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

Ladies and gentlemen, good day, and welcome to the Can Fin Homes Limited Q3 FY '21 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Utsav Gogirwar from Investec Capital Services. Thank you, and over to you, sir.

Thank you, Janice. Good afternoon all. Welcome to the Quarter 3 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; Mr. Shreekant Bhandiwad, Deputy MD; Ms. Shamila, Business Head; and 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 afternoon to all the investors. Welcome to the earnings call. So I would quickly give you a brief as to what has happened in last 2 quarters and also Q3. So after COVID, as you're aware that we couldn't do business during COVID time, we started doing business from last week of May. And quarter 1, we did disbursement of INR 400 crores. Quarter 2 was better than quarter 1, we did about INR 825 crores; and quarter 3, we did about INR 1,100-plus crores. So if you look at sequentially, Q3 disbursements over Q2, it's about 33%, 34%. In terms of book, we grew by 4%. That is because of many reasons. If you look at quarter 3, in Telangana, which contributes to 20% of our incremental business, they had closed registrations. So for almost 2.5 months out of 3 months in quarter 3, we couldn't do much business. This is not only for us, this is for the entire industry. So it opened up in mid of December, and we were able to do only 15 months business in Telangana in Q3. And therefore, you'll see about INR 1,100 crores. Otherwise, you would have been on par with last year Q3 as far as the disbursement is concerned. With respect to demand, demand is completely back in the affordable space both in builder and nonbuilder segment. So in affordable space, builder segment is small builders, so it's completely back, and we are up on that front, but for this blip in Telangana, which was beyond company's control. Otherwise, in terms of disbursement, if we had taken into account 1 quarter business of Telangana, we would have been on par with last year Q3. Now we had mentioned last quarter about our NPA. Now talking about Q3, we are at 0.68%. And as you are aware, there is a Supreme Court dispensation on tagging of NPA. If we take that into account, as we speak, we are less than 1%. So that's the overall position on NPA. As a strategy, we focused on asset quality because we knew that if we take it off the book, then getting back business is only a quarter of -- it's only a question of a quarter. But if asset quality deteriorates, then it's a question of 2.5 to 3 years time to get the book back to shape. And therefore, our focus was initially, apart from profitability and liquidity, it was on asset quality. And since last quarter onwards, we focused on business. And therefore, you will see sequentially, there has been significant growth in business. And Q3, discounting what happened in Telangana, we are on par with last year Q3. So Q4 so far is pretty good. I think it will -- from this quarter onwards, I think we'll be back to growth, which was in pre-COVID level, because now even Telangana is back. On the restructuring front, we have restructured accounts totaling to about INR 87 crores on a book of about INR 21,000 crores, so which is about less than 0.5%. So I had mentioned this a couple of quarters back also saying that our restructuring pool won't be large because we've done lot of hard work on the delinquency and collections immediately after morat and during morat period. And -- so this is the number, INR 87 crores. Now time and again, we've been working on -- I'll not talk about numbers because I'm sure you would have gone through the presentation and also the financials. So any specific query we'll be happy to take on that. Let me now try and focus on strategy and the outlook. So from this quarter onwards, we are back -- in terms of managing collections, we are back to normal. With respect to business, we are back to normal, and you will see growth happening from this quarter onwards. All this, assuming that there is no second wave or third wave, I don't know what wave it is. If it recurs -- as of now, India is immune, because across the globe, everywhere we hear threat of COVID, either second or third way, but India, as of now, there are no signs. So assuming this continues, I think we are back on track completely from this quarter onwards. There was a slight change in our strategy. What happened was immediately after COVID, since the business is not completely back and there was no opportunity in corporate and SME space, so a lot of banks, especially PSU banks, they started focusing on retail. So that put lot of pressure on NBFCs and HFCs, which were holding book at a much higher yield. So that was the threat. And therefore, we changed our strategy. This was about, I think, 3 months back. If you have seen historically, our pricing would have been 150 bps higher than the best HFC in the country or any best PSU or the private bank. So now we took the decision of trying to reprice the book, which we would have otherwise lost to competition, A. B, and also from onboarding point of view, we thought we should try and be competitive, and therefore, since last 3 months, our starting rate is 6.95%, which is on par with the best PSU, best HFC and the private bank in the country. So today, we are competing. We are operating in most of the segments. So there is no segment where we are not there as far as retail is concerned. For example, a few quarters back, we were not focusing to that extent within the city. For example, Mumbai, Poona, Delhi, Hyderabad. So now since our rates are very, very competitive, so we are able to cater to builder segment. So that would also help us as a company in terms of increasing -- increase in demand. So that's the advantage what we have. While we talk -- because yields are coming down. Yields are coming down because interest rate scenario is down. So since last few quarters, rates have been going down. And therefore, even the yields on the portfolio is coming down because we are repricing, and we are acquiring at a much lower rate vis-à-vis compared to a couple of quarters back. So in terms of revenue and in terms of revenue growth, because the yield on the portfolio is coming down, revenue is going to be less. And therefore, we should not read too much into revenue, we should look at the margin because yield also is coming down, CoF also is coming down. As long as we're able to maintain the margin, we are home. So if you compare revenue growth, for example, Q3 '20, FY '20, Q3 -- if I compare year-on-year Q3 revenue growth, it will be flat or maybe negative. But if you look at the CoF decrease also and if you look at the margins, we are pretty comfortable. Now as we speak, our incremental NIM is about 4.12% and YTD is 3.97%. Our spread is 2.9%. So we have maintained both NIM and spread. So we should not really look into whether the revenue has grown by what percentage or has gone down because the interest rates are coming down. When the interest rate starts going up, we will see increase in revenue. So I think we should more look at the margins, and I think we are pretty much there on that. Now -- so because of increased and heightened competition from PSU and private banks, because corporate sector has not kicked off -- corporate banking has not kicked off and SME banking also is not still up the curve, and therefore, there is a lot of focus on retail. And one good product to grow the book for the banks is mortgage because of the ticket -- share ticket size. And therefore, there's a lot of competition in the market in this space. And therefore, all the banks are pretty aggressive. Now this would continue till such time, corporate and SME market improve and especially in the nonaffordable space when the complete demand is back. Then again, it will be back to normal, then the company can think of increasing yield while maintaining the margins. Now we wanted to also retain the book, and therefore, we had this aggressive pricing. It has definitely helped us. So if you see our book retention percentage prior to and during the rate change, we see significant improvement there, and we would want to continue this. And this strategy might be there for next few quarters and we will change depending on the market situation. Now this has also helped us to take over more cases from good quality banks and HFCs, which means the profile is going to be far better than what it used to be earlier and also the ticket is slightly higher. So given the current context, there could be slight increase in ticket size. So it may not be drastic, but it could -- there could be a slight increase. As long as the mix is maintained between salaried and self-employed, we're not really worried. So by design, what has happened last quarter is that, nothing to do with the change in policy of the company, but the salaried proportion has slightly increased. But this, we feel, is only temporary. I think going forward, I think, 2 quarters down the line, that mix will again be back to 70 and 30. We want to maintain that mix. But not agnostic, but yes, given the current situation, at least for next 1 year, 1.5 years, we feel, I think that is very important. On the NPA front, we are pretty comfortable. I think there are a lot of questions on the INR 660 crores. I think that INR 660 crores was total number of customers and their POS who had availed morat and that outstanding today. I think now, after morat, after restructuring, and after Q3, I think that number becomes -- it's not that relevant now because now we have actual NPA and cumulative, that is deemed NPA and -- NPA, which is less than 1%. So that INR 660 crores, today, if you look at, that will be about some INR 405 crores or INR 406 crores. That's only the outstanding. So I think nothing much to read into that, but just to have this number for records, it's around INR 405 crores, INR 406 crores. Why this INR 405 crores, INR 406 crores is that I think a lot of cases have now moved back to current. So people who had opted for morat, so a lot of customers have now become current. And therefore, that is the difference between INR 660 crores and this, A. B would be the -- whenever they pay EMI, POS will come down, and therefore, because of natural payment, so there'll be POS reduction. So in terms of all the ratios, I think we are pretty comfortable. NIM is 4.12%. Yield is 2.91%. I've said this before. We will not be able to maintain NIM and spread at these levels because now we have -- we are in the process of repricing our old loans as a customer retention strategy. And also market is down. So if you don't do, obviously, customers will find many other banks and HFCs doing, and therefore, we want to retail existing customers. And therefore, you will see, eventually, it will not happen immediately, but at least in next few quarters, maybe 4 to 5, 6 quarters, you will see spread inching down from 4%, 4.1% to about 3%-plus. So we will maintain spread of 3%. And spread today, which is 2.91% -- sorry, NIM of 3%-plus and the spread today is 2.91%. I think eventually, in next few quarters, this also would come down, and we will maintain 2.4%-plus. We are able to manage cost very well. So we've been constantly engaging with all the bankers to try and reprice the term loans and also OD and whatever fresh sourcing we are doing, even that is coming at a very, very less cost. So Q3 CoF was 6.87%. This is YTD. If I have to talk about the incremental Cost of Funds, it's about -- it's less than 6%, it's about 5.5%, 5.6%. So we are pretty well placed on CoF. So even though we reduce our yields, we'll be able to maintain margins. With every passing quarter, our DER is improving. I know -- I think there's been a lot of discussion about -- new discussion paper on NBFCs. So today, our DER is 7.3x after Q3. So with every passing quarter, I think this ratio is improving. And we have plans to raise capital. So we will raise capital when -- because today, our DER is 7.3x, which is low and CAR is 24%. So at this point in time, I don't think there is a need. But whenever there is a need, definitely, we will raise capital and keep this under check well within whatever gets prescribed by the RBI once the discussion gets over. So this is broadly on the outlook and the figures, where we are. And just to give you a small -- this is not a guidance, but some kind of outlook. So from this quarter onwards, we'll be able to grow at the normal growth rate. So I think in next 6 to 8 quarters' time, you would see the growth of about 17%, 18% on both book and loan disbursements. I would request for any specific queries from investors.

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

Congrats on the quarter. I just have a couple of questions, one on margins and one on access policy.

Sir, I'm so sorry to interrupt. Requesting you to please speak a bit louder, sir.

Is this better?

Thank you.

Yes. Sir, you mentioned that now you've got home loans starting at 6.95%. Prior to this cut, what were they starting at?

7 -- no, we have been reducing rates periodically. Prior to 6.95%, it was 7.25% and before it was 12.75%, 7.9%, 8%. So you can say average -- see, we are generally -- we were generally about 150 bps higher than the best HFC or the best bank in the country. So now that gap is not there.

So let me put it this way, a year back, just pre-COVID, what was the level, roughly?

So the difference was 150 bps. So then I think our rate was 8.25%. When -- so 8.25% starting and average was about 8.5%. So others were offering about 7%, 7.25%.

Okay. And have you also repriced the existing back book similarly? Or...

Yes, yes. We have repriced the existing book also. And also, a lot of customers have come for conversion. And we also retain customers who want to move to other bank or institution because of pricing. So today, our yield is 9.78% on portfolio.

Fair enough. And sir, what is your incremental cost of funds then?

Incremental cost of funds is about 5.5%, 5.6%.

Sir, but how are we able to get at such lower rates from banks?

I think based on company's performance and pedigree, we command AAA rates. And today, a lot of banks come forward to try and offer us new products which would bring down cost.

Okay. Sir, and just as last thing, 1 clarification. What is this INR 405 crore number that you mentioned?

No. In Q2, as a part of disclosure, we were supposed to mention what is the outstanding of all such accounts who had opted for moratorium. So that number as of Q3 is approximately about INR 405 crores, INR 406 crores. That's it.

Your outstanding as in 1 DPD plan.

No, no, no. Outstanding, that's all. Not -- this is not delinquent.

Okay. Okay. So sir, then if you can just explain to us what is -- excluding the Supreme Court dispensation, what would our GNPL ratio be?

Less than 1%. Before that, it is 0.68%. So if I add that, it will be still less than 1%.

The next question is from the line of Gaurav Kochar from Mirae Asset.

I have 2 questions. Firstly, on OpEx...

Mr. Kochar, may I please request you to speak a bit louder, sir?

Yes, is it better?

Yes.

So I have 2 questions. Firstly, on OpEx. I mean there was a sharp jump in OpEx. Any one-offs in here? Or...

Yes. Actually, it's one-off because salary revision is due, and therefore, we had made provision of INR 6 crores. So that's a one-off. So I think that's the only one-off. Since the base is small, I think, because of that, the percentage increase is high. So -- I think but for that, we had spent some money on CSR and gratuity to the extent of INR 1 crore. I think rest all is normal, only this is one-off.

Sure, sure. And the second question is on margins. While the reported margins is closer to 4% and even you earlier in your call alluded to steady state margins of 3.4%, I'm just wondering, given the funding cost is 5.5%. 5.6%, and incrementally, we are still making around 150 basis point spread and maybe more in -- if I -- I mean, on the balance book, you would be making more spreads. So I mean what exactly will take the margins down if the back book is also repriced? Just wondering that 70 basis point of margin compression, would it come from yield suppressing further? Or will it be a function of some sort of catch-up on the back book which is pending?

So basically, there are 2, 3 things. One is, going forward, CoF won't be at this level. So definitely, there might be a slight increase in CoF. So whilst there is increase in CoF, banks probably may not drop yields, right? Or they may not increase because they have CASA, so which is a big plus for them. So NBFCs and HFCs, they don't have CASA. So then margin might come down. And therefore, I'm saying this 4.12% might come down and even 2.91% might come down because we want to play this for next at least 6 to 8 quarters. Because now we want to equally focus on both growth, profitability and asset quality with risk. So all the 4 parameters we want to focus, and therefore, we feel that margins would shrink.

Okay. Sure. And I mean, on the incremental cost of funds you mentioned, if I look at the share of borrowings, CP, NCD, which is basically the capital market, is only 20%...

See, I can only say this much, our market borrowings is quite low as a percentage. We have an internal threshold of 15% for CP in the overall mix, okay? So -- and the rest is from banks. So to that extent, we have a large proportion in the mix which is non-market. Suppose if I have to talk only about banks, the cost of raising funds would be around 6%. So as a mix, you get about 5.5%, 5.6%. So this could slightly change by 10, 15 bps going forward. But I think, by and large, it will be in the range of 5.5% to 6%.

Sure, sure. But given that even some of the larger HFCs are getting cheaper money through bond market, will it not be fair to switch some of our bank borrowings to the bond market?

We have. So whatever I mentioned now, that also includes bonds.

Okay. Okay. Sure. Sure. Understood. And lastly, sir, more structural question on the branch expansion. Given that our disbursement is kind of stagnant for many quarters, even pre-COVID, if I were to look at 2018, '19 levels, do you see that the growth has peaked on a per branch basis and the branches have matured and incremental growth will be a function of branch addition going ahead?

Not at all. Not at all. While I say that we will open about 12 to 15 branches every year, this year, we couldn't open because of COVID. Otherwise, coming year, we will open at least 12 branches. Our plan is 12 to 15 every year, okay. While we keep expanding our branch network, the potential from existing number of branches is immense. So we can grow our book at least by another 50%, 60% with existing number of branches. So I think growth -- for growth, opening more branches is not required. But to be future-ready, after, let's say, 2 years or so, we want to open branches today. And therefore, we will continue opening branches from coming year onwards.

Right. Okay. Sure. Sir, last question, if I may squeeze in? I mean what has held back the growth in this quarter? I mean is it the state of Karnataka that has not seen any sharp uptick, like some -- like Maharashtra has seen a very good pickup. So is it more geography-specific? Or you see this as a broad-based real estate recovery? Just your thoughts on this?

No, actually, demand is back, and we don't see any challenge. The only challenge what we have faced in Q3 was in the state of Telangana, government had -- they wanted to change the system. And therefore, they had stopped registration for 2.5 months. Actually, they had anticipated about a month or so, it got delayed. So last quarter, out of 90 days, we lost 75 days. Mid of December, it opened up. So we did only 15 days business in Telangana. Had we done full quarter business in Telangana, our disbursements in Q3 this year would have matched up with disbursements last year Q3. So I don't see any issue because there was an issue in Telangana, which is region-specific and something beyond control of Can Fin, which got resolved mid of December. I think now there is no issue.

The next question is from the line of Anirvan Sarkar from Principal AMC.

Congrats on a good quarter.

Thank you.

Sir, just 1 question. What's the total borrowing number for the quarter?

INR 18,200 crores.

And what was this number in the previous quarter?

Previous quarter -- because, yes, it will be almost -- it will be 18 -- 1 second, INR 18,000-and-odd crores only, so not much of a difference because we retired some loans, we repriced some. So we keep doing this month-on-month. It's about same, INR 18,100 crores, I think.

The next question is from the line of Rahul Maheshwari from AMBIT Capital.

Hello? Am I audible?

Yes. Please go ahead.

Sir, just 1 question on your broader strategy, which you highlighted earlier, the growth which you are witnessing and also in the interview in morning, you had told the shift towards not to the rural but to the Tier 1 city because in the last 4, 5 years, we have witnessed that there was a shift from metros to rural, now again to Tier 1. Can you explicitly -- in detail, can you explain in which broader areas you would be growing and the branch expansion which you're planning 10 to 12 on an annual basis, where it would be there? And just on the follow-up on continuing that, sir. Are you sure with the kind of after reducing the margin or the yields which we have reduced in order to maintain the retention strategy, you're confident that now whatever the customers are there, that won't be going away to the other large HFCs or to the banks? And how you look in a risk-reward, on that basis, sir?

Sure. Nothing has changed in our strategy. Our strategy what was there 2 quarters back, 4 quarters back, remains. Because we are more competitive today, we have an additional play in big cities where we can try and tap, build the market. That's going to be additional business. With increased competition from banks, both private and PSU, so we thought we should have a cushion, and this is that cushion. So nothing has changed in our strategy. When we open branches, we will open branches in Tier 2, 3, 4 kind of cities. That strategy will not change because there, we have the power to price. So we would not let go of that power, okay? Only thing is, today, since our rates are very competitive, and there is opportunity available, so we will also try to get a share in the pie, which we were not getting earlier because of our pricing, that's all. That's number one. And -- can you repeat your second... So number 2, on the margins, we are pretty sure that we'll be able to maintain our margins. So I also talked about that a little while ago. Now since we have advantage of cost, because of efficient management, we'll try and do that. So in spite of reducing yields, we will be able to maintain that margin, and it will also help us in terms of growth going forward.

Okay. And sir, just a follow-up. As you told, there would be a slight increase into the average ticket size. So on an average basis, your average ticket size used to be INR 1.8 million, though on metros, it used to be INR 3 million and nonmetro INR 1.2 million, how the structure is going? And what is the ground level you're finding in terms of consumer behavior. As you said, that the affordable housing is back to the normalized level. So can you give a rough color on the ground level activity in terms of housing trends?

I think market is very buoyant. I think in all the small towns and cities and also in big cities, wherever it is self-construction or purchase of independent house or purchase of small builder units, I think the demand is robust. And we are witnessing that in all the markets where we are present. The NCR is quite low, but I think that's for a reason otherwise rest all markets are really doing very well. So because of our focus on builders now, because there is an opportunity due to our pricing, our ticket size might see a small change maybe from INR 18 lakhs to about -- to, let's say, INR 19 lakhs, INR 19.25-kind-of-lakhs. That is the second part. Third one, which you asked, so we are very sure and we are seeing that now, we're able to retain most of the customers. So customer would want to switch, A, because of rates, or because customer gets an additional funding. Now we have a very robust policy. If customer is eligible and if the LTV supports, we can give more to the customer, instead of letting customers go to any other institution. B, today, our rates are very competitive. So customer would go only because of these 2 reasons, either getting a higher limit or better pricing. So we have both with us now. So you may have still about 3%, 4% of customers who may still want to switch. That's because they have liability account with a particular brand or bank, and the bank insists to move all the loans to their -- to that bank. So you may have some reasons beyond these two, but I think about 90% to 95% of the customers who would want to switch to other institutions, we'll be able to retain.

Okay. That's very encouraging, sir. And just 2 bookkeeping questions, sir. One, what is the prepayments we have received in the current quarter, and second, currently, the developer book is INR 5 crores and you are telling that there is a good opportunity selected one. So how -- what is the internal cap as per the policy where the developer book can go up to? Currently, it's very miniscule, I agree to that point. But what is the upper limit which you're planning?

See, we don't have -- see, as of now, our strategy is not to focus on CRF. So as of now, there is no thought on that. If at all, there's opportunity in future and if we feel that we should take some exposure, at that point in time, we may. But as of now, we don't have a plan to grow that book at all. And in terms of prepayment, it is quite normal. So BT was slightly more in quarter 2. Quarter 3, it has come down because of our pricing strategy. The other is, no, it's only normal prepayments.

But generally, how much it is, sir, just a follow-up on prepayments as a percentage of...

All put together, monthly, it's about INR 360 crores to INR 370 crores, depending on the, yes, collections.

The next question is from the line of [ Radhika ] from [indiscernible] Asset.

I have to 2, 3 questions from my end. So first, if you could just help me with the write-off number for this quarter?

Write-off numbers?

Yes.

We've not written off anything. We've not written off anything. We have not sold a portfolio. Nothing, 0.

Okay. And could you give some highlight on your ALM profile, like regarding the on-balance sheet liquidity and the unutilized business which you have?

So we -- as of now, we have about INR 4,000 crores where agreement is signed but unavailed limits, so which will take care for next about 8 months.

All right. Next 8 months. Okay. And the last question is that like since there has been a growth on a -- in the loan book on a Y-o-Y basis and on a Q-o-Q also it's flat. So reasons why the interest income is being down both Y-o-Y and Q-o-Q?

Because of the -- because yield has come down.

That's the only reason? Because of the yields?

Yes, yes. The only reason why income has come down is only because of yield. And therefore, I said we should look at margin. See, even if you look at our PAT margin, there is an improvement from 20 -- I think from 22% to about 28%. Both at net and operating level, margins have improved. So if you look at revenue, revenue has come down, that's because of the yield.

Of yield. And just on the last question, like if you can give me the SMA split, of SMA 0, 1 and 2?

Generally, we don't share that actually in public domain, but all I can tell you is that we have the lowest delinquent pool in the country, in the entire industry. Also, if you look at the NPA, I think, -- yes, you can work backwards and figure out what is the total delinquent pool.

The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

My -- I have 2 questions. The first question is on the margins and your customer set. Did Can Fin Homes have a unique customer set that is under attack from competition at this point of time, which is why your margins are under pressure? In the sense that how do you see this long term? Is it like a one-off situation, like you said, because the corporate book is slow? Or do you feel that there's some kind of permanency effect with respect to competition?

Okay. I've been saying this since last 6 quarters that the margins are not maintainable, it will come down. That's only because we wanted to grow. So at a point in time, it's also a question of how fast you want to grow and at what profitability? So I'm talking about 6 quarters back, which is before COVID. So even then I had maintained that our NIM and spread will come down because that's a strategy. We want to grow our book. And we also showed growth of 12% in quarter 3, and quarter 4 would have been 18% growth. So we have shown growth for -- growth in Q3 and growth in Q4 till about 23rd of March because 24th of March, there was a national lockdown. So very clearly, we have demonstrated growth in both book as well as disbursements. Now what is happening now in the market is -- for example, if there was no COVID. If there was no COVID, our rate probably today wouldn't have been 6.95%. Now why it is 6.95%? It is 6.95% now because there is heightened activity in retail, especially in mortgage. Why retail? Because corporate has not kicked off, SME is still yet to take off. So both are really struggling. This is the feedback from most of the PSU and private banks. And you can also see in their segment-wise growth or degrowth. Now because of this, and HL is the only book in retail where the balance sheet can grow much faster. All the banks are focusing on HL. Now a couple of months back or let's say, 3 to 4 months back, market was not completely back. Even today, affordable is back, but not nonaffordable, in my sense, in my opinion. So BT is an opportunity. So when all these banks think of BT because BT is low-hanging fruit, very easy to grow book. And therefore, the easiest thing is to try and do a shift from HFCs and NBFCs because the portfolio is a bit higher yield. And therefore, we wanted to protect our book and also grow. And therefore, we have the strategy of aggressive pricing. Now this could be there for next few quarters. We will take stock after a few quarters, whether we should go with the strategy or get back to the earlier strategy of maintaining a differential in pricing and then grow the book. So this is the strategy, at least for next at least 4 to 6 quarters. The reason is because corporate and SME has not picked up, there is too much of competition in this space, especially on takeovers from HFCs and NBFCs, we want to protect our book. And fortunately, the company is doing very well, high on liquidity, very good profitability. And also CoF is very low for us. And therefore, we thought we should play this for next few quarters.

Fair enough, sir. The second question that I had, and I'm sorry if I missed it, I joined a little late, is on collection efficiency. Again, demand -- has the collection efficiency reached robust levels and all the moratorium customers are starting to pay up and so on?

See, to be very honest with you, immediately after morat, collection efficiency is bound to be high. I also mentioned this in a couple of my earlier engagements. It is bound to be high because customer had opted for morat. While the morat was for 6 months, customers' loss of income would have been for maybe 2 or 3 months, maybe max 4 months. So customer would be left with excess cash and therefore, immediately after morat, the collection efficiency would be actually higher than pre-COVID levels. And therefore, we had discounted that. And I had also mentioned that our collection efficiency would drop by 2%, 2.5% in a steady state. So I had mentioned this. So now if we talk about, I think, for us, the collection efficiency has rationalized. So our collection efficiency is about 93%. This is -- it used to be very high earlier, and that is because immediately after morat -- event like morat, because of excess cash flow, the collection efficiency would look higher. Actually, that's not the case. It would moderate in the next 2 to 3 months' time. We feel that now it is moderating. I think, for us, Jan would be the month where it would have completely moderated, and we are now slightly better than pre-COVID levels. So that's the big comfort for us because our NPA is low, our deemed NPA is quite less. Our restructured pool is just INR 87 crore, which is less than 0.5% of the portfolio, and collection efficiency has moderated, and it has come back to the original level, which is slightly higher than pre-COVID levels.

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

Congratulations for good set of numbers.

Thank you.

Sir, firstly, the question was with respect to our competitive pricing strategy. So the broader thought process, as I understand, was to retain book. But incrementally, do we expect that the growth -- I mean, do we see that when you are changing the strategy from -- as you said, after 2, 3 quarters, we might relook at it. But do you think that you will also want to change this stance because you are getting growth of better customer profile because of the competitive pricing. So would you want to change this stance also?

Okay. So now we had no option but to change, and we had comfort of CoF, okay? Now it is not just growth, we'll be growing at slightly higher because now we will not only try to retain the book, we will try to acquire customers from the likes of State Bank of India or maybe ICICI or HDFC Bank. So now we have an opportunity of doing a takeover from big PSU and private banks. So that will give us additional lift in our disbursement and therefore, the book growth. Now will we continue with this strategy after a few quarters? I think that all depends on all the investors on this line, how comfortable you are. So if you would like to see a growth of 8%, 10% with decent margins? Or you would like to see a much higher growth, let's say, 16% to 18%, with slightly lower margins? So it all depends on, a, market condition; b, how comfortable we are and also what investors basically would like.

But sir, just 1 follow-up question with that was that since -- I mean, if we look at 2 quarters back, we were saying that we wanted to get into the semi-urban and rural areas incrementally by also expanding branches there. But then with this strategy, we are growing in all the directions is what will be the thought process, right?

No, no, no. I mentioned this is a short-term strategy. The short term for us is 6 to 8 quarters. So after 6 quarters, we will review whether we should continue with this strategy of aggressive pricing or we should resume back to our earlier strategy. So at this point in time, it is difficult to say because we should see what is the recovery time for the corporate segment and the SME segment. See -- because see, today, there's too much of competition. If I'm not at 6.95%, I will degrow. I will degrow in both book as well as loan disbursements. I will degrow. Since I have advantage of CoF, then why not utilize that by dropping yield. Suppose if corporate and SME picks up, then what will happen? Focus of all these banks will now tilt from retail, especially mortgage, SME and corporate because growing a corporate book or SME book is much faster and better for a bank compared to mortgage. Then you would have -- you would not have that kind of competition which you are seeing today. So once we reach that position, then we will play accordingly on pricing. So our strategy of focusing on small towns, nothing has changed. Our portfolio mix, regional mix, profile mix, our pricing strategy, nothing has changed. This is only for short term.

Right, right, right. Sir, second question was, like, I just wanted to confirm that -- I mean, because earlier in your comments, you said that if you look at the pricing side, because of pricing competitiveness, we might be -- are we exploring opportunities on the construction finance side? Or we are not looking at that aspect at all?

Correct. No, no. As of now, there is no plan to look at construction finance.

Okay, sir. And the last question was a data-keeping question, sir. Has there been any interest reversals during the quarter?

Interest reversal for what?

For -- on a prudent basis for the NPAs that could come up?

No, no. What we have done is, for the deemed NPA, on that we have provided additional provision which covers both interest as well as overall provisioning for the traditional increase in NPA. That we are fully covered. See, our total COVID provisioning is INR 73 crores, which is more than adequate. And also for the deemed portion, deemed NPA portion, we have adequately provided not only as a provisioning but also for interest part. Interest part is hardly anything, it's a very small amount, but still we have provided.

The next question is from the line of Antariksha Banerjee from ICICI Prudential AMC.

Can you hear me?

Yes. Please go ahead.

Yes. The first 1 is on growth. Can you tell us what is the sanction number for the 9 months?

9 months, just a minute.

Yes.

About INR 2,400 crores.

Okay. So this Telangana impact of 2.5 months, sir, was it only on disbursements or sanctions were also closed during this period?

No, to a large extent, disbursement got impacted and to some extent, sanction.

Okay. What I want to understand is, whatever the impact was, is that going to come up in the form of a pent-up extra for Q4? Or is that not going to happen?

So there'll be some pent-up. Yes, definitely, yes. Because this is not true for Can Fin, this is true for entire industry. Industry. So the pent-up demand would be there. So it will show up in Q4.

Okay. I was actually trying to look at your trend of sanctions. So -- I mean, for the last 2, 2.5 years, it's been there roughly at about INR 6,000 crores and this year, obviously, half of the year has gone because of COVID, but -- so structurally speaking, when you have to grow 17%, 18%, when do you see the sanction profile picking up from the INR 6,000 crores mark per year?

So as I mentioned, I think this year, because of COVID, definitely, we can't compare this year with last year. Definitely, we can't. So we feel that coming year we'll be same as last year or maybe slightly better than last year.

Okay. Okay. And the second is on the collection efficiency. This 93% number that you mentioned, what is that exactly? How do you define it?

Out of 100 customers, 93 customers pay up and the balance 7 customers, they will default and subsequently pay up. Some will pay up, some will move bucket.

So 93 is basically bound -- I mean on-time collection?

No, 93 is basically -- 93% of customers, they end up paying, balance will move.

Okay. No. I mean is it that they end up paying on the due day, and you have the rest of the month to recover from the balance 7 also? Is it similar to farm credit or is it...

No. For example, out of 100 customers, we rank 100 customers, out of 100, 93 pay up in a month and 7 would remain unpaid. This is the gross number. The net number would be much lower because somebody who had not paid also will pay up and become regular. So this is a gross number. I'm saying 90 -- when we talk about collection efficiency, against demand, what gets collected in terms of amount is 93%. And if you see this in terms of numbers, it will be plus or minus 0.2%, 0.3%.

Okay. And the last one is, sir, how much of repayment of the liabilities is due for the second half of the year? And how much would be from term loans and how much is covered?

So that we would have given in the...

No, the overall liquidity what we have, about INR 4,000 crores is more than sufficient to take care of all the repayment commitments.

Just to answer your question, interest and principle repayment is going to be about INR 1,600 crores.

In the second half, right?

Yes.

So would it be fair to say this INR 1,600 crores would reprice at about 200 basis points lower?

This is in the quarter. This is for Q4. And if you take Q1, you would have, let's say, another INR 1,000-odd crores.

Got it. I was actually trying to arrive at how much lower this amount of quantum of borrowing would reprice at? Because your incremental cost is much lower than your on-book cost, right?

No, no, no. But that is we are repricing the existing loans also. So we are repricing existing loans also. I think -- so that is not a worry. We are retiring all the high yield -- high-cost borrowings. So that we keep doing regularly month-on-month. The only thing is, going forward, further improvement in CoF is not expected. So it will be between 5.5% to 6%.

Got it. Okay. And in terms of leverage, where you are, you're comfortable, is it?

We are at 7.3%.

Yes. So above 7% is fine? Or are there plans to bring it down below 7%? Because you'll be growing from hereon is what I...

8% or less than 8% we're comfortable. Up to 8%, we're comfortable.

The next question is from the line of Bhavik from Nippon India AMC.

Sir, I have only one question. I just wanted to understand the average age of your customers on the book and incremental customers that we are adding, what is the profile of these customers? I just wanted to understand these 2 data points.

See, the average age will be in the range of -- it will be about 35 to 37 years. That's the average age. And the profile -- earlier, I used to say, not just the customers, but now it's across all spectrum, the entire spectrum. But the percentage of high profile customers will be less for us. That's all. So majority would be -- see, just to give you a sense, our salaried customer average income would be about INR 40,000 per month.

Sure. And sir, you mentioned that competition is heating up. Any specific players or a segment of players like a PSU bank or a private bank? Or is it across the spectrum, like even NBFCs are trying to compete hard, even though it is not profitable for them, but they are coming and competing hard in the market? Any sense on that? Or is it PSU banks specifically who are getting more aggressive because of the advantage of cost of funds?

No set of banks are eating up into our book because we have changed our pricing. So I think that risk is not there for us. Now while I say that, there will be some amount of business which will go. At the same time, we also have BT in opportunity. But generally, for the industry, all the high-yield book will shift from HFC, NBFCs to banks. And when we talk about banks, it is State Bank of India, ICICI and HDFC.

Understood. And sir, last question is, what number of your branch managers would retire maybe this year? Like how does that equation look like on the bank manager front?

That'll not -- I mean first of all, the number is very less.

It is very, very less. And also it's not going to impact.

No, that'll hardly be any number. And anyway, we have -- we will have a backup even before the person could retire 6 months in advance. So that's a very small. Anyways, we have just about 200-odd branches, so I think that will not affect at all.

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

Hello?

Yes. Please go ahead.

Yes, sir. Sir, my question was on disbursements. So as you highlighted, because of the Telangana issue, we probably have been short of about INR 2.5 billion to INR 3 billion of disbursement this quarter. So against INR 1,100 crores, it could have been INR 1,400 crores. In Q4, since we'll get the full quarter of -- full quarter benefit after we cut down the yields, do we expect disbursements to be -- to the tune of INR 20 billion -- INR 18 billion to INR 20 billion in Q4?

sorry, INR 18 billion to INR 20 billion? No, we will better our last year Q4 numbers.

Okay. So basically, higher than the INR 1,300 crores, INR 1,400 crores, but maybe in between INR 15 billion to INR 20 billion is what you are guiding?

I'm talking about loan disbursements. Last year, Q4, we will do better than that.

Okay, sir. Okay, sir, that was the only question and rest all questions were answered.

So that will be over, I think, INR 1,600 crores.

Yes, yes. That's what I was referring to.

See, last year Q4, we did INR 1,554 crores, INR 1,554 crore. So this quarter, we will improve on that.

Yes. So roughly INR 17 billion, INR 18 billion-odd to INR 20 billion, it would be in that range?

I won't give [indiscernible] will be more than INR 1,550 crores.

The next question is from the line of Rahul Maheshwari from AMBIT Capital.

I just wanted that -- as you said that the cost is now bottoming up at 5.5% to 6% is the bottom where you're witnessing. And the yields are also at near to the banks and the large HFC. The growth level which you're telling for next 4 to 6 quarters, you are targeting 16%, 17%. Is it a conservative number, sir? Or for -- just want to get that sense. And second thing, sir, that the cost which you mentioned, incremental cost of funds is at 5.5%, but tomorrow, down the line, if any divestment takes place from the Canara Bank, how -- what the cost increase can take place? Because in the current juncture you told you have a high -- well-rated company you are and you are getting across -- the banks are getting funding. But in case if that event takes places, how your costs can move up?

Okay. First of all, I mentioned that in next 6 to 8 quarters' time, we will reach to a growth level of 16% to 18%. So it's not going to happen from next quarter. For example, next quarter, the growth is not going to be 16%. I said in next 6 quarters or so, we will reach to a level of 16% -- 16% to 18% growth, number one. Okay. Number two, just in case divestment happens, there could be increase in our cost of funds by 25 bps, that we can easily manage in our pricing.

Can you pardon, 20?

Sorry, come again?

Can you repeat how much bps increase, 25 bps or how much?

Max 25 bps.

The next question is from the line of Preethi RS from UTI Mutual Fund.

Congratulations.

Thank you.

Sir, I want to understand the competition in our core business -- core segment, where you talk about that you continue to enjoy pricing powers. So who are the HFCs that you encounter usually in those areas if it's not the typical HFCs or banks?

I don't want to name the company. But yes, today, you have 2 set of institutions. Could be a bank, could be NBFC, could be HFC. Now typically, HFCs barring 1 or 2 would be having high CoF. And therefore, the yields are going to be high. And on the other side, you have all the banks, they have advantage of CA and SA. And therefore, their cost is going to be much lower, and therefore, they can compete on pricing. Now we are in a sweet spot, we may not have the advantage what bank could enjoy, but we also don't have the disadvantage of what many HFCs would have on the cost. And -- so we are in a sweet spot. We are able to be available in places in geographies where banks are not there. And there since our yields are going to be much lower than the average HFC yield, so we are in a better position to do business in those pockets at a yield much higher than bank yield. So to be very honest with you, today, we don't see too many competition because our pricing has come down even in big cities. So as long as we're able to be there right at the doorstep of the customer, we'll be able to grow our book.

Okay, sir. Got it. And secondly, let's say, if there was a customer before you took this pricing strategy, changed the pricing strategy, if the yields or the rate was probably 11%, just for example, so that would go down by what percentage?

If customer wants to switch, then his rate would be 6.95%.

Okay. It's going -- I mean you're not building in...

It depends. So 80% of our portfolio will -- if at all everything gets converted, I mean, which rarely happens, that will be at the starting price.

The next question is from the line of Satyam (sic) [ Sayantan ] Bhowmick from PineBridge Investment.

I wanted to understand 1 thing. You mentioned that there was a one-off on employee cost this quarter. If you could just explain what this is? And how should we read employee costs going ahead? That's first question. Second, while we will be competing with some of the better or some of the most competitive HFCs and banks, is there any room for us to reduce our operating costs? And last question is if you can give -- if you can spell out what is our total provisions we hold, including both NPA provision as well as our standard asset or COVID provision?

Sure. Okay. So in terms of provisioning, it's a one-off because we -- generally, we do salary revision once in 3 years. So this time, it took 5 years and because of COVID, it got delayed. So this is one time, and we have provided INR 6 crores for that. So that is a onetime item. And second, in terms of cost to income, we'll be in the range of about 15% to 16%, and we've also planned for some investments in IT which is very, very critical. So that could see our cost to income going up by 1.5% to 2%. Not now, going forward, I think, periodically. So while we have taken many measures to rationalize cost, there are certain good costs to incur, and that we would always explore to increase and improve efficiency. And on total provisioning, see, for COVID, we're holding about INR 73 crores, and we are holding additional INR 13 crores for the deemed NPA, including interest part. And this apart, for NPA, we're holding INR 55 crores and standard asset provisioning is INR 74 crores. Totally, about INR 216 crores we're holding. So our provisioning, that is INR 73 crores plus INR 13 crores, INR 86 crores, is more than sufficient for any shock because of COVID.

The next question is from the line of Miti Gupta from IIFL.

I have couple of questions. So first is on the borrowing mix, like what type of a borrowing mix currently company is having? And second is if we go through the product-wise split which is there on the Slide #8 of the presentation, so what does this top-up personal loan defined as? Third question would be, what would be the absolute GNPA number if we exclude the Supreme Court order, like the total GNPA excluding the Supreme Court order, what would have been if we would have taken into account all the accounts? And the last question is on the collection efficiency. Like you said that it is 93%. So is it on the billing versus collection? Or is it on the billing plus -- like what all we have collected, including the overdue amount as a percentage of the billing?

Okay. So if you look at the funding mix, bank is about 57%; market, which is CP and NCD is about 20%; deposits 2%; and NHB regulator is about 21%. This is the funding mix. Okay. So on the GNPA, our GN -- our NPA is 0.68%. And if I include deemed, it should be less than 1%.

No. I just wanted to know what would be the absolute number? Like you have written...

Absolute -- yes. So book is about INR 21,004 crores. So you can calculate. NPA is about INR 150 crores.

INR 141 crores.

INR 141 crores.

So this is excluding -- this is with the Supreme Court provision, right? If I don't take into...

It's given in Slide #6, actually.

Yes. I'm listening to that only. So INR 141 crores is taking into account the Supreme court ruling. So if I don't take that into account, what would be -- my number be?

No, that is excluding. We are talking about a INR 142 crores, correct, that is...

The overall NPA is less than 1%, including deemed NPAs.

So this INR 142 crores...

What would be the pro forma number in this?

Just a minute. INR 142 crores, what you are seeing in Slide #6, that is gross NPA. That is equal to 0.68%, okay? Now I'm just giving some kind of a data. Including deemed, it will be less than 1%. So book is about INR 21,000 crores. So you can calculate.

Okay.

And on the collection efficiency, this is against the demand, what gets collected in that month.

So demand includes your overdue?

No. Demand does -- demand will not include.

Okay. So it is currently the billing efficiency, which is 93% as of now?

Yes.

Okay. And what about the top-up personal loan, like you have mentioned in the...

So top-up, actually, both are the same. We have some product differentiation. Otherwise, both are same. So these 2 loans are no secondary loans based on the primary collateral, depending on consumers' eligibility, largely being for allowed purposes.

Sorry. It is made for its purpose?

Both the same. Personal and top-up both are same -- one and the same.

So is it primarily for the home loans or for the LAP purpose, sir? Like what would be the nature of the loans for?

So this could be for both. This could -- see, there can be top-up for LAP loan. There could be top-up on home loan also. It's available on both.

And what does the other comprises of? Like I think the INR 38 crore book...

Other -- so basically, if you look at the product mix, home loan is 95% and the balance, 5%, would include loan against property, then lease rental discounting, then loan for commercial properties and a very small extent of staff loans.

[Operator Instructions] The next question is from the line of [ Abhishek Sharma ] from SK Capital.

Congratulations on a good quarter.

Thank you.

Sir, I was just trying to understand or reconcile your commentary. You mentioned that the market is quite buoyant. And that's -- now we also know that COVID has fairly stabilized. But at the same time, you're saying that the growth will take at least 6 to 8 quarters to come back to the 17%, 18% that you are mentioning. So why is the slow pickup in growth?

Yes, I'll tell you. So this quarter, that is Q3, we would have matched up with last year Q3 but for the issue, what we faced in Telangana, so which means no growth.

Okay.

So Q4, we will do slightly more than last year's Q4, that means marginal growth.

Yes, sir. Just to make a point there. Last year's Q4 is already on a low base, right, because of the last week's shutdown?

That's what -- that is okay. That is hardly anything. That is fine. I'm still saying -- because, see, we are talking about 7 days, 8 days lost in March, vis-à-vis what happened during COVID period. And therefore, I'm saying to reach to a level of 16% to 18% growth on a steady state, it will take about 6 to 8 quarters. That's the limit. This is the outer limit.

Okay.

And also -- see, when you talk about 16% to 18% growth, so for example, next year, next year, Q1, I can't compare with this year Q1 because this year, Q1 is almost a washout. So next year will be compared with previous year, not this year. So there's a skip of 1 year. This year is skipped.

So you're saying FY '22 Q1 will be compared to FY '20 Q1?

Exactly. Correct.

Okay. So the growth will be on that quarter, not...

Exactly. Not this year because this year, anyway Q1 was a washout, Q2 also was not that good, Q3 is good, Q4 will be good. So we can't compare the next year with this year. We have to compare next year with previous year.

Of course, sir. Okay. Sir, my next question is on the trend of NIM. So in the last 5 to 6 quarters, the management has been saying that it expects the NIMs to come down, like they're not sustainable. But the next quarter, the NIM comes up even higher. So is there some inconsistency like in the operation...

So we are all very happy with that.

No, sir. I just want to reconcile the two, sir.

No, no, no. See, the problem is the drop in yield, if it is lesser than the drop in CoF, the NIM will be higher and the spread will be higher. So, so far, it's happening like that. So it's good if it happens for another few quarters. But I think eventually, it will come down. So we, as a company, we should always ensure that the drop in yield is much lesser than the drop in CoFs.

Right. No. Sir, I'm asking, actually from a modeling perspective, like... [Technical Difficulty]

Sorry, we lost you. We can't hear.

Sir, we've lost the line for the current participant. We move on to the next question from the line of Hatim Broachwala from Union Mutual Fund.

Sorry, sir, I've joined a little late. Sir, my question is after the reduction in lending rates, which you have talked about, what is our targeted spreads going ahead?

Eventually, it will be 2.4%-plus. Today, it's 2.91%.

Okay. So it should be -- so 2.4% would be a long-term spread or only for next 4, 5 quarters?

No. As of now, we have an aggressive pricing strategy. So if we continue with this strategy, our spread will come down to 2.4% from 2.91%. So it may take another 4 to 5 quarters.

Okay. And sir, Telangana, how much that forms part of our AUM?

Not AUM. Incrementally about 20% and the AUM also will be -- it won't be 20%, about 17%, 18%.

The next question is from the line of Aswin from HSBC.

My question was related to the difference in the incremental yield, which you said you're offering at like 6.95% for the new customers versus currently on the book, which is more in the range of 9.7%. So just wanted to understand like what would be the -- I mean, would there be a substantial difference in terms of the customer profile itself between these 2 groups? Because otherwise, like why would the...

So there could be 2, 3 reasons. One, there could be slightly difference in profile or it could be a different product. So it's a combination of profile, product and to a very small extent, geography.

Okay. But like in terms of the segment-wise, will there be any difference between salaried and self-employed?

No, for example, self-employed, our rates are higher compared to salaried, okay, at a portfolio level. So I think that differential will be there. So it is the profile, it is the product. And therefore, I told you it's a combination of all.

The next question is from the line of Shubhranshu Mishra from Systematix Shares.

I just had this question about the customer retention ratio. Generally, what happens is that a lot of HFCs, they get aggressive on the top-up personal loans in order to maintain the yields. So are we thinking of that? And just a data-keeping question, what is the FOIR on our salaried loans and the FOIR on self-employed loans? I don't know...

So in terms of pricing, our top-ups are 10 bps higher, okay? In terms of FOIR for salaried, it varies. We have a step-up. So the higher the income, higher the FOIR, the lower the income, the lower the FOIR. It starts from 50%, it goes up to 65%. And similarly, on self-employed, we have a step-up FOIR model.

What is the range for self-employed, sir?

Self-employed also, it will be in the range of about 60% to 65%, 70%.

Right, sir. And why are we not being a bit more aggressive in the top-up personal loans in both the categories, wherein we'll be able to maintain our margins and we'll be...

So we didn't want to force-sell top-up. If a customer has a need, customer will approach us. So trigger for us is when customer comes to us for a top-up or a customer wants to switch. So depending on the needs, then we offer top-up.

Sure, sir. And what is the attachment rate on our loans, sir?

What attachments?

Insurance attachments.

Insurance is about -- blended will be about 70% because we have both life and property, so blend would be about 70%.

The next question is from the line of Gaurav Jani from Centrum Broking.

Congrats on a good quarter. Just two questions. One is, sir, on the provisioning front, last quarter, we had about INR 86 crore of provisions that [indiscernible] that number is maintained [indiscernible]. So could you please explain the movement of provisions? So I think -- are we [indiscernible] the pro forma numbers and the restructuring numbers? And what is the effect, please? If you can...

No, no, no. All this is ad hoc only. So -- therefore, I mentioned that our provisioning is more than adequate. In fact, next quarter, because March is a cutoff, we'll be writing it back.

Okay.

I've shared with you my provisional NPA, which is actually NPA plus deemed. I've shared with you those numbers. You know what is the book. And you know what is the provisioning. And you know the breakup of standard asset, NPA for COVID and contingent. So we have provided more than enough. And therefore, this quarter, we didn't find the need to provide anything more.

Sure, sir. Got that. Sir, secondly, on this overdue pool, which is about -- last quarter, you had mentioned about INR 660 crores or 3% overdue book right now, which is down to about INR 400-odd crores. So what's the outlook? I mean how would the recovery shape up in this book? And is this...

Yes. That is not overdue. That is outstanding, that's all. It may be overdue, it may not be overdue because morat would be from both regular and non-regular, the regular and delinquent pools. That's only outstanding, not the overdue pool. And once we have no deemed NPA, NPA and restructuring numbers, the INR 660 crores doesn't become that relevant for discussion because now that is past.

No, sir, what I'm trying to arrive at is, is this due -- or not the overdue pool, but the due pool, so would the recovery shape up? And are we to assume that going forward, our GNPA numbers, even on a pro forma basis, would not cross 1%, sir?

No. It may cross 1%. I may cross [indiscernible] percent. All I'm saying is that I think Q3 was a reasonable time for the morat pool. And also what is the pools of restructuring that will give you a broad sense on what the direction is for NPA. So next quarter, I'm not saying it will less than 1%, I'm only saying what it stands today is less than 1%. So next quarter, it may be more than 1%, it may be less than 1%. I don't know. I'm not committing on -- I'm not commenting on that. But yes, it gives a broad direction saying that what happened to morat, what happened to restructuring pool and what is the collection efforts that the company has put in, in the last few months. Because today, if we look at collection efficiency, it is 93%. And this 93% is after moderation. So our NPAs could be more than 1%. I'm not saying that because I've always maintained that in next 4 to -- I said this last quarter. So in about next 4 to 5 quarters, we'll be able to bring back NPA to the current levels, which is about 0.8%, I mentioned, okay? Because our NPA was 0.78%, 0.8% and then we have brought it down to 0.68%, more to do with Supreme Court dispensation. So we'll be able to bring it down to about 0.8% in the next 4 quarters. Since that 1 quarter is past, so in next 1 year's time, we'll be able to bring it down. So next quarter, technically, might be more than 1%. I'm not saying that it will be less than 1%. It can be more than 1%. But it looks like we have good hand on collections and NPA numbers.

Sure. Just one data point, sir, if you could sort of give us the INR 400 crore number you mentioned, is it entirely justified?

So that INR 400 crore also -- see, the INR 400 crore would be a subset of regular pool, subset of SMA-0, -1, -2 everything. So that number doesn't give -- because, for example, let us say, INR 100 crores was in SMA. Out of INR 100 crores equal -- let's say, equaling to 500 customers, of the 500 customers, only 300 offered for morat, let's say, which is INR 60 crores. So that INR 60 crores only is part of this INR 400 crores. The balance, INR 40 crores, is not part. And therefore, I said this has a mix of both regular and delinquent. Some people have taken morat, some people have not taken morat, so it's a combination of all these things. And therefore, I said, it's only a disclosure of what we had to make. Otherwise, this number doesn't really makes sense discussing at this point in time because it doesn't lead to anything.

Sure, sir. But no, I just wanted to understand the customer profile, but I got your point. That's it from my side. All the best.

Customer profile on the self-employed is we cater to small traders and somebody who's into manufacturing or service. There, the income per month could be in the range of INR 50,000 to INR 60,000. On the salaried side, average income is about INR 40,000. So the profile across our portfolio is quite similar.

The next question is from the line of Dhaval Gada from DSP Mutual Fund.

Congrats on good numbers. I just had two questions. One, to an earlier response, you mentioned that you have seen less pressure per se on loans getting repriced, and therefore, the margin is surprising your expectation. Just wanted to understand what percentage of loans historically come for repricing in the -- where you pass on the benefit historically versus the base rate, which is eligible. So is it -- like that number is lower than the historical trend as well or it's like business as usual from that perspective?

Earlier, we were doing the repricing based on the design. So based on the initial terms, we were doing that. Now immediately after COVID and because of competition and also pricing, so the BT out had increased. So what was -- what changed was the proportion of cases going out as BT. But for everything else, it was the same. So because of that, since we wanted to bring in the customers, we changed the present strategy. So if you see what is the outflow in terms of BT and also in terms of normal closure compared to pre-COVID levels and now, now it will have increased. And why it has increased because, as I told you, most of the banks are focusing now on retail, especially in mortgage.

Understood. Got it. And therefore, sir, I mean, this sort of full impact should be visible in the next 2, 3 quarters. As you see 1 full year, you'll see more impact of this. Would that be correct?

Yes. Therefore, I suppose if we continue with this pricing strategy, you will see that our NIM will come down and also spread will come down.

Understood. The second question is related to just a clarification on NPA part. So I mean approximately INR 200 crores is the pro forma NPA, assuming the Supreme Court dispensation was not there. And against that, I mean, just wanted to reconcile the provisioning number. So on the current NPA number, which is including the Supreme Court dispensation, about INR 55 crores is the specific provisioning. And what would have been the provisioning if you were to assume the pro forma NPA? So I'm just trying to understand how much buffer you have...

So I'm not saying anything. I'm just going by whatever you said because we've not quoted the numbers. I said less than 1%. Going by you mentioned INR 200 crores, so on INR 200 crores, even if you take 15%, it's going to be about INR 30 crores. Level 1 provisioning is INR 30 crores. And if you take differential -- exactly. So if you take the -- let's say, the number which you quoted, I'm now saying INR 200 crores minus INR 141 crores -- INR 142 crores is about INR 58 crores. So on INR 58 crores, if you take 15%, it will be INR 98.7 crores. And if you take interest reversal, add another INR 2 crores, so totally INR 10 crores. Against INR 10 crores, we are holding INR 86 crores.

Understood. Okay. And sir, just -- I mean, in terms of the thought process, would you have only 15% cover or you would want to build cover? I mean given that you've already provided just a future-ready perspective, would you keep 15% or thought process like you'll keep much higher this year?

No. See, because, see, every quarter, we do business. So every quarter, we make profit. So every quarter, we will provide. So to be -- to answer your question, I think quarterly profits is good enough to provide additionally because of stage movement. But having said that, today, we are sitting on a buffer of INR 76 crores, which -- I think which will take care of at the first level increase in NPA by at least INR 500 crores. Today, we are on a base of INR 142 crores.

[Operator Instructions] The next question is from the line of Rohan Mandora from Equirus Securities.

I just had two data-keeping questions. One is that what proportion of the existing book would have already availed the benefit of repricing? And second is that on the incremental disbursements that we did in 3Q, what would be at the competitive lower yields and what would be at the business-as-usual yields that we would have charged, had we not changed the strategy?

So to answer the first question, our yields were slightly over 10% about 3 quarters back. Today, it is 9.78%. So I think that difference is reflective of the repricing that we have done either because of BT or customer request. So that's the answer to the first one. On -- I think both -- 9.78%, I think, talks about both.

Sure, sir. Okay. So sir, if you could share what is the incremental yields during the quarter, 3Q?

Incremental yield. So we don't calculate that. But just to answer you, see, our starting is about 6.9%, so incremental yield should have been 7.3%, 7.5%, it's only a guess. I have not checked this.

The next question is from the line of Swechha Jain from ANS Wealth.

Most of my questions are answered. I just have one, two more questions. So one is I wanted to know what typically would be our login to sanction to disbursement ratio for 9 months this year and 9 months last year? And if you could also share the loan which has been sanctioned but undisbursed as of now, like as of 30th -- this 31st December?

Okay. Now the login to sanction, I think the conversion is about 93%, 94%. And sanction to disbursement is about 98%. We take -- the first disbursement is disbursed. So it's about 98%. Because after sanctioning loans, cancellations are very, very few, right? So if I have to compare this with last year and this year, this year, the mix has slightly changed. Salaried has slightly increased because the reductions in self-employed has slightly increased, so not drastically, but slightly. So this 90 -- if I had to talk about self-employed, then slight change in reduction ratio, it has increased. And salaried also would have -- approval would have increased. So the difference is not much. It will be about 2.5%, 2%.

Okay. So more or less, it's the same, basically?

More or less, it's the same, yes.

Okay. And sir, sanctioned, undisbursed amount, if you can share?

Yes. It will be about 1,000 -- actually, it's not disbursed, sanctioned -- not disbursed is one category. Sanctioned, part disbursed is the second category. Both put together, it's about INR 1,300 crores.

INR 1,300 crores. Okay. And can I get the split between the 2, sir?

It's very difficult. So you can approximately take 30% of our portfolio is construction. So construction means we would disburse over a period of year or maybe 15 months' time.

So that would be partially disbursed, basically?

Yes. Exactly, that will be partially disbursed. And rest would be onetime disbursement.

Okay. And sir, you mentioned that we're moving to a pricing strategy where we reduce our pricing. So with this, where do we see the NIM stabilizing? I think you might have said it in the call and I think I just missed that number.

Okay. I'm saying, over a period of time, we will stabilize NIM of 3-plus percent and spread of 2.4%.

Okay. Perfect. And sir, how do you see the credit cost moving ahead, sir? I mean -- and what is the current credit cost?

I think hardly any movement, I think 0.2%. So there will be about 2 to 3 bps maybe higher, that's all.

Okay. And sir, just last question. So if you look at the 9-month FY '21 disbursement number, it has significantly dropped as compared to previous year.

Yes.

So what would be the reason? I know one of the key reasons would be the lockdown in Telangana. But do you see anything else...

The only reason is COVID. So last quarter, I think Telangana got added. Otherwise, the only reason is COVID.

Okay. Sir, so then -- okay. So just a follow-up, sir, on -- going ahead, what kind of average quarterly run rate of disbursement should we assume? Like if any guidance you can give?

We don't give guidance. So I mentioned that from this quarter -- see, demand is completely back. So from this quarter onwards, we are looking at growth on a Y-o-Y basis. And when I talk about Y-o-Y, I think going forward, it will not -- next year will not be compared with this year. Next year will be compared with previous year. So this year was bad, at least first 2 quarters were bad. And therefore, we don't want to compare. Because if I start comparing this year, then we should talk about growth of 50%, 60%, which is not realistic. And therefore, next year will be compared to previous year.

Okay. And sir, you had mentioned in the commentary from where the growth would come back to 17% to 18% for next quarter.

That is the next 6 to 8 quarters.

Over the next 6 to 8 quarters.

Yes. I think slowly, it will start building up. For example, let's say, from now, let's say, quarter 1, we may show a growth of about 4%, 5%, then quarter 2 could be 7%, 8%. I think eventually, to reach a level of 16% to 18%, it might take about 6 quarters or so.

Right, right, right. And sir, just...

To previous year.

Okay. And sir, if you could just give me the cash position as on 31st December? And any guidance on dividend, sir, going forward?

I would -- I won't be able to comment on dividend because it is not my -- it's not one person's decision. And in terms of liquidity, we are very high on liquidity. And we are covered for next 8 to 9 months' time. We -- as of now, the position is about INR 4,000 crores.

Well, ladies and gentlemen, due to time constraint, we take the last question from the line of Anirvan Sarkar from Principal Mutual Fund.

Most of my questions have been answered. Just one question, drawing on one of the questions asked by one of the earlier participants. What percent of our book is priced at the lowest rate that we have achieved now? So we are at 6.95%, the lowest rate. So what percent of the book is at that price at the moment?

See, basically, we changed this pricing just about 3 months back. So the last 3 months' business, 80% of the portfolio will be at 6.95% and some conversion. So maybe you can approximately assume that about 10% to 11% of the portfolio will be at this rate.

Sorry, sir, I did not get that part. So whatever disbursement has happened in the 3 months has obviously been at this 6.95%?

80% of what we disbursed in the last 3 months...

80% -- yes, 80% of the disbursement that we have made in the last 3 months...

Yes. And also some conversion. So it will be about roughly 10% to 11% of portfolio will be at the lowest rate.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference back to the management for their closing comments.

To sum up, the focus on Q2 and Q2 -- Q1 and Q2 was mainly on asset quality, including managing the moratorium. Q3, we focused both on asset quality as well as growth. And also, we did reasonably well in growth. But for Telangana, I think we could have crossed the last year's performance. We fell a little short what we achieved last quarter of Q3. This year, Q4, we are sure that we will be able to perform better than what we achieved in Q4 of last year. And as Girish told, in the next 6 to 8 quarters, growth will be back to almost 16% to 18%. So it will gradually improve. So Q4 will be -- we'll see a reasonably good growth. And it will go up to 16 to 18 percentage in next 6 to 8 quarters. And our main focus, as earlier used to be, are growth, asset quality, liquidity and profitability. We are realigning our rates depending upon the overall market's situation and also scope available for growth. So the [indiscernible] as well as spread may come down. But because of the volumes, what we are planning to increase, there will not be much impact on the overall profitability, profit and the profitability parameters. So the asset quality being intact and all [indiscernible] Q1 and Q2, we focused a lot on maintaining the asset quality. And now the next quarters, all the [indiscernible] is available to us in the next 4 to 6 quarters, we'll be able to focus on only growing the book and also with focusing on the [indiscernible] and Tier 2 and Tier 3 cities and also focusing on metros also for -- with a little higher ticket size rate being very, very competitive. We are hopeful that we'll be able to grow the book as we used to do earlier. With that, we will be able to show very good performance. And also company has taken good number of initiatives in improving the credit underwriting and also building the teams for recovery, [indiscernible] IT infrastructure. With all these initiatives, definitely in the next 4 to 6 quarters, not only growth, but also our profitability priorities will be -- will look quite attractive. Thank you.

Thank you. Ladies and gentlemen, on behalf of Investec Capital Services, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.