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PNB Housing Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY 2022/'23 Earnings Conference Call of PNB Housing Finance Limited. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ms. Deepika Gupta Padhi, Head Investor Relations and Treasury. Thank you, and over to you, ma'am.
Thank you, Sasan. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q4 and FY '22/'23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian Stock Exchanges and is also available on our website.With me, we have our entire management team across verticals, led by Mr. Girish Kousgi, our Managing Director and CEO. We'll begin this call with the performance update by Managing Director and CEO, followed by -- along with the financial performance by our CFO, Mr. Vinay Gupta, followed by an interactive Q&A session.Please note, this call may contain forward-looking statements, which exemplify our judgment on 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 statement to reflect future events or circumstances. A detailed disclaimer is on Slide 29 of the investor presentation.With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.
Good evening to all the investors. Happy to share, we had an eventful quarter 4 and the whole year was pretty good compared to last year. Broadly I'll be covering on the growth, especially on prime, then asset quality on the retail side, corporate book and performance, both on, A, in terms of resolution and also in terms of GNPA and net NPA, capital raise and affordable business, which we have started recently.In terms of growth, very clearly, there is a growth in retail side on both disbursements and book. If you look at disbursement over last year, we have grown by 36% on the retail side and book growth was 10%. So quarter 4 disbursement was all-time high in last 14 quarters.On the GNPA side, if you have to look at last quarter, the GNPA on retail was 2.86%, and as of quarter 4, it is 2.57%. Net NPA was 1.96% last quarter and quarter 4 was 1.74%. So very clearly we can see that growth is back. Disbursement, even sequentially, there was a growth of about 33%; that is quarter 4 over quarter 3, and sequential book growth of 4.4% on the retail. So very clearly, growth is back, both on disbursements and book and also in terms of asset quality, both GNPA and net NPA has come down. We had one of the best quarters for delinquency in last 14 quarters. So it was all-time best in last 14 quarters for both business as well as asset quality.If we have to look at the corporate side, as I had indicated earlier, we are de-growing the book. We are working on resolution. There has been a significant resolution, what we have done in the last few quarters. And if you look at the book as of quarter 4 end, it is INR 3,800 crores. The same number last year was INR 7,375 crores. So the book has de-grown by 48.5%. In terms of sequentially, the book has de-grown by 23%. And that was as per our plan. In terms of NPA, last year, the NPA was INR 2,738 crores, and this year INR 846 crores. So there has been a 69% drop in GNPA. And compared to quarter 3, GNPA was INR 1,307 crores, and now it is INR 846 crores.In terms of percentage, it looks high, which is a 22.5% GNPA and net NPA is 18.24%. But this INR 846 crores is only 2 accounts. And out of INR 846 crores, the one account which accounts to 92% of GNPA, this account is backed by one of the leading developers. So to that extent, more or less [indiscernible] we have sorted. We are still working on resolution. If you look at the overall book, disbursement has grown by 33% in both corporate and retail put together. In terms of book, disbursement was 33%, book growth was 2.4%.As you are aware, we have been talking about moving to prime segment. Earlier we were focusing on super-prime. So now we have shifted, we have changed the segment. So therefore, there will be a lift in yield, which will improve profitability. And our focus has been to have an ideal mix of more skewed towards salaried and self-employed. The ideal mix is 70 and 30. So we see there has been a lot of traction in terms of moving towards sourcing more salaried. In terms of product, our focus is going to be more on home vis-a-vis compared to non-home.So incrementally, we are trying to get this mix. So it will take some time. Eventually we would want to get there where our focus on home is more. So in the mix, we'll be skewed more towards home vis-a-vis compared to non-home. In terms of profile, more of salaried compared to self-employed and self-employed non-professionals.We started affordable business in quarter 4. We did about INR 137 crores of disbursement. It was just a start. So I think it will gain traction from this quarter onwards. We have 82 branches, which are now completely operational. These are dedicated affordable branches. And so this will see good contribution coming in from affordable in the overall retail segment. As you are aware, we were able to raise capital recently to the tune of INR 2,494 crores. Now this capital will be used for growth. Basically this is growth capital.I'm sure you will have seen the numbers. I would request Vinay to take you through the financial performance, and then we can get into Q&A.
Sure. Good evening, all. I will cover the financial performance for the quarter and full year ended FY '22/'23. First of all, with respect to Q4 FY '23, overall PAT that we delivered is INR 279 crores, which is a growth of 65% year-on-year and 4% on a quarter-on-quarter basis. Net interest income improved 57% year-on-year, though there is a decline 19% quarter-on-quarter. However there was a one-off in Q3 under the securitization income due to margin true-up on account of increase in yield. Excluding that, NII declined by 6% quarter-on-quarter.Pre-provision operating profit improved 32% year-on-year, and operating expenditure increased 23% year-on-year. Spread on loans as of Q4 is 2.65%. Again, there is a decline on a sequential basis. However, again, there was a one-off under the securitization. Excluding that, it is more or less comparable to what we have seen in Q3. The company has also increased its lending rates by 30 basis points at the end of March. The impact of that will come in the first quarter of next financial year, which will help us in offsetting some of this decline.NIM stood at 3.74% and gross margin stood at 3.83% for the quarter. Similarly, on a full year basis, we have delivered a PAT of INR 1,046 crores versus INR 836 crores in the same period last year. This is a 25% growth year-on-year.On a full year basis, spread on loans is 2.8%, NIM is 3.7%, gross margin is 4.1%, and ROA is 1.6%. The leverage that we have closed as of March is 4.9, and our ROE is 9.98% as compared to 8.9% in FY '22.This is a brief on the financial performance. Now we'll open it up for the Q&A.
[Operator Instructions] The first question is from the line of Samip Bhansali from Tata Mutual Fund.
Hello? Can you hear me?
Sir, please use the handset mode, the audio is unclear.
Okay. Hello?
Yes, please go ahead with your question.
I would like to know what is the status on the restructured book as on March '23. And how much is the provision that we are holding against the restructured book?
So as on 31st March 2023, we are having a restructured book of INR [ 1,870 ] crores. And we are carrying the provision of around 12% to 13% in our book.
And these are primarily like your wholesale assets, right?
No. The COVID restructured account and many of those accounts have already started making the payments. They've gone back to the paying fee.
The next question is from the line of [indiscernible] from [ Shree Investments ].
With the capital raise just finished, where are the growth opportunities you are seeing and how you will be deploying that capital?
Please use the handset mode, sir. There is some disturbance coming from your line.
Yes. So, is it clear?
Yes.
So basically, capital, what we have raised is for growth. We see a lot of opportunities both on the prime and affordable. Prime's business what we've been doing for a long time. And in prime what we have done to -- because of 2, 3 reasons, we want to move segment. One is from super-prime to prime. That is because we used to have a lot of stress in terms of customer attrition. Therefore we have -- we are now in the process of moving from super-prime to prime. And in prime, we see a lot of opportunity, not just in terms of growth, also in terms of building book at a higher yield, #1.#2, we have just started affordable housing. So there we see a lot of opportunity which will help us to build book at a much higher yield than prime. So the yield, what we are looking at affordable is about 12%-plus. On prime, the average yield is about 10%-plus. So there is a very clear difference of about 2% between prime and affordable. We see opportunity in both.In terms of geographies, we see very good opportunity in South, both for prime and affordable. And certain markets in North and the whole of West. So in terms of geography, in terms of segments, in terms of product, I think we see a great opportunity.And today, if you see, I think probably PNB Housing is the only company which has 2 different verticals, one for prime and one for affordable. So we have dedicated branches for these 2, prime and affordable. Dedicated team and the customer segmentation is different. So we see a lot of opportunity and this capital will be used for growing the business.
What kind of sustainable disbursement…
Sorry to interrupt you, [indiscernible], please repeat your question. There was some audio loss.
Yes. I was asking about what kind of disbursement growth you are looking out for, say, next 2 years, 3 years since you have recently ventured into affordable as well? And another thing is on ROE and ROA front, what's your target on this front?
So in terms of growth, disbursement growth, we are looking at about 22%-plus. This is at a consolidated basis, both prime and affordable put together. On affordable, the growth will be higher because of the smaller base. But I think overall, on retail, we'll be able to grow at about 22%-plus on [ retail ] for next 2 to 3 years' time. And on book, we'll be able to grow at about 17%-odd.
And on the ROA front, as you can see, we have improved returns from 1.2% last year to 1.7% in Q4 annualized. So we are working on improving it further, and we are hopeful with the mix of affordable coming in, we should be comparable to any other good affordable housing finance company.
And we can expect the gearing to remain here, right?
Yes. Year-end total is 1.6% on an average.
Gearing?
Gearing? Sorry, gearing currently is at 4.9x. But with the capital coming in, there would be some pressure on gearing. Obviously it will improve with the capital coming in. But we have plans for a better utilization over the next 2 years to 3 years.
So typically, if you look at any housing finance company, be it on prime or on the affordable side, I think the acceptable leverage is around 8, 7.5 to 8. But for us, I think we look pretty comfortable around 6. So post capital raise, we will be at 4, but we would have the [indiscernible] so we are comfortable around 6.
And on a consolidated basis, the disbursement growth you mentioned is around 17%, right?
Disbursement will be 22%-plus. Book growth to be 17%.
The next question is from the line of Renish from ICICI.
Just 2 questions from my side. So one on the yields. So even if you look at the yields adjusted for one-off securitization in Q3, it has actually fallen by almost 20 basis points sequentially. So I was just wondering, when we look at the industry trend, it is generally improving and it was quite surprising for us, it is declining. So what is happening on the yield side, sir, in Q4?
So if you look at yield, we have passed on the higher rates to the customers end of quarter 4 and also beginning of quarter 1 this year. So this, of course, in terms of increase in interest rate. But as I mentioned, we are changing segment. And there, we will see an upside of yield, which will be at least 0.8% higher than the super-prime. So which means that we will be able to maintain yield on prime side at around 10%-plus and an affordable 12%.So if you compare with quarter 3, of course, yes, there has been a slight drop in yield, but I think this is something which will get corrected from this quarter onwards.
So basically, I just wanted to understand what has led to this 20 basis points of reduction. I mean it was the book mix in Q4, which doesn't look like because the retail has gone up, right? So I was just wondering, it's just because of the book mix change is leading to this reduction or is there any write-off [indiscernible] or something else to that?
Yes, some part is related to book mix because the composition of retail is going up as compared to corporate. So that is adjusting to some extent the yield. There was also a securitization true-up, which came, which is on account of repricing, that has some. So the future cash flow get adjusted. So there is marginal impact on the securitization also. But our core interest income is almost flat quarter-on-quarter.And even if you look at cost of borrowing, it went up compared to quarter 3, which was 7.55%. It went up to 7.76%. So the impact is that we have passed on the benefit end of quarter 4 and beginning of quarter 1 of this year. And even the cost of borrowing went up and the mix within the overall book also changed. It is more of retail and less of corporate, and therefore that had an impact on the yield.But now today, if you look at the entire composition, 94% of the book is retail. And this benefit of interest rate increase twice in last few weeks will give us that upside business from this quarter onwards.
The next question is from the line of [ Rajesh from K Securities ].
Am I audible?
Yes, sir. You're audible.
Yes. I wanted to understand in the presentation, investor presentation, Slide 10, you have mentioned that there is a INR 1,500 crore that is write-off or -- write-off and resolution. What is the actual write-off here? And what is the resolution over here?
That we have not shared. It has been a mix of both resolution and the write-offs that we have done during this year. This is what we have shared on the page as well.
So going forward, how much will we be the [ disbursement ] in the corporate? Will it be not growing corporate book at all? Or we will be growing a little bit over there? What would be an ideal retail versus wholesale going forward?
So I think to degrow corporate book was a vision which we had taken because we wanted to resolve GNPA, bring it down to comfortable levels because we could restart. So this was by design and, therefore, we will see corporate book going down since last few quarters. Now if you look at last year and this year, corporate book has gone down by about 48%, 49%.Now the GNPA has come down and still we have about INR 846 crores in terms of absolute number, right? I think probably this year, sometime this year, we may restart our corporate business, but we will restart in a small way, focused on certain locations, specific builders, specific projects, a smaller ticket size. The idea of starting corporate is to, A, ensure that we are in this business, which has also helped us in terms of retail penetration. So we would not do a standalone corporate business. So whatever business we do, that will be linked to retail penetration. And in terms of mix, our corporate book at any given point in time would not exceed 10% of overall book.
So one last question from my side is, like the NPS on the retail side, we are still not as good as most of the competition. So are we -- how are we going to address it, #1? What is an ideal NPA ratios for the retail book going forward?
So if you look at a couple of challenges, what we had a few quarters back, was also on the retail asset quality. So now we've got a good fix on that. So now if you see the last 2 quarters, our recoveries are more than [ flow ]. So this trend will continue and will keep coming down. Probably, let us say, 4 quarters to 6 quarters from now, we will be compatible with some of the best housing finance companies in the industry in terms of retail NPA.[Indiscernible] mentioned that quarter 3 was very good for us in terms of asset quality on the retail side, and quarter 4 was one of the best in last 14 quarters.
What's a comfortable NPA ratio that you will be maintaining? I mean, can you guide in terms of what kind of an NPA we will be comfortable? And how will we achieve that in the next 2 quarters to 4 quarters?
I think any enterprise, given the mix of corporate, affordable and prime, I think anywhere between 1.25 to 1.35 should be the ideal GNPL.
The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.
I just wanted to know strategically between the prime and the super-prime segment, what is the customer difference that you see? That's question #1. And then in terms of what kind of credit card cost differences would you see between the 2 segments because you're getting an 80 bps higher yield? And then to grow your businesses, would you, especially because you've trusted now affordable housing is just taking off, would you need more OpEx going forward? Those are my questions, sir.
So if you look at the super-prime and prime and the 2 set of institutions who would -- which would focus on CAT A developer projects for retail funding and CAT A corporate for funding to their employees, that is basically super-prime. So in prime, what we focus is CAT B and CAT C developers for retail funding and CAT B and CAT C employer, employees for lending. So basically, here, we have an upside in terms of yield, which is 75 bps to 80 bps. This also would include large chunk from the government; [ sector B ], central, or state government.In terms of GMP, the difference between super-prime and prime is not significant. It's only about 10 bps to 15 bps is the difference is what we've seen in the industry till now. And therefore not much of difference in the portfolio quality.The idea of getting into prime is that, A, we would be able to grow faster; B, we would be able to build book at a higher yield; C, customers would stay for a longer time. So customers with loan on book is going to be for a longer time, and that will be beneficial in terms of customer retention and growth of book.
Sir, the other question on operating expenses also, sir. What do you see the OpEx to cost ratio, I mean, OpEx to income ratio?
OpEx to ATA right now is around 0.8. It has been consistently at around 0.7, 0.8. Most of the investment related to affordable segment has been done in the current financial year. So infra, people, all that investment is done. So this seems to be sustainable, while there would be some investment that we need for IT and ramp-up of Roshni or affordable after a few quarters.
And just to add on the difference between super-prime and prime, in prime, the ticket size would be lower. And therefore, these customers are not that rate sensitive and therefore they tend to stay on book for a longer time.
The next question is from the line of Ashwini Agarwal from Demeter Advisors.
A couple of questions from my side. One is this additional capital, what does that do to your credit rating and potentially to your borrowing costs? And the other thing is that if you look at the high-end equity and, therefore, lower gearing, what do you think would be the fiscal '24 delivered ROA and the [ CEB ] ROE given higher equity? So those are my 2 questions.
If you look at the last couple of quarter performance, I think very clearly, it is evident that clearly there is a significant improvement in growth, significant improvement on the asset quality. And this is also true in terms of corporate book in terms of GNPA. With capital raise, it will definitely help us, and we have been engaging with the rating agencies and also bankers, which will have multiple positive impact.One is, A, because of performance on business, on asset quality, free capital rate. So we are [indiscernible] rating agencies. So this should positively have a relook in terms of possible upgrade. So we are [indiscernible] agencies on this front. Not this, we would also have access for cheaper funds from national banks since our GNPA and net NPA has come down drastically over the last 1 year. #3, in terms of borrowing from bank, because of all these things, we will be able to raise funds at a much lower rate.All put together, our cost of funds would come down. In terms of ROE in the midterm, we are very sure that we'll be able to cross 2.
And return on equity, sir?
So similarly, there would be some pressure on the ROE with the new capital coming in. But with the improvement in ROA, we are sure that we'll be able to sustain the current ROE.
And sir, one more question. I mean on the spread side, I see I'm at a loss as to why these spreads should have contracted because your book is more -- mix is more or less the same between Q3 and Q4. It was 92 and now retail is 94. So it's not much of a difference. And the decline in the corporate book appears to be from a nonperforming account. So there you couldn't have been accruing income anyway. So I'm not quite sure as to why your net -- your spreads have declined in Q4 over Q3. Is there something that we are missing?
So on the spreads, you -- I mean, that is -- there is some impact. Yes, you rightly said, the impact is not very material with respect to mix change. The other impact is primarily on account of securitized book. So there is some repricing and there is some runoff, which happens on the securitized book. And that is slightly uneven. This quarter, there was a higher impact of repricing. So on the future cash flows, that repricing has to be considered to be upfronted.So that led to some impact of 10 bps, 15 bps over there. So this is overall impact of around 20 bps.
So the securitized book also is mark-to-market, is it?
Securitized book does not get mark-to-market, but you have to take into account the impact of repricing and any prepayments that happens on our securitized book. So that has to be trued up every quarter. So there is some minor impact or volatility in that particular part, which happens on a quarter-on-quarter basis.But on a core yield, we are able to sustain the similar kind of yield subject to this minor mix impact that has come on account of retail and corporate.
The next question is from the line of [ Nidhesh ] from Investec.
A couple of questions. Firstly, can you share the quantum of disbursement in the affordable housing segment and what are the yields, average yields that we are having in that book?
So actually we just started affordable business in quarter 4. So we just started. So we will start seeing meaningful numbers from this quarter onward. But just to quote a number, we did INR 137 crores in quarter 4. And from this quarter onwards, you will see a good scale up on affordable.
And what are the yields that we are charging in the segment?
It's about [ 11.2 ], 11.6.
Sure. Secondly, can you also quantify the improvement in cost of funds that we are likely to see after this capital raise and [indiscernible] improving and affinity of funding? As you mentioned, that from [ NHB ] and other sources will also improve. So can you quantify what sort of improvement we can see in cost of funds over FY '24?
Today, if you look at cost of funds of a company which has got all the advantages vis-a-vis, let's say, PNB Housing in terms of cost, the difference is close to about, let's say, 90 bps to 100 bps. So we'll be able to cover over a certain, close to 40 bps to 50 bps out of that. So we see over a period of time with performance increasing -- improving quarter-on-quarter, with capital raises with possible upgrade in ratings and also access to fund, cheaper funds, we see that the cost could come down by 40 bps to 50 bps.
Sure. And lastly, on the paid cost front, given that we have decent write-off pool on the corporate side, corporate NPAs are still slightly on the higher side, and we expect resolution to play out in FY '24. So do we envisage a situation where we may have very negligible or negative credit cost given that recoveries may pan out from these pools going into next 1 year?
So on the corporate NPA, it has only 2 accounts. In NPA, we have only 2. That INR 846 crores is only 2 accounts. And out of 2, 1 account is about 92% of the overall NPA. Right? And in the other account, we have resolution in place. And this one account, which is 92% of total NPA, is this project is backed by a leading developer. So we don't see much of a challenge in terms of resolution. And the credit cost for this year, what we had guided, that is 0.6%, is largely on the retail side.
But sir, do you see there is a possibility that the credit cost can be negligible because as we see resolution from these 2 accounts and some of the return accounts also in the corporate side may see some resolution, so?
Yes, it is possible, yes. It is possible, yes.
And any timeline do you see when this resolution can play out?
See, this year we are planning for a good amount of resolution. We won't be able to confirm any percentage. But definitely, yes, whatever credit costs we have considered for this year is largely on retail and whatever write-backs we're going to get from corporate, that is something which we are very closely working. And we've seen some resolution happening in the last couple of quarters. So this year is going to be very good in terms of resolution even from the write-off pool.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Sir, I just want to understand, I mean, you've kind of addressed this a couple of times in this call itself that we will be utilizing the capital for growth. I just wanted to re-clarify now that you've spent maybe close to 6 or [ 8 ], more than 6 months at PNB Housing. I mean there is nothing really on the asset quality front in retail that you want to utilize this capital for.In corporate, very clearly what you have highlighted, there's 2 accounts there. The other either have been written off or sold to [ ARCs ]. So corporate, what you've guided is these 2 accounts that are there, you're expecting resolutions [indiscernible] and at the same time you also stated there could be recoveries from the return of corporate accounts.But on the detailed front, I mean, where we are, do you think some of these capitals can be utilized for cleaning up the retail asset quality?
If you look at retail, there has been a good story in last 2 quarters. And some of the things which I mentioned last time is that we are now pretty aggressive on legal. So all those efforts will start playing out in quarter 1 and quarter 2. And which is what I even mentioned, especially on the retail side, maybe in 4 quarters to 6 quarters time, we should be compatible with some of the best companies in terms of asset quality.The last 2 quarters, there's been a very good story. The [indiscernible] in quarter 3 was down by 25%. And in quarter 4, as I mentioned, this quarter is the best ever in last 14 quarters. So it's a very good story on the retail side. And every quarter, you will see GNPA coming down because our recoveries are going to be more than [indiscernible].
One last question. Obviously -- congratulations on successfully completing the…
And I think this capital is very, very clearly for growth. It's very, very -- it's clearly for growth, which is why we have guided credit cost of 0.6, and that is only for retail. And capital is very clearly for growth because we have started affordable and business opportunity is quite large in this segment. And even there is a lot of scope in terms of prime. If you look at the lift in disbursement in last 2 quarters, it is very evident that very clearly growth is back. And within 2 quarters, if you see, I think the cover up on the retail side, book growth is close to about 8%. And we have guided 17% book growth from this year onwards.So very clearly, there is a need for us to grow and market is quite large. And therefore this capital is going to help us for growth.
Sir, one last question. Maybe just 2 sub-parts to this question. One is, I mean, given that you've already successfully completed…
Sir, your voice is not very clear. I'm not able to follow.
Is it better now, sir? Is it better now?
Yes, better. Yes.
I'll maybe kind of try repeating myself. Sir, given that you now successfully completed this capital raise, one thing I wanted to understand is if there is a credit rating upgrade, will that help us in start tapping the debt markets again? And the other thing is, during this call itself, you highlighted that we selectively start doing the corporate book again and will be primarily done for retail penetration.So I mean, on one side, we compare ourselves or we at least aspire to be like one of the best or among the best HFCs. But if I look at, I mean, most of the HFCs today, right, I mean, none of them really have been very, very successful on the corporate side. So why not, I mean, stick to retail because there is enough and more opportunities in retail? I mean, is doing corporate really kind of a mandatory for growing the retail book as well?
So I think it's a very good point. So our focus is on retail. And if you see today, 94% of the book is retail. So our focus will be on retail. Now having said that, there is some opportunity on the corporate side as well, but we will do corporate business strategically, which can help us to increase our retail business. So which is why I told we'll do cooperate, select developers in select markets, which we may restart end of this year, which will help us to increase our retail penetration.And also in terms of concentration, in terms of mix, corporate book will always be in single digit. So we would not do corporate business as a standalone business from profitability point of view. It will be only to help us to grow our retail book.
But to answer that question that I asked on whether -- I mean, it opens up opportunities to raise money from debt markets now?
Definitely, yes. Definitely, yes. So we would have opportunity in debt market. So we will raise it because we are supposed to -- we are to raise debt, even regulatory also, whatever incremental borrowing they want to make, 25% has to come in the way of NCD. So we will raise. And this capital raise and good performance since last couple of quarters will help us in terms of raising debt at a much lower rate.
All the best to your new team.
The next question is from the line of Subramanian Iyer from Morgan Stanley.
I have a [indiscernible] question. If you could please share the split of the restructured book in the [indiscernible]?
So as I told you, on the retail side, we have got INR 1,870-odd crores in the restructure. INR 1,870-odd crores from restructure for retail. Out of that, around INR 300 crores is into the 90-plus, that's outstanding.
And how would the performance of this book be? And would the book predominantly, say, below [ DPD ]? Or if you could just share some color on the performance.
Already with the COVID has gone by and now it's been more than 2 years and many of the accounts have come back to the repayment scheme. And all the assets are backed by our wonderful security coverage is also good. So there is no additional stress, which we are envisaging in this book. And I think it has been reached to a stage where we can say that all the risk which was built into the COVID has been settled and normalized.So from the 0 DPD or 1 DPD, 2 DPD, we don't see any significant risk arising from lending.
So after COVID and restructuring, whatever the impact of COVID and resettling is already seen in our NPA. The impact has already happened. And this is not now, I think, over a year back. And now what we are seeing is more and more of resolution, and which is why we've seen very good resolution coming in, in last 2 quarters, and this would continue. So absolutely, there is no stress what we see.In fact, now the entire pool is the same for us. So whether it is a normal flow from standard to Stage 3 or restructured pool flow to Stage 3, we don't see any difference at all because whatever had to happen has already happened. And now what we see is really resolution from the NPA pool.
And if you could also give the split of the -- the potential split of the retail disbursement in FY '24 into prime, super-prime and affordable since I probably missed the number when you gave it?
I think super-prime was not that significant. So now over the last 2 quarters, we have moved the needle, and now we are focusing more on prime. So in terms of percentage, now super-prime is very, very less.
And in FY '24…
Affordable, last quarter, we disbursed INR 137 crores.
So in the coming years, can we expect maybe something like an 80-20 between prime and affordable? Or how would these numbers look like?
Incrementally, if you look at affordable, eventually we want affordable to contribute 25% of incremental disbursement. But this year, we'll be able to reach about 10% to 11%.
The next question is from the line of Venkatesh Ramakrishnan from ICICI Bank.
This is Venkatesh from ICICI Bank. I just wanted input on your OpEx ratio is about 0.8%. Generally we are seeing that the housing finance and other companies, the peer group, generally it's 2.8% to 4% or 5%. We see that your OpEx is relatively low. Just that is there any specific reason how you're able to manage the large book at a low OpEx?
Thank you very much for the feedback. Actually we want to further bring down OpEx. So I think I would see that -- but yes, we are working on cost optimization. We want to bring down OpEx from this level to the extent possible. We take your feedback. But yes, our endeavor is to bring down OpEx from the current level as well.
The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.
Sorry, I joined late, so I don't know if you shared this. What was the incremental cost of funding for the quarter?
Incremental quarter average is 7.75 and outstanding debt borrowing cost is around 8.05.
Sorry, the incremental that you would have done on the repricing that would have happened would be at what rate? Did you say that at 8? Because I'm just saying that…
Yes, 8, 8.1.
The next question is from the line of Renish from ICICI.
So on the coverage side, this quarter, we saw the drop in coverage. So in a steady state basis, where do you see the coverage is settling?
Coverage, as Mr. Girish explained, it was primarily on account of corporate. So there we are only left with 2 accounts, where also revaluation is in progress. So on retail, our coverage is around 32%, and it has been consistently at that level, and we would like to maintain it at that particular level.
At 32? I mean around 32-35 whatever.
Yes. 32-35, yes.
And sir, one again circling back to the yield question. So you highlighted that the repricing on the securitization book has like 15 basis points, 20 basis points or maybe 10-15 basis point of yield comparison this quarter. But generally, in a rising rate scenario, your securitized pool will get repriced at a higher rate. So how does it impact negatively on the yield side?
Actually, in this quarter, you would have seen the MCLR increase was quite high as compared to the previous quarter. So most of the banks have increased MCLR during Jan-Feb-March month. So the increase in MCLR was significantly higher than the increase that we see on the rate reset that we do. So the net increase was -- net impact was negative in this segment.
So it is basically the cost of borrowing for your securitization pool has gone up, which has led to the yield compression on our book. Is that correct understanding?
It's basically, Renish, the spread which we generate on the securitized pool has come down because we have not increased the rate as much this quarter, whereas the MCLR rates have gone up substantially. And hence the [indiscernible] has come down resulting into this.
So should we consider this as one-off or?
See, there are 2 reasons. One is obviously the compression or decrease in the spread. So that is already called out as a one-off in our entire presentation. The second impact is repricing which happens for the…
So should we consider as one-off in this Q4?
Repricing is not one-off. Repricing will continue. I mean that is something which keep happening. And that's why we have not carved it out as a one-off. You will see that impact every quarter, but it is slightly volatile. Sometimes the impact is lower, sometimes it's higher. So there could be a 10 bps to 15 bps impact on account of that.
The next question is from the line of Ashwini Agarwal from Demeter Advisors.
Sir, just one follow-up question. You mentioned that the proceeds of the [indiscernible] be used to fund strategic growth plan. Do you have anything else in mind other than…
Please use the handset mode, sir. The audio is not clear from your line.
Is it better now?
Yes, please go ahead.
Yes. So you mentioned strategic growth plans. Do you have anything else in mind other than affordable housing when you mentioned the word strategic?
No, no, no, no. I mentioned that we'll be growing both in prime and affordable business. So this capital will help us to grow at a much faster pace because market offers that kind of opportunity today. So we'll be growing pretty aggressively, keeping, of course, asset quality in mind on both prime and affordable. I mentioned on the corporate business, we will do strategically just to help us in terms of retail growth.
No, no, I was referring to Slide 3 where you said that proceeds will be utilized to fund strategic growth plan, and I was wondering are you hinting at some…
Same growth in retail, both prime and affordable.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Just to kind of reconfirm. So restructured number that you have shared, retail INR 1,870 crores, there is no wholesale account which has been restructured, right? I mean at least, money which is under restructuring now in the corporate account, which is under restructuring now. So that's one thing I kind of wanted to confirm.The second thing, I mean on the restructured book for the benefit of everyone, is there any retail account which is still under moratorium or everyone has exited moratorium and resume business?And thirdly, I mean, a couple of days back or rather yesterday when we had one of the larger HFCs reporting its results, they said that they have classified the entire restructured pool in Stage 2. So while you have given out a number of INR 300 crores is in 90-plus out of this INR 1,870 crores, just wanted to understand the rest of it. I mean, all of it is parked in Stage 2 or they are based on the actual DPD, some of it could be in Stage 1 and the rest is Stage 2?
So first of all, these are the retail restructured numbers and the COVID listing. In corporate, we have only INR 108 crores, and there is no delinquency, nothing you see there. It's performing absolutely fine and perfect.In this INR 1,800-odd crore number, we have told already that INR 300-odd crore is coming from the -- which is NPA, and as we already discussed earlier, I think that probably you have missed out, it has been made a part of now normal kind of a business scenario that we have. It's already been many, many months. This [indiscernible] have come back.The allocation of this portfolio in Stage 2 or Stage 1 is actually depending on the performance. So it was handed as of now, and that's all.
The next question is from the line of Bhuvnesh Garg from Investec Capital.
Just a few clarifications regarding the field for Q4. So firstly, I want to understand that where do you book this income or reversal from securitization? Because if I see your Slide #19, so you have, there you have some difference in your reported yield versus yield at securitization. But I don't see any line item in your Slide #21, which is P&L, which shows some income from the line income on the [indiscernible]? So just want to understand where do you book this into from securitization?
So it is interest income only. We have not shown it separately under the P&L line, but it's a separate line, which is red.
So it is an interest income you booked?
Yes, yes.
And secondly, sir, in Slide #19, only. So if I look at your yield, excluding securitization, which seems to have dropped by 20 bps Q-o-Q. So excluding securitization. I just want to understand what led to this drop?
So again, this is not excluding securitization. It is excluding one-off in securitization, which is a spread movement, which we have explained MCLR versus our rate change movement. So that is what we are calling it one-off. Apart from that, there are a few other movements which happen in securitization on account of repricing of the securitized book. So that sometimes cause minor volatility. Sometimes it is positive, sometimes it is negative. So that impact is around 10 basis points to 15 basis points.
And sir, what's your guidance for NIM or spread in FY '24 and next few years?
On a steady state, spread should be 2.5 and NIM 3.5.
[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the 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 and audio of this call will be uploaded on our website, that is www.pnbhousing.com. Thank you.
Thank you. Ladies and gentlemen, on behalf of PNB Housing Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.