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LIC Housing Finance Ltd
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Ladies and gentlemen, good day, and welcome to the LIC Housing Finance Q3 FY '18 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vikash Mundhra from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Aman. Hi, good afternoon, everybody, and welcome to the Q3 FY '18 Earnings Conference Call of LIC Housing Finance. We have with us Mr. Vinay Sah, Managing Director and CEO; and Mr. Sudipto Sil, Deputy CFO, to discuss the results. I now request Mr. Sah to take us through the key financial highlights for the quarter, post which, we'll have question-and-answer session. Over to you, sir.
Good afternoon. At the outset, I would like to extend a hearty welcome to all of you to this post-earnings conference call. As you would be aware, LIC Housing Finance declared its Q3 FY '18 numbers on Thursday late afternoon. The key results of the quarterly results are as follows: revenue from operations for the quarter at INR 3,738 crores, up by 6%; individual loan disbursements, up by 32% to INR 11,324 crores (sic) [ 11,323 ] crores, out of which individual loans clocked a disbursement of INR 9,177 crores, which is up by 38%; total loan disbursements, including loan to developers for the quarter was INR 12,301 crores, which was up 27% year-on-year; outstanding loan portfolio at INR 1,56,175 crores (sic) [ 1,56,176 ] crores, up by 15%, out of which individual loan portfolio stood at INR 1,49,986 crores, which was up by 15%. Net interest income was INR 898 crores, against INR 915 crores for the same period last year. Profit after tax, INR 491 crores, against INR 499 crores in the same period last year. Gross NPA at 0.87% as compared to 0.56% over December 2016; individual loan GNPA at 0.47% as compared to 0.32% in the corresponding quarter last year; net NPA at 0.49% as compared to 0.27% as on the corresponding date of the previous year. The quarter under review saw strong uptick in demand across all the categories as the growth trend strengthened over the previous quarters of the year. Overall, disbursement growth, including in nonindividual segment, was 27%. Individual disbursement growth for the quarter was a 32%, whereas the home loan disbursement grew at strong 38%. Good growth was witnessed in the western, central, southern and in some locations in the eastern part of the country. Loan sanctions for the company during the quarter have been higher than 30%, consistent to the previous quarters' increasing trend, indicating a reasonably healthy pipeline for the coming quarter. During the quarter, in the Affordable Housing segment, we have seen a very good traction. More than 8% of our incremental disbursement in the individual category, RERA in the PMAY CLSS loan categories. It was INR 9,021 crores out of INR 11,300-odd crores. In the beginning of the year, we had created 2 new regional quarters at Bhopal and Patna. For the 9 months, the growth rate from these 2 regions is in the range of 30% to 40%. Our overall year-to-date growth in disbursements at nearly 23% is ahead of our initial projections. We are encouraged by the buoyancy in the business and our outlook for Q4 as well as for FY '19 stands positive. Overall, loan book growth continued at a steady pace of more than 15% year-on-year. Individual loan segment grew -- growth, too, was at 15%. And the loan book composition, the retail loan composition remained, by and large, unchanged from the March 2017 levels. With the increased disbursement volumes, the loan book growth will also improve its growth trajectory in the quarter to follow. As of December 2017, core home loan book growth was nearly 11%, highest in several quarters. In the current quarter, the GNPA levels have seen some increases from Q2 levels, that is from September 2017 as against 0.80% in Q2 FY '18, GNPA have risen to 0.87%, with individual loan GNPA increasing from 0.43% to 0.47% sequentially. We expect it to decline in Q4 with no further increases. The increases in the developer loan portfolio are more transitory in nature and that, too, are expected to decline.During the quarter, there has been a steep spike in the G-sec yields with the benchmark 10-year G-sec climbing relentlessly by almost 70 bps one-way throughout the quarter. However, despite such increases, we have been able to not only contain the cost of funds, but also achieve a decline in our overall cost of funds by about 5 bps during the quarter. Also our incremental cost of funds on a year-to-date basis was a shed below our Q2 numbers by a couple of basis points. Our incremental spreads, despite the sharp increases in the interest rate scenario, stood at 2.44% for 9 months. Sequentially, net interest margins declined by about 5 basis points. With interest rates hardening in the system that is likely to be lesser pressure on the asset yield, we believe that the margins have bottomed out in the quarter and look to a margin recovery in Q4.Further going out into the next financial year, more than INR 20,000 crores of high-cost NCDs are set to mature, which should offer some further [ Audio Gap ] with margin benefits. The fee-based component of the income is also an area on which we have been focusing. Fee structures in some services have been revised upwards, which will result in better fee-based revenues for us in the fourth quarter and going forward. With this brief introduction, I would like to thank you and welcome you all again once to this call. I will now take on your queries.
[Operator Instructions] The first question's from the line of Digant Haria from Antique Stockbroking.
Sir, this -- we've seen that -- I'm talking about individual home loans, the disbursement growth is 38%, but the loan book growth is just 10%. So like have we seen some very, very aggressive competition that people are putting away a lot of customers from us? I agree it's a trend which everyone others are also facing, but I think the trend is much more marked in our case versus some other players who reported numbers.
See, as you rightly said, the growth rates are around 38% as far as disbursement goes, and the loan book growth has been around 11%, as I said, for retail. Now exits do happen, there are regular exits also. I can give you some numbers to current year, the exits are to the tune of INR 19,000 crores, about INR 19,000 crores, which is, again, showing a growth rate of around 23%, 24%.
Okay, okay, okay. So sir, do you expect that like we can -- when can we move from this 10% kind of a number to a 14%, 15% in individual home loan? Like should the system as a whole grow after this RERA? Or you think competition will subside or we will become a little more aggressive? Like when do we get out of this 9%, 10% kind of a growth in the individual home loan space?
I think a couple of quarters, we should be around those percentages. I can give you one more feedback is that Q2, we've suddenly experienced that probably the exits were heavy. So we took a very conscious decision of making some tweaking changes in our rewriting rules. And thereby in Q3, the growth has gone down. The exit growth rate has gone down.
Okay, okay. And, sir, last question is on this margin front, like have we seen the worst of margins already? Like we are at 2.33% now for the quarter 3. Should we start looking at a stabilization or a little bit of improvement from the coming quarters? Or is this interest rate going up could actually further pressurize our margins?
No, the pressure is there, but I'm sure that the Q4 onwards, there will be upward trend.
The next question is from the line of Vishal Rampuria from HDFC Securities.
Sir, I would understand that within individual disbursement, how much was balance transfer for us?
Balance transfer as an?
Sorry, individual loans disbursed for the quarter, how much was the balance transfer which we have done from other banks?
It won't be much. It would be in the range of about INR 400 crores, INR 500 crores for the quarter.
So this is what you have poached from other banks, is it right?
I would not use that word, it's a takeover.
Okay, okay, okay. Takeover, okay. And sir, we -- in the quarter, again, have you continued to see pressure on yield. So can you throw some more light that from where this kind of pressure is coming? Is it from the lower yield from the new loans? Or is it the current loan getting repriced at lower rate?
See, it's effect of everything. The rates being offered for the new products are one of the lowest. Then rewriting also, as I said before, the rewriting was done, so naturally the rates were decreased. Third, also another component is that our project portfolio, there the margins are heavy, that is only 4% of our book sites -- book share. It's a combination of all these factors. It's not anything particular. Like I said, when I spoke that probably disbursement wise, this has been one of our best quarters.
Yes, yes. No doubt, no doubt.
One of our best quarters. The retail core also showing a growth rate of 38% something. And not only I mean -- not only the growth, I would like to make a comment on the volumes also. Growth can be attributed, so someone may have a feeling that last year probably was not such a good quarter or something. So we touched, I mean, we crossed -- we did nearly INR 9,200 crores only for retail core. So those type of volumes we have not seen in the last so many quarters.
Right, right. Okay. And sir, on Page 17 -- slide number, you have given the yield on advances for the 9 months. Can you give me the yield for the quarter, both yield and the cost of fund?
The incremental cost of funds for the quarter is around 7.38%.
I don't want incremental, I only want the total cost.
The total will be same.
It was 7.42%.
And how much is the yield on advances?
The see incremental -- incremental spread is around 2.44%, 9.86% is the yield.
9.86% yield for the quarter, right?
Point 86. It's 9.86%.
And what is the cost of fund for the quarter?
7.24% (sic) [ 7.42% ].
7.42%.
7.42%, sorry.
Is 7 point -- so 7.38% is what for the quarter? Is there incremental cost wise?
38 is incremental.
Yes, so 7.42%, you're saying is the total cost for the quarter, average cost.
No, no. 7.42% is the 9-monthly.
9-monthly.
So can you give me for the quarter?
Cost?
Cost of fund for the quarter.
7.38%.
The next question's from the line of Giriraj Daga from Visaria Family Trust.
First question is regarding to the margins, sir. Do you see post G-sec about whether interest rates have gone up. And second one, we have seen also banks are also marginally increase their rates. So do we expect that the prepayment should come down on the contrary we might have some repricing at our existing loan on the higher side? Is there a possibility do we see in the next 1 or 2 quarter?
I doubt. I mean much will depend on the interest rate scenario, which comes after the RERA guidelines are announced and all those things. But I don't see the pricing -- the rates going up immediately a couple of quarter.
Okay. Even if G-sec remain stable at this level for the next 6 months?
Yes.
Okay. Second question is that like what kind of project loan or LAP we can have as a percentage over the next 4 to 8 quarters? What kind of numbers we are looking at?
The results may you have seen our income has gone up by 6%. Had there been a bigger share of project loans, probably there would be scope for more increase.
[indiscernible] project loan business.
The loan book currently has a share of 4%. But if we see only the annual incremental share that goes up to about 6%. So Q4, also, we would personally like to strategically target a higher share, a higher share for Q4. This is -- I mean, we are not looking at it, at something ideal mix or something. So internally, last year, we did about INR 3,200-odd crores of project loans. Currently, initially, we were aiming at about INR 4,000 crores or so. But now we would like to increase it about INR 5,000 crores.
Understood, understood. Any target for next year we would like to have in mind?
No.
Okay. My last question is, if you look at the prepayment or let's say like the net effect of the LAP book, there is significant premium in the LAP book also, prepayments less repayment. If I look at last few quarter numbers, the last quarter in LAP, there is a significant amount of repayment.
In LAP, actually, [Audio Gap] in the total book, you're saying?
Yes, total book, I am saying.
By and large, the repayments and the prepayments in the LAP are similar as compared with the home loans. Depending upon the fact that, of course, the LAP is a fairly recent, I would say, portfolio accretion. There could be slight reduction there. But overall, the trends should be, by and large, similar.
Let's take broad number, like I got a INR 1,500 crore number as a repayment, now disbursement was [indiscernible].
No, no, no.
One-offs.
No, the LAP, if I see it as a share, I can tell you LAP, only LAP, we are having a share of about 13% now. And in the portfolio side. So that also has gone up by about 46%. Last year December, we were having noncore, not exactly LAP, but noncore retail, as you recall it, was the size of INR 14,000 crores. Now it has gone up to more than INR 20,000 crores.
[indiscernible] quarter-on-quarter it has not gone up despite INR 2,100 crores of disbursement, that was the point I was making.
Yes, yes.
The next question is from the line of Nitesh Jain from Investec.
Sir, can you share the disbursement number for LAP and housing for this quarter?
The number of loans or you want amount?
Amount, amount.
Amount. Yes, retail core was 9,180 -- nearly INR 1,080 crores. And noncore was INR 2,150 crores.
INR 2,015 crores?
50, 5-0.
5-0.
The total retail was INR 11,325 crores odd.
That was INR 2,150 crores?
Yes.
And sir, going forward, do you expect the share of LAP going up because LAP has now been stagnated for -- on a quarter-on-quarter basis?
No, yes, this also is having a share of about 17%, 18% for us. So probably it won't go much too high. That the share would be around -- in the same range around, maybe if it goes up by 1% or 2%, not more.
And sir, what -- can you share the incremental yields between these 3 products for core housing, noncore and the project finance incrementally on these 3 products?
As far as the project is concerned, for the core home loan, it is around 8.35% onwards. Whereas for the noncore segment, that includes LAP and some other products is around 10.50% onwards. As compared to that, the developer loans, by and large, you can say in the range between 12% and 13%.
And these numbers are not annualized. So annualized ...
These are not annualized, these are only the card rates for example, the interest rate variations could be there. So, for example, though the card rate for core home loans is 8.35%. There will be some products which will be offered at a higher rate also.
Okay. So sir, looking at these numbers for the incremental yield on individual portfolio is exactly actually very, very similar to our own book yield on the individual portfolio. Is that right assessment or?
Yes, by and large, you can say so, considering the asset mix.
Yes. So by and large, going forward, there should not be a yield pressure, which we have seen in last 3 quarters for the company because the incremental yield and on book yield are broadly similar?
Yes, see actually that is in the opening comments only, what was mentioned is that now that the interest rate cycle itself is hardening and we are seeing the reversal of interest rate cycle. The pressure -- the competitive pressure on pricing and yield should generally come down.
Yes, yes. And sir, last 2, 3 quarters, we have seen that our book was pricing because of we have reduced our PRR and there was a competitive pressure of your probably back book repricing at a lower rate?
Yes.
That will now stop?
That will ease out. That will ease out. We cannot say that it will stop fully, but it will certainly ease out significantly.
And lastly sir, on the cost of fund side, is it reasonable to expect that we will continue to see lower cost of fund on an entire book because it's still some of the higher cost borrowings will price at a lower rate?
Yes, that is, of course, in addition to that, at present also, despite the fact that the interest rate scenario is hardened, we are still borrowing below our weighted average cost of fund by almost 30, 35, 40 basis points. So that should continue to yield some benefit on the weighted average cost of funds, so we can expect it to trend down.
The next question is from the line of Nilang Mehta from HSBC Global Asset Management.
Sorry, maybe my question is repetitive, but I just thought I'll just reconfirm. You mentioned your incremental cost of borrowing for this quarter is around 7.38%, right?
Yes.
And as you go into the next quarter, the 10-year yield is already at 7.35%. How do you -- what would be the -- what would you expect this quarter to looking like current -- assuming current rates stay? And generally, we know Feb and March are tight on liquidity.
See, Nilang, see -- the G-sec as you have very rightly understand, I mentioned, the 10-year G-sec is around 7.33%, 7.34% levels. And the yield curve right now for the corporate bond is quite flattish between 1-year tenor and up to 5 to 6 years tenor, it is quite flattish. But overall, the borrowing plan for the next quarter, at least Q4, will also include reasonably good infusion of low-cost Commercial Papers. That is what we have been doing in the earlier quarters also and we'll continue to do in this quarter also. That should help us to ease the overall cost of funds.
Okay. So you would be running some temporary mismatches or you're taking ALM call then? Is it...
It is not ALM call per se. Actually, about 2 quarters back when the G-sec has come down significantly and there was almost any -- no difference between a G-sec and a repo rate. At that point in time, we had done a fairly large quantum of long-term borrowing. So that has actually opened up some space for us to do short-term borrowings. So that is how we are approaching it.
Okay. And when you say your incremental yield is around 9.86% is what you mentioned, can you give a split of the, again, so your home loans or retail home loans on an average are happening at what level?
The average annualized home loan rate will be in the range of around 8.7%.
Okay, okay. And you mentioned in the opening remarks your high-cost debentures, which are coming up for renewal. Can you just give that amount and costs over there?
It is around a little more than INR 20,000 crores. And at this point, they are carrying an average coupon of around 8.5%.
And they steadily mature into FY '19?
Yes, across the year.
Okay. And considering that rate cycle has changed a bit and, obviously, it's not going down and might start hardening, from product point of view, are you planning to introduce some of your older products which you used to do 3-year fixed, 5-year fixed kind of products? Or you think still that's not the right time to come up with these products?
No, the products as fixed up, the mixture of things, some of them are still there. And I mean it -- I would not like to use the word relaunching, but then maybe you have some focus may shift in certain segments for that. But the products are ...
Yes, I mean, my question was where do you start refocusing? Do you think that ...
Yes, yes, they are. Yes, maybe we have to.
Okay. And sir, you also mentioned that from a developer loan perspective, you're reaching your credit appraisal system. Is that what you said? I didn't get your comment in the start.
No. I didn't.
No, okay.
That's an ongoing process. Yes, but we are -- I mean, we have a very strong SOP, already a very strong SOP. But yes, there is a relook into it. And we did have a relook some 4 months back, 4, 5 months back.
Okay. And I just wanted to reconfirm your LAP, which we current -- still to continue to do is only to sell the right people predominantly and the credit underwriting there is similar to your home loan, retail home loan in terms of...
Yes, yes, yes.
It's predominantly to salaried and the assessment is done almost exactly the same way for with our home loans.
The next question is from the line of Dhaval Gada from Sundaram Mutual Fund.
Sir, sorry, if I'm repeating this question, I joined late. A couple of data points. First, what is the interest income reversal for the quarter and 9-month '18?
The interest rate, sorry?
Interest income reversal, sir?
The interest rate reversal will be to the extent of the increasing the NPL sequentially. The NPLs increase sequentially is about INR 100 crores or so, INR 120-odd crores. So to that extent, for 3 months, you can assume around a 9% rate of interest.
Okay. And for 9 months, would you have the number in digits?
For -- this is actually as on date, this is how it is calculated. And this is actually the same because whatever is accrual in 6 months will have to be reversed when you book the fresh accruals for the current quarter.
Okay. And the second question was, what is the quantum of individual home loans which got repriced in the 9 months?
It was to the tune of INR 27,000 crores -- INR 27,400 crores.
Sorry -- 20?
INR 27,400 crores.
Okay. And lastly, sir, on the LAP, I think this is a question which was asked earlier about some prepayments happening in the LAP. Could you sort of quantitatively give some numbers? Is it -- what is the kind of prepayments we are seeing in the LAP book?
There has been no major account going into that. It's the usual ones. And that is what I made a comment at. In fact, LAP book has grown up to Q3 by about 27%.
[Operator Instructions] The next question from the line of Roshan Chutkey from ICICI Prudential AMC.
Yes, so just wanted to understand this comment of yours. I mean you want to do more of short-term CPs going forward. Where do you want to do it if you are seeing a flattish yield curve within 1- to 5-year tenors?
The reason is that the differential between a Commercial Paper and a tenor borrowing is almost 150 basis points. And we are not doing the commercial paper at the risk of kind of distorting the ALM. It is within this space, which is provided in the ALM, because we're already done a lot of long-term borrowing when the G-sec was around 6.6 or 6.7.
Okay, but this -- just because there is space, where do you want to do it? Given a choice, you would want to do as long tenor borrowing as possible, right?
Well, not necessarily because it also -- it depends upon the overall ALM structure. When there is a -- when there are short-term assets also being added on to the book, then there is basically no risk. You're actually balancing it off against the short-term assets that you have created on the book. It is against the cash flows of those short-term assets that you're planning these borrowings.
The next question is from the line of Nishant Shah from Macquarie.
Sir, just a couple of questions. First, I would like to know what are your -- what is the repricing pipeline that we have both on the asset side and on the liability side, like how much of our borrowings are going to come up for repricing in FY '19? And how much of the individual loans of our earlier fixed-rate product are going to come up for repricing? So can you address that first, I'll ask the next question then later.
Yes, actually, as far as the borrowing is concerned, on the NCD, is about INR 20,000 crores that's coming up in the next 1 financial year, that is FY '19, for the full financial year, about INR 20,000 crores is coming up for repricing. As far as the assets are concerned, see, now most of the assets are already in floating. The residual amount of assets which are coming up for repricing, the number is very small.
So could you quantify that?
I think it will be around INR 3,000 crores to INR 4,000 crores.
INR 3,000 crores to INR 4,000 crores? Okay, and these are repriced about what 50 bps lower right?
No, it could be. Some of them could actually get repriced higher, depending upon the kind of rate at which it was contracted. Depending upon also the rate of interest prevailing at the time of conversion.
Okay. Would we have like that number on hand, offhand like...
I would consider it to be neutral. There could be some assets which will be repriced upwards as well. As well as some assets which could get repriced downwards.
Fair. So the broad point that we take forward is that net -- on a net basis, because INR 20,000 crores of liabilities are going to get repriced downwards, that is going to give you some cushion on your incremental spreads?
Right.
Okay, sure. And the second question is on your corporate NPLs, the builder segment. So what's the progress there? It has been like these NPLs have been just piling on for quite a bit. Last quarter, we had indicated that there was some solution probably likely in one of the large accounts of INR 1.3 billion. So any progress on any of the 7 NPLs that we have on the corporate side?
No, like I mentioned last time, in fact after Q1 also, I had made a comment that probably we were looking into a very close solution to one of our very old accounts also. But it was just a slip between the cup and the lip sort of a thing. So I would not like to now make a commitment but then the only thing is that it can happen any day at any time now. In one of the accounts, in fact, the money has been deposited in a account of the Court. But as you know, the court may give an order today, maybe after 1 month, after 3 months. We are keeping our fingers crossed. Because the date happens, the money will come to us. That's the problem. But I'm still very hopeful that Q4 should see a resolution of at least a couple of accounts.
Okay, sure enough. And would we need to have any provisioning requirement against these or all of them already...
No, they're fully provided.
Fully provided, like the net of the recoveries that you expect, right?
No, actually the recovery could be of the entire amount, so there could be a provision reversal as well.
The next question is from the line of Kunal Shah from Edelweiss Securities.
So sorry, just to touch upon the previous question in terms of the corporate NPL. So what is the exact provisioning against the corporate NPLs which are there?
See there are some accounts we have been provided fully, 100% provision has happened. Couple of accounts which have gone into NPL in this current financial year as per the requirement of the NHB, 15% has been provided.
Okay. So on this INR 655 crores that's the corporate NPL for -- as for Q3?
Correct.
So what's the amount out there?
Yes. As far as the total amount of INR 665 crores is concerned, the provision -- specific provision against this is approximately around INR 360 crores, INR 360 crores.
Okay, okay. And any seasoning expected again say in the coming quarters or next 2 quarters on this? Or maybe we are comfortable.
We do not see seasoning of any of the major accounts because all the major accounts are the 3 very old accounts have been fully provided for. Two accounts which were large ones, which have slipped into NPA this current year, I think they are still in the early buckets. They do not need any further -- I mean there is no transition of buckets in the next couple of quarters.
Okay, okay. So provisioning on this might not go up with the resolution, we should only expect the recoveries coming through?
Right.
And any color in terms of the increase which has been there, in this corporate GNPL this quarter?
Yes, basically very small accounts. In current quarter, you're saying, small accounts. I mean it is not in any of the lumpy accounts.
But technical largely or how should...
Technically. Mostly technically, mostly technically.
Okay. Okay. And just lastly, in terms of the incremental spreads, so that has moved up and particularly yields have also gone up. So is it more to do with the mix during the quarter, be it maybe in terms of the project loans? Or is there any other reason for it? And would there be the pressure on these incremental spreads because maybe I don't know, yields are still holding on, okay, and that's the reason not able to get it as to how that has happened in this particular quarter.
See, as far as the current Q3 yields are concerned, I would say that to some extent probably overall the situation will be a little less pressuring because of the interest rate scenario itself is reversing. So pressure on yields going forward should ease a little bit. As far as on the cost side is concerned, as I just mentioned that we still continue to borrow at the levels which are lower than our weighted average cost of fund. Plus some amount of short-term borrowings should help us hold on to those incremental spreads to some extent.
Okay. So there is maybe -- at least on the yield side also, we don't see any kind of a downside also going forward in terms of [indiscernible]
No, right now, I think, overall in the market, generally everybody is holding on to their price points. Nobody is talking of any rate reduction.
The next question is from the line of Anand Laddha from HDFC Mutual Fund.
You had given the breakup of the gross NPA on the individual and corporate. Within the individual gross NPA [indiscernible] NPA what could be the breakup between individual loan and LAP?
Yes, you want a breakup between LAP and?
The breakup of gross NPA between LAP and normal individual loan NPA. Pure home loan NPA.
Yes, LAP would be 0.55%.
Okay, okay, right. And sir if...
Individual would be about 0.53%.
Individual will be 0.53%? Hello?
Yes, yes, yes.
Okay. Sir, if I had to look at the borrowing side, borrowings from short-term like CPs are just 3% for total borrowing, is there any plan -- is there any thought of management to increase this proportion further?
No, this will go up actually. What you see is the share of the total borrowings. But CP's, as Mr. Sudipto was saying, probably looking toward short-term payment also. Maybe 10 to within our ALM ratios, we will take it more.
Okay, but is there any thought of the management so probably over the next 4 quarters or next 6 quarters this 3% kind of proportion can go to 7% to 8% of the borrowing?
No, actually, Anand, probably as on a quarter end reporting date the number will still be around 3% to 4%. We typically do a lot of borrowings intra quarter.
Okay. Okay, so we will look at borrowing for 2 months, 1 month in between the quarter, and at the end of the quarter, it remains the same.
Yes, not 1 month, 1 month is too short. Between 2 and 3 months.
Okay. And just a data point. If you can just give me absolute amount of disbursement on the LAP segment this quarter?
Absolute amount of disbursement is...
INR 2,146 crores.
The next question is from the line of Nischint Chawathe from Kotak Securities.
Just one question from my side. Within the retail business, are you able to see any specific trend in NPLs between the LAP and the housing segment?
They are approximately around same. It's not that one sector is contributing more or so.
Can you share the numbers, if possible?
LAP is about 0.55%. And individual is 0.53%.
The next question is from the line of Vishal Rampuria from HDFC Securities.
Sir, some follow-up question to ask you. One is that, how much was the LAP disbursement growth for the quarter?
For the quarter, it was about 14%.
14%.
1-4, 14.
1-4, yes. Secondly, sir, you spoke about some progress on the builder book. So can you throw some more light, because I think you spoke only about like one account. But overall how you will -- because right now the NPL numbers are roughly 10% to 11% for the builder books. How do you see this number coming down over the next 1 year or so?
See, builder book -- what happens is because our -- the volumes are less, so probably like the ratio is shown is 10.5%. But the gross -- the amount if you see is about only INR 650 crores odd. So -- and this if you take into consideration the major accounts, so the number-wise not many, many of the project loans get into this. And as I said before, probably, had the position would improve drastically once we get these -- at least 1 or 2 accounts sorted out in this quarter.
So your top 5 accounts in the...
If I may just add. Out of INR 650 crores of NPLs on the developer side, 5 accounts itself account for more than INR 450 crores. And in all those 5 accounts, there are various stages of resolution. As our MD mentioned, in one of them, we even received the money which is deposited in account under court's direction. And there are also progress on some other accounts. So it is basically 5 accounts.
I was very hopeful even after June quarter that the money will come to us.
Yes.
At that time the money was not with the court, but the proceedings were in a very advanced stage, we were thinking that we'll get it. But then suddenly the borrower again went to a different court. And during this time, the money has come, now it's a battle between 2 courts and all those things. But then again, any day it can happen, it's that sort of a thing.
Okay, okay. So overall you're saying that -- so given the level of resolution, we probably expect probably this number can half in next 1 year or so, so INR 650 crores can easily come down to INR 350 crores or INR 400 crores.
Definitely. Definitely.
The next question is from the line of Nilang Mehta from HSBC Global Asset Management.
Just a couple of follow-up. So on the developer loan side, while our base is small and we have been growing that on and off, the overall market seems highly competitive with lot of other NBFC's extremely aggressive in the lending space and yields coming down. How do you see ourselves competing in this space and where? And my question is coming from the point where whether we'll be able to compete at this space since we've not been there lending very aggressively or not actively in this space in the past? So just wanted your sense that how we will ensure that the new growth if you're right will maintain asset quality as we go ahead?
Very consciously, we had decided at the start of the year that probably we would not like our project shares to go up very drastically. And today, also, we maintain that. In between looking to the market, looking to the market dynamics, we did have a relook into our underwriting rules also, not exactly relaxing them but making it more market-friendly. And after that also, the last -- in fact, Q3 was not that good as far as project loans are concerned, but if I see it from the sanction point of view, probably I'm very hopeful, not in Q4, towards the end, but maybe this month or early February, we may touch last year's figures very, very soon. Last year, we did about INR 3,200 crores. I'm in line of touching those figures by the mid-February or so. And as I said, the underwriting standards have not been lowered or diluted so that the asset quality is not a question that will come up later on.
Okay. But my question is like as you said this quarter wasn't great. So where you'd have missed out, is it because of pricing? Or is it because of the underwriting which you are looking to do in terms of collateral and all? What would have caused some of the potential disbursements not happening?
It's a combination of, see pricing also, then sanction of the project loans, 90% of the disbursements don't happen very fast. Some of them are immediate, some of them are over staggered stages of construction and other things. So they don't -- so sanction-wise, that is what I'm saying, sanction-wise, December was not bad, particularly month of December. So probably all those things, which have got sanctioned in December will come up for disbursement in this month.
Okay. My other question was around distribution and your sales strategy. So when you said you opened 2 regional offices, Patna and one more place and growth has been strong. So have you been able to map out where the market leaders or the new competition is and how geographically we are spread and what are the gaps we need to fill?
See, this is a constant activity. Every year, we have a performance budgeting event, which is scheduled normally in the month of February, wherein all these things are factored in, the regional offices also, the corporate office also, sits down and evaluates what all regions we need to enter more based from the point of view of our presence as also from the point of view of presence of the competitors. These 2 regions, as I had said probably earlier, our central region, which were comprised of UP, Uttaranchal, MP and Chhattisgarh, they were doing volumes, which were, say, nearly half of the southern zone. Today, they are doing as much as, if I combine both the things, they're doing as much as South zone. And growth wise, they are the top 2. So this year, taking another cue -- I mean not cue, taking another -- I would like to make one more point that as I said, the current -- next year planning for opening of new offices, more presence, and all these, that's going on. And last year we had opened 2 regional offices and around 6 area offices. Current year, regional offices, we won't be opening because the controlling office wise it's a fairly good number. But we plan to open nearly around 18 to 20 new area offices next year.
The next question is from the line of Kamal Verma from CLSA.
A couple of questions. One if I could have the home loan disbursement for the previous 2 quarters, 1Q and 2Q, if you have that handy. Home loans, not the individual.
June quarter, it was 8,286. September quarter, it was 10,300.
Okay. And if I may ask, sir, the way generally 3Q because of all the festive season tends to be higher. Why would the disbursements on the home loan part come down from 10,300 to 9,100?
No, this is -- current year, I'm telling you the retail portion.
Yes, so I believe the...
It is 11,300, current quarter it is 11,300.
Sir, that is individual, right? INR 11,300 crores?
Individual. Total retail.
No, I only wanted the home loan piece, sir. Home loan piece, the core book.
The core book you want?
Yes, sir. Individual number I have, you gave it on the PPT.
Q1 was 6,894. Q2 was 8,434.
And now this is 9...
9,177.
Perfect. This is great. And sir, in the presentation, you do give out the 9-month yield and 9-month spread. Could you share with us the spreads for this quarter on a stock -- on the stock basis?
The stock basis for the quarter it will be the same only.
Okay, because generally it's been coming off because the absolute margins are coming off. I believe, it will follow the track line of margins.
There has been a small decline year-on-year by about -- the spread has also declined by about 6 basis points and margins have come down by 5 basis points.
Okay. And also just wanted to understand, when we look at the stock growth in LAP book, so the LAP book is about INR 20,000 odd crores, and INR 20,600 crores. And last quarter it was just touching INR 19,000 crores, INR 20,000 crores. So it's quarterly growth of about 3%. There is one way to look at how the annualized or how the quarterly buildup book is happening. And other way is to look at Y-o-Y because it adjusts for seasonality. So how is this book building up to go back to of whatever increasing the share or being even flat on a Y-o-Y basis? Or I think the idea you were saying that at the margin this number could be growing faster than the overall book. So 3%, 4% sequential will probably still mean you'll probably in 12 months from now we'll see a 15%, 20% growth in the book. Is that how you are looking at it?
Yes, by and large the growth trend in fact just to share with you another data point if you look at the asset composition as on March 2017, and if you compare it 9 months down the line, the asset composition has changed very, very minutely by about 0.5 percentage point or not even 1 full percentage point. So that is a part of the strategy where we articulated that the LAP book or the noncore book will be allowed to grow a particular percent to a particular composition of the total assets. And from there onwards, we will maintain it at that level. So that is exactly how it is panning. Then after March, probably we'll see all the -- both the 2 pieces of book might be growing by and large at the same rate year-on-year once the base has been corrected.
Okay. And lastly from the provisioning perspective, currently you're running at like 44% NPL coverage. Some of your loans possibly can even get repaid, the NPL loans as you were mentioning. But in the near term, will there be any seasoning-related aspects that we should be aware of in terms of how 1 or 2 large NPLs moving from D2 to D3 sort of a bucket?
No, not in this couple of quarters.
The next question is from the line of Bunty Chawla from B&K Securities.
Just on the data point I require, you had said INR 27,400 crores were repriced in the 9-month FY '18, right?
Yes.
So can you give the similar amount, or sorry, similar number of accounts in that case, how much were the accounts?
Number of accounts?
Yes, yes.
1,90,000.
1 lakh...
90,000.
9-0.
1-9-0, yes.
1-9-0. And similarly, on the developer portfolio, you have said few small project loans have turned NPA. So can you share the amount per se on that?
For the quarter?
For the quarter, for the quarter, sir.
It was around INR 73 crores, INR 74 crores.
INR 73 crores, INR 74 crores, which is equivalent to INR 130 crores you said in Q2 number, right?
Yes.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for the closing comments. Thank you, and over to you.
Yes. Thank you for your participation. As I said before, this quarter has been one of our better quarters as far as disbursements go. The income levels have gone up. We would like to, of course, work upon more on the spreads reduction as far as the borrowing cost is concerned. Being higher -- still a higher contribution from the project loans, so that we further build upon our yields. Thank you very much.
Thank you very much. Ladies and gentlemen, on behalf of Axis Capital Limited that concludes this conference. Thank you for joining us, and you may now disconnect your lines.