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

Good afternoon, everyone. Welcome to the Q1 FY '21 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 Limited; Mr. Shreekant Bhandiwad, Deputy MD; Mr. Prashanth Joishy, CFO of Can Fin Homes Limited; Ms. Shamila, Business Head. I would now like to hand over the call to Mr. Girish Kousgi for his opening comments. Over to you, sir.

Thank you, Utsav, and thank you, Raymond. And thank you all the investors for joining this call, earnings call for quarter 1. With me, I have Shreekant Bhandiwad, who's DMD; Shamila, Business Head; Joishy, CFO. I'll give you a brief of the financials and then I'll share my thoughts on how we've managed and what is the outlook, and then we will take questions, if any. Q1 was pretty good for Can Fin, I would put it that way. In spite of COVID, we were able to manage well. We showed growth of income by 8%, PAT by 15%. NI, we showed growth of 25%, that is INR 191 crores, this is Y-on-Y compared to INR 153 crores last year. NIM was quite stable at 3.7%, so -- which is pretty good for a housing finance company. We managed to maintain yield about 10% in the dropping rate scenario. Since the cost is coming down, yields also would come down. However, we'll try and manage and we will maintain the spread and NIM. Cost of funds for us was about 7.31%. Incremental would be slightly less than that, but this is as of June compared to 7.93% Y-o-Y, spread of 2.72%. So as I mentioned, PAT was about close to 16%. We showed 16% growth. Only in disbursements, we couldn't show because whole of -- we had challenge in March because from 24th of March, we had to close down due to COVID and national lockdown. So we lost about 8 critical days in March. And whole of April we lost. I'm just connecting this with Q4, however, it's nothing to do with Q4 as such. So April, full month, we didn't do business. May, first 3 weeks, we didn't do business. We started doing business from last week of May. In the month of April and May, when we were not doing business, the entire team was working from home. And they were basically focusing on collections and moratorium. So we were trying to call all the customers, bringing the awareness and try to get customers option for either morat or no morat. So the entire team is working from home, but we couldn't do business. So in Q1, we effectively did business for 5 weeks, full month of June and 1 week of May. And that is why you'll see a sharp drop in disbursements. However, as far as the book is concerned, we've shown growth of 10%. In terms of liability mix, not much of a change, close to 60% is bank funding, NHB is 20%, then the market is 20%, and the rest is deposits. Out of market, CP is 9% and NCD is about 11%. What really drives the mix is cost of funds. So if you're able to try and keep our cost low, we are open to any source of funds. So not necessarily bank, not necessarily in HB or market, it depends. So whichever cost comes to us at a lower level, we are open for that. Otherwise there is no much change in the level of the mix. In terms of portfolio mix, we still deal -- we are still highly focused on HL compared to non-HL. HL is about 95%, and non-HL is 5%. HL includes 5% of top-up and the 90% is home loan. In terms of profile mix, salaried continues to be at 71%, SENP, 29%. There won't be much change in this as well. Now in terms of how we managed, as I mentioned, because of COVID, we had a lot of challenges. One is to ensure safety of all of employees. So we were shut for the whole month of April and -- sorry, till 19th of April, from March 24 till 19th of April, we had shut all our branches. And we were working -- we were operating from home. 20th of April, we started functioning. We were -- we opened about 50% of branches and slowly, this number went up. And from 20th of April till third week of May, gradually, this 50% went up. And I think by last week of April, all the branches were open, barring 1 or 2 branches raise -- which was in COVID area where we were not allowed to open. These branches were in containment areas, I think, about 5 to 6 branches, otherwise, we were almost about 98%, 99% of branches were open. In May, we started business. We were completely focusing on the available stock. And June is when we saw some demand coming back, not able to really confirm whether it was new or it was pent up. I think it looked like more of pent up. But however, we've seen that the trend month-on-month was actually increasing. So in terms of outlook for business, we feel that business is slowly coming back in the space where we are operating. We operate in affordable space. Again, in affordable, the builder segment is taking more time than what we expected. So the non-builder segment, which is basically construction, composite loads, then resale and purchase, that's where we are seeing slight demand increasing month-on-month. Currently, it will be at about 65% of the original levels. So maybe in another 2 quarters or so, maybe after December, then, we will see complete demand coming back. In terms of outlook for NPAs. See, we have been very clearly focused on 4 pillars, that is liquidity, asset quality, profitability and growth. So we always said that nothing supersedes anything, but we equally focus on all the 4. Now because of COVID, I think the cycle has slightly changed. Now the focus is more on asset quality. Because if you're able to manage asset quality for next couple of quarters, once growth is bad, then I don't think so it will be difficult -- tough for us to pick up market share. And therefore, we are completely focused now on asset quality. Of course, we do business whatever is available, depending on the opportunity, at a profitable level. So this is what our focus is. Q2, we may not see real increase in NPAs. Q3 -- as an industry, I'm talking about. Some might see Q2, Q3 and Q4 troubling and some HFCs will see Q3 and Q4 troubling more than Q2, because how well Q2 would be, depends on what is the opening stock of SMA-2 and what is their effort in terms of trying to collect. So this is the outlook on NPAs. I think in next 4 quarters or so, we would be able to bring back NPA to the level of what it was in Q3. That is 0.3%. So there will be increase in NPAs, let's say, in Q3 and Q4, but the increase may not be substantial compared to the increase what the industry will see. Whether it is home, whether it is nonhome, whether it is salaried, whether it is self-employed, nonprofessional. So this is the outlook on asset quality, on business. So this is what we are trying to do. I would request to open the floor for Q&A.

[Operator Instructions] The first question is from the line of Rahul Nair from SBI Mutual Fund.

Yes. My first question was what was the liquidity available with us?

Okay. Liquidity available is close to INR 4,000 crores. This is unavailed -- approved but unavailed limits, mainly from banks. So we are pretty high on liquidity. So this we are maintaining quarter-on-quarter.

Okay. So we would be maintaining this liquidity till Q4 or will we bring this down?

No. If you look at last 3 quarters, now every quarter, we were high on liquidity. And this will continue for at least next -- I mean it will -- we have to actually decide on what level of liquidity that we are comfortable with. So we always buffer for next 7 to 8 months time. And with every passing quarter, we'll try and moderate that number. So as of now, we are comfortable till, let's say, for the next 7 to 8 months time.

Okay. And my second question was on morat. What was the moratorium position as on June and probably July end?

So I would put it this way. So far us, the way we calculate morat is different. I think for us, morat means full morat and part morat. Why I'm saying this is that option 1 we had opt out, okay? And #2 is we had full morat, we have part morat. So from a conservative perspective, if customers has paid 5 out of 6 EMIs or 4 out of 6 EMIs, we consider those accounts as morat and we offer moratorium to the customer. In terms of provisioning, in terms of all our calculations, we have taken that as morat. So that is 28%. Okay. Now if I have to now assume the next question and answer, number of our customers who have not paid anything, that's about 14%. So like-to-like would be 14%. Since we are clubbing the morat with the bounds and part morat, it's 28%.

Okay. And one more question. Do we have any capital raise plans during the year?

Yes. We do have capital raise plan. In fact, we had AGM yesterday. So in the AGM, shareholders approved one of the agenda item, which was to raise capital we have planned. When are we going to raise this year, in what form and what amount, that we haven't decided. We will take call at the appropriate time, but we do have plans.

Okay. But you have received approval for what amount?

INR 1,000 crores.

INR 1,000 crores. And is there any update on the stake sale plan by Canara?

No, there is no update. There is no update. I think whatever you know -- you are aware, even I am aware of the same thing, but there is no update after the last news of what we all are aware of.

The next question is from the line of Amit Ganatra from HDFC Asset Management.

Yes, I have a couple of questions. The first question is that when I looked at your annual report disclosures on Stage 1, Stage 2, Stage 3, there was a big difference between Stage 3 and gross NPAs this time around. Can you explain what is the reason?

Right, right. So basically, that is summation of our NPA, which is INR 157 crores; and INR 210 crores, which was the SMA-2. So we have clubbed together and shown. I think that is the difference.

So effectively, when you have reported your Stage 3, you'll not freeze the classification?

So we have taken a conservative approach because we have to provide 10% on SMA-2, which is INR 210 crores. If you look at the last quarter, we have provided INR 21 crores on SMA-2 base of INR 210 crores. So in Stage 3, on a conservative basis, we've taken INR 210 crores plus the NPA. And therefore, I think it comes to about to 368...

INR 368 crores.

INR 368 crores.

Okay. And then does it also mean that your Stage 2 movement also reflects the actual movement till March, and it has not freezed off as of Feb 29th? Because your Stage 2 assets also went up significantly year-on-year.

No. Stage 1 and Stage 2 remained as it is, Stage 3, the movement has taken there because the morat concept is applicable from March. So for the conservative approach, we morat only that SMA-2 to the Stage...

Stage 3.

Stage 3 for -- in [ March. ] But see, one thing provisioning, we have to maintain either as per the ECL model or IRAC norms, which is IRAC norms is higher, so provision has been made according to that in the same disclosure [indiscernible].

Got it. The second question is on -- you -- today, in the TV interview, you said that something that has been -- SMA-2, that can probably become NPA in September quarter because 60 days overdues are already past. Now if I look at your Stage 2 book, almost INR 1,000 crores-plus. On top of that, there is INR 210 crores of deferred NPA recognition that you have done. So in that context, what makes you confident that -- you also then -- also added that for you, the NPA addition will be there, but it will not be significant. But these numbers are actually quite large as compared to what your current NPAs are. So what makes you confident that your NPA numbers will not go up meaningfully despite this kind of pipeline?

Okay. So I was referring to opening balance of SMA 0, 1 and 2 as of March 1 because that is when morat started. And for the last quarter, we had covered 10% on SMA-2. So there are lot of recovery which has happened out of the 210 days. And therefore, I said that because what will happen is morat gets over in August. And if September month EMI is not paid, let's say, on SMA-2 accounts, those account will become NPA. Since there is significant amount -- significant recovery of what we have done in the last few months on SMA to pull itself and, therefore, we are sure that our NPA would not increase. Or rather, it will increase marginally next quarter. Because this is based on our collection experience in the last few months, especially on the SMA accounts. And same thing is true for even SMA 0 and 1. And just to add, I've told this in various public forum as well. Our delinquent pool is the lowest in the industry. Why I'm making this statement is that -- so if you look at the portfolio, so there are certain regular set of accounts, which typically -- if we talk about industry, it will be about 80%, 81%. And the rest, which is about 19% to 20%, would be the delinquent pool. So delinquent pool would mean SMA 0, 1, 2, NPA and the pool in recovery. So for us this delinquent pool or the regular pool, regular pool is very high for us and delinquent pool is very less. So once morat ends, the propensity of customer defaulting would be more in the delinquent pool. If your delinquent pool itself is less, that means the flow is going to be far lesser, even in terms of percentage, compared to the industry. Because regular customers, they're used to paying EMIs from time to time. And only because of morat, they have taken this option of moratorium. In the absence of too many job loss or pay cut, we have done a detailed check on all the customers. And for us, job loss is hardly any percentage. It's actually less than a percentage. And pay cut is around 4.5% to 5%. So we don't see any major issue either because of job cut -- sorry, because of pay cut or job loss. And therefore, the flow from regular pool into SMA is going to be very less for us. And the flow from SMA customers into NPA is going to be in terms of percentage, very less. Because of our recovery efforts in the last few months, it's going to be hardly anything in Q2.

The next question is from Ashutosh Garud from Ocean Dial.

Hello?

Yes. Please go ahead.

Congrats on a good set of numbers. I wanted to understand on a qualitative or a quantitative aspect, if you can give some color on the self-employed book of -- even though it is in the housing segment, how has the self-employed book -- I mean, any color on those -- how it's panning out on the NPA front or the repayment front? And what are your communications with that particular book.

Yes. Non-salaried -- there's no order book, almost 70% is salaried and around 30% is non-salaried. So when we analyze the portfolio, so the nonsalaried -- there is slightly higher delinquency compared to salaried. Salaried is -- overall it's okay. Nonsalaried, there is slight increase in the delinquency compared to salaried portfolio. So -- but it is not that high. We will be able to manage in the next 2 to 3 quarters.

And just to add to Shreekant. See, non-salaried -- SENP is definitely much riskier than salaried. It's a known fact. But what we have done is we have ensured that we have taken care of so many other aspects, which are qualitative in terms of -- for example, the collateral, what we fund is only the residential and commercial. Now ticket size is low. We keep the ticket size low because the risk is diversified, and we'll be able to assess them better. Because in our country, we have most of our customers, most of the businesspeople don't show actual income. Number three, we don't fund on non-assessed income, which means we don't have surrogate products. We don't fund on banking product our liquid income plan. So we only go by declared income. So to that extent, income is understated and, therefore, we have a comfort there. Last but not the least, we -- see, our company, from the beginning, we have been focusing on salaried. And therefore, SENP is quite less in terms of the mix, it's just about 29%, 30%. So wherever we do SENP. We ensure that we do SENP only because that's -- because of 2 reasons. One, in that state, scope for salaried is less. Number two, SENP, the repayment culture is good. For example, Gujarat. For example, Rajasthan. So Rajasthan and Gujarat, you will see a lot of self-employed people. Not just that, the repayment culture is very good. If we pull bureau and check, if you do an analysis city-wise or state-wise, we find that Gujarat and Rajasthan, even though the profile is self-employed, great culture is good. So we choose geographies very carefully, and we do more business in geographies, which are safe, even though we do self-employed. So we have taken a lot of mitigants to ensure that our SENP, we don't have a higher delinquency. However, whatever checks, whatever precautions you take, SENP delinquency is slightly higher than salaried, even for us.

And then any comment on the cost-to-income ratio, which has been -- I mean, this quarter, you've seen a positive direction for that. So any part of this sustaining any aspects of your cost, which you see might have gone down permanently because of this current scenario? Any new ways of implementing the OpEx?

Not much. Not much, I would say. I think this is basically because of the interest income. And so I think there is no one item or a few items to say that no, we have been able to curtail costs. It's largely because of COVID. I think a quarter later or 2 quarters later, it will come back to the same level. So this reduction in cost-to-income ratio should not be read otherwise. It's largely because of COVID.

And sir, you also mentioned earlier where you've been quite confident on your NPAs coming back to normal by the end of this financial year. So does that mean that FY '22, on a general -- assuming that there is no escalation in the COVID situation in the country, do you think FY '22 is going to be a kind of a normal business year for you on those lines, what you mentioned?

So 3 things I'd like to clarify: One is it's not end of this financial year. I told 4 quarters from now. So that is Q2, Q3, Q4, and Q1 of next year. So it's not this -- because the Q3 -- and Q3 would be peak, and Q4 we'll be able to contain to a certain extent. And the next quarter, we'll be able to bring it down. So in next 4 to 5 quarters, we'll be able to bring it back to the levels of Q3 of last year, that is 0.8%. So I'm talking about next 4 quarters. On the business outlook, we feel that if COVID doesn't deteriorate, as of now, there are signs of COVID not deteriorating. Only a couple of states are quite high, otherwise, in the rest of the states, even though number of cases are not coming down drastically, at least the effectiveness, I think, is reducing. So that we feel in next 2 to 3 quarters time, business would be slowly back. I'm talking about affordable space, within affordable, excluding the builder space. So which, for us, is about 75%. And therefore, I feel that business would be back. I'm not very sure how next year would look like. But I can only tell that whatever is the industry growth rate, we would grow at a much faster than the industry.

[Operator Instructions] The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.

Yes. Sir, congrats on the quarter, and thanks for the explanation on the morat. I just have a couple of clarifications. So the SMA-2 number was INR 210 crores as of Feb 29, right?

Yes. Yes.

And so now what is that number like? Since you said we've recovered a lot of...

Yes. I would -- thank you so much for your compliments. That number is very, very less as of now. As I've told you, we've done a lot of recovery. And therefore, I was so sure of saying that next quarter, you would not see -- you will see only marginal. You may see marginal increase in NPA. So we are pretty comfortable on that number. A significant portion of that pool is already collected.

Okay. That's very good to hear. Sir, and secondly, you said 14% of customers are not paid at all, that's between April and August, right?

No. This, I'm talking about overall. Because, see, we have taken the most conservative approach. Even if you look at our provisioning, we have provided INR 73 crores. And if you compare this with the industry, I think we'll be the only HFC for that sake, which would have provided for COVID such a huge amount. So that is only because we are so confident of our book and our selection mechanism and, therefore, we have done that. So we are pretty comfortable on our SMA book. And this morat of 14%, as I told you, the risk of any flow would be more in delinquent. And for us, that pool is less. In fact, this is true for the entire industry. Any company which had a smaller pool of SMA-2, and if they had done good recovery in last few months, their increase in the NPA would be hardly anything in Q2. So that is what I was saying for Can Fin. And similarly...

I get that. I do get that. No, my question mainly came from the point that one of your competitors had a 7%, 8% of customers who hadn't paid at all in 1Q, but then half of them ended up paying in July and August. So I wanted to understand if you all also experience such a phenomenon?

No. So as I mentioned in the beginning, 14% of customers, they have not paid for 6 months.

Okay. Okay, sir. Sir, and lastly, just a data keeping question. What is our capitalized interest this quarter and our borrowing number -- outstanding borrowing?

Outstanding borrowing number, I'll share with you. And typically, we have accrued interest in all these accounts wherever we feel that the case is going to turn NPA, of course, we would not recognize income on those accounts. So I think that would be hardly anything, as I mentioned. I will share with you what is the borrowing number.

It is INR 18,200.

INR 18,200 crores.

Okay, sir. Sir, that's all from my end. If you could always put the borrowing number in the PPT, that would be helpful, just as a hygiene factor. That would be good for us also.

Sure. Thank you so much. We'll take your feedback. We will do that.

The next question is from Aswin Balasubramanian from HSBC Asset Management.

Yes. Just to more understand on this 14% number, which is not based for 6 months. So I mean, if you can give some color in terms of like these customers, is it mainly self-employed customers who have not been able to restart their business? Or is it like salaried customers who have had job losses and so on? And in that case, like how will you approach the post-moratorium period? I mean, would you be like restructuring these loans going forward or I mean, what would be the approach you would take in order to recover these loans? So that's my first question. And the second question is on the remaining 14% that you said, that's part payment. So that, again, is it like the trend is improving from the second morat onwards? Or is it more like there are customers who paid in March and April and then have again slipped closer to June or so or something like that?

Sure. So the 14%, which is part payment, is basically customers initially, they didn't pay. But later on, they paid. So that is the part of it. Which means with every passing month, the numbers are increasing. And therefore, if I have to talk about this 14 customer -- 14%, the later part of the morat period, all these customers started paying, which means we have a better comfort because they're used to paying at least last 2 months, 3 months, 4 months. So that is on the 14% part. The other 14% where we say that a lot of customers now who -- the 14% of customers who haven't paid anything, these -- this is a mix of in terms of profile, SENP and salaries. Since our SENP base is quite low, we are pretty comfortable there in spite of morat. Because here, the regular pool is substantially high. And delinquent pool, anyway, SMA 0 and 1, we still have time to work on that. And SMA-2, as I told, we've significantly reduced in terms of collection. So on the 14% I gave a view that a lot of customers have paid in the recent months of the morat period. The other 14% is a mix of both SENP and salaried. And also, I mentioned that because of job loss, job loss for us is a very small percentage, and that wouldn't really impact much. Pay cut is about 4.5% to 5%. And when I say pay cut, it is -- a pay cut is in the manageable level in a sense of 15%, 20% pay cut. So even that would not really impact in terms of too much of flows. All this is part of the 14% morat and this morat again is a split of both regular and delinquent. So delinquent, when I talk about delinquent, largely, these customers are SMA-0 and 1, since we've already taken care of SMA-2 to a large extent. So we don't see too much of flow from the regular pool or even delinquent pool because for SMA-0 and 1, we've done a lot of -- our team has done good work in the last few months, and we still have another 3 months to get this completely out of SMA. So in that extent, SMA-2 is what really matters for Q2, which we have taken care significantly. SMA-0 and 1, morat cases would impact Q3, one, we have taken care, number two, we still have another 3 to 4 months. And therefore, I was very confident in saying that we'll be able to manage our NPA numbers. Hope I have addressed all your queries.

And in terms of your yield, which is on your book, which is about 10%. I mean, despite 90% being housing loans, so like -- I mean when do these loans like repaid, I'm assuming most of them will be floating rate loans. So I mean, like, what would be the nature -- because the banks today are offering at maybe, let's say, 7% or so. So from that perspective, like what -- how quickly would this reprice?

So we give only on floating rate basis because now I don't think so any company would be on fixed. So it's completely floating. And even our lending rates are, in a way, linked to our cost, which is bank finance, CP has been borrowing from market in terms of NPV and deposits. So yes, there is a lot of competition from banks, both PSU and private, and also large HFCs. And therefore, our geographies are different, our customer profile is different. We focus on niche segment. So this competition was there in the past. It is there now. It will be there for the next 4 to 5 decades as well. So that is there because there is no answer for this only because banks are not able to reach out to all home buyers, HFCs are surviving. And to an extent, our pricing is slightly higher than bank pricing. So we try to use our USP in terms of service and being present in geographies where others are not able to easily reach has kept us on the edge and perform till now. So we'll continue with that. Our yields will come down because our cost also will come down. We'll try and maintain spread and NIM.

Okay. And what would be the incremental cost at which you'll be borrowing from banks, sir, as of today?

See, cost is about 7 -- cost is about 7.31%. Incremental will be about -- around 7%.

[Operator Instructions] The next question is from Anirvan Sarkar from Principal Asset Management.

Congratulations on a good quarter.

Thank you so much.

Just 1 question. I'm trying to understand the movement in your loan book based on disbursements and repayments.

Yes?

So what I'm seeing is that in this quarter, our repayment rate is a bit on the lower side, which is understandable given that a big part of the book is in moratorium. So the repayment rate annualized comes to around 5%. Now our normal repayment rate is at around 17%, 18%, in that range. So if 72% of our loan book has been paying EMIs regularly given the 28% is being either fully or partly -- not paying fully or partly. So 72% is paying fully. So given that 72% of the book is paying fully, this repayment rate is a little low compared to the normalized rate.

No. See, there are 2 things. One is we need to understand, first of all, why this 28% because our option was -- first option was morat, which was opt out, which means the hit rate would be low, which means very high moratorium rate. So that is on the percentage trend. Now on all these cases, interest will accrue, which is why the amount -- what you're seeing seems to be -- interest will accrue on all these accounts, but for the account where we feel that it would shift to NPA and, therefore, we would not recognize. That will be hardly very few cases. Otherwise, interest would accrue on all these accounts.

So sir, what would be the amount of interest accrued, but not received during the first quarter?

So see, it is -- we can just calculate, say, on the entire portfolio, the yield is about 10% and if you take about 14%, see because there is not much difference in percentage between number of customers and the amount. So you can say that 14% is in the big part. You can take average 2.5 to 3 EMIs -- 2.5 EMIs and on the balance, 14% is where we have not received any EMIs because of the morat option.

Right. And so therefore, the interest accrued part comes to really low, right? So that's where I'm coming from, that our calculated repayment for the quarter is around INR 266 crores?

No. Sorry -- I'm sorry. See what -- see, the repayment rate also depends on the strategy which each company would adopt. For example, in Can Fin, we have a very strong retention team because we know that we are funding at a higher rate. And obviously, it will be a good opportunity for other HFCs and banks for a takeover. So we have a good retention team, which very closely work with the customers to try and retain all the customers. So our BT-out percentage, for example, or our customer foreclosure, for example, or the normal repayment. So we can't do much about normal repayment because that is the normal amortization. Otherwise, we have a very tight control on BT-out and customer foreclosure. So this percentage would differ; however, what you're saying is right in terms of industry perspective, we are better than the industry and, therefore, maybe you're seeing this gap.

Sure, sir. And sir -- and the other thing that I wanted to know is that if you could summarize how many price cuts we have taken in our yields in year-to-date FY '21? That would be fair.

Sir, I think I would draw your attention to look at our NIM and spread for the last 3, 4 quarters, sir. Because always have maintained that for a housing finance company, NIM of more than 3% is good enough and spread of about 2.3%, 2.4%, but you can see our NIM and spread, even though we've been maintaining that, we are already at a high level. Fortunately, till date, it's increasing, but we'll not be able to assure that we'll maintain this. But definitely, NIM will be more than 3%, and the spread will be more than 2.4% or so. Today, if you look at our NIM and spread, and if you compare this with last 3 or 4 quarters, I mean, it is -- not that it was designed like that, but we see that there is an increasing trend of both NIM and spread. But we don't subscribe to this because there will be a lot of pressure going forward. We will maintain, but 3.7%, 2.7%, definitely not the one which HFC should have. Luckily, we have these kind of numbers. But going forward, there'll be a slight change, maybe 10 bps, 20 bps here and there, but we will broadly maintain this. The trend for the last 3, 4 quarters, it is going up.

[Operator Instructions] The next question is from Harsh Agrawal from Infina Finance.

Sir, just wanted to understand, when you say this morat number of 28%, that is on the basis of the number of customers. So what is in terms of AUM?

See, last time also I mentioned this. So in terms of numbers, it is 28%. In terms of amount, it is 29%.

Okay. So sir, 29% of our total AUM is under morat and when we -- and again, when we say that 14% customers have not paid any EMI since March, so what would be the AUM this 14% customers would contribute?

Not much of difference. So it's about 49%, 51%, so not much of difference. Because our ticket size itself is quite low. We focus on affordable and we don't do high-value loans, so not much. So whether it is SENP or salaried, whether it is delinquent or regular, even if we look at geography-wise, I think the difference is not there.

Right, sir. But then the only point that I'm trying to understand is like because that's -- the other 14% of the customers, which have made part payment, they would be contributing much lesser than the 14% of the book, right? Because the customer would still remain on the book, but in the last 5, 6 months, he would have made some payments, some EMIs to you. So the contribution to AUM would be much lower?

You're right, correct. You're right.

Yes. So that is why I wanted to understand, like if the AUM is 29% under morat, so what -- how the AUM would be contributed by the 14% customers who have not paid anything?

We have not seen that number in terms of AUM now, but when we did this check a little -- a few weeks back, the amount was almost 50-50. And therefore, because the ticket size, and in terms of number of customers also, it's exactly 50%. In terms of AUM also it will be...

It's almost same.

It's almost same. Maybe 1% here and there.

Okay. So sir, can I understand it this way that the 14% customers who are not paying -- who have not paid any EMIs are -- have actually less than average outstanding on the book? Like maybe like -- because our average ticket size is somewhere between INR 18 lakhs to 20 lakhs, so this 14% customers have an average outstanding of much less than INR 18 lakhs, INR 20 lakhs?

No, it's like this. See, when I spoke about ticket size, I was talking about at the time of sanction. So when I saw this number, even on outstanding basis, it is coming to almost same. But it may still happen. If your question is to ask, has recent book have opted for a higher morat in terms of percentage compared to vintage book?

No, sir. Right.

So that is what I was coming to. See, if you look at any HFC, bulk of the portfolio would be of last 3 years, 75% to 80%. So we saw that for the last 3 years, we saw that the latest year was a little lesser compared to earlier 2 years. So not much of difference there. Because 80% of book is of last 3 years only.

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

My first question is on the interest rate decrease. So we have reduced the interest rates from 1st of July by about 55 basis points, and that is the rack rate at the lowest level has decreased by about 55 basis points. So should we expect a similar decrease in our yields going forward into the year as loans get repriced? Or would it be higher since we are also running from -- we were also running some teaser schemes earlier in the year?

So this is a continuous activity. So we also -- when we reduce the card rate, we also reprice the book, depending on the timing, so it's a continuous process. Whatever happened last year, whatever happened last to last year would happen this year as well. So just to answer your question, reduction in card rate won't amount to equivalent reduction on the portfolio. But however, there will be some drop in yield on the portfolio as well. But this is no different from what they have been doing for last several years. And therefore, just to answer your question in simple words, if I dropped my card rate, it will -- my yield will come down. And the reason for that would be my cost would have down. So my guiding principle would be what is my cost of borrowing. So basis that, my card rate and the portfolio yield also would depend in terms of reduction.

Okay. So we shouldn't expect a similar decline in yields?

No. You can -- No, if the interest rate trend is downwards, we can expect a drop in yield. But what is important to note is that we've told that we will maintain our spread and NIM. See, I would drop rates only if my cost is going down. So we would maintain NIM of more than 3% and spread of about 2.38% to 2.4%. Today, it is 2.7%. And today, the NIM is 3.7%, but we will definitely maintain more than 3% in terms of NIM, and more than -- it will be around 2.4% in terms of spread.

Okay. My second question is on repayments and earlier participant had alluded to it and you had answered it. But if you can tell me what would be the normalized repayment of principal, excluding of BT-out in a normal quarter? That would be helpful.

See, whatever repayments happen on a month-on-month basis, since we have a very strong control on BT-out and foreclosures. So our normal repayment would be almost close to about 68% to 70%, and the rest would be a combination of foreclosure and BT.

So if I look at the figure a year back, it was about INR 700 crores. So about 70% of that would be about INR 500 crores would be the normal repayment in a quarter?

Not necessary. It also depends on my acquisition, it also depends on my pricing strategy, so this would keep varying. But on an average, I can say that we have a pretty strong team since last few quarters for retention. So not necessarily. Yes, there could be a difference of 3% to 4%, but by and large, you are right, in terms of mix.

Okay. And the last question is on the retention part only since now the card rate that we are offering or the rates that we are offering are significantly above the rates that some of these private -- public sector banks are offering. And they are actively pitching for loan takeouts. So how has been the trend of loan takeouts in the current quarter, July onwards, since the lockdowns have been released a bit and people can actually move out. Are we seeing increased trend of loan takeout now?

So during COVID, especially last quarter, I think at the industry level, we saw that there were a lot of takeovers in the industry because the demand was down. And no company was able to do business in the normal course because visits were not possible; property visits, customer visits were not possible. And now in home loan, there are so many like legal, which might require registration at sub-registrar office. Because of all these things, we saw that BT was quite high and it was true for us as well. And, therefore, we had thought about this much earlier to put up retention team. So if we compare to earlier months, yes, there is slight increase in BT-out, but at the same time, we also did BT-in. So if you see the net of effect, nothing much. But yes, if you have to talk about stand-alone BTs, I think BT -- see typically, BT is 20% market. So during this time, we thought this 20% went to about 40%. And if you see 40% of overall base, since the base has come down, this 40% increase also wouldn't really mean much because -- let us say, for example, there are 2 HFCs, HFC A, HFC B and HFC C and let us say, cancel this HFC B. And if A takes over from B, B takes over from C, and therefore, the net effect would be hardly anything.

Okay. And we are actively participating in the loan takeout from other HFCs?

Both, both, both. So if you ask me, we have lost a little more cases in terms of percentage during COVID. At the same time, we've also gained from other HFCs, which were, in a way, the price was slightly higher than Can Fin. So BT-in/BT-out, it averages out. And as a mix, BT went up from 20% to about 40% and once business picks up, I think this will again go back to 20%.

The next question is from the line of Sanket Chheda from B&K Securities.

Sir, congrats on the continuous stellar performance. I had just 2 questions. First is on your view on the onetime restructuring? Have we formulated any internal strategy around it? And how are we going to use this as a tool in case of delinquent accounts? And my second question is, as you said that NPAs are unlikely to go up materially high given the robust collection efforts in last 3, 4 months, I would be happy if you could give out some numbers, whether they can increase threefolds, fourfolds, but they will be below 4% to 5%. And not actual number on NPA, but at least an upper limit, have you workaround any number around that?

On the restructuring, we are waiting for guidelines from RBI. But as a company, our strategy is to offer restructuring to very few customers who actually deserve it. So when I say deserve, it depends on whether there is a job loss or a business loss for a prolonged period. And only then we will do it. So to that extent, the number of cases which will get restructured, I'm not able to commit at this point in time, but I can only say it will be very less, A. B...

On the stock of NPA?

So on NPA, see, if you look at -- let me talk about industry. So if you talk about industry, home loan, NPAs will go up by 85% to 90%. So today, if home loan NPA is x, because of COVID in the next couple of quarters, NPA will be 1.9x. If it is the loan against property or nonhome loan, then the NPAs would be 150% more. So today, if it is x, it will be 2.5x. So this is what the industry is expecting in terms of growth in NPA. Now all I'm saying is that even for Can Fin, there will be increase in NPAs. I'm not saying, no. I'm only saying that we have very good robust collection mechanism and we've been tracking every single account from the beginning, and therefore -- see, NPA for us also, it will go up, but it won't be in line with the industry growth. It will be far, far, far less than the growth rate of the industry in terms of NPA, both for home and nonhome. I would not be in a position to give you a number because even we are not very...

That is very helpful. Yes, that's enough said. That is very helpful. And well, one more question, if I can just sneak in on the NHB mix in your borrowing. We used to have a very high share of NHB borrowing in FY '14, '15. And then the share of NHB borrowing had dropped. And again, we are ramping that up. So any particular reason? Because NHB borrowings would always be cheaper when compared to bank borrowings or any of the market borrowings? So why that share had gone down? And plus, what is the room available now to inch up that further? We are currently at 20%, how far it can go?

Yes. Reason is the cost. When the cost of NHB borrowings at that point was a little higher, so we have restricted. And now the rates -- the cost of funds are really low. The NHB, what we are getting, is at a very good rate. So that's the reason why it's moving up a little.

So as a company, our focus is very clearly on safeguarding the interest of the stakeholders, all stakeholders, including shareholders. So what drives the source of borrowing is only cost. Be it banks, be it NHB, be it any bank for that matter, be it market, be it deposits, what drives is cost. So if we are getting funds from NHB at a lower cost, we would take from NHB. If we are getting lower rate from banks, we will take from banks. So I think that is the only reason, otherwise, there is no other reason. So this mix, as of now, NHB is 20%. Earlier I think it was quite less...

14%.

Because their rates are very high. And now they also have a lot of mandate to -- because -- to ensure that they disburse more loans and the rates are competitive. So the only guiding factor is rate. So this 20% can become 30% next year if you're are able to get much cheaper than banks, subject to -- because NHB also had certain limits for each company, depending on the balance sheet strength. So we will utilize full amount if we're getting at a good cost.

Sure, sir. Your answers have been pretty satisfactory.

The next question is from Swechha Jain from ANS Wealth.

I think most of my questions are answered. Just few, 1, 2 questions. Sir, is there any disbursement target or a number that internally we are looking at for this year and for next year?

Yes. As of now, it is difficult to project any number because we also don't know how the COVID will -- how long it will spread and what will be its actual impact. So maybe, by another 2 or 3 months or by the end of October, we'll be able to see the impact and then we'll be able to give some kind of a projection, but in the present scenario, it is difficult to give any kind of projection for -- yes. So -- but internally, we are planning to reach a level of about 5,000 crores for disbursements.

So just to add. See, we feel -- as a company, we feel our strategy now is to very, very -- we are very comfortable on liquidity. And touchwood, I think, that will continue in the quarters to come. So if we can take care of asset quality, which we're doing -- our team is doing really well on asset quality. If we can take care of asset quality now for next 3 to 4 quarters and -- then growth is only a question of time. So if -- once market opens, then company will be future-ready in terms of taking on growth to show whatever growth rate which will be much above than the industry growth rate. So it is more of a strategy what we have adopted that now the entire focus is on collections and recovery. We are not letting go any business, but as seeing that demand is low, we are trying to channelize our energy more on recoveries. As Shreekant mentioned, last year, we disbursed about 5,500 crores. Our attempt is to get closer to that. We may not be able to reach that number because we lost effectively 1 quarter, I must say. And still demand is quite low, so we will make an attempt to reach that number, which is why Shreekant mentioned 5,000 crores.

Okay, okay, sir. So that's helps. Sir, second question, with respect to the branch expansion, I think we've mentioned we are looking to add 10 branches this year. Sir, can you throw some light as to what geographies are we looking at? And how are we planning brands expansion next year? Or is it too early to think about expansions next year?

No. We are planning to open 10 branches. Now our main focus is on Tier 2 and Tier 3 cities, especially outside metros also and also Tier 2 and tier 3 cities. So it all depends upon -- or what will be the impact of COVID and how far we'll be able to move out and relocate people and open the branches. So as of now, we may not be able to open any branch during this quarter. And we will start the process by next quarter. And hopefully, by year-end, we'll be able to open a few of these branches. And it's too early to project for next year, so...

Right, right, right, okay. And sir, just last question, if I can squeeze in. With respect to credit costs, do we see this going up in future, like next couple of quarters? Or where are we looking at, the credit cost?

No. Credit cost is presently around 0.35%, and it remains constant at that rate only. And as I explained, that NPA will not increase much. It will remain at that level only now.

[Operator Instructions] The next question is from Shubhranshu Mishra from BOB Capital Markets.

Two basic questions. One, after seeing the lockdown and operating in the present environment, have we changed any of our operations? And if yes, what are the kind of OpEx benefits structurally we are going to see in the next couple of quarters? Second question is that any changes that we have done to our credit engine in terms of increasing our LTV or changing any kind of negative areas, negative people -- negative kind of customers that we have added to our list. So these are my 2 questions.

Okay. So just to answer your question. See, this -- we have done a lot of changes in terms of processing. Okay, nothing would yield immediate benefit in terms of reduction in cost. So whatever reduction in cost you have seen, that is largely because of COVID because we couldn't travel. We couldn't do all those things. Otherwise, in terms of policy, we have tightened some of our policies. And COVID was a good eye-opener for the entire industry. And therefore, we have reorganized our policies geographically to a certain extent and also in terms of profile, but all these are tightening and not loosening. And we see huge growth opportunity in future as well in spite of tightening for a simple reason: market has shrunk. Given the market has shrunk, a lot of players have -- number of players have come down. Because while we talk about liquidity being very high for Can Fin, asset quality being stable for last 3 quarters -- and we are also saying that in next 3 to 4 quarters it will not go up drastically, and we'll be able to bring it back to the current level in next 4 to 5 quarters. However, industry is facing a lot of challenge in terms of liquidity and flow of funds. Because of that, even though demand has shrunk, available demand will be good enough for good existing companies to do and gain market share. So to that extent, we'll be able to grow at the rate at which we want to once we are comfortable in terms of managing the other 3 pieces, that is: liquidity, profitability and asset quality. So I don't think -- so yes, to answer your question, we have tightened the process. We have tightened the policy in certain geographies, in certain products to ensure that we become a little more wiser and prudent at least for the next 2, 3 quarters. This is not permanent. This is temporary. And once things is done, we would probably go back to our original policy, which itself is very robust and prudent.

The next question is from Gaurav Jani from Centrum Broking.

Congrats on a good quarter. So just if you could -- your commentary on collections, that was helpful, but just if you could just quantify. I mean, what have been the trends that are we seeing in July and, for example, August? Now we are nearing the end of August. So it would be helpful if you could throw out some numbers, please.

Okay. So we are quite conscious about a couple of geographies in terms of going slow. Otherwise, in all other -- because of COVID, because COVID has still not come down in those geographies. And therefore, it is risk in terms of for our employees to go out and also in terms of customers coming and seeking loans. So we are going a little slow in a couple of geographies. Otherwise, we are trying to utilize the opportunity available. In terms of business level, it's back close to about 65 to -- in some markets 65%, in some market 70%, which is still about 35% less than the normal level. So every passing month, we see that the current month is better than the previous month. So currently it's about, I would say, 67%, 68% business is back in the affordable space.

And also collections is improving month-on-month...

Yes. Only April was not -- it was not that good for collection for the entire industry, and same thing is true for Can Fin. That is also mainly because a lot of HFCs were focusing on how to manage this moratorium because guidelines came far end of March and every company was very busy formulating policy for implementing moratorium. And therefore, April collection was pretty low, and for us, that number was about 42%. And now if we talk about June, it was in excess of 70%, so drastically, collection percentages have increased with every passing month.

The next question is from the line of [ Nitin Jain from EssKay Capital ].

Sir, I have a more long-term kind of question. Sir, I've been observing that Can Fin has improved its debt-to-equity ratio over the last 3 to 4 years from somewhere around 10.5%, 11% to close to 8% now. The larger players in the market like HDFC, et cetera are close to debt-equity of 5%. So what is our vision going forward? Like do we plan to bring it down further? What is the thinking on this?

See, there is no benchmark for DER for a housing finance company. Some company believes in keeping that ratio low. Some companies are comfortable at a slightly higher number. So as far as we are concerned, we feel 8% -- 7.5% to 8% is the right level at which our company should be in, even though we have plan of raising equity. We feel that around 8% is good enough because we have a very strong parent. And Can Fin is not -- in all meaningful words, Can Fin is not equal to any other private HFC. So we are somewhere in between -- in terms of the entity, I'm talking about, not in terms of performance. In terms of entity, we are somewhere in between a HFC which is private and HFC which is PSU. We are somewhere in-between, and therefore we have better comfort with respect to parentage. And therefore, we feel that -- and also the strength of balance sheet is such that we feel 8% -- 7.5% to 8% is definitely a comfortable level. Having said that, in terms of entity, we are in-between. In terms of performance parameters, we are better than the best. All parameters -- I think, most of the parameters, we score better than most of the HFCs, but for the size. We always believe that size, if it comes with profitability, it is great. If size comes without profitability, then obviously big is not great. We want to -- we have growth plans, but we want to maintain profitability. And therefore, the only difference today, what I can see, is the size, but for that, we are better off in almost all the parameters.

The next question is from Pooja Ahuja from Equentis.

Most of my questions have been answered. Just wanted to know, are you seeing any geography-specific trends in your morat book?

No, we don't find any such distinct differentiation in morat. Maybe slightly higher in NCR region and slightly less in South, but overall there is no such differentiation, very, very distinct differentiation.

The next question is from Rahul Picha from Multi-Act.

Hello, can you hear me?

Yes, yes, please go ahead.

Sir, earlier in the call, you said that, in spite of higher costs, customers come to you for better service, so can you please elaborate a bit on what you mean by better service?

No -- see -- I mean, see, it's a very, very tacky subject. All I'm saying is that today we have so many PSU banks. We also have private banks. So in most of the PSU banks, there is no need to maintain minimum balance, or the minimum balance is quite low. It's as low as INR 500 or INR 1,000, whereas in private banks I've seen INR 5,000 or INR 10,000. So I'm only saying that there will be difference in offering and that will be backed by USP. So by and large, all I'm saying is that today HFCs are in a position to offer better service to customers in terms of TAT and advice, and therefore probably we have an edge in terms of sourcing at a slightly better rate. I think that's the only difference. It existed for last several decades, and it'll also continue for next few decades. That is the only difference and the reason why HFCs are able to survive and do good business in spite of competition from PSUs and private banks.

Okay, okay. Secondly, sir, earlier, you had also said that the delinquent pool for you is lower than the industry. Can you explain that again?

Okay. What I meant was -- so suppose, let's say, the portfolio size is 100 crores. So if any -- if there is an overdue of 1 day and above -- that is delinquent pool. That is basically it could be SMA-0, SMA-1, SMA-2, NPA or in recovery bucket. So there are 5 buckets, very clearly. That is the delinquent pool. So regular customers are customers who pay EMIs regularly without even a single-day delay. So if you see this regular versus delinquent mix, we have a better mix. I can talk about industry. Industry for home loan, it's about 19% is delinquent; and regular is about 80%, 81%. And for loan against property, it's as high as 27%. It's 27% to 30%. Okay, so I'm saying we have a better mix in terms of both HL and LAP. Why this is important, because what will be the NPA in next 3 to 4 quarters. Because of COVID, it would largely dependent on how big is the delinquent pool or what is the mix between regular and delinquent.

We'll be able to take one last question. We'll take the last question from the line of Rohan Mandora from Equirus Securities.

[indiscernible] the moratorium number...

Mr. Rohan, I'm really sorry to interrupt, but we can't hear you very clearly, request you to use the handset.

Is it better?

Just a reminder. If you have -- if you have more questions, we can take more questions. There is no dearth of time. We can keep it up for another 20 minutes, half an hour, not an issue at all, so please don't deprive any investor of asking questions. We are open. We can be on for another half an hour, 45 minutes. It's not an issue.

Absolutely. Sure, sir.

Yes.

So sir, on this moratorium piece, the 14% which have not paid anything for the 6 months. So are you indicating that around 5% to 6% is such which have seen a pay cut or job losses? But for the reminder, in your discussions with the customer, what is the rationale for them on sitting or conserving the liquidity? Any thoughts on this? Are there...

Sure, sure. 2 things: one is, no, not 5% of this 14% is because of pay cut and job loss, no. I only told, out of the entire portfolio, job loss is about -- it's about 0.5% and pay cut is to the tune of 5%. So it's not part of 14%, no. It's an entire portfolio. So it is, maybe both put together, 5% of 100%, not 14%. Because a lot of customers, even though there is pay cut, they have not even opted for morat, and they are paying regularly. So I think that is -- these are 2 different things. Now second question, why people have opted for morat. People have opted for morat for so many reasons. One is it is school admission time. Number two, because of COVID, there is a lot of uncertainty, so they wanted to conserve cash. And number three, just because there is an option available from the regulator and from the company, they have opted for morat, but also it is true that a lot of customers realize that, if they opt for morat, they will end up paying a few more installments at the end. Or they'll have to pay interest on interest. And therefore, a lot of customers who had the capability of paying, they've come back and started paying.

Sure. And sir, like, so in the 5% which we're seeing some pay cut but still paying, so what is the percentage which is under moratorium which is paying right now within that pool of pay cut customers?

That is -- as of now, it is very less, but we can't go by that. Let me also tell you that with a caveat. We need to see September and then decide because August is when the morat gets over. So -- but we have seen a lot of people out of that 5%, they're actually paying and they have not even opted for morat. Since we reached out to all the customers to understand the impact of COVID in terms of job loss and pay cut, we got this number. Otherwise, as of now, neither job loss nor pay cut seems to be a problem in terms of managing our delinquency.

And sir, what percentage of the book would reprice over the next 6 months, the back book.

32...

It depends on the market situation. And also it depends on timing at what point in time how many set of customers had opted for what loan under what option. So on an average, every month, it will be about 3% to 4%. This has been happening since a very, very long time, and it will continue.

Sure. And sir, lastly, on that remaining 14% which are under partial moratorium. So when they have started paying, they are clearing the entire EMI amount of the recent months...

Entire EMI amount. When I say part, it is only part of 6 EMI, not part of 1 EMI. So it's entire EMI.

The next question is from the line of Sangeeta Purushottam from Cogito Advisors.

My question was that, when you were looking at new disbursements right now, have you actually tightened your underwriting standards? And how are you looking at it in terms of new client sanctions? The second question I have is that when do you actually think that you will be in a position where you will be comfortable focusing on growth. Is that likely to be maybe 6 months later? What is your sense? And what is the customer behavior in terms of seeking new loans given that property prices are down, interest rates are down? Are you seeing any pickup in inquiries or demand happening also, if you could give us some indication of these?

Okay. So we have tightened our policies to a certain extent. We have put more filters so that we get better profiles than what we were getting earlier. Nothing to do with the profile or the geography but only because of COVID, because income levels of customers would have changed because of COVID. And therefore, there's a slight change in the policy and process, a. B, will we be comfortable doing business if growth comes back? Definitely, we will. But it won't be at the cost of profitability or at the cost of asset quality. Because today, as an investor, all of you are more worried about asset quality than growth. And I think this is true for the entire industry, and for us it is in our DNA because Can Fin is known for asset quality. And we -- our focus is always a little bit more on asset quality. Whenever growth comes back, we will definitely grow because for us, growth is not a concern. Any HFC can easily grow. They can grow from 10,000 crores to 1 lakh crore book. So growth, I don't think, is a challenge at all, but what is the challenge is only asset quality. So as long as we are able to build the book in the right way, we are absolutely okay in terms of growing much, much, much above than the market growth rate.

Right. And are you actually seeing -- has there been, for example, an increase in people wanting loans? What is consumer behavior right now? Because we have seen 2 differing trends. One is there's some pressure on income, and there is a concern and therefore a desire to conserve cash. At the same time, the property markets are close to a bottom. Interest rates are at almost decade lows, so how are you seeing consumers respond to these 2 slightly opposing forces?

So probably, if I have to name job loss, I would have to name job loss in top 10 companies where the salary levels are upwards of INR 70,000, INR 80,000, which means where it hits the most is employees who are at a very high cost. Since our focus is on affordable, the propensity of our customers losing job -- because our customers are neither migrant labors or high-profile customers. For example, companies like Infosys, Wipro and Accenture, their employees would hardly be our customers for a long time. They might for a year or 2 but not for a long time because our segment is different. 50% of our customer profile is from government, and 50% is from private space. So their -- to their employers, cost -- CTC of the employee won't be that high. So whenever any company wants to cut costs because of drop in revenue due to COVID, they would always look at top-down approach even in terms of income. To that extent, the impact on HFCs focusing on affordable would be less, so you're right. In terms of customer comfort, customer would first try to get back to normalcy and, therefore customer would first like to look to raise personal loan or take some limits and credit card and then only think of hope. To that extent, demand in home is going to take a little longer than the demand what you see in personal loans and credit cards and, therefore, I said that it will take about 2 to 2.5 quarters for demand to come back.

The next question is from the line of Dixit Doshi from Whitestone Financial Advisors.

Sir firstly, in the morat book of 14% where customers have paid some EMI, so is it more towards the 6 EMIs or more towards the 0 EMI? If you can just elaborate.

The 14% is very clearly -- as I told you, the reasons are multiple. This 14% of customers, they have taken morat for entire 6 months. But however, most of the customers are also -- this has a pool of regular, this has a pool of delinquent, this also has a small portion of pay cut. So this is complete morat. 14% is complete morat.

No. I'm asking -- so 14% have not paid anything. And other 14% are paying, have paid some EMIs out of the 6 EMIs.

Correct.

So those who have paid some EMIs are more towards like 4 EMIs out of 6 and 5 out of 6 or 1 out of 6 or 2 out of 6?

So we have all the combinations. There are 2 things: One is there is recency factor to this. And number two, in morat 2, a lot of customers have come back and paid.

Okay, okay. Secondly, sir, historically, whenever we have raised funds, we have preferred rights issue. So how do you see it going forward? Because in case of right issue, even Canara Bank has to invest. Or do you see we might go for a QIP...

See, we haven't decided at this point in time what should be the -- we have not decided even the quantum and in what form we should raise equity, whether it's going to be rights or QIP; and if so, what quantum? We have taken enabling approval up to 1,000 crores. So we haven't really given a thought to that because we feel that it is quite some time for us to look on that option. So we will decide at the right time what option is favorable to the company and to the shareholders.

Okay. And sir, one more small question. Like let's say if somebody has not paid any EMIs for the 6 -- in all the 6 months of morat. So he will need to pay the September EMI in September and the entire 6 EMIs in the September? Or how it will go...

No, no, no. So let us say a customer has availed morat for entire 6 months. He has to pay only 1 EMI in September, that is September EMI; and October, only 1 EMI, that is October EMI. And the 6 EMIs, what will happen is that, what customer has not paid, that will be -- his tenor would increase. And he would pay basically -- let's just say, I am customer. I have taken -- I'm a customer. I have taken morat for 6 months. And what will happen -- my residual, let's say, tenor is 60 months, that 60 might become 68 or 69. So customer will end up paying only 1 EMI after the morat period.

Okay. And sir, just 2 small questions. One, you mentioned that we fund to a project -- we fund less to a project when the builders are involved, and more towards a single kind of accommodation like a bungalow or a single project. So if you can split between the building system and a single flat?

See, it is not by desire, it is more by design. Our builder -- when I say builder, funding for individual apartment, okay? That is about 25%. And the rest is 75%.

Okay, okay. And sir, lastly, just a small question. So last week, we had a Board meeting and the Board meeting lasted almost for 2, 2.5 hours and then it got postponed. So obviously we -- the corporate governance is very high at Can Fin Homes and we have seen it in past. But if you can just elaborate a reason for postponing the meeting after almost 3 hours of Board meeting.

Whenever we do, see, we do -- whenever we do Board meetings, we also have other meetings like NRC, like Risk Management Committee, then Stakeholders Committee Meeting. We have Audit Committee. And the last item will be adoption of results. So this is the format I think most of the companies follow because, once we -- suppose if we do the reverse, first, we adopt -- we have meetings for adoption of financials and then other meetings. We are very sensitive about this information. And therefore, always at the far end of the schedule, we will have both audit and Board for adoption of results. So it so happened that we had to postpone because of COVID reasons. Otherwise, everything was as per planned.

The next question is from the line of Jaikishan Parmar from Angel Broking Private Limited.

Okay. I have one question only. For last 2 quarters, we have higher provision cost compared to other HFC, if we compare it with the loan book. And so just can we have -- can you give us what will be that for next 2 quarters? Or it will remain high for next 3, 4 quarters. Just idea on, rough idea on that, sir.

So we have -- see, we have also -- we very clearly mentioned that we have provided more than what is required, significantly higher than what is required. So keeping that in mind, in next few quarters, provisioning won't be substantial.

Okay. I mean -- so in -- if I ask you in percentage terms for our financial year '21 would be -- the rough estimate would be what, like...

I've already indicated that our NPAs will not -- will see only marginal increase in Q2 and not substantial increase in either Q3 or Q4. I think that is an indication that, whatever provisioning which we feel is required as of extreme situation, we have provided more than that now only. So in that sense, you would not see provisioning other than whatever is required because of standard and a few lags here and there. So it won't be substantial.

Okay. So I can -- like I can interpret that you have assumed a worst-case scenario for this provision cost...

No, no, no.

No, okay, okay.

We have assumed much beyond the worst situation and, therefore, I said, "more than required."

Okay.

And also because we have an option of writing it back this March.

Correct.

So it's only temporary. It's only a question of another 2, 3 quarters, we can write-back the entire amount. Whatever is not required to be provisioned, we can always write-back. So this is not the worst possible scenario. Worst possible scenario requirement, whatever is the number, we have provided much more than that.

The next question is from the line of Sonal Minhas from Prescient Capital.

This is Sonal. I have 2 questions. One was regarding the delinquency where you were making comparisons of Can Fin vis-à-vis the market. I just wanted to know, what are the numbers for Can Fin? When you said the industry is at around 18% and the LAP portfolio is between 27%, 30%. And I'm assuming you're comparing this as of March because, post March, everybody has been on a different barometer. So that was one. And secondly, when you talk about provisioning, it's linked to -- so we have 14% of the portfolio which is not paid at all. Is it in a scenario where we assume, let's say, this 14% becomes the nonpaying pool after September? Is the provisioning enough on the balance sheet to actually capture that stress? Just a theoretical question from my side.

Okay. So you will be pleasantly surprised to know that our delinquent pool as a percentage is much, much, much lesser than the industry average. I won't be able to share the numbers because these numbers are not in public domain. And therefore, I reserve my comments on that, but it is far, far, far lower...

But could you share with us the...

I can only tell you -- I will tell you, industry, I mean, it can differ from company to company. Industry average NPA to total delinquency, as a multiple, it will be as a blend of both [ CRF ] for HL and non-HL, will be in the multiple of 17x to 18x. If [ CRF ] is not there, it will be in the range of 13 to 14 multiple. So I think that's all I can share with you on this trend. Number two, we have been very conservative in terms of provisioning. And whatever we talk about 14% plus 14%, 28%, I think we have provided much, much beyond this percentage, what we talk about.

Okay. So a follow-on question on that, sir. I -- and just tell me if you can't share. Sir, this 14% who have not paid at all as of June, would you be able to share any trend of as of June, July -- sorry, as of July, August? Or that's something which you reserve for the next quarter.

No. Whatever number I quoted now, this is for the entire 6 months. I have not split because we've seen some of the HFCs, they have given numbers month-wise. Since we have taken the most conservative approach, even if a customer has paid 5 installments out of 6, I have still offered morat to that customer and have provided. So we have taken the most conservative approach and, therefore, our approach is different. Our approach is full morat, part morat. Part morat could be 5 paid out of 6 also. And I think it's a big comfort for us in terms of providing, big comfort for the investors as well because we have taken the most conservative approach. And I am saying the most conservative approach, the amount what we have provided is much more than what we feel we would require in the worst possible scenario.

I understand that, sir. And sir, just a last question on collections, if I may. So are the collections moved to digital given people are not able to reach certain geographies? If you could share some trends on that, that will be helpful just to understand if there is any transition happening there in the company.

We are already up on the automation piece. 98% to 98.5% will get to electronic mode. So that is, anyway, in place, but we are still working on further automating in terms of tab, in terms of mobile. All those things are in the pipeline, but in terms of electronics, it's close to 98%, 99%. We are already there on that. So it is not in -- to answer your question, it is not cash collection. Cash collection would largely be there for the delinquent pool because there we'll have to reach out to customers and then collect. Otherwise, it is completely electronic.

Got it. And sir, just a request. I've been a shareholder of the company for the last, I think, 2, 2.5 years. And I think you've changed the format of the presentations in the last quarter and this quarter. We used to cover a few more details comparatively. Is there a conscious choice to actually share less and more concise information in the management presentations? I just want to understand your side of it. The earlier presentations seem to be far more detailed.

Not at all, not at all. I think the idea is to share as much as information as possible with the shareholders. So you can let us know what specific information you want, and we would incorporate that. I think we are very open to that. There were certain things we thought which would be of no interest to you or us in a big way, and, therefore, we have tweaked. If you are looking for any particular information, you can give us feedback, we will incorporate that. The only thing is we don't want to be biased in terms of geography -- yes. Sorry.

No, sir. Sorry. Continue. Sorry. I'll ask...

Please go ahead, please go ahead.

I was just saying more around the asset quality, sir. I think that used to be far more detailed. I agree with you, the geography part was not that much required, to be honest, I agree.

So in terms of NPA and all, see, earlier, we were also getting into detailed presentation in terms of number of cases where SARFAESI is initiated and stuff like that. So now, see, I'll tell you what has happened is, in last 3, 4 years, we have adopted more customer-friendly approach, towards customers. So we would, for example -- just to give you an example, we would not -- we are not clinical in terms of going to the customer through SARFAESI if we feel that customer is going to pay. So if we can give a little long rope to customer and if we know that customer is going to pay, we would wait for that time so that customer also would be comfortable in paying. So we've made some changes in our approach towards recovery and collection. Other than this, there is no change at all. In terms of data, I think certain minute details are -- may not be required. Otherwise, by and large, whatever information is required, as an investor, for you to be comfortable with, we are willing to share.

The next question is from the line of Shreepal Doshi from Equirus Securities.

Sir, my first question is with regards to our -- you had mentioned that your repricing of loans is close to 3.5% to 4% per month. So that gives a number of close to 48% to 49% of the loan getting repriced. So I mean, then how is the calculation summing up there, sir?

We have an option. While customer avails the loan, if customer has opted for this option, only then it'll come for repricing.

See, we have an annual resetting options available to the customer. So usually, if you divide by 12 months, it should be average, but some of the loans are getting repriced in April and May, so in the remaining part it is slightly less. So maybe 8% to 9%, every month, loans get repriced to the annual resetting option, those who have opted for annual resetting. So usually 8% to 10% of the loans get repriced.

In that pool.

In that pool. So whenever we reduce the rate of interest -- so it will not impact the whole portfolio in one go. Whereas every month, to the extent of about 8% to 10% of the loans get repriced.

So it is 3.5% on the portfolio; in that pool, about 8% to 9%.

Yes.

That's the way to read it.

Okay, okay, okay. Got it. Sir, my second question is with regards to -- we are seeing low -- like weak growth on the developer portfolio, like the flats that we fund in that particular category. So how do we see that ramping up or that sort of trending in the next 12 months?

See, we are not -- see, that is not part of our strategy, but if there is any 1 or 2 good developers we feel that we can take exposure on, we will take exposure; however, such exposure will be less than 0.5% of our entire book.

Sir, I didn't mean the developer funding side. I meant the houses that we fund in that developer category, the flats that we fund basically, the home loans. So -- and we are seeing the slowdown there, so how do we see that trending for the next 12 months?

So basically if you look at even in affordable space, Tier 2, 3 and 4 kind of cities, developer projects coming up, demand is there. We can see maybe next 3 to 4 quarters, not in next 2 quarters. So in next 2 quarters, we can see demand mostly in nonbuilder space. In builder space, I think it will take some more time because developers are really struck with liquidity. And flow of credit has drastically come down and, therefore, we fund based on progress of the project. And therefore, we feel that demand to get back in that space takes a little bit longer than what we can see in nonbuilder affordable space.

Okay. And sir, one last question. With regards to like our -- how are -- like how is our disbursement in some of the key states like Karnataka, Tamil Nadu and Andhra Pradesh? And how are we seeing things like turning in Tamil Nadu now for us?

So basically Tamil Nadu is doing very well. I think I'm talking standalone. I'm talking independent of COVID. So for a minute, I'll keep COVID aside. And then if we have to talk about geographies, for us, all the geographies are doing very well. Karnataka is doing well. TN is doing well. AP and Telangana is doing well. So all the geographies are doing very well. Kerala is doing well given the size of the state and the market available there. Now the only difference now is because of COVID. Because of COVID, a couple of states where COVID cases are still high, there obviously the proportion of business, what we are doing is less than what we were actually doing earlier. So it's a question of, another month or 2, we'll pick up there as well. That's got more to do with COVID. Otherwise, to answer your question, TN, which used to contribute very less in the past, now has picked up very well.

Tamil Nadu. Okay, okay. And sir, what percent of our like mix in the disbursements in the developer category -- so basically my question is that, within the housing loan, what would be driven by developer category and nondeveloper category?

I think I answered this earlier. 25% is apartments, 75% is composite loan, resale, purchase...

Construction, house construction...

The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.

Yes. Sorry. All my questions have been answered. Thanks.

Thank you.

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

Yes. Just one small clarification. The data that we are seeing on moratorium, that is as of when? The 28% moratorium?

So that you can say because now we're in August, so we have given the complete morat details.

Okay, so this is as of August, so...

This is for the entire morat period of 6 months.

Okay. So if we were to look at a similar number in -- for June end, what would it be?

No. See, the approach what we have taken is different. For example, there are 2 approaches. So approach one is some customer will tell, "I want morat in March. I don't morat in April. I'll pay in April. I want morat in May. I'll pay in July." Okay, now there are various approaches. What we have done is even, if 1 EMI is not paid out of 6, for us in terms of provisioning, we have taken that particular customer as morat customer, and we have obtained the necessary documentation from the customer. So the approach what we have adopted is the most conservative approach in terms of provisioning and in terms of considering morat percentage. And therefore, no, I should only talk about the entire period. For example, just to answer your question, let us say my morat was -- today, what we are talking about, 14%. If it was 12% in June, no, the 12% has no meaning now because I have to still work on 14%, right?

Yes.

Yes. And therefore, we have taken morat for the entire period because that is the entire pool that -- where we need to work on.

Yes, sir, that makes sense. My question was more from the perspective of the repayments that I had asked earlier. So I just wanted the number of -- the percentage of portfolio that was complete -- that had 0 delinquencies as of June, if that is possible. The Stage 1...

So if you're asking the mix, the proportion, so out of morat customers, what proportion is from regular? What proportion is from delinquent? By and large, in the industry, the proportion will be fairly high for delinquent cases. And therefore, I always kept on saying that our delinquent pool itself is so low, and therefore the -- even though the percentage looks high, because the delinquent pool is low, so therefore we'll be able to contain our delinquencies.

Is it possible to get the Stage 1 number for June end, the Stage 1 assets?

No, no, no. I'm not very sure whether we can share that number.

The next question is from Rahul Picha from Multi-Act.

Sir, if I remember correctly our morat 1 percentage was 28%. So of that amount, what was full morat?

No, no, no. 28% is full, 14% is where customers have opted full morat.

Out of that.

That is for now. I'm asking as of May end. Morat 1 was also 28%, right?

No, no, no. Morat 1 was 45%. Morat 2 was 12%. As an average we took, that was some 28%. And incidentally, both the numbers are same. That's all. See, because our morat -- our option was opt-out, so by default the hit rate is very low. So there was a lot of education which happened with the customers later and, therefore, this percentage has changed.

The next question is from Swechha Jain from ANS Wealth.

I just have a follow-up question. With respect to the 28% morat, will you be able to give us a split as to what percentage is SENP and what percentage is salaried?

See, in terms of our regular and delinquent mix of salaried and SENP, there is no much difference. Even in terms of morat, there is no much difference.

Okay, okay. And -- but if -- like if you were to give a number, can you give a number to it...

I can give you in terms of proportion. So SENP will be 54%, 55%, and salaried will be about 46%, 47%.

Okay, okay. Sir, just another follow-up is with respect to provisioning. So do you see any extra or one-off provisioning that you're looking at in next 3, 4 quarters? Or you think it's just going to be the way it is, like...

As of now, everything is very -- pretty comfortable to us. So we don't see any unexpected provisioning to be made in near future.

The next question is from the line of Prasanna Surpuriya from Validus Wealth Managers.

The first one is, so we had, I think, mentioned somewhere a target of INR 40,000 crores of loan book for FY '22. So where are we now in terms of that target? Does it get postponed by 1 year or 2 years? Or how do you see that is the first question?

That was something which we had a vision a few years back. That got changed, I think, a few quarters back itself. The book what we're seeing this -- by this March, because as of now, the focus, as I mentioned, is completely on asset quality and, of course, growth, but we are looking at a book of about INR 23,000-and-odd crores by March. So the INR 40,000 crores was a very, very old statement. We have revised that long back.

Okay. So INR 23,000 crores is what you are saying for FY '21.

It's not a guidance. It will be about INR 23,000-plus crores.

Okay. In terms of the share of our housing to nonhousing, where do we see that moving ahead? Do we expect the nonhousing to sort of inch up from 5% or going ahead a little bit...

In the normal course, 5% would have become 10%, but because of COVID, at least for next 3 to 4 quarters, we don't see that proportion changing.

Okay. And in terms of the capital, you mentioned that you have taken an approval from the Board for INR 1,000 crores. I think the mix and the timing is yet undecided, but any approximate at least time line this year? Next year?

We have obtained shareholders approval in the AGM for raising up to 1,000 crores capital. Timing and the form is not decided. It's an enabling approval. We may raise in this financial year.

Okay. And any further updates on the stake sale by Canara Bank?

No, no update on that.

The next question is from the line of [ Manish Shah ], who's an individual investor.

Sir, my question was the same that, will the fund raising of INR 1,000 crores will happen in this calendar year?

I'm not very sure of that because we have a very comfortable CAR and DER. So this is only enabling approval. If we feel that we need to raise, we might raise in this financial year. Calendar year, I'm not very sure. Even this financial year, if we need, we will raise.

And my second question was, sir, which are our 5 biggest geographies, our biggest states?

Biggest states. So the -- predominantly, see, South was a big region for us. It continues to be a big region for us, though we have spread across the country. So in terms of proportion, South is big for us.

No, no, after South, sir.

It's Rajasthan, Gujarat. We're in Maharashtra also and we have a fairly good presence in NCR also.

Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.

As our MD, Girish, told, so the focus will be mainly on asset quality. And we'll also focus on growth henceforth, though we could not do much in Q1. So -- but anyway, business also. We have now come back to almost 60% to 65% of normal business. So the main pillars wherein we'll be focusing will be on asset quality, liquidity, profitability and growth. So these will be the guiding pillars for us in the next 3 to 4 quarters. And definitely things will improve quarter after quarter. And Q2 will be, hopefully, much better than what we have shown, as far as business is concerned. And asset quality, we have already made enough provision, and definitely we will be able to contain the NPAs and also delinquent portfolio. Q3 definitely will be -- Q3 onwards, growth will come back. And by the year-end, we will -- business front, we'll be able to do almost close to what we did last year. And asset quality also, there will be somewhat slight increase, but hopefully, by year-end, we'll be able to contain it to almost 1% of our portfolio. This is what we are planning for the next couple of quarters. Thank you.

Thank you very much.