarter. So this will continue for the -- this will continue for the coming quarters as well? Or how should one look this actuarial impact?
I said it's one time.
It's one time. So -- okay.
The next question is from the line of Mahrukh Adajania from Elara Capital.
Sorry to harp on the same thing. But if you look at your interest reversal of INR 250 crores on a book of INR 7,300 crores, then it roughly works out to 3.5%. And if you're annualizing at 7%, so is the reversal rate high?
No, sorry, your voice is breaking.
We are losing audio. Ms. Adajania, are you able to hear us? As there is no response from the current participant, we move to the next question from the line of Shashank Verma from Axis Mutual Fund.
I had one query on the cumulative number of provisioning, this INR 5,354 crores. Does it include the provisioning on restructured book of approximately INR 700 crores as well as the COVID-related INR 300 crore provision that we have made?
The COVID-related provisioning is there, INR 314 crores is included in ECL provisioning. OTR provision is made under IGAAP, under IRAC norms of Reserve Bank of India under IGAAP.
Okay. So it will not be included in the INR 5,300-odd crores number.
It is there. It is reflected there. And the balance is transferred to the impairment reserve as an appropriation.
We take the next question from the line of Chandrasekhar Sridhar from Fidelity International.
This is just to complete, I think, someone who is asking a previous question, so if you look at the interest reversals, it's INR 250 crores, which on an annualized basis works out to almost 7% interest, which is -- have you given like a 1-year waiver?
There is no waiver. There is a moratorium. Moratorium and waivers are completely different things.
Right. Okay. So then you're saying -- so in that case that there should be a write-back which will come sometime later, right?
That is precisely what we are saying. There is no waiver. Please make it very clear, there is a difference between moratorium and waiver.
Right. Okay. Okay. And just secondly, can you just remind me on just over the next 12 months, how much of the bond book is up for repricing?
Not able to hear. Can you please repeat?
Just over the next 12 months, the bond book which is up for repricing?
Approximately around INR 22,000 crores, INR 23,000 crores.
Requirement.
No, you are saying redemption, no, repayment?
Yes.
Yes.
Bond redemption.
Yes. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, we take one last question from the line of Mahrukh Adajania from Elara Capital.
Sorry, can you hear me now?
Yes.
Yes. Yes.
So just finally on this restructuring thing, so what will be the average tenor of restructuring? I mean average moratorium in restructuring? 1 year, 2 years or 6 months.
2 years.
2 years. So that is why the interest reversal looks a bit high, is that right? Because it's 2 years?
It is on a valuation based upon the effective interest rate.
Thank you. I now hand the conference over to the management for their closing comments. Over to you, sir.
Thank you. Thank you, Praveen. Thank you for having the call and our best results to all of you. Looking forward for a great ending in the days to come and especially in this quarter. And I also wish all the members and also, you, people all a very, very Happy Diwali to all of you.
Thank you. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.