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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 '21 Investors 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. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, everyone. And we have with us Mr. Siddhartha Mohanty, MD and CEO; Mr. Y. Viswanatha Gowd, he's the Chief Operating Officer; and Mr. Sudipto Sil, CFO, to take us over the results, post which we'll open the floor for Q&A.Over to you, Mr. Mohanty, for opening remarks, please.
Thank you. So good afternoon, friends, and welcome to the post-earnings conference call of LIC Housing Finance Limited. As you are aware, LICHFL declared its Q3 FY '21 results yesterday. Before beginning, I wish you and your near and dear ones good health and safety in the new year.Before I begin detailing the operational aspects and numbers for the quarter, I would like to highlight the strong surge in recovery from the effects of the pandemic and ensuing lockdown, which had brought the economy to a grinding halt just a couple of quarters back. Given that backdrop, the significant growth in economic activity that we are witnessing currently, especially in housing and real estate, speaks about the resilience of the sector and the inherent demand.The quarter under review, that is, Q3 FY '21, can probably be recorded as the best Q3 for the company, with disbursements improving month after month in continuation of the second quarter, which also was strong. For the quarter, we have recorded a 28% growth in disbursements, highest in recent several years, with the individual home loan segment recording 36% growth year-on-year. The growth in disbursements was almost uniformly spread across the country, with the affordable housing accounting for more than 30% share in disbursements. Lowest ever interest rates in home loans, stable property prices and incentives like stamp duty reductions have assisted in lifting the sentiments for the sector and also triggering demand.Key markets, including centers like Mumbai, witnessed record number of registrations in December. On the side of the company, several initiatives taken by the company, including an innovative new product Griha Varishtha for pensioners, new mobile app launch and other digital initiatives have made the customer experience positive.The financial highlights of the quarter are as follows. Total revenue from operations INR 4,907 crore as against INR 4,996 crore for the corresponding quarter of the previous year. Outstanding loan portfolio stood at INR 220,197 crore against INR 208,270 crore as on December 31, 2019, reflecting a growth of 6%, out of which individual loan portfolio stood at INR 204,444 crore against INR 194,004 crore, up by 5%. We are witnessing a steady improvement in asset growth every quarter for the past 2 quarters.Total disbursements for the quarter were INR 16,857 crore as against INR 13,177 crore for the Q3 of FY '20. Out of that, disbursements in the individual home loans were INR 14,511 crore as against INR 10,655 crore for Q3 FY '20, showing a growth of 36%. As mentioned earlier, the growth in disbursements improved every successive month from June onwards and has continued even in January. The recovery, which started initially with Tier 2 centers in June, has by now covered the entire country.For the month of December, disbursements clocked a growth in the mid-30s. Business under the PMAY-CLSS category continued to remain strong with nearly 32% of retail disbursements coming in this category.Our mobile app, HOMY, which has already crossed 0.5 million downloads, has also helped us garner new loan applications of over INR 1,800 crore.On the net interest income front, NII was INR 1,281 crore for the quarter as against INR 1,254 crore for Q3 FY '20. Net interest margin for the quarter stood at 2.36% as against 2.34% as on Q2 FY '21.Profit before tax for the quarter stood at INR 969.64 crore as against INR 745.32 crore with a growth of 30%. Profit after tax for the quarter stood at INR 727.04 crore as against INR 597.53 crore for the same period previous year, reflecting a growth of 22%.In this kind of an economic situation, perhaps the most important area of concern for any lender is the asset quality. In the past 3 quarters, we have seen a series of developments in this area. In March and May, the RBI announced moratorium. Thereafter, a onetime restructuring was also announced. The government, too, announced a series of steps to alleviate the situation of the borrowers, including ECLGS scheme and so on. This being an unprecedented situation, a fine balancing act to protect the interest of both borrowers and lenders has been attempted by the regulators and government. At the company, we too are extremely alert and vigilant to protect the interest of all the stakeholders.In terms of asset quality, the Stage 3 exposure at default stood at 2.68% as against 2.73% as on December 31, 2019. In the past 3 quarters, we have increased provisions gradually, taking the total provisions as on December 31, 2020, to INR 2,948.05 crore, reflecting a provision cover of 40% from 47% earlier. This includes INR 211 crore for COVID-19-related provisions and INR 186.53 crore for impairment in light of possible increase in NPA in light of final outcome of the honorable Supreme Court interim order. We are evaluating proposals received for onetime restructuring under the RBI guidelines. Till date, no such case has been restructured.We have been very closely focusing on the collection efficiency. And for December month, it stood at about 98%.On the funding side, we have witnessed a significant reduction in overall cost of funds by 36 basis points during the current quarter and 83 basis points during the current financial year. Incremental cost of funds has also come down significantly and stood at about 5.25% for the quarter. Net interest margin for the quarter stood at 2.36% as against a 2.34% over Q2 FY 2021. The funding environment and liquidity conditions remain quite favorable for the company. During the quarter, we successfully raised INR 1,000 crore Tier 2 bonds towards improving the capital position.Project RED, that is Re-imagining Excellence through Digital transformation, this project RED in association with Boston Consulting Group, BCG, has also been progressing quite rapidly and some projects, especially in areas of CRM, video KYC, et cetera, have already been rolled out. As mentioned in our earlier interactions, we believe after the completion of the project in about 1.5 years from now, the company will be digitally amongst the best-in-class.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 Pranav Gupta from Aditya Birla Sun Life Insurance.
I have a few questions. So firstly, can you -- so can you give a sense on how the -- or can you give the number out for pro forma NPAs that you have seen this quarter ex of the Supreme Court stay on classification?
See, we have also assessed internally, and my sense is whatever can be, if Supreme Court relief is not there, that will be around 1%.
That would be an addition to your current [ Stage 3 ]?
Yes, yes, that is my sense. And we are also assessing. And that may also be reduced because there may be some overlapping. Restructuring also -- proposals are also pending. We are also examining whether they are eligible or not. So if you take into account 2 things, some of them will overlap. So that may also be reduced. But upper limit is around 1%. That is my sense.
Yes. So sir, then is it fair to assume that this 1% that you're saying is largely sitting in Stage 2 because Stage 2 has dramatically jumped even from historical levels of 3%, 4%. It's up to almost 6.95%. So...
Yes, yes, yes. So the Stage 2 has gone up. Yes.
But even if we exclude this 1% that might go to Stage 3, the number still has jumped drastically. So is it largely because -- could you just help us understand why it has jumped so drastically this quarter, even from historical levels, not just on a Q-o-Q basis?
Yes. Pranav, this is Sudipto here. Pranav?
Yes, sir, I can hear you.
Yes. Yes. See, actually, if you look at the Stage 1, Stage 2, I will take both together. If you see December '19, Stage 1, Stage 2 put together and December '20 Stage 1, Stage 2 put together, it is almost same, maybe slightly less. So -- or maybe around the same level. So it is not that there has been a drastic increase. What you are probably comparing is a sequential comparison from quarter 2, that is, September quarter to December quarter. September quarter, there was capitalization, which has happened, for which it had come down. But generally, our Stage 2 has remained in the 5% range for quite some quarters before the pandemic also.
All right. Okay. Sir, next question on the liability side. Could you give us the number for how much of your liabilities would be maturing in the next 12 months?
Yes. See, roughly around INR 20,000 crores will be maturing in the -- financial year, I'm telling you, financial year of '21, '22.
FY '21. Okay.
FY '21 -- FY '22. FY '21 will be maybe around INR 6,000 crores to INR 7,000 crores.
So a total of about INR 27,000 crores, INR 28,000 crores in the next 15 months.
Correct.
Okay. And sir, last question from my end, I'll join the queue again, is...
Hello?
Mr. Pranav Gupta, your voice is not audible, sir.
Hello, am I audible now?
Yes, yes.
Sorry. Yes. So just last question from my end, sir. So how are we seeing the overall provisioning on the restructuring or possible restructuring plus possible stress that might come in? Because you said that about 1% could be added to the overall stress plus some more restructuring as well. How are we seeing the overall cover if we add that to the stress pool?And secondly, just a clarification. Isn't the window for retail restructuring closed? Or am I missing something?
No, no, it is going on because last date was December. So we have received applications. We are now processing. And so far as the restructuring, if you see in my statement, I have also told COVID and other impairment, we have already provided INR 400 crores.
Okay. So you've invoked it, but you have not implemented it yet?
That will be considered. We are examining. So once we implement all those provisioning, things will also come because many of them may not be eligible also.
See, actually, right now, the applications have been -- are under review and process -- evaluation. And what we just mentioned is that we have actually proactively created some provisions. COVID provisioning is INR 212 crores plus further provisioning on impairment that is because of the Supreme Court order. We have already created some INR 180-odd crores. So total provisions for this kind of situation is already standing at INR 400 crores, which is over and above whatever provisioning is required for the normal ECL. So this INR 400 crore provision we have created, and it stands as of date. And that, we believe, will be substantially able to take care of whatever is required going forward.
The next question is from the line of Nishant Shah from Macquarie.
A few questions from my side. So just continuing on the previous question on restructuring. I think in the last quarter, you had indicated that there would be a few thousand crores worth of restructuring that are likely, right? A big part of it coming from the developer pool and some small part coming also from the retail pool. So could you at least like give us some sense how much of it has been invoked or like you've received requests which are under process? What would be the total amount between retail and builder?
As I told, it will be around 1%, say, INR 2,000 crore to INR 3,000 crore, within that range, total, that we are calculating. And applications are being processed.
So just I'm clear, I think last quarter you had mentioned close to about INR 4,000 crores or INR 5,000 crores odd, that number has come down.
That was on the basis of inquiries only. I remember that in that call, we had clarified, those are inquiries only. Many of the inquiries have not translated into actual applications.
Okay. Perfect. So second question on the provisioning requirement. So just like -- maybe I'm not very technically clear on this. The RBI or the NHB requirements are to have like a certain amount of 25, 40, 75 basis points of provisions against standard assets. Now how does that -- yes. So how does that figure in into our current ECL-based provisions? Because in Stage 1 and Stage 2, I see like we don't have any -- we have like almost 0% provisioning.
Nishant, I think it is completely different. There is no connectivity. See, ECL is a completely different platform, and NHB provisioning is a completely different platform. There is no connectivity.
Correct. So basically, the bottom line is that whatever provisioning requirement is there as per the current extant norms, that is already there. It's just sitting somewhere in Stage 3 or somewhere else, but the classification doesn't matter, but then it's already done.
It is done. It is done. It is done. And as we mentioned, over and above that, we have created some further more provisions.
In fact, our PCR has also gone up. Last time, it was 47, now it is 50.06.
Correct. Okay. Perfect. And just last question on -- I think you had mentioned in some interviews recently that you have about INR 14 billion worth of assets in the builder fund, which you have referred to SWAMIH. So is that number correct? And could you just like give some qualitative comments as to the timelines of the resolution that you expect over here? When can we see those NPLs getting upgraded?
Yes. Actually, NPA upgraded -- only resolution [indiscernible] resolution so that the projects are completed and homebuyers get their house. That is the objective of SWAMIH Fund designed by government where LIC and State Bank, they are the participants. And all banks and LICHFL, we also -- all of our NPA assets, they also approach them. And depending upon eligibility, SWAMIH fund, they sanction further, last mile funding.
Correct. But...
[Foreign Language] that figure is correct. But so far, one case already done, 3 cases are in pipeline. Those will be done -- they're waiting for our NOC. That is put up to our EC. Once EC approves, will give NOC. And another, I think, 12 -- 10, 12 cases are there. Total number of cases will be around 14 cases.
Okay. And our total exposure to these cases is INR 1,400 crores, right?
Around.
Okay. Perfect. And...
Nishant, sorry to interrupt. One small clarification I would like to provide. In SWAMIH fund, whatever funding happens, it's a last-mile funding being provided by that fund that does not result in an upgrade. That results into a commencement of the project. It does not upgrade the account. Just wanted to clarify.
That's exactly what my question was. Once that last-mile funding is provided, do you have like an estimate as to what is the timeline on which you can say the project would be completed and...
It varies from project to project. It depends upon the expected completion timeline. It depends upon project to project.
Okay. No estimate on the timeline...
As I said, it varies from project to project. Some projects might get completed in 1.5 years to 2 years, some projects might get completed in 3 years. So it depends upon the stage of construction, which is there at present and how much construction it is required -- further construction is required. So the timelines are not uniform.
The next question is from the line of Aditya Jain from Citigroup.
A couple of questions on the additional provision that you mentioned for the SC standstill, INR 186 crores. So if I see the SC standstill, you said might increase -- adjusting for that can increase the NPA by 1%. So that's around INR 2,000 crores. So on that, we are carrying INR 186 crores, roughly, less than 10% of provision.
INR 400 crores. You can include -- COVID also INR 400 crores, no? COVID we have also included INR 212 crores. So that is around INR 400 crore we have provided additionally.
Okay. So this entire INR 400 crores will cover the maybe around 20% provision or...
Maybe, we do not know, but it will be around. We have taken adequate precautions. We have provided that amount for now, INR 400 crores.
Got it. Okay. And Stage 2 loans of 7%. So you mentioned the normal level is 5%. So from this, you would expect some higher slippage to happen in 4Q? Is that the right way to think of it? Or are you seeing that accounts within this are servicing and they can recover?
No, if you look at, Aditya, the Stage 2 accounts as on December '19 was 5.72%, which in December '20 was 6.95%. So there is roughly around 1% increase here -- 1 percentage point increase here.
Okay. So this is [ as of the ] SC standstill, which is instead of being in Stage 3, it's coming into Stage 2.
Likely, likely.
Got it. And could you tell the NPA ratios in individual and nonindividual segments?
Yes, certainly. See, in the individual segment, the NPA ratio is 1.62%, and on the project, it is 2.66%. Within the individual also, home loans, which comprise about 77% of the portfolio, there, the NPA is 1.07%.
Nonindividual is 2.66%?
That is the project -- project loan is 16.22%, total is 2.66%.
The next question is from the line of Amit Ganatra from HDFC Mutual Fund.
Just one clarification. See, this exposure and default disclosures that you have given, where Stage 1, Stage 2 and Stage 3 categories are available, so this does not -- I mean this is still a standstill as far as Stage 3 is concerned, is it? I mean 2.68 does not -- I mean it assumes that there is a Supreme Court order, which means that there is a standstill.
Yes, obviously. You can refer to our note to accounts on the disclosure. It's very clearly mentioned there also.
No, no, I understand, but I think -- I mean some of the companies, what they have done is that they've reported gross NPAs as standstill, but when they reported Stage 1, Stage 2, Stage 3, they have reported as if there is a roll forward. So that's why I was just confirming. So in your case, 1% is the additional impact on Stage 3. That's the way to interpret.
Yes, to interpret, yes.
The next question is from the line of Umang Shah from HSBC Securities.
Congratulations on a good quarter. Sir, I just have a couple of clarifications. One is, as sir mentioned that, let's say, even if the Supreme Court standstill was not there, there could be a maximum 1% increase in gross NPLs, and this is -- there could be some overlap in restructuring. So it's not 1% restructuring plus 1% rise in NPL, right? The maximum increase could be 1% in either of the bucket, it depends, wherever it flows. Is that the right interpretation?
Yes, that will be around 1%, we are telling, around 1%.
Okay. But 1% restructuring is not over and above the 1% rise in NPL, right?
No, no, no. There will be some overlap.
Okay. Okay. Understood. Sir, second clarification which I wanted to have is the COVID and impairment provision. Is that sitting in the Stage 3 provision number that we have of about INR 29 billion or it would be sitting outside these ECL provisions?
It's in Stage 3.
Okay. It's in Stage 3?
Yes.
Yes.
Okay. And sir, my last question is about the digital transformation, operation RED, that you spoke about and, obviously, the project completion will take another 1, 1.5 years. What sort of OpEx does the company intend to incur? And will there be some sort of lumpiness or it would get amortized over a period of time?
It will be amortized.
Most of the project outlays for whatever development happens will be probably over a period of 5 years. The benefit will be accruing to the company over a period of 5 years.
Okay. Okay. So the OpEx will also kind of reflect in a similar fashion, and there would be no onetime or lumpiness?
Yes. Yes.
Correct, correct, correct.
Okay. And sir, sorry, just one last thing. In terms of repayments, loan repayments appear to be fairly high this quarter. Is it because of BT out? Or how should one read it?
See, it is not disproportionately higher. It has remained more or less in the 10.4%, 10.2% range, which was there in the earlier part of the year also. Sometimes what happens is that the first quarter, the prepayment rates were drastically low because offices were closed, business transactions didn't happen. So it probably got accelerated in Q2 and Q3. But overall, if you see on a year-to-date basis, 9-month to 9-month comparison, it is fairly stable.
The next question is from the line of Kunal Shah from ICICI Securities.
So in Stage 2, if you can highlight this 6.95%, how much of that would be between the individual and the nonindividual? So on Stage 3, we highlighted, but if you can just give a color in terms of -- in Stage 2, it is largely the developer loans or it's the individual loans which are there?
No. If you look at the -- you want the Stage 2? Hello?
Yes. So Stage 2 assets, 6.95%, just need the breakup between the individual and the nonindividual. The way we gave it for Stage 3, if you can share it for Stage 2 as well.
Just 1 second. Yes, Stage 2, the EAD is around, say -- for the retail, it is around -- number-wise or percentage-wise, it will be around a little less than 7%. So by and large, it is reflective of the same trend. It is slightly lower as compared to the project.
Okay. And projects would be?
Projects will be slightly higher.
Okay. So the projects will again be like 10-odd percent or so?
No, not 10%. It is less than 10%.
Okay. So when we look at 16% of projects in Stage 1, 16.2% in Stage 3 and another 8%, 9% would be there in Stage 2, maybe slightly higher than retail, so that would be, say, 8%, 9% would be there in Stage 2?
Around 500 to 600 will be there in Stage 2 and some 500 more will be there, which will -- which could be getting into a restructuring model.
Okay. Okay. So 500 in Stage 2 and 500 can get into that restructuring model, which will be currently sitting in Stage 2 only?
That is right.
Perfect. Okay. And during the quarter, any movement in terms of the developer NPLs? Last time, I think, it was 16.5%, now 16.2%. So any additional resolutions which would have happened out there? And just the breakup also between the home loan and the LAP, if you can share on the Stage 3 side.
See, there has been some recoveries. I would say that those are -- number-wise, it may not be very significant. But more importantly is that we have seen some resolutions happening in the builder and high-ticket segment. Some more might actually come in the next 2 months before March. But more important thing is that there has been no fresh additions.
Okay. So -- and developer at least in Stage 3, there were no additions?
No, no. Some movement is there. Some positive movement is there. Maybe it is not big enough to move the needle significantly. But some encouraging movement is seen. Right now we would not like to give more details on that, but there is some development there. And as we mentioned earlier, at SWAMIH fund also, there is some positive development. So overall, there seems to be some positive outcome. It obviously will take some time, but at least something is...
In fact, some resolutions have achieved final stage, but that is -- this NCLT final clearance is awaited. We were thinking to get by December, but it is now lingering to, I may be thinking, February or March. So big ticket size. Everything is finalized. Only NCLT staff -- once that is there, so we'll get back the money.
Okay. Okay. And secondly, in terms of this pro forma, so last time, we highlighted 150 to 170 basis points, okay, in pro forma. So no doubt, collections would have been better. But still, there should have been a good flow-through over 3 months because last time, it was only 1 month, which would have been there, but now it's like almost 3-odd months. So -- but still, like, we are saying that, that number is lower. In fact, on the pro forma, it is only 100-odd basis points. So how should we look at this number maybe in terms of the assessment? Because last time, it was quite high. So is it purely collections or there is -- maybe that number could still be on a higher side when it gets reported?
No. See, there are 2 things to it. One thing is that we said that there could be some overlap also. So that also is likely that the pro forma and the restructuring, there will be overlaps. So to that extent, it might -- at that time, when we had discussed, probably we had separately looked at it. And that time, it was not very clear what was going to be the color of the restructured -- number of restructured accounts actually flowing through. So to that extent, there was a little lack of clarity. So more clarity we have right -- we have received right now. So to that extent -- and obviously, there has been some improvement in collections. As compared to September, the December collections have increased. The increase, again, is a small increase, but at least there is a positive direction.
Yes. So the only thing I'm trying to get is it has not moved up actually from last quarter. Maybe some would have flowed into restructuring and some under pro forma, but still it's stable at 150 to 170 is what we are indicating.
Yes, most likely it will be around that.
Okay. And last -- sorry.
Overlap will be there for sure.
Okay. Yes. And lastly, in terms of like growth, so it's quite significant, I think, and it's largely because of the competition on the rate side. But on the margins, again, it's still flat. No doubt, we have gained the advantage on the funding side, but that seems to have got passed on. Is there any risk of further repricing on the loan side, which can get the yields lower or maybe even when we look at it in terms of the spreads, given the benefit which we are passing on? And what would be the guidance on margins? Because it's not going beyond 2.4% despite such a rate advantage? So growth is coming at the cost of the margin. So how should we read into this?
See, volume-wise, we are now increasing volume because we are in competition. And in order to sustain, you should have a competitive rate. So that has been reflected in all our activities and also results. And margin, marginal increase is there, 2.34% to 2.36%. And a look into present interest rate regime, which I believe it will continue till March, there may not be much change. We'll make out in volume. Margin, slight improvement may be there. In March, I believe it will still improve from 2.36% to a little more.
See, you have to see, Kunal, the margin in totality. First of all, the focus was to ensure that we get good-quality customers, and for that, the best rates that we have given comes along with a specific CIBIL cutoff score. So there probably, there is also a value being created in terms of better asset quality, for which probably the best of the rates are being offered.Secondly is that we have been able to come back on the growth path, and every quarter, there has been improvement in the growth. More importantly, it is in the home loan segment, which again is, I would say, relatively lower risk and distributed risk.In terms of the cost of fund you have seen, the kind of benefit that we have received on the cost of funds and I can -- with a great deal of clarity, I can say, the cost of funds will continue to go down at least for the next 2 to 3 quarters.On the yield side, whatever pressures were there, that was there initially when there was a big cut in the lending rates by competitors and, obviously, we also wanted to retain our customers, our good and loyal and well-paying customers, especially in a situation of the pandemic in order to balance out the possible increases from weaker accounts. So that was a very conscious call taken by the management to balance it out.
Sure. And one last thing on LAP. So LAP, I think it is still cautious, but do we see that maybe demand will follow in LAP as well with a 2- to 3-quarter lag. And if that also comes up, would we be equally participative in the upcoming demand? Or we will still be cautious in terms of our approach on the LAP side?
We are definitely very, very careful while taking up LAP cases. But as you see, as the economy opens up and grows, there will be demand for LAP because that helps businessmen and others. They get funding and that helps in business growth also. So in coming quarters, I believe there will be some growth soon. Recently, we have opened up. In between, we stopped. First quarter, second quarter, we stopped, we did not give any loan on LAP. But recently, we believed that it is very much essential, and there is no risk. And the property is mortgaged, so there is no risk. So coming quarters, you will find some growth in LAP also, but very, very carefully we'll choose.
[Operator Instructions] The next question is from the line of Adarsh Parasrampuria from CLSA.
Sir, question, again, on your Stage 2. Maybe I missed your opening comments on collections. Can you talk a little bit about collections? Because one of the questions I would have is for most of the banks, a good part of the NPA formation...
Can you speak up a little loudly, please?
Okay. Sorry. What my question is, for most of the banks or companies who are reporting, a good part of the stress expected is already flowing through in this quarter, right? And majority of them are going ahead and providing for it, right? And in our case, seemingly, we aren't providing enough and the gap between where overdues are there, which is broadly Stage 2 and what you call pro forma, is just 1%, that gap is still very large for us. So if you can just talk a little bit more about collections in mortgages and LAPs. Specifically in these 2 segments, where are we? And what were the trends in, say, October, November, December? What are you seeing in January?
Collection trends have improved. If you remember, in September, it was around 96%, now it is 98%. So collection trends have certainly improved.As regards provisioning, your observation that provisioning, it's not that it is not done. It is done. INR 400 crores of provisioning for COVID-related impairment, possibility of impairment in context of the Supreme Court order. Those have already been made.
Got it. And can you talk about collections specifically for the individual nonmortgage book, which is basically a LAP portfolio?
Sorry?
For your loan against property, can you just indicate...
Loan against property?
Yes, LAP, loan against property.
It is around 96% to 97%.
96% to 97%. So as we get into this 1% of portfolio railing into, let's say, Stage 3 when the Supreme court judgment is -- or the stay is defeated, would one expect a lot of provisioning to happen here? Simply because, historically, you've held a certain 40%, 50% coverage, and currently, you are sitting on a coverage of maybe 10%, 15% on that 1% stress.
No. Actually, if you look at it, the restructuring provisioning requirement is not 50%, it is 10%. That is number one. Number two is that we are also expecting that there could be a flowback from Stage 2 to Stage 1 because, on ground, whatever is visible is that there is improvement in collections almost every successive month.
Got it. No, I'm asking for Stage 1, Sudipto, that if the pro forma 1% ends up becoming NPA in the fourth quarter...
As we mentioned, there's going to be overlaps also.
Some of them will be restructured, no?
And generally, March collection has always been the best. What we are also not seeing is that there has been an improvement in the Stage 3. Stage 3 has improved actually. And we are also expecting, as we mentioned a few minutes back, what our MD has mentioned a few minutes back is that some collections and some actual recoveries, physical recoveries are also expected from the Stage 3 accounts as well. Some of them, as mentioned that in the NCLT, there is a possibility that there could be some improvement there as well. So you have to see the overall provisioning in totality, not only for Stage 2 but also from Stage 3.
Right. And can you -- just my second and last question is, can you talk about refinancing trends? Like where is your stock of -- what is the yield currently on the stock of home loans that we have? And who are the more aggressive refinancing players? What are you witnessing? How much of BT are you net positive, negative? If you can talk about that, please.
You're asking of refinance means balance transfers, right?
Yes. Balance transfers. So one is balance transfer. And what's the yield of your home loan book on a stock basis?
Sorry, I didn't follow. Again, your voice is not very clear. Last portion of...
I was asking, Sudipto, if the home loan rates, let's say, in the market is 6.7% on new loans, what is the yield of our home loan portfolio? Excluding LAP, excluding builder, what is the yield of our home loan portfolio as...
By and large, in the range of around -- incremental, it is -- you know that incremental, it is slightly more than 7% on an aggregated basis. 6.9% is the lowest. And depending upon the score, it increases a little bit, whereas on the book -- your question was regarding on the book, right?
Yes. Yes.
On the book, it has now come down because we have been also passing on repricing benefits. It is more or less around 7.5%. 7.5-ish, 7.6%. Most of the IHL, that is, the individual home loan, right, I'm not adding the LAP or the other portions of the portfolio. That is around 7.6-ish, you can take.
So you're saying versus incremental fees, our stock is already down to 7.6% within this quarter?
Yes. And incremental rates, you know.
The next question is from the line of Roshan Chutkey from ICICI Prudential.
Firstly, in the developer book, of the INR 15,000-odd crores that we have, you are saying INR 2,550 crores approximately is residing in the Stage 3 pool while another INR 1,000 crores is in the Stage 2 pool. Is my understanding right?
No, no, it is not Stage 2. See, there is a restructuring also which can happen. That is what we've mentioned. That is not Stage 2.
So what is the amount in Stage 2?
Around, say, INR 500 crores to INR 600 crores. That is the number we have shared.
INR 500 crores. So where does the restructuring INR 500 crores reside in, Stage 1, is it?
Yes, it could be.
Okay. And the SWAMIH fund resolution of about INR 2,000 crores is what you mentioned, right? That is the residing in these buckets?
No, less than INR 1,400 crores.
INR 1,400 crores. INR 1,400 crores. Okay. That is in the Stage 3 assets.
They are all in Stage 3.
All in Stage 3.
And this NCLT thing that you mentioned where you are out there to get the approval, how much -- what is the amount of that approximately?
Big ticket size.
In the order of INR 200 crores, INR 300 crores?
It depends on how much -- NCLT, how much they approve because the resolution professional, all, CoC, they have approved a certain amount. Let us see. But a big amount, big amount.
Okay. And if you can just talk about the Stage 3 -- Stage 2 number as of this month and also, if you can, whatever -- if you can give a ballpark.
January, there is no change.
January, there is no change? It's about the same? Stage 2? But you said there is successive improvement month after month. So I just wanted to understand the Stage 2 number as of...
We are expecting a good collection actually. All this -- before March, normally people pay up. So some improvement will be there. Because our experience is most of the borrowers, many of them are also holding back cash. They want to take advantage of various government schemes, RBI schemes. So they wait and watch. Despite having fund, they do not want to part with that. So let us see what will be the final outcome of the Supreme Court. But definitely before March, collection efficiency will be there.
Okay. Understood. And this pro forma thing is a little unclear to me. So is it maximum 1% including restructuring?
Around 1% it will go up.
It's not 1.5%, it's 1%?
No, no, as I said told earlier, 1% here and restructuring will also be there. So there may be some overlapping. And if we do maximum restructuring, 10% provision you have to do.
I'm not talking about provision number, sir, I'm talking about the pure asset number.
Total -- yes, yes, yes. So that will not affect much, that will not affect much.
Your next question is from the line of Mayank Bukrediwala from Franklin Templeton.
Can you also give the book yields on the corporate book right now from the project loans?
Yes. Corporate means builder loans?
Correct, sorry, yes, builder loans.
Developer loan, book size is INR 15,000 crores.
Yes, 7% of the total.
7%.
7% of the total.
No. I'm trying to understand the yield, the interest rate on the book.
The yield is around 13%.
Okay. Understood. And incremental, what is it?
Incremental is slightly less than that because incremental, I mean, we have done little cases. Around 11% to 12%, you can take, average.
Got it. Got it. Sir, in the disbursal growth that we've had in this quarter or the total disbursements that we have done in this quarter on the individual home loan book, what percentage of that would be balance transfers that we have done from, say, smaller NBFCs or maybe some other banks or anything?
Actually, we -- normally, we don't encourage any such thing. We do not tell our people [Foreign Language]. Customer on their own, they come because now you see price is most competitive for all the players in the market. Not only that we are giving 6.9%, all others are also giving. So -- but there is still -- some takeovers are there. It is very, very less.
Less than 5%.
Very negligible. Most of our loans are original loans. Yes.
Organically first-time customers. Yes.
Got it. And sir, the borrowing that we are doing, we are incrementally shifting the mix towards banks. And you're also talking about really low cost of funds coming from the banks right now. I think your weighted average cost of fund on the banks is just about 6%. So can you just talk about this? At what rate are we borrowing from the banks right now? And incrementally, is this mix that has been increasing towards the banks, will it keep increasing?
Two things. One thing is that the mix shift that you are seeing, it has to be seen in -- not in isolation, it is a part of our broader strategy that we need to diversify the resource base. Two years back, almost 80% of our funding used to come from only one source, that was the NCDs, which was the wholesale debt market. From there, we have moved to different segments of the market, including the deposits, which is retail banks, which is a different institutional market and also commercial paper we have been doing earlier also and foreign offshore borrowings, that is, ECB.So as far as the mix is concerned, I think we generally do not hard coat ourselves to any specific mix, but certainly, there will be a much, much more wider and more diverse source of funds for the company in the years to come. NCD will still continue to be the largest, and it will be around 60%. And the others will vary depending upon our flexibility in raising in terms of ALM and in terms of the rates that we receive.Your first question, that is, regarding the bank funding, we have been able to get significant benefit in the bank funding, and we have shifted most of our loans from the MCLR regime to repo-linked and external benchmark regime, where we have been able to cut down costs significantly by almost 100 basis points. And that is the reason why we have also focused slightly more in getting new bank lines. INR 31,000 crores of new bank lines we have raised in this financial year to date, that is, in 9 months. And more are there in the pipeline. So that is as far as the bank funding is concerned.
So these repo-linked bank loans, to venture a guess, is this coming at rates of close to 5%, 5.5% right now?
Yes. Yes. Yes. A significant amount of them are below 5.5%.
Significant are below 5.5%. And out of your 25% of your mix that is from the banks, can I assume more than half is now repo-linked and external benchmarking?
Yes. Yes. Whatever little MCLR is remaining, MCLR linking, those also will probably get revised in the next 2 months.
Understood. And sir, just if I can slip in just one last question, how much of our business mix, especially in the last 9 months, has come from Maharashtra, Mumbai, the Western region? Is there a skew over there?
Actually, it is across, not specific.
Just to give some specific, if you want -- normally, we do not share region-wise split, but out of the total disbursements of, say, INR 33,000 crores until 9 months, approximately, you can say, the Western region -- you asked for specifically Western region. That was your query, right?
Yes, like, the Mumbai, Maharashtra region, basically.
Mumbai has improved. Mumbai -- last quarter, Mumbai has contributed...
Around 15% plus will be the share from Maharashtra, Gujarat.
15% plus?
1-5.
[Operator Instructions] The next question is from the line of Chandrasekhar Sridhar from Fidelity International.
Could you -- just wanted your thoughts on few things. One is...
A little louder, please. Yes.
Yes. Just wanted your thoughts on a few things. One is that the incremental ticket size seems to be increasing with every quarter. That's one. Second is, if I look over a fairly long period over the last couple of years, your developer book repayments as a percentage of your opening book is now down to about 6%. So I'm just trying to understand what's happening there. And can you just help us understand what is the interest accrued as a percentage of your AUM as of this point in time versus last year?
See, average ticket size has gone up. Earlier for our company, it was around INR 23 lakhs to INR 24 lakhs. Now it is INR 26 lakhs to INR 27 lakhs, average ticket size. It has gone up.And your second question was...
I'm trying to understand what's driving that? Is it because in this quarter or this year...
Yes, bigger ticket size people are -- bigger ticket size loans people are availing and -- because of price concession and rate of interest. So people are moving to bigger loans.
The lower interest rate and lower property prices allow higher affordability. What was your next question?
Okay. Second is your developer book repayments as a percentage of opening book, which has been dropping over the last 2, 2.5 years, is down to about 6%, 7% at this point in time [ versus ] 25%. So just take us through what's happening there. And can you just tell us what's the interest accrued right now sitting in your AUM?
See, the developer loan repayment, obviously, 16% is NPA. So where that will be a repayment? The repayment will not come there, no? So that, obviously, has been one of the reasons why your repayment is not showing up. So repayment and prepayment don't happen on the bad loans. So that is where it gets -- that answers your query. The other one that you wanted to know is how much is the accrued?
Yes, yes, what's the accrued interest, again?
Accrued interest on?
How much of it is in your AUM? I mean interest accrued -- how much of your AUM is now the accrued interest?
See -- you are talking about the capitalized -- I'm not very clear because -- so if you look at overall -- maybe I'm trying to answer your question in a slightly different manner. The difference between your IGAAP and your Ind AS on the project loan, I think that will give you an answer of what is going to be the AUM, right? Because as far as the IGAAP is concerned, there was no concept of an accrual in the AUM itself, whereas in the Ind AS, you have that.So my estimate is that probably it will -- as far as the IGAAP project loan outstanding is concerned, it stood at INR 15,602 crores. That is the loan book under the IGAAP for the project loans only, whereas your outstanding loan on the Ind AS is INR 15,000 crores -- I'll just give you the number. It's INR 15,763 crores. So that is roughly around, you can say, how much, INR 100 -- INR 50 crores, we can take?
Sorry, INR 1,050 crores.
INR 15,602 crores and this is INR 15,763 crores. INR 15,763, that is as per the Ind AS AUM, which also takes into consideration the accrued. And the IGAAP figure is INR 15,602 crores. So roughly, you can say INR 150-odd crores.
The next question is from the line of Pranav Tendulkar from Rare Enterprises.
So I have a question about the existing NPAs, so existing NPAs of about INR 6,000 crores. What is the split between retail and builder?
See, builder loans, NPA is 16.22%.
Okay. So if I subtract that, then it will be the retail.
Yes, if you want the exact figure, it is around INR 2,532 crores, INR 2,530 crores, you can take.
Okay. Okay. And the rest is retail?
Yes.
So out of the INR 2,500 crores, the recovery mechanism, the arrears recovery mechanism because last quarter also, you mentioned that there will be 3 -- 2 to 3 accounts, which could be resolved in H2?
Yes, yes, yes. Some small amount recovery has happened, but there has not been any significant or large ticket recovery which has happened. But some small ticket recovery has happened. It is under process. Some NCLT cases are also there.
Right. So this NCLT cases, our exposure is how much?
Triple-digit figure.
So INR 1,000 crores above.
Triple digit.
Triple digit.
Okay. Okay. Triple digit. Okay. Okay. So that is one. So second thing is that the way I see your NIM shaping up, if suppose interest rate market -- in market rates have bottomed out and market rates go up in various sizes, then I can see that you can -- you are actually repricing something like INR 26,000 crore, INR 27,000 crore in the next 15 months and incremental lending that you will do could actually move along with the market rate. So am I correct in assuming that NIM could actually bottom out here? And could it see, say, 10, 15 basis points minimum increase if the interest rates don't go down further below?
Structurally, if you say, about 60% of our liability is around fixed rate. So whenever there is an increase in the interest rate scenario, then what actually happens is that around 90% of our assets are on the floating side. So that gives us the maximum advantage.
Correct, correct. Exactly. Exactly. And your borrowings are maturing less than what you are disbursing or net loan growth. So basically, if the interest rate environment becomes hard or it goes up, then you are going to have a NIM expansion just by the construct of your balance sheet?
You have seen in the previous rate cycle also.
Correct. Correct. Exactly. So that is the second point. Sir, third point is that in terms of existing builder NPAs, you would know better that demand has improved everywhere. So even though other states didn't have stamp duty relaxation like Maharashtra, everywhere the demand has gone up in all states. So am I correct in assuming that loss given default in those INR 2,500 crore builder NPAs would be much better than the previous case?
That is what we are also witnessing on ground that many of the projects, which were stuck, they're also actually coming back to us for resolution.
Right, sir. Right, sir. Yes. Sir, last question from my side. The project, BCG project that you mentioned, what are the outcomes that you're visualizing? Is it fee income increase? Is it...
Basically, all process digitalization that we are looking at, all processes, including our appraisal process, all other customer service, everything, and we'll use total, we'll use analytics and other tools, so that customer -- not only we acquire good customer, but also customer is retained and a predictive analysis for maintaining asset quality, all these things are there. So some milestones also -- 100-plus milestones we have identified and 5, 6 milestones already achieved. Some others are in the process. So at the end of the project, you will find this HFC is a next-gen HFC and high-tech HFC. That is our objective. We want to be #1 in technology space amongst all the HFC within a span of 1 to 2 years.
Broadly, you can say that there will be a strong focus on the customer experience and also on control and governance aspects.
Okay. Okay. Sir, last question from my side. This incremental, if I see, incremental cost of fund, as we mentioned, was 5.25% and incremental home loan yield is, I think, 7-point-something, 7.5% or 7.6% that you mentioned, but other loans are obviously higher than this. So am I correctly assuming that incremental spread would be higher than what is the existing spread of the balance sheet which is reported now?
That is absolutely correct. In fact, if you see year-on-year, there has been a significant improvement in the spreads. There is a 23-basis point improvement in the spreads on a comparative 9-month period this year as compared to the previous year.
Perfect. Perfect, sir. Congratulations on a growth path, because after so many years, you are already in a situation where you can have a 30% or 20% disbursement growth, at least.
Thank you.
Thank you.
Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.
So thank you. I would like to thank everyone for your support over the last 2 years since I took over as the MD and CEO of LIC Housing Finance. And it has been a very good experience for me. Your contribution and views have added a tremendous value to the growth of the company, especially during this pandemic period. And I'm confident that your support will be there in future as well.Friends, let me just share, I am taking charge of LIC as the Managing Director on February 1, that is, coming Monday, and my successor, our Chief Operating Officer, Mr. Viswanatha Gowd, he is already designated. He will also take over as MD and CEO of LIC Housing Finance Limited from February 1. And I also expect total cooperation to Mr. Gowd. Thank you. All the best.
Thank you. On behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
Thank you very much.
Thank you.