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LIC Housing Finance Ltd
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Good morning, ladies and gentlemen. I'm Bharathi, moderator for the conference call. Welcome to LIC Housing Finance Limited Q4 FY '21 Earnings Conference Call. [Operator Instructions]. Please note, this conference is recorded. I would now like to hand over the floor to Mr. Praveen Agarwal of Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Bharathi. Hello, everyone, and welcome to this earnings call. Today, we have with us Mr. Y. Viswanatha Gowd, MD and CEO of LIC Housing; and Mr. Sudipto Sil, CFO to take us through the results. I would request Mr. Gowd to give us the key highlights of the results, post which we'll open the floor for Q&A. Over to you, Mr. Gowd.
Thank you. Thank you, Praveen. Thank you, Praveen. Very good morning to every 1 of you, and I also welcome to the post earnings conference call of LIC Housing Finance Limited. As you are aware, LIC HFL declared Q4 FY '21 results yesterday. Before beginning, I wish you and your near and dear ones good health and safety. I also actually suggest the team of our LIC HFL for the current quarter, stay protected, get vaccinated. Prior to 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 was witnessed in Q3 and more specifically, in Q4 of FY '21. This had come on the back of significant variance seen in the economic activity during that period, and had elevated hopes of sustained recovery, including in housing and real estate. Since April, however, the situation changed rapidly with the emergence of second wave of the pandemic with lockdown and restrictions being reimposed across various parts of the country, plunging the economic recovery again into uncertainty. The graph of recovery will continue to hinge on the pace of vaccination and containment or prevention of future resurgence of the pandemic. The quarter under review, that is Q4 FY '21, has been the best Q4 for the company with disbursements improving month-over-month. For the quarter, we have recorded 97% growth in disbursements, the highest ever in the recent -- actually several years, with the individual home loan segment recording 114% growth, year-on-year. The growth in disbursements was almost uniformly spread across the country, in all the regions, with the affordable housing accounting for more than 34% share in disbursements. Lending rates continue to be benign and incentives like stamp duty reductions also aided in improving the buyer sentiments.The financial highlights for the quarter are as follows: total revenue from operations INR 4,968 crores as against INR 4,920 crores for the corresponding quarter of previous year. Outstanding loan portfolio stood at INR 232,003 crores against INR 210,575 crores as on March 31, 2020, reflecting a growth of 10%. Out of which individual home loan portfolio stood at INR 180,665 crores against INR 161,842 crores, it is up by 12%. We are witnessing a steady improvement in asset growth every quarter for the past 2 quarters.Total disbursement for the quarter was INR 22,362 crores as against INR 11,323 crores for the Q4 FY '20. Out of that, disbursements in the individual home loans were INR 19,010 crores as against INR 8,877 crores for the Q4 FY '20 with a growth rate of 114%. Business under Prime Minister Awas Yojana, CLS' category continued to remain strong with nearly 34% of retail disbursements coming in this category. Our mobile app HOMY, which has already crossed 1 million downloads has really helped us garner loan applications of over INR 2,200 crores during the year. On the net interest income front, NII was INR 1,505 crores for the quarter as against INR 1,134 crores in Q4 FY '20 with a growth of 33%. Net interest margin for the quarter stood at 2.66% as against 2.17% as on Q4 FY '20. Profit after tax, PAT for the quarter stood at INR 398.92 crores against INR 421.43 crores for the same period previous year. For the full year, PAT was at INR 2,734 crores against INR 2,401.84 crores for FY '20, recording a growth of 14%. Our board also recommended a dividend of 425%.Asset quality is an area of highest priority subsequent to the vacating of the stay by the Honorable Supreme Court, we have recognized the NPAs very stringently which has resulted in a sharp uptick in the Stage 3 assets of the company. This has been an unprecedented situation, which has led to the drastic increase in the NPAs due to intermittent lockdown and the stoppage of activities, economic activities during the year due to the pandemic. We have set up a task force at all operating office levels to ensure that there is an active follow-up of all these accounts. In terms of asset quality, the Stage 3 exposure at default. It stood at 4.12% as against 2.86% as on 31/03/20. In the past year, we had increased the provisions gradually, taking the total provisions as on March 31, 2021, to INR 3,971.42 crores. It reflects a provisioning cover of 42%. This includes INR 520 crores for COVID-19-related provisions with nearly INR 985 crores provision in Q4 itself, including necessary impairment reserve for affecting onetime restructuring under RBI guidelines. We have been very closely focusing on the collection efficiency, and it continues at around 98% from all the regular borrowers. On the funding side, we have witnessed a significant reduction in overall cost of funds by 30 basis points during Q4 FY '21 and 115 basis points during the entire year FY '21. Incremental cost of funds has also come down significantly, and it stood at 5.15% for the quarter. Net interest margin for the quarter stood at 2.66% as against 2.17% over Q4 of FY 2020. The funding environment and liquidity conditions remain quite favorable for the company. For the full year, the incremental cost of funds was 5.62%. Full year NIM was stable at 2.37%.During the quarter, we successfully raised INR 800 crore in Tier 2 bonds towards improving the capital position. Then project RED in association with the BCG Group has also been progressing quite rapidly and some projects, especially in the area of CRM, video KYC, video PD have already been rolled out. As mentioned in our earlier interactions, we believe after completion of the project in about 1.5 years' time from now, the company will be digitally transforming to the highest amongst -- and it will be the best amongst our entire class in industry.With this brief introduction, I would like to invite you for your inquiries. Thank you.
[Operator Instructions] The first question comes from Kunal Shah from ICICI Securities.
Yes. So firstly, in terms of the asset quality, so if you can just tell me the sense in terms of the incremental spread. How much is coming in from the retail side and how much is coming in from the corporate developer? So what is the outstanding number now in terms of GNPL for retail and developer?
As far as our NPAs are concerned, the bifurcation, you wanted from -- for both, what you call retail as well as developer loans. In Q -- for the Q4, or you want for the whole year?
Yes, sir, as of March the outstanding number. Yes.
Yes, correct. As of much what happened, if you look at the, what you call, entire portfolio, in that, the NPA from the project, individual housing loan, it is around 1.89%. And the nonhousing individual, it comes around 5.82%. And then project comes to 14 -- project comes to 18%.
Project is 18% and individual housing is 1 point?
1.89%.
1.89%, okay.
Project is 18%. Total comes to -- overall, it comes to 4.01%.
Okay. And in terms of the project, so whatever has got restructured, you already have like INR 2,800 crores in now NPL. So -- and over and above that, there is a restructuring of INR 2,400 crores. So there is no overlap between the restructured and the NPL number or Stage 3 number in the project side. This will be like cumulative 18% plus 50-odd percent?
No, no. All OTRs are in Stage 1 only. They should become eligible for that OTR, that is the thing. So they are all performing assets owned and up-to-date. They're not a problem.
Okay. They are in Stage 1. No, sir, the only thing is when we look at the Stage 1 provisioning, that number was still low. So if all restructured numbers are in Stage 1 that provisioning was not getting reflected towards the restructured account. So is it the impairment allowance, which has been taken from the network?
No, it is actually -- Kunal, the way it is to be done is that for the OTR accounts, there has to be a separate provisioning for impairment reserves. And that has also been provided out of P&L that is not taken out of reserves. So whatever incremental provisioning you are seeing in fourth quarter, that is almost INR 980-odd crores. Out of that, the OTR-related provisioning, which is required for the creation of impairment reserve is also included.
Okay. But that is...
So that is not an ECL provisioning. That is creation of an impairment reserve. That is why we are not providing the provisioning figure.
Got it. Got it. So maybe it will still be like a part of Stage 1 and maybe provisioning would be there. But when we are showing this, the ECL representation in the slide, it is not included within that?
No. It is not included within that. But separately, it is -- that impairment reserve is also created out of P&L. There's no balance sheet here -- coming here.
Yes. We have done some INR 204 crores also.
Yes, INR 284 crores. That is there in the disclosures also you'll find that number.
Yes. Yes. Sir then would it be fair to assume that Stage 1, Stage 2, Stage 3 ECL provisioning, which is there of INR 117 crores, INR 37 crores and INR 3,800 crores, this is over and above that. It is not included in any of the stages at all?
Which one?
In the presentation, what is given in terms of the provisioning INR 117 crores towards Stage 1, INR 37 crores towards Stage 2 and INR 3,800 crores towards Stage 3. So this INR 284 crores is over and above this. It is not included...
Right, right. Right. Because kindly, again, try to understand, that is an impairment reserve, not a provision.
Yes, yes, got it. It's not a part of this. Okay. Yes, yes. Sure. And just in terms of last question in terms of overall outlook, so currently getting into second wave, how we are seeing last time we guided for some pro forma and restructuring. Maybe, obviously, things were like it was quite early at that point in time, it came in relatively higher. But how are we looking at it now getting into second wave, what could be the estimated restructuring or what could be the further steps looking at the collection efficiency?
Now currently, as I already talked -- mentioned in the letter also to you that we are all having now on the regular accounts, the collection efficiency is more than 90%, and there is also every month, we are getting that collections. And going forward, our what you call teams are in place, especially like last year, we came across more or less same situation when the moratorium was announced last year also. We found what you call task force, like we call NCA Warrior teams. These teams what happened now, these people actually get in contact with the customers on a regular basis and see that accounts are upgraded regularly, number one. Number two, now what happened, we are almost to the eNACH facility we are now enabled like anything. So earlier the eNACH was not there with us in last year. So that is giving us a good result. And we are also encouraging online collections now, people sitting at home can pay. So by using all the method, certainly, there is a good improvement, even accounts in Stage 1, even Stage 2 accounts also, which can be brought into Stage 1. So with all these things, we are sure that further slippage may not be so significant going forward? Like what happens earlier, yes, maybe there, that's correct.
Yes. Sure. And restructuring also last time, it was corporate and major is now under restructuring so that would also not come through.
Yes, yes, what happened now, of course, restructuring also certainly, we have to provide for all who are eligible as per the actual rules. And we have now enabled through our website also, a template format is there. So it is a web process and anybody can log in, then they can opt for a restructuring. And I agree, as you say, some uncertainty, again, has come now because of the second wave. This time around the impact, maybe what we feel may be lesser than last time. And further OTR request may also be there because we can't totally deny that when a OTR have to be extended for the eligible people. So that may be to up to another 1% must within more or less because some people existing also now ask for extension of time of the limit of within 2 years permitted. And all put together, I think, up to 1% on the loan book size that also can be there, as far as our indications are.
[Operator Instructions] Next question comes from Aditya Jain from Citigroup.
I just want to understand the higher provisions in the quarter. So you mentioned the provisions on restructured loans. which are not coming in the ECL provision of INR 3,970 crores. So that is 1 component. And then within the ECL provisions, some coverage has increased on Stage 3 and very -- some minor increase in Stage 1 plus 2 coverage also. So is there a plan going forward to build up the coverage further in either Stage 3 or Stage 1 plus 2 loans? Or is this level of coverage now the stable level?
See, actually, the present level of coverage, as you have said, it has come on to different platforms. One is, of course, the provision required as per the ECL mandate. So that has been done. And obviously, the Stage 3 assets have increased significantly. So to that extent, the outlay has also increased. Now over and above this for onetime restructuring, the provision has to be made out -- that has to be made out of the P&L account that we have made about close to INR 300 crores, but that is reflecting an impairment reserve. So in a way, that is a reserve. Though it is a reserve, this is also towards creation of an additional buffer for those accounts, which probably you are not counting in the ECL provisioning cover.
Yes, specifically...
So you can look at it. For example, these are all standard accounts. Earlier, there used to be a concept of standard asset provisioning. So somewhere you can relate it to this impairment reserve.
And certainly Stage 1...
Overall coverage when you see overall average, though it is mentioned at 42%, actually, if you add the impairment reserve figure, though it is a reserve again, and we are saying that it's not a provision, it's a figure. But if you add that notionally also, that gives that additional buffer for these accounts.
Got it. So in terms of the coverage required, you are feeling that on the existing strength, there is enough on whatever new structuring happens, obviously, that might need new provisioning, but on the existing there is enough coverage?
Further, further we have also increased the ECL provisioning on Stage 1 and also Stage 2. And in Stage 2, the provisioning cover, which has been done, is not too small. It is, I wouldn't say, very high, but it is fairly good.
The [ risk ] of slipping into Stage 3 has been taken care of adequately current quarter. So with that, I think further slippage into Stage 3, even Stage 3 some account may be there, but it will -- now it is protected with a very good provisioning so far at Stage 2 itself.
Got it. And then on collection efficiency in May, you mentioned that regular accounts are more, I think more than 90% collection.
98%.
Sorry, this is 98% for May, is it?
Yes.
98%, as on -- that's the March figure? Yes.
That is a March figure. Okay. But so in April, May or May specifically, when there was a lockdown kind of a thing...
They were more or less in the same range.
Same range, it is 90% plus only.
98% -- it's near about 98%.
Okay. And would that -- how would that look across the individual versus private, sir?
See, for the regular accounts, it is more or less consistent.
Next question comes from Anuj Singla from Bank of America.
First question, Sudipto, when you talk about the impairment reserve INR 204 crores. Do we have some other -- this is the total amount on the -- sitting on the balance sheet as of now? And this is the first instance we have facing, right? Is the understanding correct?
The impairment reserve that -- the regulation for creation of an impairment reserve has come only in the year FY '21. Prior to that, that impairment reserve concept was not there.
Okay. Understood. Understood. And this is beyond the ECL provisions, which is there on the balance sheet. That is also correct, right? Understanding here.
Yes, yes, see that is a reserve. This is a provision, that is a reserve.
Okay. Understood. Okay. Secondly, can you talk about the capital raise. Now you've already raised INR 800 crores, and there is also a preferential allotment to LIC. How do you see our capital adequacy? And given that the growth is coming in a big way, do you see a need for another maybe capital raise over the next 6 to 12 months? How should we look at that number?
As it is now, if you look at that the other day, our Board has approved for the capital inclusion by our promoter with almost on preferential allotment basis shares of INR 4.54 crores. So really, this will give a lot of what you call ample scope for us to further expand and also to what you call leverage all our operations better. So even last year also, if you look at, we raised a lot of what you call our Tier 2 capital also. So this year also going forward, certainly, whenever possible, certainly, we'll look into the capital actually Tier 2 capital acquisition also.
See, Tier 2 is obviously -- it's a debt. So we have raised about INR 800 crores in Q4 and Q3 also we raised about INR 1,000 crores. So INR 1,800 crores of Tier 2 we have raised. Now in the current financial year, as you are aware, the promoter is infusing about INR 4.5 crores shares, whatever it translates to in terms of the SEBI formula and all that pricing, I'm not getting into it. But this should substantially address the capital requirement to -- and further requirement of capital looking at future growth expectation, obviously, the Board will take a decision at the appropriate time, the way they have taken it this time also.
And how much further scope for Tier 2 capital is there? So this is still whether buffer we can still utilize in this year?
Tier 2?
Tier 2, yes.
Sorry, I didn't get -- so the Tier 2 there is -- the headroom is significantly there. There is significant headroom for that.
Okay. So we can still raise more Tier 2 in the coming...
Yes, yes. Yes. I mean you can say it's almost like on tap, we can go ahead, there is significant headroom. There is no upper limit for Tier 2, basically.
Okay. And lastly, sir, can you talk about disbursement and growth trends in April and May? We hear, obviously, there has been a lot of disruptions. So any kind of color you can provide will be helpful.
Which one, the growth in our books?
Disbursement on loan growth, April and May.
Yes, yes. Yes. Actually, last year, really, even you see a similar situation was there more or less in Q1, Q2. But after Q2, certainly it recovered and then Q3, Q4 gave good results. So more or less the same sort of bounce back with more influencing and even intensity may be there this year, we are seeing that. So once the situation becomes stable, I think, more or less, it will be -- a lot of pent-up demand is there, again, across all the regions, even in the Tier 2, Tier 3 good demand with that certainly we are a very much positive. And then challenges are there, but opportunities are more than that, what we see.
In fact, in current year, April and May, as far as the run rate is concerned, we have already crossed last year's Q1 disbursement. Of course, last year's Q1 numbers itself was depressed. But certainly, the upside is very much visible.
Next question comes from [ Abhijit Tibrewal from Motilal Oswal ].
Yes. My question is to Sudipto, sir. Sir, I mean, while we ourselves acknowledged that, I mean, things were are rapidly recovering until March and only in April you kind of saw, I mean, the second COVID wave and certain lockdowns across the country. Then I mean, when we kind of report our large numbers, why has there been such a sharp deterioration in asset quality? And I mean, if I just kind of try to add up some of the retail and the project thinking NPA numbers that you shared earlier in the call. And see there has been both a -- the INR 320 crores in slippages in your project on the developer book.Can you give some qualitative color around has there been a lumpy exposure, which has sort of slipped? Or I mean, which are some of those developers which have potentially slipped in the fourth quarter? And why were they not restructured if at all a stretch was there? And likewise, on your retail on the individual book, I think, incremental GNPAs of about INR 3,300 crores. I mean where is it coming from? What are the kind of customers who have not been able to repay and what really changed in that Jan to March quarter? Is my first question.
See, if you look at between December and March, that is Q3 over Q4, actually, the increase in GNPA on the project side has been not very significant. It is around say INR 300-odd crores. Whatever it was, as on December, from December to March, the increase has been around INR 300-odd crores on the builder loan side. Other accounts -- yes. So the NPA ratio as on December for the project loan was around 16%, now it is 18%, and the book has almost remained static.
Right. So any particular per se for particular developer, which was lumpy in nature, which kind of slipped or across how many projects or developer accounts is it the INR 300 crores?
Who are eligible under the OTR already, they were made available. Actually, what we did at that time as it was going on, given all the benefit like UCLGS, even SWAMIH funds, all things were there last year. So wherever they are fitting into that already, who can be given the benefit was given.So with that, I think project in the developer segment, I think almost all that is taken care. As you're mentioning in the Q4, certainly the what you call because the provisioning is high, it is because of our what you call already mentioned also by Honorable Supreme Court, judgment made a what you call consider assets and different classifications. So once that got lifted actually immediately, we recognized the whatever actually it is meant for. Accordingly, treatment is given in provisioning as far as retail segment is concerned.
So sir, I mean, am I right to kind of -- I mean, you kind of conclude this that till the time there was a Supreme Court dispensation, and assets were actually not marked as or tagged as GNPA we were not really providing over the last, let's say, second quarters and only after they have been kind of tagged as GNPA, we have gone ahead and made the requisite provisions during the quarter?
No, I wouldn't say that way. If you look at last year, also progressively it was -- there was a provisioning made. Of course, the exact impact of it could not have been anticipated earlier because we were getting intermittent payments from these accounts. It is not that accounts were not -- payment was not being received. Intermittent collections were happening from those accounts. But technically, if you go by the definition of NPL, obviously, when the Supreme Court stay was in effect, then obviously, there was a standstill. And even after it was removed, even if it has fallen -- slipped over by even 1 day, it has to be qualified as an NPA.
More over, even slip actually they -- most of them would have slipped from Stage 2 to Stage 3. That was also trigger, correct.
Okay. Okay. And sir, I mean just 1 last question here. I mean, why is our provisioning policy, especially the coverage that we maintain on Stage 1, Stage 2, stage 3 effect so, so volatile. I mean, I remember until last quarter, we used to say that whatever provisions that we have made on our Stage 1 and Stage 2 asset, they are adequate. And suddenly, this quarter, I mean, we feel a need to kind of improve the provisioning coverage ratio, while I mean, Sudipto himself kind of acknowledge some time back that -- I mean these OTR assets sitting in Stage 1. They have been -- they already have a separate provision reserve. So I'm assuming this incremental Stage 1 and Stage 2 provisions that we have done in the quarter has nothing to do with restructuring as such?
No, no. This is actually a different matter altogether. See, what has happened in the last 1 year is that we also had to look at the valuation of the underlying assets. And we have conducted a very extensive valuation and revaluation of the underlying assets. And on the side of caution, wherever we felt that even there is a marginal decline in the value of assets We have gone ahead and made a provision. That is on the side of conservatism. That is the reason why you are seeing the Stage 1, Stage 2 ECL provisioning being improved because we have conducted a revaluation of all the underlying assets in the context of COVID. Now it is very much possible that after the COVID, once the pandemic gets over and the COVID situation improves, it could be possible that the underlying value of the securities of the underlying value of the properties might also increase. But to be on the more conservative side, the management thought that it is prudent to do a comprehensive revaluation of the properties wherever we felt that there could be a reduction in property prices. of property values or security value. And we have gone ahead and made a provisioning adding on the side of conservatism.
Okay. Okay. All right. That's very helpful. And if I may squeeze in just 1 last question here. What is the quantum of NCDs that's kind of coming up for maturity and will get repriced in this year? Again, I mean, the reason I ask here is why we have demonstrated about a 20 bps expansion in spread in FY '21. Just trying to understand, I mean, what is the quantum of liabilities it can potentially get repriced? And to that extent, what is the proportion of our backlog on the asset side, which will kind of be to reprice at lower interest rates? And where could we see these spreads stabilizing in FY '22?
Yes. As far as the NCDs coming up for redemption -- not repricing, redemption is about INR 25,000 crores to INR 28,000 crores. During the entire financial year, so some of it has already gone off the books in the last 2 months. So -- and obviously, the assets are mostly predominantly on the floating rate side.
Okay. So last part of the back book has already been repriced?
So it has been already repriced. And obviously, I mean, as matters stand now, probably it looks like there may not be any further reduction in interest rates in the economy. As matters and, of course, situation -- it's a very dynamic thing -- so keep on changing.
[Operator Instructions] Next question comes from Piran Engineer from CLSA.
Yes. Most of my questions are answered, but I have 2 follow-up. So firstly, what percentage of our loans come from Maharashtra and given that the stamp duty cuts are now over, how do we see growth sort of trending in after the second wave?
Piran, can you please repeat? Your voice is not very clear if you can stick closer to the mic?
Am I audible now?
Yes it is.
So my question was that what percentage of our loans come from Maharashtra, and now given that the stamp duty cut is over, what sort of growth do we foresee, let's say, not in the next 3 months, but after the second wave is over?
Last year, actually, I'll tell you for the whole year, we had a very good, what we call share from state of Maharashtra, around, I think, more than 14% around, we got from the state of the Maharashtra then the stamp duty waiver also really helped us a lot. That was what you call quantum of our share from Maharashtra last year. Similarly in Karnataka also that was there. Like that what happened, looking forward now for the current year, also, we expect supposing even -- or without stamp fee waiver also what happened now pent-up demand certainly will be there and going forward in the quarters to come, more or less the robust growth we see like last time, or even better than last time.
So stamp duty is certainly 1 of the triggers of 1 of the sweeteners. But more importantly, if you look at the affordability index in terms of stable property price and low interest rates, those situations still remain today.
Okay. Okay. Fair enough. Sir, my next question is on the asset quality bit. Now half of our builder NPLs are under the SWAMI fund. I recall last we had mentioned it was about INR 1,400 crores. Now what is the progress there? Because I believe a few projects has been completed and the key is handed over to the home buyers. So why aren't we seeing recoveries on that front for us?
No, SWAMI funds, I think only 5, I think we got to what you call -- only 5 have got [indiscernible]. In that, the 3 were almost all got it over last year itself. So I think that acquisition all naturally is a due process may be in the process actually.
See SWAMI fund the process is that, first of all, a large number of projects have been identified and slowly they are taking NOC and all that process takes a bit of time. But SWAMI fund doesn't guarantee immediate upgrade. SWAMI fund is only a last-mile funding, which helps to recommence and restart the project. And that has already started, as our MD sir mentioned, in total, 5 accounts, we have those entities or those builders have received the fund last-mile funding from that SWAMI fund, which is managed by SBI Caps. So there have been 5 cases, yes.
No. And out of that 3, sir, MD sir said the 3 has started or something. So in 3, construction has again resumed that you started getting collections.
Correct, correct, correct.
So the 3 out of those 5 have started paying you back. Is that the right way to think about that, but they're still tagged as NPL?
No, I would say that the collection at the fund side has increased projects have started. It has just happened some 2 quarters or 3 quarters back.
Further the guidelines are there because how -- what share we get, all things are there.
Those things are there.
There are for agreement whatever do we have to get that.
Okay. Got it. And sir, last question for Sudipto, It's a bit technical, but what are the fee and commission expenses in the fourth quarter that was almost equal to FY '20 levels? And about INR 55 crores just in this quarter, last full year, it was only INR 50 crore.
Yes, I got your query. There has been some kind of a one-off addition. I think it is better to look at on a full year basis rather than a quarterly basis. So in this Q1, there has been, I would say, a rewriting of -- our portfolio of retail loans with some entity for which we have collected some onetime fees. The what is reflecting. On a full year basis, you should see that should be comparable to the disbursement growth.
No, these are fee and commission expenses that we pay out...
No, no, I'm talking about the income.
No, I'm talking about the expense. Last year, the full year it was only INR 50 crores. And this quarter alone, it is INR 55 crores.
So that is because of the amortization.
Of?
That is amortization impact.
Amortization of what, sir?
See, what happens is that whenever there is a closure of a loan or there is a rewriting of a loan to a lower rate of interest And whatever you have collected as a fee for those accounts will also have to be recalibrated. And that expense has to be taken in the expense column to reflect an EIR based computation. This is mostly because of the IndAS adjustments.
Okay. Okay. So it's fair to say that a lot higher proportion of loans or be maturely closed this quarter if I just think about it at Like our balance transfers were much higher this quarter than it was, say, last year?
No, it is there probably the field collections have been higher.
Next question comes from Nishant Shah from Macquarie India.
One quick clarification. What you mentioned in the previous question, was that -- 5 of the same fund projects have been approved, but there are still overall about 10 or 12 projects that have been referred.
Those are in pipeline.
Okay. So the total amount is about INR 1,400 crores, but those are yet to go through the judicial process and get the disbursement?
And in 1 of the cases, the builder has opted out of the SWAMI because now he is more comfortable with servicing it in 2 himself only. Because from our side for example, ECLGS was also offered. So he said he has opted for the ECLGS route, rather than go for a SWAMI fund route.
Sure. Okay. Understood. Got it. So yes, so now I have a couple of questions. So first, on the provisioning requirement. So we have about 2% or 1.89% of home loans -- like retail home loan NPLs. So I understand these are like very low ticket granular homes which like low ticket size, low LTV, what is the LGD that we build when we calculate ECL for these products? Should it be like a single-digit percentage because the overall Stage 3 provision that we hold is about 40%. So I'm just curious what loss given default goes into the calculation of the home loan component of these NPLs?
See, the home loan component of the portfolio in terms of both [indiscernible] and LGD will certainly be much lesser than that of the builder of the corporate accounts.
Correct. Is it possible to quantify? Should it be, like say, hypothetically less than 10%?
You are talking about the LGD?
Individual home loans.
Yes, yes, yes.
Yes. So basically, the implied kind of provision coverage on say, the developer loans is probably significantly higher than 40%. And the coverage on basically, but the home loans is less than 10%. So that's the correct interpretation here, right?
Yes, no, you're talking about the provisioning of -- the LGD math is a fairly complex one. If we not directly related to the provisioning because there are other things also which are there. In terms of, say, the value of security, et cetera.
Even collateral also, what is the value of your collateral.
Also built into the ECL model. That will not probably give you a correct indicator.
Okay. Fair enough. What I was essentially trying to understand was that when we think about...
Logically, the LGD for retail accounts, home loan account will be lower than a corporate or billion account. That is a logical explanation and which has fitted into the model. But then it is not only the LGD which matters because there is also a play of the value of security, which very from accounts account.
Okay. And the second question is on growth. We've seen like very strong growth in 4Q, probably helped a little bit by the stamp duty cuts in Maharashtra and Karnataka. But now already like almost 3 months, like, okay, 2.5 months into 1Q. Could you like tell us probably if some of this kind of disbursement strength has kind of sustained? Or has there been some bit of like tapering down after the very, very strong kind of 4Q, which had some bit of like upfronting of growth. How are the ends like looking like in the last 2.5 months? Are they sustaining? That's the question.
Currently, if what you call, of course, last year, as you say, Q4 was really was the best in the last several years. of the company, Q4 concerned. What you call now in the current year, especially after this pandemic second wave, April and May. Of course, overall, if you look at last year, Q1 was not that much. So already we have actually we have crossed that figure under problem. Only thing is now going forward, you are mentioning about stamp duty waiver that has been launched last year. And in the Q2 afterwards, after from Q2 onwards, once the situation slightly improves, we are very positive that there will be good what we call now rebounds as far as the volumes are concerned, especially in type 2 and tight cities and affordable segments and also now the favorable factories out still the rate of interest are very, very low on the side. And then most of the houses are also affordable. So with this, I'm very clear that I think going forward, we may see more or less the same sort of rebounds this year also.
Okay. Is there any visibility to be able to give like a growth guidance in terms of AUM, like is 15% by the end of the year, kind of possible in terms of 7-year?
We certainly will keep up more or less like last time, it will be in double digit certainly will be there, not a problem.
Next question comes from Dhaval Gada from DSP Investment.
Actually, I had 2 questions. First is -- on the first question, where you replied to Kunal. Could you just give the absolute GNPA for the individual home loan separately, the absolute amount for the fourth quarter and the third quarter? Because the numbers are not able to reconcile when I multiply that with the book. So if you could give the absolute numbers.
No, the absolute numbers will not be -- because GNPA and Stage 3 will be slightly different. There will be a minor variation, but what GNPA numbers are given that is under IGAAP. So the ECL numbers if you're trying to find out from the ECL -- from the IndAS portal we will not be able to reconcile. But there's a minor variation. I'm quickly telling you the numbers kindly, note down, quickly. So the project loan NPLs will be around 18%, which will be a little less than INR 3,000 crores. Then you have got the individual home loans, which is about 1.9% of thereabouts. It will be around INR 3,400 crores to INR 3,500 crores. And then for the other categories, the total NPLs will be about, say, another INR 3,000 crores. So that is how we get the total INR 9,000 crores-plus.
Understood. That will include LAP and some other as well, sir?
Yes. Yes. Yes.Nonhousing individual corporates, et cetera, apart from the project.
Good. Got it. Yes, yes. And the second part is just, again, on provisioning. So the INR 3,971 crores includes all sort of provisioning, right? It doesn't exclude any provisioning that you talked about, which is not in the INR 3,971 crores. Am I correct in my understanding or there is something more?
First let us kindly understand what you mean like all provisioning. I'm not [indiscernible].
Certain provisioning is not part in the calculation, which we are missing. So the INR 3,971 crores, which is the ECL providing, that includes all forms of provisioning, whether it is on impairment or COVID excess, which are where it includes everything, right, INR 3,971 crores?
No. Again, I'm telling you, you are again confusing provisioning with reserves. Impairment reserve is not a provision. I have already clarified in 1 of the earlier queries.
Yes, no problem. I'll connect offline if that's fine. And just a final thing, just on going forward basis, how are we thinking about like -- I mean, if you look at directionally in the last 3 years, we've seen consistent increase in individual as well as nonindividual NPA. Individual side, our performance gradually as sort of the delta difference has been much higher than the industry and even some of the other prior years. Just how do we think going forward, which is this gap what will make the gap compress back to where we are like pre-2017 period where our performance was in line with the industry, what's required there?
Looking forward now, okay, what happened on individual segment, in the housing loan segment is now our book also contained almost of close to 80% from individual housing loan. And then as far as the recovery matters are concerned in this group. Our teams are actually last year also we had put the teams, like NPA, Warrior team I told know, these people get in touch with the customer and ensure updation quite often, very, very frequently.And we also enable this time what you call eNACH, then online collections are also enabled. So with all these things, we see that I think there are not much what you call a significant actually downside as far as the recovery matters are concerned, and the provisions also what we have made now, more or less, we will be taken care, not a problem. Even additional COVID impact also we have put some INR 500 crores into that.
Next question comes from Vivek Ramakrishnan from DSP Mutual Fund.
It follows the earlier questions only. In terms of your retail NPL, which we have seen, are you seeing part payments by customers and so on, where we'd actually see that they're lagging there and facing some temporary difficulty but they'll initially come through? That's the first question. And secondly, you answered the question about recovery. But just going back to underwriting itself, is our customer segment relatively weaker and so they're going through stress and that they'll recover in a matter of time. Those are my 2 questions, sir.
So first question, what you are mentioning about, what is that actually? Some part we missed actually.
Like retail, in your non-wholesale customer, is there -- are they -- even if they are NPLs or Stage 3, assets, are they making part payments and so on, which is seen in the...
Correct, correct. That's why there's some confusion. Yes, that is correct because what happened, people whenever they're having money, what they call, of course, OTR, whatever possible they could avail, I agree. And last year, moratorium also was there after moratorium ended what happened people, they even recognized accounts. Of course all of this is made for that. And even in India housing loans also what happened, there is a good uptick as far as the collection efficiency is concerned. And even from the regular account, now I'm telling you even current trend also around more than 90%. So that way, we see that they become almost regular in the due course, once the pandemic unlocking eases out.
Second question, see, actually, these guys are -- these accounts and these borrowers were repaying until before the pandemic. So obviously, the pandemic is something that was obviously unforeseen and unprecedented. So there could have been some impact of it. But still before that, there are all people who are regularly servicing.
Next question comes from Vikram Subramanian from Spark Capital.
Question on the LRD portfolio. What would be the quantum right now, the lease rental discounting? And how is the asset quality behaving there?
Approximately INR 8,000 crores.
That is the portfolio amount of lease rental discounting?
Yes.
And how is the asset quality behaving then, sir, in terms of GNPA or outlook?
About 3% to 4% is the GNPA. There also what we mentioned in the previous call is that there's a delay in the rentals. It is not that it is completely stopped, but it is coming. It has been -- there have been so slight delays in the rentals.
Okay. Okay. Got it. And just 1 clarification. I'm sorry, I might have missed a bit on the impairment reserve. The impairment reserve that we have created that is not -- that does not flow through the P&L, right? So the INR 985-odd crores...
No, no, it has flown through the P&L. Again, I'm telling you I think 2x I've already clarified that has flown through the P&L, which is reflected in this Q4.
So the INR 985 crores will include the amount that the -- INR 985 crores of provisions that we have shown in the P&L, that will include impairment reserve as well?
Yes, yes.
Okay. Because if I remember in the RBI guidelines that came out last year, I don't the impairment reserve was to be carved out of the subs and surplus in the balance sheet, which is why I just wanted to clarify it.
No, no, there is no appropriation.
No, this is meant for only what you call, only for a specific purpose. That's why it is kept like that. We can't use for any other purpose other than this.
Okay. Okay. So it does flow through the P&L. -- credit cost includes the -- okay. That clarifies my doubt.
Next question comes from Nitesh Jain from Investec India.
In the nonhousing individual segment a gross NPA is pretty high at almost 6%. So how do we think about growth in this segment? And if I remember correctly, historically, we have been saying that this segment has very high share of [indiscernible]. So any particular reason that the NPA in this segment is higher for us?
As far as this is -- this we actually portfolio -- total portfolio is to see this segment not that much, maybe not even nonhousing individual segment all put together, small ticket between out putter maybe not even 3% to 4% in the overall portfolio. But the way what you call, now after the pandemic, I agree there may be some sort of what we call slippages, especially in either big city or even Tier 2, Tier 3, also. So keeping all these things into account, now we have also actually valued what we call revaluation we have done for all the assets at the end of this March also. So adequate provisioning has been made for all these things taken into account.
But in respect to growth in this segment, what is the strategy going forward?
Growth, what happened as far as that is concerned, normally, our focus is mostly on the individual house -- actually individual housing segment only. And as far as vertical we segment our portfolio is very, very less and moreover growth also, we don't have much even last year also be within 10% growth on housing, not much.
And sir, lastly, in the developer loan, we have around NPA of INR 3,000 crores. If you can -- and I think last quarter, we mentioned that 1 of the accounts is likely to get resolved in Q4. So if you can just give us some status on the INR 3,000 crores of NPAs, what are the 3, 4 major accounts? And what is the resolution expected in coming financial year? How many of these accounts you expect to get resolved in FY '22?
All are on different see if now, even that what we were expecting last year time also did not happen because of some other reasons, because sudden month of March and all because some thing and all happened. So are the -- whereas the closely monitoring, I think now I think to come be logical and it may take some more time. It may not happen is too early in the next quarter, like in all. So because the many are the NCLT and other folks are there. So whatever the legal position is there, that has to continue, and it may take time also. I think the future, we don't have any idea that we'll get to over very fast.
Okay. Okay. And lastly, sir, can you share the incremental funding mix, the funds that we have -- that funds that we have raised in Q4 FY '21? What was the share of CP and market borrowings and bank loans in that incremental funding?
Yes, incremental, we have raised about around 20 -- the market borrowings we have raised around close to INR 70,000 crores. Out of which about INR 3,500 crores to INR 4,000 crores was through [indiscernible] and rest through NCDs.
The next question comes from Prakhar Agarwal from Edelweiss.
Just 1 question. When I looked at -- if I heard you right, probably the restructured book that we have been talking about is entirely in Stage 1. So what explains this 6% plus Stage 2 that was having? And if you could give to your Stage 2 composition in terms of how much of that is developer and individual loan portfolio?
Can you please repeat? It is not very clear.
Your voice is little feeble. Can you speak louder?
Yes, sir, we made a comment that probably all the restructured book that is there, it's sitting in Stage 1. So what explains this Stage 2 of around 6% odd levels? And if you could give you Stage 2 composition for developer and individual books?
Stage 2 accounts have been there earlier on, it's not that Stage 2 accounts have come now. Earlier also, there was Stage 2 account. For example, now the Stage 2 accounts in the retail will be around, say, 4.9% approximately. And for the overall, we'll be say around 6%.
But -- so this sort of Stage 2 number is a steady-state number? Because what we have seen earlier that probably December over around [indiscernible] number has been there.
No, earlier -- prior to the pandemic also if you see the Stage 2 has been in the range of 4% to 5%. That's why in the [indiscernible] would have been around 2%. Just let me complete. If you see prior to the pandemic, maybe 1.5 years or 6 quarters back, if you see, the Stage 2 -- Stage 3 would have been around 2.5% or thereabouts. Stage 2 would have been between 4% to 5%. And balance about 91%, 92% would have been in Stage 1. So Stage 2 wise, if you see, Stage 2 wise it will be more or less in that ballpark range. Sometimes it is 5%, sometimes it is -- in fact, I think 1 quarter back, it was closer to 7%.
So this is broadly the steady-state numbers that we could expect around 4% to 6% of Stage 2 numbers that you can build it?
Yes. Stage 2 can get upgrade to Stage 1 also.
Okay. And then last time, we highlighted that probably 8% to 9% of our book developed book is in Stage 2. Will that number be same as of now or probably has decreased?
No, developer book, I think, is not okay. Now what happened, no NPA, we have made provision for that. And then developer booked Stage 2 not that much of percentage. These are little bit less -- not that much. It is also more or less over and around 10% to 15%. Developer portfolio itself less, around 7% in the overall book sales.
Okay. Okay. And just 1 more question. So just in continuation with other questions. So what explains the sort of divide that we are seeing at least on core home loan side in terms of it NPA asset quality performance and I look at industry and your sales given the customer segment and the ticket size that you operate [indiscernible]?
Yes. For the -- going forward, we are very much hopeful and also positive that because vaccination, then again, what we call this easing out of locking and unlocking all going on midway. I think there will be very good turnaround in the Q2 afterwards that we are able to foresee. I think now the pent-up demand also will be there in addition to that low rate of what you call this loan interest rates are very low, then again, affordable prices are there. So with all these things, we are very hopeful that there will be good demand actually as far as the -- our disposals are concerned. Then regarding the recoveries also what happened has already been talked to some of your people that, we are having very good what to call mechanism. A group of teams are there working out all levels. These warrior teams what happened, they get in touch with the customer and then enable -- see that the accounts are upgraded quite often. So that what happened, they don't slip into either Stage 2 or Stage 3. And then what happened now even OTR too all is another instrument given. So this also will be made best use of all those who are eligible. So with that, certainly, there will be very good recovery in the days to come. That's what we see.
Sir, just to continue -- 2 questions to continue. One is, so while we may talk about future prospects and we may talk about recovery. The benefit of the question is, why is there such [indiscernible] to start with. So we may talk about recovery, we may talk about the fact that it will what happen in the future. But why has this been a happened is the benefit of this question. And the second part is in terms of OTR, what sort of portfolio do we expect at some retail side to come in OTR to any ballpark number?
OTR 1 really almost a 1.5 -- close to 1.5% of our book was almost under the OTR 1, both segments put together. Now I think OTR2 benefits people may await it out. Even the maximum loan is INR 50 crores, probably we not operate in that segment very well. So for individual house loan is concerned only people may go for extension of term as far as these, what you call, OTR 2 are concerned. .Then overall, what you call now another maybe 1% more may add to that, actually going by all these what you call our earlier past experience. Another 1% may -- of the book may add to that what to call this, OTR 2.
okay. And then the earlier question that why is this usage higher or get in terms of leveling between you and industries?
No, a bit louder please.
You're not audible.
So we talked about recovery, we talked about the fact that it will not happen in the future. But I'm just asking why this has happened in terms of our [indiscernible] asset quality being more of them at least in 4 home loan segments [indiscernible] of the industry. So we may have a recovery team we may want to recover and we may see that it will not happen in future. But what exactly has panned out to date that this sort of evidence has been reported vis-a-vis [indiscernible] industry given the customer segments and all these we focus on.
No, earlier here, if you see in the last year, what happened, no provisioning was made only because last quarter, we had to make provision because of what we call Supreme Court -- Honorable Supreme Court judgment also was there. .So what happened once it is lifted, we have to reconsider all the loans at the appropriate what you call, classification was made for that do what you call, [indiscernible] is given for that. That's why in the Q4, actually generally, the proving has gone up. Number one. Number two, if you look at the developer loans, already were taken care of. So with that now looking forward, even from here, I think there's not much of a significant what you call, there's not actually that much of worry as far as the asset quality is concerned going forward.
Ladies and gentlemen, due to time constraints, that would be the last question for today. Now I hand over the floor to the management for closing comments.
I thank our organizers as well as all the participants. Really, the Q4 also last year fully what we call, If you look at the whole of last year in terms of disbursement, had a very good year, then again, going forward also, we look -- we are very positive as far as volumes are concerned in disbursements. The asset quality will certainly be improved. There will be a lot of scope in that one, and we are also actually our teams are working for that. And then the capital infusion and all these things certainly will give a lot of scope to what you call to operate better and also what you call, to have better leverage. And then this year, we would like to actually consolidate ourselves and then further, what we call, strengthen our all the ratios whatever are -- now we are now focusing, suddenly, there will be a remarkable improvement in all the operating ratios, what the improvement will be there. Then our digital transformation will certainly give us a lot of addition value addition going forward in terms of customer satisfaction and also all other matters are concerned. And then this year, actual 19th of June, this month, is the foundation day of LIC HFL. So on this apt occasion, I will also extend greetings to every 1 of you. And we once again rededicate ourselves, our team members and all in LIC HFL, I will rededicate once again to our customers and ensure that our company will be having a very good brand value in the market again. Thank you.
Thank you, sir. Thank you, everyone. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.