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PNB Housing Finance Ltd
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Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q3 and 9 Months FY '22/'23 Earnings Conference Call. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Deepika Gupta Padhi, Head of Investor Relations and Treasury. Thank you, and over to you.
Thank you, Sri. Good evening, and welcome, everyone. We're here to discuss PNB Housing Finance Q3 and 9 months FY '22/'23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the stock exchanges and also available on our website.
With me, we have our entire management team across verticals, led by Mr. Girish Kousgi, Managing Director and CEO of PNB Housing Finance. We will begin this call with the performance update by the MD and CEO, followed by an interactive Q&A session.
Please note, this call may contain forward-looking statements which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on slide 26 of the investor presentation.
With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.
Good evening, and welcome to the earnings call. I think we had a very good quarter. I think there were a lot of positives to take back and work further on it.
So we basically talk about the numbers on a Y-o-Y, disbursement has grown by 21%. 9 months, we've grown by 39%. So book last quarter, it was negative. It was minus 4%. I think now we are 0.3% if you look at retail, because the focus is going to be on retail going forward. I think it is 2% growth.
And if you look at Y-o-Y retail, we are at 7%. So on the 9 months, we are at 7%. Corporate book, as I had mentioned earlier also, we are de-growing. So on a Y-o-Y it is minus 39%.
In terms of revenue, 20% quarter-on-quarter, and it's 2.5% in 9 months. Prior to that at 43% quarter-on-quarter and 15% in 9 months. We increase at 11.38%, last quarter was 10.7%. The cost of funds, it has slightly gone up, it was 7.32% last quarter and now it is 7.55%.
We have improved spread from 3.38% to 3.83%. NIM from 4.14% last quarter to 4.68% this quarter. I think the big story is around traction business, both on the disbursement and book and also on asset quality.
So if you look at asset quality, GNPA is now at 4.87. If you compare this number last quarter, it was 6.06, and the net NPA is now at 3.22. If we talk about retail, specifically retail GNP is 2.86. And net NPA is 1.96. So corporate, as I mentioned, is de-growing.
So if you look at CRAR, it is good, now it is 24.6%. And GR is at 4.89x. Largely, the focus was on retail. We focused on a few things. One is on the disbursement. I can say that last 2 months, there is very good traction, and this would continue in the future.
In terms of book, we have done a great job in terms of retention. So that has also helped us to grow our book. So we have, to a large extent, controlled on the foreclosures, part closures and also BT out.
Now we have tweaked our policy, trade policy to a certain extent and also process to ensure that the book, what we're going to build in the future is of pristine quality. And we've done some design level changes in terms of ticket size, in terms of product mix.
We are focusing now more on home, vis-a-vis, compared to nonhome. In terms of profile, we are now focusing more on salaried when we compare to CNP. And within salary, the focus is now also on government employees, which is a very small portion in our portfolio because this segment will give us the least delinquencies.
We have seen this in the industry, and therefore, we want to do that shift within salaried. So we have now changed our strategy in terms of focusing on retail granular business. To that extent, high-ticket loans, I think it has come down drastically directionally. And going forward, actually, we can see this in the book, what we are going to build in future.
Today, retail disbursement accounts to 92% of the book. In terms of affordable, we have now set up the entire team. We have a dedicated team starting from sales, credit, operation, elections, the entire architecture is different. The policies are different. And the set of branches, channel partners, segments, I think everything is different, starting from pricing to segment employees are from affordable background. The entire architecture is different to affordable.
We have started this in last week of December. So probably this quarter, we'll be able to see some traction there. And it will carry on going forward. I had mentioned in the last quarter, I mentioned that incrementally going forward, affordable will contribute 25% of business, which might -- which is, let's say, 12 months from now, it will start contributing about close to 20%, 25% of incremental business, and that's our focus on affordable. It has started very well.
And of course, the book growth would have been slightly higher. But of course, we had certain subsidy amount to adjust to see this is on PY, right? And therefore, the book growth, what you see is little mixed. Otherwise, the book growth would have been a very -- it could be far better than what we see now.
We have done a few changes in the sales structure. We are now much more closer to market. And we have added more, if I can say, more zones, more regions that we are much closer in terms of tracking, monitoring and business development. On the credit side, we are working on automation and distribution, we have launched STP, just launched now STP, straight through process. This is for salaried segment. So this would give us faster TATs and efficiency in trade underwriting and standardization.
So this will pick traction in the next couple of quarters. In terms of policy, as I mentioned, we have done some tweaking just to ensure that the book what they we will be able to build in the future will be of very good quality. And we have kept certain processes. We have tried to cut down on some of our inventories and improved efficiency.
In terms of collection, the collection strategy is very, very clear. We have now 4 different verticals under collection. One is completely focusing on bound and x bucket. There, we have seen significant improvement in the collection efficiency. And then for the entire SME pool, that is SME 0, SME 1 and SME 2, we have a different set of team managing this to ensure that the KPIs are the lowest.
In fact, quarter 3 saw a significant reduction in the slippages. The slippages was down to the extent of 25%. And the 90-plus, which is basically NPA, 90 plus to 360 will again have a different dedicated team and 360-plus will have a recovery. So we will have expected SMA, NPA and recovery. So this we have done this tactically. We've done this bifurcation within the collection architecture.
We had highest NPA recovery, and the slippages have come down by 25%. And we have fast tracked the entire legal process in terms of [indiscernible] , in terms of settlements terms of sale of assets. I think all these things have resulted in asset quality improving especially on the retail front.
I would now -- so what we've done is, as I mentioned, we have now slowly trying to change the profile mix, product mix. And also in terms of ticket size, now we are trying to get more granular and we want to focus on retail.
So we've seen some improvement in terms of the mix what we want. It's hardly, of course, one quarter. So it will take some more time to see this impact coming in. So our valid share has increased incrementally. Our profile in the product mix, we have seen that HL is gaining more traction when we compare to non-HL. And in the ticket size, we are seeing that up to INR 1 crore per share of the percentage of cases which have been booked are on the increasing side. I would now open the forum for Q&A.
We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Abhijit Tibrewal from Motilal Oswal.
Yes. Congratulations on a good quarter. So just 2 or 3 questions. Firstly, on the corporate book, have there been any NPA resolutions that you've seen in this quarter among those 4 or 5 large accounts?
Secondly, during this quarter, I think you -- in your disclosure, you talked about some impairments or provisions that you've taken on assets held for sale. So I mean, if you could just kind of throw some more color on what is the quantum of this asset for sale and what have we actually classified under asset sale? And sir, then on margins, just wanted to understand last quarter, it seemed like there is a one-off in the margins and probably something that should kind of normalize in this quarter. But seeing margin expansion in this quarter as well in a rising rate environment, I mean, very, very counterintuitive. So if you could kind of just explain what has happened there? I mean how is it that we are looking at margins expanding and how long kind of you want you kind of suggest that this -- I mean maybe just one-off from this assignment loans can continue.
And lastly, sir, on the OpEx side, I think in the affordable bit, you have said that you've added about 81 branches during this quarter, if I kind of heard you right. So I wanted to understand that how should we look at OpEx since there are so many branches which are getting added, so many -- I mean this entire affordability that we have built up, I mean, why is it not reflecting in the OpEx numbers that we've reported?
Right, listen before -- it's not really. You see resolution both in NPA and non-NPA pool in the corporate.
In terms of margins, I had mentioned that for profile like PNB Housing, we should look at NIM of 3.2 and spread of 2.2. Currently, NIM is at 4.68 and spread is at 3.83, but the guidance is 3.2 and 2.2.
In terms of assignment, one of basically, this is a lag effect. So sometimes it is plus and sometimes it is minus. The only thing to say it evens out in a year's time. And therefore, I think that is something part of business, and we should continue with that.
In terms of OpEx, I think whatever OpEx we are seeing now that I think most of the OpEx of affordable vertical is already built in. So what we are seeing now is most of it is part of what we've already built in. Because, now all the branches are operational and most of the spends are already done.
In terms of asset held for sale, I think we had a small pool where we had to -- so that is we have just marked it down to the value to [indiscernible] value, and that is the impact what you can see in P&L. So there is a bit of charge to P&L, and that is what we can see in the period.
What is the quantum of this assets which are held for sale?
It was roughly INR 100 crores, but it has now completely marked down to the realizable value. So it is a one-off you can say. And these were some [indiscernible] .
And these are not your NPA accounts, this INR 100 crores, what you said, these are not the NPA accounts?
Yes, there were not NPA accounts. Those were current assets held for sale.
And sir, I mean, on the corporate NPA resolutions that I asked, I mean I kind of missed you. There were no resolutions during the quarter is what we are seeing?
No, no, there was some resolution, so which was both in NPA and non-NPA, but the amount was quite less. Therefore, it's not -- I think the quantum is not huge. But having said that, on the corporate side, we are working on resolution. So as I mentioned earlier, it will take about 4 to 6 quarters for us to completely come out of the entire corporate NPA pool. So we're working on account by account resolution, and we see a lot of positive -- feelers what we are getting in terms of resolution. So that would start happening in the next 4 to 6 quarters.
Unless and until if there is some kind of one-offs, which probably we might look at, we're open to all. We're open to all the options.
Got it. And sir, just a follow-up question on the margins. I mean, so I mean I understand the guidance was more around, I think, margins of 3.2%. But I mean I'm finding it a little difficult to understand that until, I think, the first quarter of this fiscal year, margins were around about 2.36% is what I'm seeing in front of me, and they are about 4.68% now. So other than, I would say, this onetime gain that we are getting from the assigned pool, there is -- I mean other than that, no one-offs and you just expanded from 2.36% to 4.68% now.
Yes, that's right. That is right. So see, I'm talking on a steady, long-term steady state. So I'm not talking about next 2, 3 quarters. If you have to look at both spread and then the next 2, 3 quarters, I don't think so, you will not see much of a change in what you are seeing now.
But if I have to talk about the long-term guidance on a steady-state business, I think normalized NIM and spread would be in the range of what I mentioned.
We have our next question from the line of Sharaj Singh from Laburnum Capital.
Congratulations on the good numbers. The first question is on the disbursement. It has actually fallen Q-o-Q despite the expansion we've taken. And the guidance you've given, we've required around INR 5,000 crores of disbursements quarterly rate. So how do we look at that?
Yes, I can only say that in the last 2 months we have seen very good traction on disbursements and also on the closures. And if you though I had mentioned in the last quarter that we are looking at a book growth of about close to 10%, especially on the retail, I think we will be able to hit that number because now we are at about 7%.
I think with quarter 4 it will be close to about 10%. And the guidance from next year onwards I had mentioned that disbursement will be 22% to 25% and book would be about 17%.
So, 22% to 25% of the loan book?
On a Y-o-Y. Yes, correct. On the loan book.
Okay. And second question is on the retail. So we've seen a expansion on the yield, excluding securitization. So how much of this is for the NPA and how much of the rate [indiscernible]?
Sorry, I didn't get your question. You were talking about the...
Yields. The loan book yields excluding securitization, so they've expanded about 90 bps.
It will be less than 100 bps, that's the gap. Sometime it is in 70 bps, sometimes it is 80 bps. Yes.
How much of this is attributable to NPA reversals and how much of this is pass-through of the rates?
No, I didn't get your point. What is NPA reversal?
NPAs have gone down from 6% to 4%, right, 4 point some percent. On the entire book, right? 4.87% from 6.0% Q-o-Q.
Correct. I think that is because of -- that is because of a few things. One is the slippages have been controlled, and there is an NPA recovery. And there are certain one-offs in both retail and corporate.
Actually, I'm trying to understand is if I look at the yield, which has gone up by 90 basis points, some of this would have come from the NPA reversals, which are NPAs? So what is this portion which could be attributable to these reversals [indiscernible] ?
There is no correlation between NPA reversal and the yield per se. Whatever recoveries we have done, I mean, this is a portfolio yield we were talking about. [indiscernible] you understand.
Okay. Okay. And sir, 1 question on the cost of funds side. How much of the rate hike, I understand that 62% of our borrowings are floating rate. From this floating portion of the borrowings, how much of the rate hike is yet to play through? Has all the floating rates followings have been completely...
Yes, it has been fully passed on to our customers.
So on the cost of funds, the borrowings have been reset completely or there are some borrowings which would reset in the upcoming quarters? I'm talking about [indiscernible].
So most of it is done, and we have quite a bit of pool which will happen in next few quarters -- a few weeks.
Q4 being [indiscernible].
Mr. Sharaj, you are not clearly audible.
We're not able to hear you properly.
Sorry. Is it better now?
Yes, please go ahead.
Yes, right. And one question on the provision, the total provisions have come down Q-o-Q from INR 2,100 crores to INR 1,760 crores. So have we taken any write-offs during the quarter?
Yes. We have taken write-off, a small pool in retail and a small pool in corporate as well.
Okay. Okay. And one last question on the AFS assets markdown, what is the nature of these assets? Are these treasury assets? Or like what is the nature of these assets? .
These are certain current assets basically repossessed assets, which we were holding per sale. These were some legacy assets, very old, which are now getting -- we're planning to dispose them off.
We have our next question from the line of Anand Venugopal from BMSPL Capital.
My question is in regards to our provisions still remain high. And hence, we are not able to achieve good ROEs. How do we get to a 15% ROE from here?
So basically, if we look at the provision, if you -- leaving the one-off, it is quite less. So in the last quarter, I had mentioned that for this year, credit costs will be about 1%, right?
And this is maybe from coming year onwards and this corporate book aside, I'm talking about retail, I think it will start normalizing because we have seen a lot of traction number on the retail NPA. The corporate NPA also we have seen good visibility. The only thing is that time trim is a little longer, given the nature of those accounts and the size of the loans, right? So basically, when you talk about credit costs, we should ideally look at the slippages and another stage movement, right? I think these 2 are something which would be [indiscernible].
And if it is a one-off and because of that if the credit cost is going up -- even in that case, now we are talking about overall 9 months of credit cost 1.13. Now for the whole year, we'll be able to maintain 1%, unless there is a one-off.
So in terms of our focus now being on retail, and with retail not just try and given the affordable and there is a clear guidance given on in terms of disbursement growth and good growth and also in terms of margins. I think the next few quarters we'll see good traction on all the parameters of what I mentioned, be it growth in disbursements or growth in book or profitability. I think in all these things, there will be a good traction. So I think I will leave that for you to work out on the ROE. But yes, I give you the guidance and outlook for the next few years.
We have a next question from the line of Ashwini Agarwal from Demeter Advisors LLP. .
Congratulations on an excellent set of numbers. And I was intrigued about your opening comments and how your renewed focus is going to be on salary and billing salaried on government employees. So 2 questions here.
I mean, this is more or less the space where the PSU banks and the large commercial banks are very active in. And therefore, even from a strategy perspective, if you go back into the market, which is already very keenly competed for, what is the edge that PNB housing brings because as a stand-alone housing finance company, your cost of funds are not as competitive as they are for the banks. So why go there? Why not focus on the self-employed category, which obviously is more difficult to manage, but at least has a profile where the competition is somewhat discrete. Could you help me understand the reason behind the change in strategy?
Very good question, sir. I think we have seen for the last many decades in this industry self-employed as a profile compared to salaried is highly delinquent, a.
B) also, the book attrition is higher in the self-employed segment. Now when we talk about retail, we are looking at salaried as a profile to increase salaried profile. Now in salaried, there are 2 things. One is if you focus on slightly higher ticket size, which is very safe, for example, INR 1 crore, INR 2 crores, there, we will have book depletion pressure, right?
And therefore, let's say, we focus on 30 lakhs, 40 lakhs ticket size, which is basically from salaried. Now this is the space, this is a segment where we see that this segment is not that price sensitive. And therefore, our strategy very well, our pricing strategy very well fits in a; b, there won't be depletion pressure.
Number three, today, if you look at all the housing finance companies, all the small brands, I think their focus is on this. Our USP will be a) in terms of our digital strategy where we can know direct customers to us, a, b, we have doorstep service. Number three, our advisory to customers, especially on the legal and technical sense. And our TAT, we always ensure that our TATs is very competitive in the market.
And therefore, I think looking at all these things, we have an advantage, a, in terms of being present there. Through doorstep service, we can increase the book at a higher yield with less book depletion. And also, we are able to see this particular segment on the asset quality side behaving very well.
Maybe I misheard. I thought you said that your focus is going to be INR 1 crore loans in your opening remarks.
No, no, no. What I said was our focus is going to be on both salaried and self-employed. But within the entire profile mix, we would be slightly skewed towards salaried, which means we will be increasing our share in salaries. Within salary, we will focus on all these segments. But yes, we would also focus on 30 lakhs, 40 lakhs of ticket size.
Now this is a vast segment where on the private side, CAT B/CAT C employer -- employees would cater to. And on the government side, this is a typical segment where the book is very good. The book depletion pressure is quite low. And this set of customers are not that rate-sensitive. And therefore it fits into a pricing strategy. So we will focus on all.
We would ideally keep the ticket size around 26, 27 lakhs. So this chunk could be major portion for us within salaried.
Okay. And sir, could you also explain the focus on the affordable side, what kind of customers we are looking at for the average ticket size that you're looking at? And who is the real competition there? And how do you differentiate yourself?
Sure. So on the affordable side, basically, in terms of geography, there is opportunity in metros, big cities and Tier 2 and Tier 3 towns. Now for example, if it's a metro we're talking about the entire periphery, the outskirts.
So there, we have very good opportunity. In terms of segments, basically focusing on, let's say, if you talk about developer, no CAT fee, good CAT fee and good [indiscernible] developers. In terms of profile, it will be let's say, both private and government employees whose income is in the range of, let's say, 40,000 to 50,000, 55,000. So in terms of affordable, our ticket size is going to be 16 to 17 lakhs.
On the prime it will be 26 lakhs, 27 lakhs and affordable 16 to 17 lakhs. And in terms of affordable, I think we would benchmark with some of the listed affordable companies whose ticket size is in the range of about 20%, 22%. I think 70% to 80% of that would be our affordable segment.
And which is the reason why you're kind of signaling to a lower sustainable NIM in the long run, but that hopefully will be offset by lower OpEx to total assets as the asset growth takes place and lower credit costs, thereby driving up the ROE. Is that how I should see?
Actually, if you see the margins in last few quarters, it is really varying. It is fluctuating. And therefore, with respect to guidance, what I said was this is the minimum what we are going to protect -- this is the minimum what we're going to protect. And if everything goes well, obviously, we'll be able to maintain this and probably it will be much higher than what I mentioned.
We have our next question from the line of Vikram Damani from Damani Securities. .
Good evening. Can you hear me? A question in regards to the rights issue. You said in your press release that the last letter was filed back in November. Any updates on when we can expect further clarity? And what are we planning of quantum, pricing, et cetera?
We are awaiting the confirmation from SEBI to take this forward.
And any idea, sir, as to how long that might take? Any internal planning, anything you can throw light on?
I think there was some query situations resolved. And our overall timeframe is by end of March or so, or it might let's say, first week or second week of April. And at this point in time, we are awaiting the SEBI's approval.
Okay, sir. And 1 last question, sir. I did not come across a specific cost to income number. Do you all disclose that? Do you all share that?
Okay. So I think probably it was missed out. So let me give you that. So for 9 months it is 18% and 6 months is 15%, and the corporate is 14.8%. So we can take it at as 17% to 18% as the normalized rate cost - sorry cost to income, yes.
17% to 18%, is that it?
Yes, 17% to 18%. Thank you.
We have a next question from the line of Aditya Doshi from Chanakya Capital. We are unable to hear you. We're not able to hear you sir.
We're not able to hear you, sir.
Is it better now? .
Yes, it's better.
Yes, congratulations on a good set of numbers. My question was regarding [indiscernible] disbursement or [indiscernible].
I'm sorry.
We're not able to hear you.
Can you move to a place with a good network. .
Is it better now?
Yes.
See, my question was related to fee income. If we see fee income as a percentage to disbursement last 2 quarters, we have been disbursing around INR 3,500 crores, but if we see that as a percentage of disbursements, it has reduced from 3% from Q1 of this year to now 2%. So can you throw some tight on why that fee income has reduced for the last 2 quarters?
So actually, the fee income related to disbursement is actually deferred. So it is accounted in the interest income line itself. So it is accounted at a yield level. The fee income that you see there is more like a peanut income and some other charges which are recurring.
We have our next question from the line of Abhay Modi from Helios Capital.
I was going through the draft letter of offer. And there, it's mentioned that the retail loans of about 21.7% is under moratorium. I mean can you tell how much is it as of end of December? And when do you think it will end?
Actually, morat and restructuring, I think it's almost -- I think for the entire industry it has almost come to an end or maybe it's in the final stages. So today, what NPA pool we are seeing. I think most of it is already taken into account because this moratorium started in the year 2020 from March '24, it is basically for quarter 1 and quarter 2 of '21, '22, if I'm not wrong.
So then, of course, we had a slightly higher moratorium rate. So now all those things are budgeted and all the things are taken into account. And now what we see is the NPA pool -- water had to flow from morat pool or the restructured pool. So what you see now is consolidation of all those things.
No. But are the loans under moratorium or is it over? Because it's mentioned it is still under morat as of 30th of September '22.
No, no, it's over. See, because this was in 2021, the first and the second -- the second thing got over in October, I think the April to June and September. So basically, quarter 1 and quarter 2. So that's over.
So as of December '22, there are no loans under moratorium?
Under morat no. .
No. Because in September '21, so all of these loans have come out of moratorium in the current quarter?
Basically, the morat was for 3 plus 3, 6 months. After that, there was restructuring resolution under Resolution 1 and Resolution 2. So we may have some accounts under restructured pool. But even in the restructure pool it is for a period of 2 years. So we would have structured it in a different way.
For example, certain sets of cases would have 3 months morat, certain cases would have a 6-month morat and then the [indiscernible] or the full EMI.
So if you are talking about morat, I think none of the accounts are today in morat. Would we have a few cases which are part of restructuring, yes -- the answer is yes. In all those accounts, the EMI would have started. Because 2 years, morat is something which is not given. And whatever you have given, wherein is 3 months, 6 months that is over, both on the entire retail or corporate. .
No, I understand that. And that is exactly why I'm asking this question because this is mentioned in the letter of offer. That is why I'm asking this question that it states very categorically that 21.7% of our retail loan book as of 30th of September 2022 is under morat. That is what I'm asking.
Let's have a look at that . Because there's nothing which is now under morat. .
Nothing. Okay. There are no loans under moratorium as of now. Everything is either restructured or is in NPA? Okay.
We have our next question from the line of Sanket Chheda from DAS Capital.
Congrats on a decent set of numbers. My question is -- first question was that credit cost run rate since last couple of quarters, though it is not in-step, but it's quite high at about 170 bps or 180 bps. So while on margin -- we mentioned that currently at 4.7%, but steady state, we would like to see at 3.2%, 3.3%. And maybe that's a conservative guidance, and maybe we would be around 3.7, 3.8, but that's a big drop so on and we are making ROIs 150 bps to 160 bps as of now.
So unless we say compensate in credit cost somewhere when it normalizes over '24, '25, what are the kind of [indiscernible] that we are seeing? And are we seeing credit costs normalizing to say 50 bps, 70 bps in FY '24 or FY '25?
Okay. So if you look at H1 trade cost, it was 0.94. Nine months is 1.13. And if I remove one-offs, it is 0.72. So this year, leaving one-off, the credit cost will be 1%, right?
Now on the retail side, very clearly, we can see credit costs normalizing at about 0.6%. So that I'm very, very sure about that. On the corporate side, I'm very sure about resolution. But if there is one-off credit cost -- obviously credit cost is going to be slightly more. So I think the way I would want to see credit cost is that with one-off, without one-offs. So definitely, if not coming year, next year, we can see credit cost of about 0.6% to 0.65% 100%, that's for sure. Now on the retail side coming year, we can see about 0.6%. Now if you take both retail and corporate together, and if there is a one-off, then the credit cost could be slightly higher than what I mentioned.
Okay. Okay. And in this [indiscernible] some impairment on assets held for sale, which is like INR 52 crores. What's that?
Actually, we had clarified that, this whole thing small pool of asset which was held is a very old book legacy pool so that we already clarified. We have marked it down and now that is around.
So that asset we should see as a part of the credit cost only, right?
No, that is not part of credit cost, anyway, it's onetime. So this is a legacy pool. So if you see, of course, we have charged the P&L, but that is not part of credit cost. .
Okay. Sure. And when we talk about disbursements, maybe we will close this year with a lower single-digit growth Y-o-Y. And on that, even if we grow 20%, 25% the next year growth that we are guiding, we won't be able to do that unless the disbursement growth is much higher, maybe for at least FY '24 and then from FY '25, it can normalize to the number you are guiding. But is that a right way to look at?
Okay. If you look at quarter 3, the disbursement growth is 21%. If you look at 9 months Y-o-Y, we are at 39%. So what we have guided is about 22% to 25% of disbursement growth and around 17% growth on the book. So this is very much possible because it's not just a disbursement even on the book retention piece. So we're working on both. And therefore, we see this is quite possible. .
My question was, sir, that this year you have been doing and 20%, 22% is met. I'm not denying that. I'm saying that, that has not resulted in [indiscernible] this year. So you're guiding for 15% plus even for the next year disbursement growth has to be much higher.
No, this was talking about 12 months from now coming year. So I told -- so this year, we had guided book growth of close to 10%. .
Okay. And lastly, sir, and out of overall restructure, how much is in stage 2 or there is some part which will be in stage 1 or stage 3?
So talking about retail, no. What is in NPA is about close to 15%. And what is in Stage 2 is 3.9 months. .
So it is either in a stage 3 or stage 2, there is nothing in stage 1 out of restructuring.
For the restructuring book, we have got a 15% NPA and that number is [indiscernible] . There is no additional incremental in the last 2, 3 quarters. So whatever the steps we are looking into restructuring that is getting settling now. .
No, I'm asking that of the restructured book, is there anything in stage 1 or the entire restructuring is either in stage 2 or stage 3?
No, no. Not the entire in Stage 1. So it isn't as per the SICR logic, which we have already discussed in the earlier investor call, as per that only we are doing.
Again. And I just wanted to know what -- how much is in Stage 1, not entirely. But how much is in Stage 1 of the restructure if we have that number?
We can come back to you on that. So as I mentioned earlier, because now morat and restructured pool is restructuring is behind us, whatever we are seeing is the result of both moratorium and restructuring. So whatever NPA pool we see in either retailer is post moratorium and restructuring. So we can get back to you on the specific numbers.
We have our next question from the line of Pratik Chheda from Guardian Capital Partners.
So in your opening comments, you mentioned that there has been a control on the [indiscernible] pre closure and foreclosures. So what has been the staging strategy here? I mean, what has been the key difference that has led to these lower [indiscernible] ?
And in terms of -- if you can also quantify what is the [indiscernible] percentage maybe a year back, [indiscernible].
So what I was saying was I think our overall runoff in the month was close to about INR 1,000 crores, right? Now that INR 1,000 crores, we are able to control it to less than INR 800 crores. So that we were effectively able to manage, which means this is largely coming out of BT out and also foreclosure and part closure, this also includes normal runoffs.
Okay. So in terms of percentage, if you just have to strip out the BT out and foreclosures, not the normal runoffs, how much will that be?
It has come down drastically. Of course, even though these are early days, but we have seen very good traction in the last couple of months, and we hope that this trend will continue. And there is scope for another INR 50-odd crores to come down.
Okay. Sir, my second question is on the margin. I would like to know what the yield rate on the affordable piece. And when we say that we are going to get incremental business of around 25% from the affordable segment. That is I'm assuming it would be slightly better yield or even much more better yields. And then on the other hand, we say there is good 50 bps, 60 bps compression coming in the margin. So this is slightly countering to this. What is going to contribute a majority -- which is the majority that will contribute to the sort of normalization of margins.
Is it the mix change? Is it again I say, growth plan, which we might offer in terms of trying to grow maybe a little bit faster? See, affordable book would definitely would be able to generate a higher yield really compared to prime. So in that thing is definitely here, right? All I'm saying is that we have seen some fluctuations in the past, and it may continue for the next few quarters. And therefore, it's in the long -- so if you talk about the next 3 to 4 quarters, I think there won't be too much a variance from what we are seeing is now. I'm talking about long-term steady state. So obviously, affordable is going to come at a higher yield compared to prime.
We have a next question from the line of Nidhesh Jain from Investec.
Firstly, what are the incremental yields on affordable housing and prime income segment that we are getting?
Sorry, please repeat the question, sir?
What are the incremental leads on affordable housing segment and the prime home loan segment that we are getting in -- which we have got in Q3 or we are getting in the month of January on incremental basis.
Basically, what we are seeing now is largely from prime, and affordable is going to be at least about 125 bps to 150 bps higher. .
And what are the prime yields? If you can share that level, what is yield in absolute percentage?
So ETB prime is about 9.11%. So affordability will be in the range of 9.6% to 9.7%. .
Sure. And secondly, is this one-off that we are getting from our income. So I understand it is because of MCLR rate changes, which led to the spinoff. So as interest rate stabilizes, then this one-off will not recur next year probably. Is that the right understanding?
Yes. Absolutely, you're right. Because now we are seeing that interest rate has almost peaked out. And before this one-off, whether on the negative side or positive side I think it won't probably happen in the next few quarters to come.
And it is linked to our base rate pillar -- is it a function of we changing our interest rate to the customer or it is a function of banks changing their MCLR, which drive this one off?
It is linked to the bank's base rate. .
Okay. Okay. And lastly, on the operating expenses, we have seen -- you have added almost 81 branches on affordable segment. But if you look at employee expense or nonemployee expense, they have not grown. In fact, employee expense has declined sequentially.
So is there any one-off in the employee expense? Or what should be the quarterly OpEx that we should build in going forward?
On the affordable piece, I think most of the OpEx is already built in because all this spend during the financial year, right? So in terms of OpEx, I think there is no major one-offs. And therefore, going forward, we will see only a marginal increase in the OpEx, not significant increase.
We have our next question from the line of Nischint Chawathe from Kotak.
Sorry, I joined late, so maybe this was discussed. But just trying to understand a little bit on the arrangement that you have on the assignment side with bank. So is the rate fully passed through whatever the changes the bank will make? Or is it something that your cost your cost of assignment from the bank will be linked into their MCLR, but what you're charging to the customers into your rates.
So in most of our places, the rate is...
Can you speak louder, please?
Yes. So in most of the cases, it is linked with the MCLR of the respective financial institution. So whenever there is a change in the MCLR of those financial institutions accordingly it is -- accordingly it is passed on. So if I have changed, let's say, the rate by 50 basis points. However, the MCLR changes by 20 basis points [indiscernible] will be 20 basis points. .
So you will end up kind of having a positive or a negative impact to the extent [indiscernible].
Yes. And that's how this assignment income, which comes in our P&L. .
And just again, when I'm looking at the yield on loans, and that has sort of -- so that has kind of gone up by almost around 200 basis points over the last 2 quarters -- I'm sorry, around more than 200 basis points actually over the last 2 quarters. So is it something that it is just to do with the fact that you have a raised the benchmark rates? Or is there kind of a higher increase in the incremental loans or anything of that sort?
It's a function of both. So if we see our yield excluding the securitization in Q3 FY '23, it's 10.83. There's an increase of 90 basis points. And as MD had mentioned earlier, this is primarily on account of increase in the yield -- increase in the rates by the company.
And so will be the case between 1Q and 2Q?
Yes.
And this is basically the entire benchmark going up, right?
Yes.
Sure. And just 1 last question. I know we touched upon it. But to understand the entire COVID restructured loans of INR 2,037 crores, these would be in Stage 2 or 1, depending on [indiscernible] that is right, right?
Yes.
Okay. And you'll probably share the breakup offline in terms of how much is in stage 1 and stage 2.
Sure.
We have a next question from the line of Akash Sethia from Elin.
So my questions have already been answered by earlier. So I'm just going to step back into the queue.
We have our next question from the line of Sandeep Joshi from Unifi Capital.
My question is for Mr. Girish Kousgi. Sir, the question is actually related to corporate book. Sir, since you've completed about 3 months in the organization, you have actually spent a good amount of time to go through all lumpy exposures. So can you give a sense on the performance of corporate books in terms of do you expect any lumpy slippages in near term? Or do you believe all stresses at are already recognized and you do not expect any incremental slippages in the book?
Yes. Thank you very much. So I have seen the entire portfolio at a close detail. So I think we are adequately provided. All the accounts which are in Stage 1 very closely have seen and I don't expect any slippages in the next few quarters from these. As of now, we don't see any slippages, right? .
And we're also looking at some resolution. The only thing is the timeline for resolution might take some time. And if you look at the entire NPA pool as well, so there are close to 50% of the NPA pool, we see very good traction on the resolution. And therefore, I don't see any slippages happening in the next 2 quarters.
Okay. And so how the Stage 2 is performing? I mean, are there any sticking lumpy exposure over there or the book is churning?
Stage 2 is zero. We don't have any case in Stage 2.
So it is all retail in Stage 2?
Yes, exactly. Yes. .
Okay. Okay. The second question is on the income on your assigned loans. So I mean, you just answered to the whole participants that how the [indiscernible] . So I just want to check. So from next quarter onwards, there will be no such income? Or do you think some part of it is going to be passed on by the other financial intuitions and that effect will come in next quarter?
Basically, we get record of with no change in repo. So if there is no change in the repo or if the interest market condition if there is no change, I think there won't be any impact. .
Okay. But for whatever repo rate hikes have already been happened and that -- and the rate which got -- and the rate which was increased by the financial institution, that has been passed completely till now or some part is pending?
No, it is passed on completely. .
Okay. So if there is no repo rate hike, there will be zero income in next quarter?
There won't be any fluctuation. Because this -- I think the trigger is change in repo.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call, as well as the audio, will be uploaded on our website, which is www.pnbhousing.com. Thank you very much.
On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.