Can Fin Homes Limited (511196) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '20 Earnings Conference Call of Can Fin Homes Limited, hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Utsav Gogirwar from Investec Capital Services. Thank you, and over to you.

Thank you, Stephen. Good morning, all. Welcome to the Quarter 3 FY '20 earnings conference call of Can Fin Homes Limited. To discuss the financial performance of Can Fin Homes and to address your queries, we have with us today, Mr. Girish Kousgi, MD and CEO of Can Fin Homes; Mr. Shreekant Bhandiwad, Deputy MD; Ms. Shamila, Business Aid; and Mr. Prashanth Joishy, CFO of Can Fin Homes Limited. I would now like to hand over the call to Mr. Girish Kousgi for his opening comments. Over to you, sir.

Good morning to all of you. We had a very good quarter. You must have seen the numbers. I just thought I'd just give you a summary and then share vision and then open the discussion for any specific questions which you may have. If you look at growth in terms of disbursement, last quarter was almost flat, last to last quarter was negative, whereas Q3, we have grown by 12%. So disbursement has grown by 12%. This is a very good sign we think because we've been saying this since last few months that we are seeing growth in the market because we operate in niche segment where we don't see too much of competition. And this quarter, we've seen a growth of 12% disbursement, which is quite different compared to the previous few quarters. Book has grown by 15%. I'm just rounding it off. If you look at revenue, revenue has grown by 16.41%. It was INR 444 crores, and this is all Y-o-Y Q3 comparison. Revenue has grown by 16.41% from INR 444 crores to INR 517 crores. If you look at net interest income, the growth is about 23%. And we had a very good increase in PAT, which is 41%. Last year, Q3 was INR 76 crores. And this year, Q3 is INR 107 crores. So it's an increase of 41%. Our NIM has increased. In comparison, last quarter was 3.31% and this quarter it's 3.42%. Going forward, we will try and maintain this NIM. NIM won't increase substantially because there'll be only variance in terms of maybe 2 or 3 bps. Yield has more or less remained very stable. We maintained spread of -- we actually, we improved spread to 2.32%, it was 2.17%. So now it is 2.32%. The incremental cost of borrowing in Q3 has come down. So we've managed to keep our cost pretty low. Asset quality is quite stable. Last quarter was 0.79%. This quarter is 0.8%. A lot of effort has gone into collections and recovery. We have seen some result this quarter, and coming quarter, you will see a significant impact in terms of NPA numbers. If you look at our liability mix, more or less, I think we have focused largely on banks, keeping costs as the guiding factor. You have to compare with last year Q3. There's an increase from 48% to 57%. NHB, it was 13% last year, Q3. And this year, it's 15%. So not much of a change there. And NHB, we actually prefer because -- so a, it's from regulators, so they're a little stringent compared to other [ hill ] stations where we borrow. And to that extent, we feel really reassured. And in a way, we get it with the advantage of lower cost. Market borrowing was 38%. Now it has come down to 26%. We've kept our CP percentage quite low within [ 26% ]. It's hardly 9%. And deposits grew from 1% to 2%. Now, this is broadly on the numbers. In terms of our strategy, we remain focused on home. Today, our home is almost close to 94%. And I'm just taking [indiscernible] part of home loan because that is a second loan given on the primary security and primary loan based on the repayment track record. So our LAP exposure is only INR 5 crores, and all others put together it's another 1% -- sorry 5% and 1%. So 94% is home loan. So we want to keep it this way. Our salaried is still at a portfolio of 71%. Even on incremental sourcing, our salaried is about 70%. Our ticket size remains almost same. There's no change in ticket size. We focus on affordable. We operate in Tier 2, 3, 4 kind of cities. And therefore, our focus is on low property value and low loan ticket size. In terms of branch expansion, I had said this earlier also, we would reach a branch count of 200 by March. So we stay committed to that number. We see -- in terms of market, there has been a lot of challenge in the market. Demand is slowly coming back, but still a long way to go. Especially in nonaffordable space, there is too much of pain in systems. Since we don't operate in that, we are not really impacted. So for us, the growth has -- market has slowed down a bit since number of players have come down, and we thought it's an opportunity for us to try and grow our book, keeping our risk profile of the company intact. So we could encash on this till now. So going forward, we'll try and keep growing at a reasonable growth. I would now request for any specific questions, which investors might have.

[Operator Instructions] The first question is from the line of Dhagash Shah from CD Equisearch.

My question is that, what percentage of your incremental loan book in Q3 has been in organic?

Everything is organic. 100% is organic.

Okay. And sir, regarding your LAP book, can you tell us that what is the largest exposure?

See, if you look at our LAP, it's only 5%. And we focus on low ticket size. Average ticket size for LAP and non-LAP is still the same. So in terms of what would be the -- I'm not very sure, I need to check this. So by highest LAP could be, I'm not very sure, maybe INR 40 lakhs, INR 50 lakhs, I need to check that. Otherwise, if you look my INR 50 lakhs and above, at portfolio level, is only 3%, and majority of this 3% is from -- is home and salaries.

Okay. So roughly sir you're saying out of that INR 1,000 crores, largest is INR 40 lakhs, INR 50 lakhs?

I'm not very sure. This is my guess. It should be in the range of maybe INR 40 lakhs, INR 45 lakhs.

Okay. And sir, regarding the last question, you mentioned that 100% is organic. So could you give us an idea about what part of it is refinanced from other banks or other NBFCs?

No. Refinance from other banks or NBFC is 0. This is the entire business, which Can Fin has done. So there is no inorganic growth.

So are we looking at inorganics going ahead?

Not at the moment.

Okay. And sir, just one last understanding part of it that why is the comparative growth slow in the housing book?

I'm not very sure with this question because we see that there is growth in both the home and nonhome. Only thing is since the nonhome, the book is very small. So the growth seems to be a little higher. And in home, since we have a large portfolio. See in home, we have grown by 15% and nonhome is about 20%. So since the base is very small and that's the reason you would see the growth in nonhome is quite high compared to home. Otherwise, our focus remains on home.

Correct, sir. But when I said...

[Operator Instructions] The next questions is from the line of Nishant Shah from Macquarie.

Yes, sir. So just trying to put this into context, where we have our margins at 3.4%, which have improved, spreads have improved, we have a tax benefit, and we have like a couple of competitors, a fairly large-sized competitors who are active in the affordable space, now becoming beleaguered, right? So what stops us from like trying to push the pedal on growth a little bit, right? Are we just trying -- like at least, optically, it looks like we're just pricing ourselves out of the market by holding on to our spreads and our NIM. Is there no space where you vacated? We appreciate that, like the space itself is taking time to grow, but then is there no scope for market share gains?

See market -- we want to be very, very cautious in our growth. We want to grow. We will definitely grow much higher than market growth rate, but we don't want to really press the pedal too much and grow at a rate, which is harmful for the asset quality. So we are very, very clear on asset quality. We feel about 19%, 20% growth is a good growth rate, considering the market situation. And therefore, we want to be focused on 20% growth rate. So is there an opportunity to grow at 25%, 30%? The answer is yes and no. The answer is yes, but then definitely, it will come with a lot of nuances, a lot of challenges, which we don't want to take, because we are very, very clear on asset quality. Growth of 30% in this market, definitely, the portfolio would suffer. And we don't want to grow, compromising on asset quality and compromising on profitability. And therefore, we thought that 20% is a good rate.

Fair enough, sir. So just a couple of follow-ups on this. So let's say, let's take something like a DHFL, right? They vacated the space. Probably, there's a little bit of room for you to price the risk better. But are we not able to like gain some of the market share from some of these vacated spaces, like where without compromising on your asset quality? Or is your understanding that these were probably opportunities which could have never fit into your risk appetite criteria at these kind of borrowers?

Let me answer your question in 2 parts. One, definitely, we are trying to gain that share, and therefore, you can see growth, which has come back, A. B, our risk appetite is different. So most of -- I don't want to name the HFC or company. But what we do is what fits into our risk profile, we are happy to do. And we see that a significant part of the space, which is vacated, doesn't fit into our risk profile and therefore we're quite [indiscernible]. Yes.

Fair enough. And just one last thing on this...

[Operator Instructions] Mr. Shah, sorry to interrupt, sir but for any follow up request you rejoin the queue please.

Sure. Okay.

The next question is from the line of Nirmal Bari from Sameeksha Capital.

My first question is on the repayment rate tax. Repayment plus prepayment rate has shot up in the current quarter to almost 8-quarter high. So what is it that we are seeing in the market? And specifically, with, let's say, pooling rates as well as MCLR coming down, is it a trend that banks are poaching on to our clients or why is it so high?

Okay. So why is it so high? It was high in this quarter because of the CLSS subsi credit, and therefore, the book came down, and that's where you see that the prepayments approvals are high. Otherwise, we've been managing customer retention very well. So that is the only reason. So decrease in interest rate, both in MCLR and repo, that is there -- that was there even in the past so because there is a differential pricing which banks charge and which we charge. And therefore, there is always an arbitrage. So we have taken that into account in our business model. So that is not the reason. The reason is because of a subsidy amount. Because of that book went down.

What would be the quantum of this subsidy in the current quarter?

It's about INR 145 crores, INR 150 crores.

INR 145 crores with credit, okay. And secondly, the capital adequacy ratio has also shot up from 18% to 22% in the current quarter. So what was the reason for that?

So -- and capital adequacy is 22%, okay? So share, basically, there are 3 parts. One is sanctioned and agreement not signed. This is category 1. Second category is sanctioned agreement. One is signed, one is not signed. So these are 2 categories. Number three is, sanctioned, agreement signed and part disbursed. So we need to provide for sanctioned and part disbursed, sanctioned and agreement signed, and not for sanctioned, agreement not signed. So there was some classification, which we did in the last quarter, which we rectified this quarter, and therefore, 22% is the right number.

Okay. And if you may allow one last question...

[Operator Instructions] The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

My question has been answered.

The next question is from the line of Punit Mittal from Global Core Capital.

I had 2 questions. First of all, Mr. Girish, welcome to Can Fin. Exciting to have you on board.

Thank you so much.

Now 2 questions. One is on the repayment. It seems your repayment has increased, which is surprising given that the competition is reduced and as you've mentioned that you don't compete with banks. So where is this repayment coming from?

So -- okay. I think I answered part of this question earlier. Let me just repeat. Repayment looks to be higher in this quarter because there was about INR 145 crores of CLSS credit what we got, and therefore, the book went down to that extent, A. B, when I said we don't compete with banks, we don't compete with banks when we source and book business. But however, after, let's say, 2 or 3 years' time, so customer would see an opportunity. This is in the business model. This is true for any HFC because there is a differential in pricing between banks and HFCs. So after 3 to -- let's say, 3 years or 4 years, some of the customers may move out. So today, we have HFCs, which charge different rates. For example, let's say, starting from 9%, right up to 15%, 16%. So we have categories of HFCs. We have categories of banks. PSU banks charging the lowest, starting from 8.2%, 8.3%, and there are certain banks, which charge about 8.95%, 9%, 9.25%. And there are HFCs -- there are so many categories. Starting from 8.75%, they go right up to 14.5%, 15%. So there is always an -- there is always a -- there is risk of book depletion in terms of HFCs losing some kind of book to bank. For example, Can Fin would lose some kind of book to bank, which charge lower rate. At the same time, Can Fin also has an opportunity to do the BT in from HFCs where the rate is higher, rate to customer is higher, but which fits into our risk profile. So there is BT in and BT out. Every day, day in and day out, this is there. So we have a strategy to retain our customers. So that is in place. But having said that, we need to budget this. This is part of a plan. So this was their -- when HFC started decades back. And this will continue for next 4 to 5 decades, maybe more than that. So this is part of the business model, and we manage that. Decrease in the -- increase in prepayment in Q3 was because of CLSS subsidy. I hope I've answered your questions.

Sir it seems like we lost the connection from Mr. Mittal. We move to the next question from the line of Amit Rane from Quantum Securities.

I had one question on asset quality. How much is the Stage 2 assets as on Q3 and comparative number in Q2?

We can share that with you.

Okay. And sir, outstanding borrowings as on Q3 FY '20?

Outstanding borrowing is at [ INR 20,000 crores... ]

INR 17,800 crores.

Q3 '18?

No, no, current.

Q3 '19? Current? So it's 20,100...

The borrowing.

No. The borrowing.

INR 17,800 crores.

The next question is from the line of Ritesh Bhagwati from Rockstud Capital.

Sir my question is like, was this growth in disbursement a one-off one, as we did quite better in this quarter versus previous quarter? And will we able to maintain this kind of disbursement growth for our forthcoming quarters as well? So that is my first question.

Yes. So we've been -- I have said this before also, we are seeing an opportunity. And therefore, we want to growth -- we want to grow and we will grow at about 19%, 20%. So what growth we have seen in Q3, this would continue in the quarters to come.

Okay. So you're saying like overall disbursement growth rate can be in the range of 19% to 20%?

Yes. So what I'm saying is, in next 4 to 5 quarters, we can see a growth of 20%.

Okay, next 4 to 5 quarters, at least 20% kind of disbursement? And one last, like, in regards to the stake sales of Canara Bank, sir that has been an overhang on the company since [ cycle of ] Time? So what is wrong? What's happening over there?

I mean, the answer is, we are concerned -- no, we are focused on business and operations. So company is pretty strong. We see growth coming in from various quarters. So we are focused on that. So today, our parent is Canara Bank, so it is eventually their decision. So I won't be able to comment on that. As far as we are concerned, we focus on company operations and business.

Next question is from the line of Bunty Chawla from IDBI.

Congratulation on a good set of numbers.

Thank you.

I have 2 questions. One is that, as we have seen the cost of funds has declined during this quarter, but there has not been a big movement on the yield front. So how would we see the net interest margin for next 2 to 3 quarters? How should that shape up?

So any incremental reduction in cost of borrowing, you can see the impact in next 4 quarters. So the impact in this quarter were little. Next quarter will be slightly better. And then, of course -- so in next 3 to 4 quarters, you can see the impact. However, what is important is, we have been able to raise funds at a much lower cost. So it's a good sign for next 3 to 4 quarters in terms of earnings.

So can we say the margins should improve from here on and the cost of funds should decline?

We don't know how the intercept market is going to pan out in future, though the trend looks to be either flattish or slightly down. So all we can say is that we will maintain our spread and maintain our NIM. So there could be a slight increase by maybe 2, 3 bps, but otherwise, by and large, we will try to maintain this.

Okay. And secondly -- lastly, sir, previously, we used to give the -- our target for the loan growth for next 3 to 5 years. So now that has been removed from the presentation. Now what is the thought process? How we should take the loan growth per se for next year and next to next year?

I can talk about next 2 years. All of us know how the market is. So a lot of things changed after ILFS scenario. And therefore, what you saw earlier is not there now. So next 2 years, our growth will be moderated. As I mentioned, it will be in the range of 19%, 20%. So we will take stock after 2 years, what should be the growth rate depending on the market situation. Because now we see a lot of pain in system, the demand -- though demand is there, supply is quite low. So since there is a gap in demand and supply, we can't really grow at the rate, which we saw pre-ILFS regime. So for next 2 years, we would grow much higher than industry growth rate.

So 19%, 20% for next 2 years, you were just talking about loan growth...

About 19%, 20% is what we feel that we should be able to grow.

For loan growth or for disbursement you're speaking because...

I'm talking about [ ALM ] growth.

The next question is from the line of Antariksha Banerjee from ICICI Mutual Fund.

My first question is on the liabilities piece. You gave out the borrowings number, sir. Now if I look at from mix, it's -- what the message is you have degrown your capital market borrowings by 20% both year-on-year or quarter-on-quarter, roughly like that. And I'm sure that will be including NCD, CPs both. Now I speak about this in light of the event on your rating that happened during the quarter and subsequently, the announcement by your parent to not go to the stake sale. So what is the dialogue we are having with the rating agencies now? And what's your plan for fresh capital market borrowings in this quarter? Or when will you look to that?

Okay. So let me answer your question in 3 parts. One is, if you look at the CP, CP is about 9% of the total liabilities. Okay, now CP, we want to raise CP only if we have a backup. And we want to keep this percentage quite low. So we want to be a little low NCD considering the risk. So that is by design. Now on the NCD, there were -- there's some maturities happened. So we have a plan to raise NCD, which we will -- which maybe we will unveil in next few months. Now what drives the source of borrowing is largely the cost. Now banks, we are able to raise long-term funds from banks at a much lower rate. It's in spite of one notch rating downgrade. We were able to raise at the best possible rate. So we were raising at AAA rates. So I think that has not impacted us at all. And now since the decision is out on the stake sale, we are engaging with rating [ agents ] and they are pretty comfortable. So I think we expect maybe in the days to come. So there will be a revision in rating.

Sure. So when you're talking about your cost of funds going down in the next 3, 4 quarters, it is including of your NCD raising plans and the borrowing mix and whatever?

What I mentioned was at the overall level, we will maintain our spread and NIM, so which means I have to manage main overall cost of funds at a lower level, so that we will manage. Because today, if you look at -- for me, NHB is the lowest followed by banks. Of course, I'm not talking about CP. CP would be the lowest then NHB and banks. So NCD would come at a slightly higher cost and even deposit at a slightly higher cost.

Can you tell us how much outstanding bank lines we still have unutilized?

We have close to about INR 4,000 crores.

INR 4,000 crores unutilized lines.

Yes.

Absolutely.

No, the INR 4,000 crores is unutilized, which is documented and unutilized.

Sure. And the second is...

When I say this, I'm excluding sanctions.

Yes, sure. Okay. Do you want me to follow up or do you want me to join the queue?

Sir, I request you to rejoin the queue, please. The next question is from the line of Digant Haria from Antique Stockbroking.

Sir, I think the results have been so good that there is nothing to ask on the business part. So I have 2 questions, which are slightly more theoretical. One is that since you have just spent a few months with whatever experience you could gather of this organization, what would be your 2 or 3 top priorities in the next 1 year? So that's my question number one. And question number two, is that I understand that seeing the stake sale part, you guys have nothing to do, it's the parent who will decide. But what are your dialogues with the banks because I think we have a lot of borrowings, which come from banks, Canara Bank, especially and a lot of other banks. So what do you expect -- or you can give us any color on what can happen if, say, the buyer is a private entity, whenever that happens, what happens to the comfort that the banks enjoy right now versus what they can later on? So that's it from my side.

So for us, top 3 priorities are not in the order of priority. But yes, these are the top 3. Growth, asset quality and profitability. So these 3 are the top 3 priorities. And in terms of dialogue with the banks, our pitch is very clear. As a company, standalone, we are doing extremely well. We have a very clear strategy laid out. We are seeing growth. We are making more profits and maintaining asset quality. So what happens in terms of change of hands is something which we won't really get into. So I want to really speculate on that. If at all it happens in the future, at that point in time, probably, I would be able to comment. So as of now, our focus is only on the company in terms of managing and growing.

The next question is from the line of Kunal Shah from Edelweiss.

Congratulations for good set of numbers. Firstly, in terms of the overall exposure on the home loan side, how much would be towards the underconstruction property?

I mean, I guess you're asking this question for the apartments, correct, flats?

Yes, yes, yes.

Yes. So if you look at the total portfolio, 75% is self-construction, independent house and composite loans. So only 25% is apartment funding. So out of that, we fund only low-rise projects and we fund at nearing completion stage. So if you're asking about completion, that's hardly anything because we...

Okay. Yes, so in terms of the risk on the asset quality, what we are seeing it for the other housing finance company with a similar profile, they have a relatively higher GNPLs compared to us. So we are not seeing that kind of stress rising in our book?

No, we are not seeing.

We're stable.

We are not seeing because of 3, 4 reasons. One, our share of LAP is very low, it's hardly 5%, A. B, we operate in very select and safe geographies. Number three, we assess only based on declared income, not surrogate income. Number four, we are in affordable space. So our ticket sizes are much lower. Even in case of stress, if we have to sell the property, our recovery is 100% in terms of costs because -- and we have literally no exposure to developers. Because of all these 4, 5 reasons, we are not seeing stress, which generally is seen by other companies.

Sure. And what is the incremental yield and incremental cost? And cost, if you can just break it down between at what rate are you borrowing from banks and through NCDs?

NCD, we have not borrowed for the last few months. So NCD, I won't be able to comment. But I can see at least 20, 25 bps lower on the bank rate.

No. Sir, what's the rate as of now, incremental? What is the...

No, it is blended. So I'm saying it is blend. Blended bank borrowing would be about 20 bps lower, which is 7.75%.

Okay. And incremental yields?

Our spread is 2.35%.

Okay.

2.32%. So our spread is 2.32%, so our cost is about -- if you take for Q3, it is -- cost is 7.88% and yield is 10.2%.

No, sir, this is on a book basis. I'm asking incremental.

So incremental, I told 7.75%.

Cost is 7.75%.

Cost is 7.75%.

Yield is -- we don't have readily available. Incremental yield is pretty good.

Incremental yield, I'll come back to you. Incremental cost is about 7.75%.

The next question is from the line of Piran Engineer from Motilal Oswal Securities Limited.

Congrats on the quarter. I just wanted one clarification. To an earlier question, you said that you don't do refinance of other HFC's loans, but then you also said that you do BT ins. Can you please clarify on that? And how much of our disbursement actually came from BT in?

What I meant was, definitely, we do BT. What I meant was, there is no portfolio buyout.

Yes, that's fine. But in terms of BT in, how much would that have been?

So on a monthly basis, we do BT of about -- not much, about 20%.

20% of disbursement. Hello?

Yes.

Yes. 20% of disbursements is BT in on average?

Yes.

Okay. And my second question is, over the last couple of quarters, large HFCs have cut their home loan rates. And how much have we cut our home loan rates in the last 6 months?

We have not cut across all the segments. Certain segments, we've cut about 30 bps and certain segments for some time about 0.45% to 0.5%, but then that is 50 bps. So it is between the 30 to 50 bps.

So what does our interest rate start at now?

8.75%.

See, with an offer, now it is 8.75%.

The next question is from the line of Sanket Chheda from IDFC Securities.

Congrats on good set of numbers. Probably an improvement on all the fronts. So sir my question is on NIM. So the benefit that we might have derived from annual rate we said that you were talking about in last quarter also. So all of that has coming into this quarter or there is some benefit pending in Q4 also?

No. As I told you in any -- if you want to see an impact, it will be spread across 3 to 4 quarters. It's a 1-year cycle. So to answer your question, yes, there is some impact in this quarter. There was some impact in last quarter also. So every quarter, there will be some impact. So that is only one part of it. And also, there is a lot of focus to increase NIM. And therefore, you have many pieces added to this increase.

Okay. And sir, just on the funding mix, we used to have NHB more than 20% at some point in time in past. So being -- it being the lowest source of funding, are we planning to increase that? Or this is the optimum level, which we can borrow from NHB?

It depends on the rate. For example, in last 6 to 8 months, we are seeing -- we're getting funded at a very, very competitive rate from NHB, whereas earlier it wasn't. So from whom we will source primarily depends on cost we are raising. A higher return. Now, it is quite low.

Okay. And how things are panning out in southern geography states of Karnataka? And are all the issues relating to registration and [indiscernible]. You were talking about it getting -- that's smoothened out. It has started smoothened out. How -- what is the progress over there?

I think if you're talking about last year, Karnataka, there were certain challenges in terms of RERA registration. I think that is now resolved. And because of that, growth, which was quite low, now it's back. Growth -- at least for us, now growth is back, though we opted it in different segment. So we are not too much dependent on developers for funding apartments. And therefore, we are not impacted to that extent. However, generally, Karnataka was quite low last year. Now the growth is back. And not just Karnataka, now our dependency on Karnataka also is coming down because we are growing in other markets. Like AP, we're growing, Telangana, we are growing, we're growing in Tamil Nadu, we're growing in northern markets. So specifically about Karnataka, growth is back.

Okay. Sir, and one last question that now we sit on probably the lowest cost of funds if we compare our peers. So is there any thought process in mind to grow the nonsalaried segment because I feel there in that segment also, we have the ability to now cherrypick accounts without having to compromise on asset quality?

Our focus will remain largely on salaried. Having said that, this mix of 70 and 30, I think, could be maintained for some more months. There could be slight variance going forward depending on the need. But by and large, this mix should be maintained. So our focus would be primarily seats like this. It also depends on geography. If it is south, we are more focused on salaried. If it is north, we are okay to slightly focus on SENP as well other than salaried because these are good geographies. So we have a strategy, which is carved out geography wise. And based on that, we maintain the mix to ensure that our risk is not quite low.

The next question is from the line of [ Amish Kakani ] (sic) [ Amish Kanani ] from JM Financials.

Sir, we have a branch base of around 180 and we're planning to take to -- we're seeing maybe add 10 branches, probably 200. So if you can just elaborate mix of where our next branch expansion is, a store? Is it the 20% growth is contingent on the branch expansion? Or how is the strategy in the medium term?

We are currently at 196. So 4 more to go this financial year. Yes, some -- so whenever we talk about growth, there will be some growth coming in from expansion, which may not be that much relevant for this financial year because we've already reached 196 count. But going forward, whenever we told branch expansion, there will be some amount of growth coming in from new branches. But to a large extent, we would expect from existing branches because of improvement in productivity. And we have opened a lot of branches in the last 2 years. So they are now delivering. So it will be a mix of all. Old branches, recently opened branches and the branches which are going to open in near future.

Okay. And sir, there seems to be a focus on this nonmetro stuff. So where -- are we opening the branches in nonmetro at the same states we are? And how is expansion?

Yes. So I would say, same states because now we are present in many states. So any expansion, we'll be penetrating within the state. So yes, adding new state per se might be very less because we are present in all the critical states. So any expansion will be in smaller cities within the existing geographies.

Okay. And sir, what is our strategy on the portfolio sell down? Do we securitize the listing and...

We don't have any plans. We don't have any plan to sell portfolio or buy portfolio.

Okay, because our growth is enough for our fund mix, right? And sir, this raising of fresh equity of INR 1,000 crores, was it contingent on the parent selling stake? And is it on the card? Or it is independent of that?

The company had planned to raise capital, so we stay focused on that plan.

The next question is from the line of Ritika Dua from Elara Capital.

Congrats on the good set of numbers. So most have been answered. Just one thing on the CLSS subsidy. What is the outstanding exposure towards the PMAY schemes? I mean, as in, what is the percentage of book towards the PMAY?

As of -- Madam, this is Joishy here.

Yes, sir.

See as of now, as we told last quarter, it is around INR 145 crores in subsidy. It's an ongoing process as such. And average ticket size being INR 18 lakhs. Virtually most of the loans will come under that category, which are sanctioned after the cutoff date, that is June 2017 onwards as such. It is an ongoing process. Now they have made it as the online portal where we're -- it goes on uploading the process and sanctions. So you can take into consideration whatever the book growth has been taken place after '17 onwards to the extent of around 75% will qualify for that category.

So sir, because the question here is that, then with -- then we see for the other affordable housing finance companies, say, like an example, maybe a Group Finance, they have been showing this repayment for quite some time. So any particular reason that why are we showing these repayments because I haven't seen -- or if I'm wrong, at least I haven't seen any particular spike in any particular quarter, which was because of this? So if I'm wrong, please correct me there. And if that is not the case, then why are we seeing the repayments on the subsidy now because generally, they have to be given in the span of 3 months, right, since the loan sanctioned and then generally, what HFCs tell us that, it takes 3 months for the borrower to get that subsidy from the -- you're getting the subsidy from NHB and eventually passing it on to the borrower.

Yes, that 3 months, what you referred, madam is 3 -- we have to submit the claim within 6 months from the date of final disbursement. If we are trading it on piecemeal basis as for the pro rata basis, then it goes on a spread period as the loan is getting disbursed. So because we are disbursing and it goes on uploading from the '17 cutoff data as such, we have some data connections with interest to match with their requirement. So that process has taken. Now we are an online basis and the inflow has increased. Not that it's not coming, the volume was small at the range of around INR 15 crores, INR 20 crores every month on a quarterly basis, which is around INR 30 crores, INR 35 crores. Now it has reached around INR 45 crores to INR 50 crores per month. Again, this month also, that train has gone to the extent of around INR 60 crores, INR 65 crores. Over a period of time, this goes on increasing and we are getting the subsidy as such. So you can see that variance in last quarter onwards. That's why you can feel that there is some ALM has gone down on account of that range.

Okay, sure, sir. Sorry -- and so sir, the second question would be on the OpEx front. Is there a one-off in the OpEx this quarter, especially on the staff side?

No.

Okay. And so, if you could kindly explain, sir, the jump in the absolute quantum? I mean what is the...

We've added people. So we feel -- comparative to the last 1 year, we've added people. So that will start delivering results in next few quarters.

And sir, if you could just kindly guide on the same? Sir, this was just a follow-up actually on the same OpEx front. So on the staff expenses, could you just guide how the run rate should look like? Should we expect the same run rate?

Same run rate means what? What do you mean by same?

Like in terms of the absolute cost, if we are to keep adding. So would the staff expenses look on a similar -- on an absolute basis?

Yes, this increase is only because of increase in manpower count, which is to ensure that we'll be able to grow our business. So in terms of growth percentage, it will by and large remain the same.

The next question is from the line of Anirban Sarkar from Principal India. Mr. Sarkar, I request you to take the phone off the speaker please.

Yes. Is it audible? [Technical Difficulty]

Sir, it seems like we lost the connection for Mr. Sarkar. We move to the next question from the line of Jaikishan Parmar from Angel Broking.

Actually, my question is related to the loan mix. At the moment, like we have almost negligible bidder loan book, which is like hardly, absolute terms INR 7 crore. So I just wanted to know, do we have any like plan or thinking to raise even bet like 1% or 2%, so that it can support the [ NIM ]? And that's one. And second, up to what level we are comfortable to increase our mix in nonsalaried class, up to 30%, 35%? What level we are comfortable?

So on the developer front, we don't have any plan because we don't really operate in that space. So today, INR 7 crores in terms of percentage, if we talk, it won't cross maybe 0.4%, 0.5%, I'm talking over next 2, 3 years. As of now, there is no plan. So definitely not in terms of 3%, 4% or even 2%, A. B, in terms of nonhome loan, so we're at 5% today if we talk only about LAP. I'm just excluding top-up because top-up is part of home in terms of the behavior. So in next 3 years, we may at most double. So definitely, this number won't go beyond 10% to 11%. We don't want to grow beyond that level for nonhome. And while we say this, in nonhome, the way we do business is different compared to what the market does. And therefore, the risk is absolutely low, the way we do business. So it's not a like-to-like comparison. But in terms of percentage, maybe next 3 years, this could become maybe 10%, 11%. Definitely not more than that, not 30%, 35%, no, we don't have the plan.

So CMP will remain at about 30%.

The next question is from the line of SivaKumar K. from Unifi Capital.

Sir, in your opening remarks, you had mentioned that you would be seeing an improvement in the asset quality over the next couple of quarters. So on an absolute sense, can we see -- would be seeing a decrease in the GNPL? Is that what you were hinting at?

Yes, you can see both in terms of percentage and also in terms of absolute value. I won't be able to comment to what extent. But definitely, you'll see asset quality improving quarter-on-quarter, at least the next few quarters.

Right. Sir, and in one of your recent media interviews, you had referred to raising INR 1,000 crores by March. But with capital adequacy at 22%, are you still very particular about raising this much -- that much quantum of money within the next 3 months? Or would you revise those timelines and the quantum?

The time lines could be next 3 to 6 months' time, but definitely, we will raise capital and not because of our capital adequacy ratio, which is very comfortable, but it is because of the leverage ratio. And therefore, we want to raise capital.

So what is the leverage ratio you are aiming at when you say you're -- you want to draw comfort from a lower leverage?

As of now, it's 8.7%. We want to be below that.

Right, sir. Is it -- is there a request on the banker side or it's an internal guideline sir?

It's our internal guideline, it's our strategy.

The next question is from the line of [ Manav Vijay ] from [ One-up Financial Consultant ].

Yes. I mean -- so sir, my question is very simple to you is that. So we are having an ROE of 20%, our [ CAGR ] is already 22%. And within our loan book, we don't have any chunky accounts, bad accounts, our growth was very stable, given to -- I mean, our [ ATS ] is just INR 18 lakhs. So apart from this, this leverage factor, which you want to, let's say, keep below 8x, is there any specific reason to raise this QIP because if you won't increase the growth rate, which you said you won't over the next 2 years, then this QIP money is going to ultimately dilute to a 20% ROE?

Okay. Very intelligent question. I think the call, what we have taken is that we need to raise some capital. I will leave the ratios for experts to work out like you. We will stay focused on doing business. And certain key ratios, we need to keep under check. And therefore, we want to raise capital to a certain extent.

So what would be our -- are you comfortable, your leverage, let's say, which you will maintain overall, let's say, over a long period of time?

We don't have any particular number in mind, but yes, currently, it's 8.7%. So obviously, if you raise some capital and looking at our growth and borrowings, it should be a little less than what we are currently at.

The next question is from the line of [ Shijit Gulati ] from Haitong Securities.

Yes. So this is Hitesh Gulati from Haitong. Sir, can you just quantify the growth in disbursements in Karnataka in this quarter?

Just give me a sec. So if you look at the incremental sourcing, entire Karnataka would be about close to 9%, 10%.

Okay, sir. This is the disbursement growth rate, sir?

This is disbursement. Yes.

Great. And sir, on NHB borrowing, so what is the cost of borrowing from this channel?

NHB borrowing.

NHB borrowing in terms of percentage, Q3 was 15%.

Sir, what would be the cost of this borrowing? What would be the cost?

It will be blended cost. For various schemes, we have different, different costs. So it will be less than 7%.

The next question is from the line of Ayushi Somani from SBI General Insurance.

Can you throw some light on your ALM profile?

Can you repeat, ma'am?

Can you please repeat the question?

I just wanted you to throw some light on your ALM profile, like in 6 months bucket, 6 to 1 month or 1 year bucket?

Yes, madam, this is Joishy here. See, the ALM as such, as of now, regarding the liquidity, we are comfortably placed with the documented by line of credit facility our commitment up to July is already in hand. That means we have a liquidity to take care our commitment up to July. Going forward with the process of closure of existing term loan refinance projects, we can able to raise the funds. As you can see, the capital [ expenditure ] is [ INR 22 crores ] liquidity is around -- as I answered to one of the parties earlier, we are having documented unveiled limit of around INR 4,000 crores and approved sanction, which we are right to document is to the extent of around down INR 1,650 crores. So this will comfortably throw you where we are placed in the liquidity and ALM position as of now.

Okay. So is there any mismatch in of 1-year bucket except the Sberbank line and sanction lines?

Mismatch will be on the positive side because the liquidity is more.

Next question is from the line of Anirban Sarkar from Principal India.

Yes, hi sir. Can you hear me?

Yes, yes.

Yes.

We can hear you.

Congrats on a great set of numbers. My question is on the liabilities funding mix again. So while we see that the mix of bank borrowing has gone up significantly in the quarter. Just a bit of trying to work it out since -- I mean, if you could throw some light on what portion of your market-based borrowing or bonds and NCDs mature over the next 3 to 6 months? And what's the thought process on replacing them? Is it going to be with bank borrowings? Is it going to be with -- are you going to come to the bond market again? And what could the liability mix look like? I mean what's your internal cap on the proportion of bank borrowing and NHB borrowings in the next few, 6 months? What are you thinking of this?

But today -- let me tell you how the mix looks today. Banks is 57%, NHB is 15%. So banks' 57% would more or less remain the same or maybe slightly come down. NHB could slightly go up. Market today, we are at 26%. So this could slightly go up. Today, NCD and CP is 17% and 9%. So NCD, we would be replacing if you're talking about next 3 to 6 months' time. But by and large, the number would remain the same. And deposits, there will be a slight increase in deposits. So the mix would, by and large, remain the same with 2%, 3% variance here and there. So banks would slightly come down, and NHB would go up.

Fair enough. And if I can ask a follow-up on that. So if the NCD -- and the NCDs that are getting replaced, what's the difference in the cost of borrowing on them? So how are they getting repriced?

We will have to discover that. Definitely, our attempt is to -- as of now, I think for everyone NCD would be at a higher cost, so we're very, very particular about cost, and we want to raise at a lower cost. So there will be some difference, but that won't be significant.

The next question is from the line of Ashlesh Sonje from Kotak Securities.

Can you please share some details of NPLs across the salaried and self-employed categories? And how this has changed?

Okay. Our overall is 0.8%. If you see a split between salaried and SENP, the difference would be about -- SENP would be -- as a profile, SENP is double of -- it's more than double of salaried. So actually, it's a combination. So if you're talking about profile, definitely, SENP is -- there's some kind of stress in the market. And therefore, our focus also has been a little low on the profile as such.

Okay. And any color on asset quality by geography?

Yes. We don't see much of a difference geography-wise. It's more to do with products and the profiles.

The next question is from the line of Dhagash Shah from CD Equisearch.

So as our loan book is mostly granular. So why are we not aggressively looking at housing loans going ahead?

In terms of growth?

Yes, sir.

I don't see because there's a lot of pain in system today. Demand is quite strong in certain segments, that is affordable segment, but not in all the segments. Even affordable, the demand has come down, but available demand is good enough for players who are doing business. Now it's -- I think next 6 to 8 quarters is not the right time to push pedal on growth. While we say that, we want to definitely grow much above industry growth rate. Anything more than 20%, we feel in this market, at least for the next 2 years would be detrimental to the quality of the book. And therefore, we don't want to grow.

Okay. So if that is even with our granular distribution because some of the industry players are growing at 20%?

Let's see, it's like this. If we have to grow more than 20%, I'll have to somewhere agree for a lower spread. So we want to balance all the 3: growth, profitability and quality.

Okay.

So definitely, we can grow more than 20%. And if we grow more than 20%, I can't maintain the same spread and NIM, which we don't want because obviously we want to do business, keeping profitability in mind, and therefore...

And sir, just one more data point. What is the share of corporate loans?

0.

So no loans to corporates?

No loans to corporate.

The next question is from the line of Saurabh Dhole from Trivantage Capital.

Sir I have 2 questions. One is with respect to this stake sale announcement and the retrackment of that announcement, what -- apart from the possible change in ratings, how else would this impact your business? So your ratings would impact your liability profile and your liability rating, your liability pricing and that will have an impact on the NIM? So that is question number one. On the geographic concentration of the book, can you please tell us what are the top 3 states that your book has exposure to? And what is the contribution of each?

On the stake sale, I would say there is no impact because we always focused on performance and growth. So that news had -- as far as the company is concerned, I don't -- I would say there is no impact. On geographical concentration, our south book is close to about 70% and the rest would be 30%. So within south, the top 3 would be obviously all the states except Kerala.

Okay. And what are the contributions of each of these 3 states?

As I mentioned, in terms of incremental, Karnataka is about 10%, then AP is about -- so at the portfolio level, we are at [ 20% ] in south. Incremental level, south is quite low because we're trying to diversify that by focusing on the salaried segment in other geographies. So at the portfolio level, 70% is south.

Okay. And you're not disclosing on a portfolio level the stock contribution of each of these states. Incrementally, I understand Karnataka is 10%. But on a stock basis, what is the exposure to Karnataka, Tamil Nadu and AP?

On a stock -- on a portfolio basis, Karnataka is about 20 -- around 25%, 26%, and it is much close to that. And TN would be about 30% lower than exposures in Karnataka.

Sorry, I didn't get this. TN would be?

TN will be much lower than AP. AP is about -- see, Karnataka is about 25% -- 25%, 26%. AP is about again 19%, 20%. Tamil Nadu would be about 13%, 14%.

The next question is from the line of Akshay Ashok from Dalal & Broacha.

Yes. Very good set of numbers, sir. So I have 2 questions. That you are moving to Tier 2 and Tier 3 cities, will you maintain the customer categories, say, like salaried percentage and nonsalaried percent around the same, even in these Tier 2, Tier 3 cities, which you're planned on going? And will your yields improve because of that? And the second question I wanted to ask is about the SBI. They had introduced this product RBBG, Residential Builder Finance and Buyer Guarantee, for affordable housing projects so -- where they have a deal with the builders. So do you see some kind of competition from this? And are you planning on having an alliance with any of these builders in the future?

Okay. We've been present in small cities, Tier 2, 3 and 4. So we're there since last many years. So that would continue. And that would help us to maintain the customer profile. So there is no change in customer profile per se. What we were doing 5 years back is back now and maybe 2 years in future. So there is no change in the profile. Answering your question on tie-up by SBI, where -- so, see the market is very big, huge. There's a lot of opportunity. So I don't think -- any which way we are not competing with banks because our rates are different and banks price differently. So we are not there in that space. Even today, many banks are funding to affordable segment, which means the profile is, by and large, the same. But the pricing will be different because the [indiscernible] [ of things ] is different. It could be HFC, it could be bank. So I don't see that, that would impact us per se.

The next question is from the line of [ Karan Rathore ] from [ AEM Fund Advisors ].

My questions have been answered.

Thank you.

The next question is from the line of [ Agastya Dave ] from [ CAO Capital ].

Excellent numbers. I've been a very long-term shareholder. And this is the fourth set of management that I'm looking at. And all of you guys have stuck to the DNA of the company. It's very heartening to see the performance. Sir, my questions have been answered. I just had one question. There were certain appointments, which were expected. One was, I believe, a CEO, another was a CRO. Any progress on that side? That's my first question. The second is on the fundraising sir. Would you take the QIP route? Or will you stick to the old method of doing the rights issue? And in that rights issue, is there any indication from Canara Bank, whether they will participate or not?

Thank you so much. In fact, I am the CEO. I just joined a few months back. I'm the MD, CEO for Can Fin.

Sorry, I said CEO. I meant the CRO, sir, the Chief Risk Officer.

We have a CRO. We have a CRO in place. And we have a CRO.

Right. Right.

So there is no hiring, which is pending.

No incremental hiring, which is pending. Okay. Fine, sir. And sir, on the fundraising side, sir, whether it would be a rights issue or a QIP?

We are evaluating at this point in time. So we will disclose at the right point in time.

The next question is from the line of Sunny Gehani from Birla Sun Life Insurance.

Great set of numbers. I just had one question. What percentage of the portfolio is under the subvention scheme by developers?

0.

0.

0.

The next question is from the line of Subhradeep Mitra from UTI Mutual Fund.

So I was looking at the liquidity position that you have provided on Slide #11 of the presentation. Sir, there is a line called future borrowings, which states INR 1,500 crores for March '20 and then INR 2,000 crores for June '20. Sir, what's the surety of this future borrowings because if I remove that line, then you were running a negative mismatch from Q1 of FY '21?

So every month, we'll have repayments to make, and every month, we will raise funds. So we've been doing it for last so many years and more without -- I mean, the performance of the company is actually improving. So I don't see any reason why we won't be able to raise that kind of funds in future.

And just to substantiate that we have already given an answer to earlier question where we have unveiled documented bank limit to the [ HLF ] of INR 4,000 crores, which will already take care in your Q4 as well as Q1 of next. And further, whatever is maturing, yes, we have to go for the NCDs as per the [ RBI norms ] that is also in the offing. We have the bank sanctions, what we have been sanctioned in yesterday's Board meeting, that is to the extent of around INR 1,600 crores. That will take care of what we have presented that to the extent of INR 1,950 crores, plus INR 1,800 crores and INR 1,900 crores.

Okay, okay. So basically, what you mentioned is that, the [ unveiled ] limits that has been mentioned INR 4,137 crores in that opening balance, so that is sanctioned, but not yet that drawn down, but the INR 1,500 crores that you mentioned is not yet sanctioned, but it's in the process of sanctioning?

That's all.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.

Thank you very much for -- to all the investors. You've been really supportive in terms of staying invested in this company. We have shared our plans, vision. And going forward, we would try to maintain the same level of performance. Thank you very much.

Thank you. Ladies and gentlemen, on behalf of Investec Capital Services, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.