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

Ladies and gentlemen, good day, and welcome to Can Fin Homes Ltd. Q2 FY '22 Conference Call hosted by Investec Capital Services. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nidhesh Jain. Thank you, and over to you, sir.

Thank you, Aman. Good afternoon, everyone. Welcome to the Q2 FY '22 Earnings Conference Call of Can Fin Homes Limited to discuss the financial performance of Can Fin Homes and to address their queries. We have with us today, Mr. Girish Kousgi, MD and CEO, Can Fin Homes. Ms. Shamila, Business Head; and Mr. Prashanth Joishy, CFO of Can Fin Homes Limited. I would now like to hand over the call to Mr. Kousgi for his opening comments. Over to you, sir.

Good afternoon to all the investors. Welcome to quarter 2 earnings discussion. With me, I have Amitabh Chatterjee, who is our Deputy Managing Director. I think Shamila and those who are introduced, I also have my Product & Strategy Head Prashanth Shenoy. So quarter 2 was basically pretty good for us as expected a few months back. In terms of disbursement, we did all-time high. And I had mentioned a few months back that quarter 4 was the best ever quarter in terms of disbursement. And quarter 2, we did 10% more than quarter 4. If I have to compare it on a Y-o-Y basis, we increased the disbursement by 153%. Loan book in last 7 quarters was the highest at 13.2%. See, most of the things I think we should compare with sequential last quarter, last to last quarter, but not on a Y-o-Y. For the simple reason, last year, we had taken a call and we have changed the pricing strategy wherein we had to drop rates to compete with the big banks and HFCs. And therefore, I had indicated earlier that our margins would come down, both NIM and spread would come down. And rightly so, we changed our pricing strategy, we dropped rates for 2 reasons: one, to generate new business and also to protect the book because we saw flight of booked from -- at 2 banks. And therefore, we wanted to stop that. And therefore, we devised this strategy, where we had dropped the rates. That lasted till about quarter 4. And after that, we have increased price. So in last 6 months, we have increased rate twice. And in spite of competition from some of the big banks, and HFCs were able to plug all time high disbursements. So not only on disbursement even on book, we have grown. In terms of NPA, we have reduced from 0.9% to 0.78%. What happened generally is that when there is an interest rate scenario, which is downwards, first, margins will contract followed by contraction in yield. So now we have seen reversal in trends that if you see if I have to compare margins this quarter with last quarter, NIM, which was 3.31 has now increased to 3.4 higher by 9 bps and spread from 2.41 to 2.4 to it's almost flat. So since we have increased rates in last 6 months twice, so margins will improve, which will also see increase in net yields, which means our revenue and PAT, both you will see growth, if I have to compare quarter 2, if I have to compare on a Y-o-Y basis, both revenue as well as PAT was low, it degrew. If I have to compare H1, H1 there was a growth of about 5% impact. If I have to compare Y-o-Y quarter there was a degrowth. And the reason for that is because we had to reprice our portfolio margins contracted, which is followed by contraction in yield. And therefore, when I compare now you will see a degrowth. So I think that is the context. So now there is margin reversal. We are seeing increase in both spread and NIM, we have increased rates. We are seeing good disbursement, good demand in the market. So H2 will be better than H1. So in H1, quarter 1 was not that great because of COVID second wave. But quarter 2, we did really well, and this trend will continue for next couple of quarters, both in terms of, I'm talking about this year. In terms of trend continuation, this will continue for the next few years. So there will be good growth in disbursements and book. In terms of revenue and profit, there will be definitely improvement from now on. And I think very soon, we'll be start showing good growth there also on a -- both on absolute terms and also in terms of percentage growth. In terms of asset quality, we are able to manage it pretty well, and we brought it down, our peak was 0.91. I think now it is 0.78. Even during COVID period, even after COVID, we will be able to manage our asset quality pretty well. In terms of our restructured pool, totally, we have restructured 2.73% of the book, which is approximately about INR 645 crores. Now this number, maybe it will look slightly higher. I want to draw your attention to our morat scenario where we had morat of 28% when the entire industry was talking about 9% to 10%. So typically, Can Fin would always get a higher request, whether it is morat or restructuring. I think given the pedigree. And therefore, even we had 28% moratorium, I think it didn't impact our asset quality at all. Of course, we did focus more on portfolio quality and covering all the customers in terms of getting their understanding, helping them to choose the option and stuff like that, that really helps. So in spite of 28% moratorium, we didn't see increase in NPA whereas you would have seen in the market in most of the other players where NPS did go up. So this 2.73% restructured pool we have done our own calculation. And based on our estimate, we feel that maximum of 7% to 8% would flow over a period of time because this won't happen in 1 quarter or 2 quarters. Over a period of time, 7% to 8% of INR 645 crores would become NPA. So which comes to approximately about INR 50-odd crores. Now in the last 15 to 18 months' time because of COVID both first wave and second wave, we had literally suspended all our legal initiation. So now we are pretty active with respect to onetime settlement and also SARFAESI. So now we plan to recover about INR 50 crores to INR 60 crores in next 3 to 4 quarters. So eventually, when you look at net increase in NPA, today, we are at 0.78%. And if we have to look at net increase, I think we would be able to maintain NPA less than 1% for the next few quarters to come. I think that is the whole context on restructuring. You've seen most of our customers if you look at the profile mix, we have now at a portfolio level, we have about 74% salaried and 26% self-employed nonprofessionals. But the recent sourcing after COVID started, you've seen that there is a shift more towards salary and now salaried is close to about 82% and the SENP is 18%. So we've seen product mix, geography mix, we've seen the vintage of each account on book, and we've done our own estimate we feel that maximum 7% to 8% would become NPA. We are hopefully that it will be much lower than that, but to estimate, I think you have taken this percentage of 7% to 8%. In terms of LIBOR rate settings, we were able to bring down our cost and our incrementals cost 4.77%. And at portfolio level, it is I think 5.57%. So we're able to bring down costs. Only thing is it might take some time for us to see growth in terms of revenue and PAT because when the rate comes down, obviously, the yield which was earlier at about 10% has now come down to 7.99%, right? So if you have to look at incremental spread it is 2.68%. So at a portfolio is 2.42%. While if you look at quarter-on-quarter, I think this split will keep on improving going forward. This will also aid. And we also do a reset. When we do reset since the increased rate in price in the last 6 months, we'll get approximately about INR 1,250 crores every month for reset. So all those loans will be repriced at a higher rate, which means the yield from this level also will go up, which will also ensure that in terms of absolute amount, both revenue and PAT would be higher. In terms of liability mix, I think our focus to ensure that we need to focus on source of funds which could give us more defensive and lower costs. And therefore, our bank proportion was about 47% and NHB 25% because NHB rates were much lower and not much of change in terms of deposits. And in terms of market, I think some of the entities mature, and CP, as I had mentioned earlier, CP commercial paper, we take CP only for leveraging cost, not for funding purpose. So if you have bank approved limits or OD or CC limits unutilized only against that will take CP. So CP is more of a cost leverage instrument the way we look at and not for funding. So to this extent, there was a slight tail in the funding bucket. I think rest of the things you would have probably gone through. So I would open the floor for Q&A.

[Operator Instructions] Our first question is from the line of Nitin Jain from Fairview Investment Advisory.

Yes. Good afternoon, and thank you for the opportunity. So I have a couple of questions. So recently, LIC Housing Finance, they tied up with Indian Post Payments Bank, like for distribution of their products. So is Can Fin also looking for any similar tie-up that is question 1. And secondly, in the last couple of quarters, there has been no network expansion for Can Fin, like I see the 200 branches pretty much maintained for last few quarters. So what is the expansion plan in terms of the network for this fiscal? And the third question is, like recently on 21st of September, Can Fin's Twitter handle had tweeted that home loans starting from 6.75%. So is that correct? Or what is the recent -- what is the latest rack rate, if you can clarify that as well. So these are my questions.

Okay, okay. So at this point in time, we don't envisage any tie-up for business. On branch expansion, of course, last year, we couldn't open too many branches because of COVID. Otherwise, we have planned to open 12 to 15 branches every year. And not only that, we're also working on including branch productivity. We are closing some of our nonprofitable branches and opening those branches in the outskirts. With respect to the pricing, 6.75% I think that is there, but that would be hardly about 0.1%, 0.15% of our entire resourcing, because when you say starting from 6.75%, that would be for -- we would have certain filters like bureaucrat and stuff like that. So if you look at the proportion of loans, what we do at this rate, probably it will be less than 0.25%. But yes, we do have an option where we start. In fact, if you look at the market, most of them, they would mention a 6.5% or 6.6% you must have seen, but these rates are with certain requirements with respect to the bureaucrat, let's say, some -- someone would say, 800-plus bureaucrat should be there and then it should be for a CAT A developer, maybe approved project and stuff like that. So a number of cases, which 1 would source under these categories would be hardly anything.

Okay. So just a clarification. In terms of the rack rate or the rate at which we are repricing now, what would that rate be?

So now we -- of course, we have -- based on risk-based pricing, the average has come to about 7.75%. So now average at what we raised is about 7.75%.

7.75%. Okay.

The next question is from the line of Manan Tijoriwala from ICICI Prudential AMC.

One question. I wanted to understand the quality of the borrowers that you're unholding at 6.70% versus the rate that you mentioned at 7.75%. So is there a difference in the type or quality of the borrower at this rate?

In terms of past repayment track record, yes, there is a difference, because somebody who would be eligible for 6.75%, now typically be, a, earning high; b, would have a lot of loans on bureau history and therefore, the bureau score will be more than 800. So otherwise, in terms of repayment capacity and intention, there is no difference. In terms of past record of loans and bureau score, there is a difference.

Right. Fair enough. And sir, so now an extension to that question, last time, you had mentioned that around 10% of your book was priced around sub-7%, which is generated around Q3 of last year, and that you have annual reset to this book, which will get repriced to say 7.75% or so, which is the minimum rate now. So do you foresee these borrowers to react differently, will they opt for BT outs or will you be able to retain them?

So we have seen the BT trend also because we have increased rates twice in the last 6 months, and we have seen the trend. So our BT outflow is now back to normal. So we saw book depletion in quarter 3 and quarter 4 of last year and also in quarter 2 but now in last 2 quarters in spite of rate increase, in spite of repricing, BT out is normal. So there is -- it's a normal reaction. However, last year, we saw abnormal reaction because we saw abnormal reaction, we had to change the strategy in terms of pricing. And I had mentioned then also this change in pricing strategy is short term in nature. I think now that period is over. Now we've increased rates twice. And we feel that in another quarter or so, maybe a quarter or 2, I think rates would start moving up.

Basically, there will be a sub-7% borrowers should we expect it to be retained at around 7.75%, and 8% as well, is it?

Yes. Because today, our portfolio is about 7.99%. So we would have people at different innings. So typically, we've seen that if the differential is about 25 to 50 bps, customer tends to stay back and not switch. So there are yields were about 10%. Now it is, it come back to about 9%, maybe it will inch up to about 8.5%, 8.6% in next few quarters. So we don't see too much of a challenge in terms of book retention.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

Firstly congratulations on delivering such good loan growth during the quarter and other corrections which is far from the larger banks and the larger HFCs. Sir, 2 questions here. One is, I mean, like you suggested that you have increased rates twice in the last 2 months and that loans could potentially get repriced at around 7.75%. So maybe an extension to the question that was asked by Manan, what I'm trying to understand here is, I mean, how often are the loans repriced. And today, if you are lending to someone at a particular rate, I mean, for how long will those rates remain fixed and subsequently at what tenure, it will get repriced? That's one. And the other thing is also while you suggested 7.75%, what is your prime lending rate now? Because, like you suggested, you've been increasing the rates over the last 6 months. So what was it when we were there around March and how has it been increased over the last 2 quarters? If you can help us understand that. And sir, then the last question that I had was on your CP book while -- I mean in this earnings call as well as in the last few earning calls, you have highlighted that you are using CP predominantly for leveraging cost and not for funding purposes. But today, about 19% of your borrowing mix is in CP. And when we look at, I mean, some of your peers, I mean, be it the larger peers or the smaller HFCs, no one is really using CPs I mean predominantly as part of their borrowing mix. So when rates actually kind of start to harden and which I am kind of sure it's beginning to harden now. I mean don't you think it can impact you very adversely given that close to 20% of your liability is in CPs?

Okay. Now in terms of rates, in March, our rack rate was 6.95%. So till quarter 4, we had actually dropped the rates. Now from April, what we have is we have an offer. So when we say even now, for example, our rates are starting from 6.75%. In March, 6.75%, probably 30% of the sourcing would have come at that rate. Whereas now we get less than 1% rate. So now it's an offer, but then it was rack rate. So which means most of the portfolio, which got built in quarter 3 and quarter 4 was at a much lower yield. Whereas now, I mentioned you, it's about 7.75%. So since we have increased rates now and in fact, if you look at any bank for this matter, I think whatever rate they say is basically an offer. And there are a lot of conditions with respect to bureau and et cetera, et cetera, would be there. And therefore, increase in rates, now we've increased by about what 6.75% to now about 7.75% about 100 bps in terms of average yield. Even when we offered 6.75%, our yield was about over 7% because not all the loans would come at 6.75%. And therefore, today average is 7.75%. Now this is number one. Number two, when we talk about this liability mix. See, we have to raise NCDs this year, and we will raise. And we will -- this year, we will raise up to INR 750 crores because that is mandatory. Unfortunately, now the rates are very competitive. Last year, we didn't raise for 2 reasons. One, it was not mandatory last year, and number two rates were higher. So now we are able to raise NCD at a very fine rate comparatively. And therefore, we will raise in NCD. Suppose if CP becomes expensive, see today we are able to raise funds from bank at about 5.5%, and we have raised at 5% also. And when we have increased our allocation from NHB, should be much finer. So today, we are using CP, because we are seeing opportunities there. So basically, CP used to be earlier 12%. Now it is 19%. It's only because we had to retire some of the NCDs. And now in this quarter, we will raise NCD. This quarter, we plan to raise about INR 500 crores. This whole year we are supposed to raise about INR 750 crores. So we will raise because that is mandatory. Any incremental borrowing, 25% will have to come the way of NCDs, right? So if CP rates goes up, we will change our mix and we will either take from NHB or from bank. So I think that's not an issue at all. Overall, CP rates will go up only if overall, there is increase in interest rate, then you would see that impact across. Then we would also try and increase that yield so that we can protect our margins.

Right, sir. And sir, maybe as a last follow-up here, at what vision or at what frequency are the loans are repriced for the customers in other words, if someone takes the loan from you at, let's say, 6.7%, for how long will that rate be locked in for that customer? And sir, secondly, I mean, some time back, you said that -- I mean -- and that is also evident in the numbers that you report the pressure on BT out has eased significantly and because of which your loan book runoff, with what needs to be there, let's say, a couple of quarters back, if you need to be much lower, I would say, in this quarter. So what has really seen banks continue to offer interest rates at those low interest rates what they did in the past. So what has kind of changed that is irrationality to more rational behavior today from the customers?

Okay. Reset happens once in a year. And beyond that, it depends on the market conditions. As of now, no interest rate, in fact, during the last meeting, before was unchanged. So it depends on the market condition. Otherwise, reset happens once in a year. Now BT out was very high last year. So what happened was we actually reprice. We reduced the cost, we reprice the portfolio so that we can return our customers. And therefore, whatever you mentioned now from logical, I think it has now moved to a bit of more logical stuff. So now the difference is not much. But we always ensure that we maintain whatever is the required margin. So going forward, if the interest rate goes up, then we have scope to increase yields. So we'll manage this like this going forward as well. And not only this, we had set up a core team more than 1 year back, so that which only handles customers who want to switch or customers who want to move out. So we have a retention team, strong retention team. And depending on the customer need, if a customer is looking for a switch we do switch, if a customer is looking for a slightly higher loan on maybe at top of the extent of top up loans or personal loans. So we have a dedicated team now which is supported by all the branches. So our retention strategy, our pricing strategy and our focus on growing disbursement and book has changed this enter scenario.

The next question is from the line of Harsh Shah from L&T Mutual Fund.

I just have 2 questions. First is on the growth. So since this quarter has been very healthy for you as a company. How do we see this growth pan out in terms of disbursements for the next 2 quarters and then eventually into FY '23?

H2 will be far better than H1.

So H2 will be better than Q2 is the question?

H2 will be better than H1. And Q3 and Q4, if you take both the quarter's average will be far better than Q2.

Okay. And secondly, on OTR. So you had also mentioned that conservatively on a base case scenario 7% to 8% of the OTR will slip eventually that is around INR 50 crores. But then what is the rationale beyond writing back our buffer provisioning of INR 13 crores because we could have used that provisioning whenever this OTR book starts to slip. So do we also see eventually, even if you spread out your OTR slippage book? Still you will have to do that incremental provisioning going forward. So what was the rationale behind the writing back the provisioning in this quarter?

So we have provided INR 65 crores. And we expect only INR 50 crores to slip and that to over a period of time in next few quarters.

So still, you feel that there will be again write-back of provisioning, if this number...

Eventually, yes, Eventually, yes, because we have provided INR 65 crores and we are expecting INR 50 crores to slip. And this INR 50 crores will not slip in 1 or 2 quarter. This will be over a period of time. And while we say this, we also have plan to recover from losses. So we plan to recover slightly more than what would slip into NPA. So net-net, we always want to maintain NPA less than 1%. So our recovery in next few quarters is going to be about INR 55 crores to INR 60 crores, that's our plan and what would slip is INR 50 crores. Apart from these to what could actually happen is that there could be some incremental slippages, so that we will manage through the normal recovery. That is a logic for us to write back because we have already provided INR 65 crores.

So just a follow-up on that. So is there a possibility that since you are already operating at such a high PCR, you have already provided INR 65 crores of provisioning on OTR book. So on a total company level for next 2, 2 or 3 quarters or even a little bit slightly longer let's say 4 to 6 quarters, we will see a very compressed credit cost as a whole?

See, this INR 65 crores, what we have provided is for restructured loans, that is not part of PCR. Irrespective of that, we have still increased our coverage to 40% now.

Yes. That was actually the question. So that's what I'm trying to say, since you have already provided INR 65 crores, plus you're already operating at such a healthy OTR.

We don't expect any credit cost increase.

Sorry, can you repeat?

We don't expect any increase in credit costs.

Okay. So credit cost will remain at a very compressed level only for the next 2 quarters at least in medium term?

Yes.

[Operator Instructions] Our next question is from the line of Amit Premchandani from UTI.

Sir, I just wanted to have your views on what can be the steady state NHB borrowing next 1Q moving to 2 to 3 years of the current yield?

If you've seen market in last 2 years, I think there has been -- it has been a roller coaster for HFC as a industry. It's very unfortunate that some companies had to slow down disbursement and some companies have to close down and on stuff like that. So if we look at the current trend, our allocation probably should slightly increase. At this point in time, it's about INR 2,000 crores. So this is every year, every year INR 2,000 crores. So in the next couple of years, we see that this amount could increase by about 25% at least.

And what is the duration of this borrowing?

This is a long term, this is a long-term 15 years.

At rates off?

Sorry, come again. Rate will be very, very, it will be the lowest actually. It will be sub-5%.

And it to be fixed in nature, right?

Rates?

Yes.

Rates are not fixed. Rates are not fixed but whenever -- so we have a small portion, which is fixed. Otherwise, they have a variable rate. Depending on the situation, they also either increase or decrease rates.

And that is linked to what is variable rate?

It is linked to their own reference rate, which broadly is linked to the RBI report.

Sure. And sir, why do you think Can Fin Home has the ability to predict short-term rates, and hence, you have kept CP at such a high share of the overall that would be 5%. When none the other mortgage lenders seem to have that ability.

So I think the first basic difference is that -- I'll tell you what we do and whatever I would say probably would be applicable to others. See, we don't use CP for funding. We think the CP is very risky because CP is short term, and we don't want to use that for lending. And therefore, since we are -- we enjoy huge liquidity. And we have the low cost benefit. And therefore, we use CP only for cost leverage, right? You see CP share going up. It's only because we had to retire some of the NCDs. So the minute we raise NCDs now you'll see the mix changing. It looks high because NCD has come down. So once we raise NCD of INR 500 crores, you will see that mix. And CP, we will use only if we have backup, which I already mentioned, since they're higher on liquidity, we use that to leverage and keep our costs low.

And what is the liquidity, sir, in terms of -- as a percentage of AUMs? What is the -- how high is it?

We always keep about a year's liquidity.

Year of repayment obligation.

Total obligation net of that.

And what would be that number now?

It will be about INR 4,000 crores.

And that will be consistent in the sense, that is the policy that is clearly 1% -- sorry 1 year?

With increase in disbursement, our CP percentage might come down because now we are able to source from banks at a much finer rate because we also have to manage the ALM and therefore, and we are able to get through at a much finer rate from banks. So this proportion would come down because of 2 reasons. One, bank could slightly go up. Number two, NCD would go up.

The next question is from the line of Bunty Chawla from IDBI Capital.

One data point, if you can share because I missed the initial part that is incremental cost of funds and incremental yields? And secondly, continuing with the previous query from the -- amid you said that now this -- we will be raising NCDs, so these CPs will be shared or replaced by NCD. So can we say that the cost of funds could increase or could rise and that could be equivalent to an already price hike we have taken last 2 to 3 months. So that could have a not much impact on the margin pressure? That's it from my side, sir.

Yes. So incremental cost is 4.77%. Incremental yield is 7.45%, incremental spread is 2.68%. So the portfolio is 2.42%, incremental spread is 2.3%. So we will not change the CP number. Yes, there could be slight up or down depending on the maturity. What will happen is now NCDs, once they source NCD, the mixing will change. So now that CP will go down and NCD will go up. NCD will go up because NCD goes up, CP will be slightly lower than what it is today. And CP we will operate within the limit. And there could be ups and downs depending on the maturity. Suppose if CPs have matured, then the percentage could look lower. And once we reset that it will look at the right level. And in terms of margins, we'll be able to maintain now we've seen the reversal because we have increased rates twice in this financial year. So you will see improvement further both in and rest of yield.

Okay, sir. And sir, lastly from my side, restructured assets, as you rightly said, it's 2.7%. So can you share the profile of this restructured book. Is it equivalent to the same, which you have shared for the overall loan mix, 74% kind of thing? Or is it different if you can share that data?

So I think by and large, whether I take geography, whether it take profile within salaried or different segments within self-employed, I think not much of difference. Yes, but if I have to compare between salaried and self-employed, self-employed is slightly higher compared to salaried. Otherwise, there is no change in the mix from that.

The next question is from the line of Chirag Sureka from DSP Mutual Fund.

Sir, I just want to understand the bank's behavior because I know you've been trying to answer these questions in the past. Last quarter -- Q3 of last year, banks seem to be taking away a lot of your customers and you had to drop rates. Now though you have increased sales you seem to be able to hold on to your customers better. Was it 1, 2 competitor banks in your area that caused this kind of disturbance who have now stepped back? Or is there anything else that we are missing sir?

Actually very good question. This is not because of any bank per se. It is because of COVID. It is because of pandemic. So what happened because of pandemic and because of -- there was a national lockdown, and there was a challenge in terms of mobility of refill. And because of this, it impacted economic activity and great uptake in all the segments and products. And therefore, it was difficult for any entity to do business, whether it is bank, be it private or PSU or NBFC or HFC. So therefore, BT was 1 segment which has chosen for growing the portfolio. And since there was an arbitrate opportunity available because of the differential need between the banks and NBFCs and HFCs. So the focus was more on BT. BT generally comprises 20% of the total market in terms of incremental business, now it's shot up to 40-plus percent during COVID because for most of the banks or maybe all the banks, other industry, corporate and SMB offtake was at its low. And retail, the risk was very high in unsecured. And therefore, the whole focus was in secured. And again, in secured, equity was mortgage because of its share ticket size and long term in nature. And therefore, there was heightened activity in mortgage which serve lighter book from HFCs and NBFCs to bank. Because since this happened, a lot of HFCs have to, we think, on the strategy. We also did the same thing. But our strategy was short-term and which is why we had to change our trading strategy. And now that it is almost 4 and which is why now we don't see that kind of competition from banks because economic activity has shifted. And now there is a good offtake in SMB. In corporate, it's far better compared to what it was maybe a year back or back to its 100% potential, but far, far better than what it was last year, and therefore, now mortgage is back to explore in terms of a focus on various institutions across.

Excellent, sir. Another good sign of normalization, which we appreciate. Sir, just 1 last question for me. Have you considered products like loan sell-downs, securitization to kind of manage the ALM is that market still alive? Or that used to be quite active some time ago. So I just wanted to know when you explore that?

Yes, I see it's very much there, but we don't want to sell a portfolio. And we don't intend to buy the portfolio as well because we do not know the quality of the portfolio, and we don't plan to do it in near future. However, since the market is very robust, we want to grow our book, and that is what we are focused on. But this market is pretty active even now.

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

I have a couple of questions. One on the yield side, you mentioned on the incremental side, the yield is 7.45%. So going ahead, what is the sort of -- you believe that this spread of 2.42%, is it bottoming out and going ahead, as you mentioned, marginal spreads are at 2.68%. Do you see spreads going up, at least in the next couple of quarters. Can you just elaborate a bit more on what is the outlook on spreads?

So both spread and NIM will go up because we have now increased rates. The first, we will see expansion in margins. And then you'll see revenue going up. So because when the interest rate falls, the cost margins in contract and then these 2 contracts. Now we have increased the price, the margins will expand, started from last quarter. So in the next few quarters, we'll see both margins, both spread and NIM increases.

Okay. Sure. And sir, the liquidity on balance sheet right now, I mean, quarter-on-quarter, it is up -- last quarter, it was around INR 70 crores, and this quarter, it's around INR 400 crores. So in terms of a drag on margins, is that also 1 of the aspects going ahead? Do you see this kind of liquidity going off in the next couple of quarters or this kind of liquidity will be maintained?

So that is only on balance sheet. Off balance sheet, we have bank sanctions, which are documentation then, but not drawn. So that have enough and now -- so we always have excess liquidity, which can take care of at least close to a year's time. So because of that, we will also have the pricing part in terms of negotiating and pulling -- getting the costs down. So we feel that this will last in the years to come. Because we have never ever faced any challenge on liquidity. And this doesn't impact the cost or the margin rather, it will impact positively because since we have liquidity, we use CP2 leverage, and therefore, it helps us on the positive side.

Okay, sure. But my question was only to the extent of on-balance sheet liability -- or sorry, on balance sheet liquidity which went up -- it used to be around INR 100 crores, INR 120 crores. The run rate of liquidity on balance sheet used to be INR 100 crores, INR 120 crores, that has certainly spiked up to INR 400 crores. So just wanted your views whether this kind of liquidity on balance sheet. I understand off balance sheet, we do have lines and online from bank. But on balance sheet since it's a direct drag on margins, will we continue to have this kind of liquidity?

No, we will continue to have this kind of liquidity, and it will further go up. But this will be a positive drag, not negative because this is for clear focus. So what we do is we also placed at a much higher rate. And therefore, there will be a fortune carry on this.

Okay. Understood. Understood. Sure. And sir, the next question is pertaining to the restructured book I mean you mentioned 2.7% of the loans were restructured. Are you seeing any sort of prepayments still early days, but are you seeing any sort of prepayments from this restructured book?

Yes. Before I could answer this question, I would request Joishy to clarify on the earlier point.

Yes, that on balance sheet liability what effort you're talking about because the liquidity coverage ratio is applicable to the company with effect from 1st of December. And on the back of envelope calculation, it comes to around INR 800 crores. So our average INR 800 crores, we should have in the government calls are indicated as in readiness to that one, we have started acquiring the investments, which can yield at a better rate than the loans as well as the cost of funds. The accumulation amount what you saw in the financial is around INR 300 crores is only for that purpose. It will go up as the quarter passes, but at the end of Q3, we are going to have the limit of what I have been told. But all these things will be at the positive carry without any decline on the funds cost or the yield assets.

Okay, Understood. Yes. And sir, on this restructured book, any sort of prepayments that you are observing in this book? Maybe you restructured something in July. Are you seeing some repayments happening?

Actually, we saw this not now even in morat what -- even though customers opted for morat, we saw -- we were in constant touch with the customers. So customers, whenever they had surplus, there is to pay. Same trend is continuing even in restructuring. So we see that customers are making payments. So we feel that by the time whatever is the period given to the customer, it gets over, I think we would have surplus of about at least 2 to 2.5x of EMI in customer account. So we are -- because see actually COVID pain is nowhere now I think it is seen across. Salaried absolutely, there is no issue. Most of the customers who lost job they have -- they are now reemployed elsewhere. And most of the self-employed nonprofessionals where there is loss of income, that is, by and large, covered. And I think, by and large, there -- because we don't fund to big businessmen. We only fund to small retailers, small businessmen who are into service. So our ticket size now is about INR 21 lakh, it has inched up, it used to be INR 18 lakhs earlier, now it is INR 21 lakhs. So average income per month is about -- now about INR 40,000 per month. So these are small businessmen mostly retailer or somebody who's consolidator maybe who is in the service industry. So most of the businessmen to whom we cater to I think income is almost back to 100% or maybe 90%. So we don't see that risk at all. The COVID risk, I don't think so, we would see that beyond a month or 2 for self-employed for salaried, it's not there at all. And therefore customers would have excess cash now. And therefore, customers who would want to pay and request us either to adjust towards the Princeton or set aside that against the EMI, which falls due in future. So we are seeing a lot of payments coming in from customers.

[Operator Instructions] Also ladies and gentlemen, due to time constraints, we'll be taking our last question from the line of Dhaval Gada from DSP.

I think just a thing, we can extend the time by half an hour to 45 minutes, time is not a constraint. We can extend, not an issue. We will take till the last question.

All right, sir. [Operator Instructions] So Mr. Dhaval Gada, you may please proceed with your question.

Sir, just a couple of questions. If you could just sort of summarize the total provisioning that we carry as of September '21. We have the NPA provisioning, but just apart from that, the total restructured provision and any other excess provision that you carry apart from specific and restructured provision?

Okay. As per IRAC norms, we are holding INR 159.19 crores. And resolution framework INR 17.37 crores, resolution frame work was INR 257 crores, the total is INR 223.79 crores. So this is the total provision what we are holding.

And how much is allocated towards restructured provisioning, total restructured?

Restructured totally, it's about INR 65 crores. So yes, INR 65 crores.

Okay. So INR 65 crores restructured, INR 75 crores NPA provision and the rest is excess that you talked about.

That is for the standard asset. INR 84 crores is for the standard asset.

INR 84 crores is for the standard assets. Understood. Okay.

Basically 3 parts. One is NPA, standard assets and restructuring.

Restructuring.

Got it. Understood, sir. The second question is, sir, was there any interest income reversal related to OTR that we would have done during the quarter? 1 of our peers has seen a significant interest income impact. So I'm just trying to check on that one as well.

No, we didn't had that in the quarter.

Understood. Okay. And just lastly, sir, in terms of growth, you had earlier guided to about 16% to 18% growth, given the current trajectory and the commentary that you gave around disbursement, it seems that we will exit at a pace which could be slightly higher than that run rate. So would you have some -- give some color around what kind of growth we can expect in next year FY '23 and beyond? Just directionally, how should 1 think about growth?

So I had earlier mentioned that we will grow at about 18%, 18%, 20%. That was on last to last year base because last year, because of COVID we disbursed less. And therefore, I had told will grow at about 18% compared to last to last year. So last to last year, we had disbursed about INR 5,500 crores. So on that, very easily, we can grow beyond 18%, 20%. And going forward, year-on-year, we can look at growth of about 18%.

Our next question is from the line of Shubhranshu Mishra from Systematix.

A couple of questions, sir. One, if you could explain, if you could drill from the salaried segment, how many of them are due to credit, how many of them are PSU sector, private sector, government employees? And what kind of average income levels would there be? That's the first question. Second is, what kind of concentration we have in terms of top 20 branches contributing to the sourcing and top 50 branches contributing to the sourcing. And my third question is on the CP, sir why are we so defensive on the CP. There have been a lot of questions, but we tick almost every box because we are a AA-rated company promoted by a PSU bank, which has an implicit so we're in guarantees. So why not use CP for funding, why are we so defensive in all these, these are the 3 questions.

Okay. In terms of salaried segmentation, 50% is private and 50% is government. In terms of income level earlier it used to be about INR 38,000 per month now it has inched up to about INR 40,000 to INR 42,000 per month. So this is across geographies. So top 20 branches in terms of incremental disbursement, it would account to about 45%, not the book in terms of incremental, top 50 I think would cover about -- I'm not -- I need to check on it, it will be about 65% to 70%, if I'm not wrong. So in terms of CP, it is not that we are defensive when we have an opportunity of creating liquidity from other source of borrowing, we don't want to use CP. Because generally, if you look at last 5 to 6 years, I think most of the damage has been created because of over usage of CP for funding purposes. And before, we have not found the need now to use CP for funding purpose because they are high on liquidity, which is why as a strategy, we would always keep a buffer in terms of liquidity so that we can aim negotiate with the existing bankers to reprice the loan downward. And also, we can use that cushion and leverage CP to leverage the cost. So it's not defensive. We have not found the need till now. CP will be used for 2 purposes. One is when the institution is not getting enough sources to lend, that's number one. Number two, to keep the cost low. So we have not found reason to borrow for the first one. So -- but we thought that it will be a good idea to leverage cost because we need to be very cost efficient in this competitive market. And therefore, we don't use CP for borrowing. Basically, why because we are into long-term business, CP is short term, 3 months, 6 months, up to 1 year, and we may also face challenge in terms of ALM. And therefore, we just take CP only for cost leverage and we keep rotating that and not use for funds.

And sir, 1 question, sir, unanswered. What percentage of the customers would make new to credit?

Can you please come again? Please come again. New to credit.

Yes, sir.

So new to credit would be in the range of 35% to 38%.

Sure, sir. That is only outstanding or incremental?

I am discount -- incremental. I am discounting credit card exposure. So new to bank or new to institution, I'm discounting. I'm just saying new to credit, new to credit will be about 35% to 38%.

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

A couple of questions from my end. So firstly, if I look at your coverage ratios, I think in the last -- I mean long-term trend has been somewhere around the late 20s in the early 30s. But today, you are at 40%. So I'm just trying to understand when the quality of the book has gotten only better, why would you think of increasing the coverage ratios as the quarters go by and do you think this -- there is some more space in terms of the kind of coverage ratios you want to have. So do you want to hike it to, say, 45%, 50% as -- in the future periods. So that is question number one. The second question is, could you talk a little bit about the competition in the SENP segment. So you've already talked about how competition is abating in some of these borrowers segments. So do you want to have a relook at this segment? And you've already said that you want to concentrate on the salaried book. But is there a rethink that the changed landscape is prompting you at?

In fact, a few quarters back, we were getting questions as to why you're PCR at tax level, we see other institution at excess 20%, excess 30%. So actually, this is not customized. We just provided during bad times, and we didn't write it back. And therefore, you see that the coverage ratio increasing. Anyway, it has to give more comfort to all the investors that our coverage ratio has increased. Otherwise, there is no other reason. In terms of COVID, I think we've seen that risk. I think it's almost coming to an end. And we don't see much of a challenge in terms of the restructured book. And therefore, we don't have a number in mind. We will take it up as it comes in, but I think now 40% seems to be a very good coverage. And in terms of our focus, we focus both on salaried and SENP because SENP is 1 segment where we get better yields. It is just that after COVID, the mix has changed more by design, not by desire. We desire to acquire both salaried and self-employed. Because of COVID, because of the fear in system. No, we don't see too many SENP profiles now opting for loans. It is slightly improving compared to what it was 2 quarters back, 1 quarter back, it is slightly improving. So we feel that we should get corrected in the next maybe 2 to 3 quarters time. And on an incremental level, we should very soon see 75, 25 kind of mix. It's only a short-term phenomena, but we don't want to be very aggressive force it and source self-employed. We would want to go back to pre-COVID level in terms of standards for sourcing both salaried and SENP. And if it fits into our norm, we are more than happy to onboard self-employed customers. Now it is more of a design that the demand is more from salaried and less from self-employed and therefore, we also see the same genomics.

So is it fair to assume that in the medium term, you think that the 75-25 mix works the best for you?

Short term, not medium term, next 2 to 3 quarters, definitely it works. We are okay up, right up the 35% also, but not more than that. So 65-35 is what we think is ideal, but we would not force it to reach that mix in a given time frame. No, we are okay whenever it happens. So if market dynamics would want us to have that kind of mix without adding any incremental -- significant incremental risk, we are quite open to it.

Our next question is from the line of Shreepal Doshi from Equirus.

My question was with respect to have you changed the payer structure for the DSAs and the collectors when we've changed our sourcing strategy towards more semi-urban and another locations.

No, we haven't changed. We haven't changed payer structure of DSA. Now, I think for many, many quarters, we have not changed at all.

Okay. And sir, while we changed our focus towards like the change in pricing strategy towards our semi-urban, urban locations. How easy will it be for us to switch back to again, Tier 2, 3, 4 geographies when we plan to change the pricing strategy. And then what will be the operational changes that we will look at? And like how easy we get actually is what my question is more focus to those.

We have done both. We were operating at a high yield, we dropped our yields. We dropped our yields, again, we have increased our pricing, which will see increase in yields. So we've done both in the last probably 5 quarters. 2 quarters with higher -- with increase in price. And prior to that, we had dropped rates. So basically, switch is not going to be a challenge for us to a certain extent, which we have displayed in the last 4 to 5 quarters. And we would use this strategy in future as well. There's nothing occasionally that we need to tweak. It's more of a focus and our approach towards this entire pricing strategy.

But sir, like because what about the infrastructure that 1 needs to sort of have to cater to salaried customer profiles in different geographies. So from that perspective, was there a material change that you see what we have tweaked in.

Nothing. Because our profile mix is still intact. Barring that is a slight change in mix between salaried and self-employed within salaried segmentation or within self-employed segmentation is still the same irrespective of a change in yield.

Even on geography front, the infrastructure is when could we source it.

Exactly. So only thing is when we had dropped the rates, we have seen slightly better salaried profile customers coming in and slightly higher ticket cases, which again saw our ticket prices going up from INR 18 lakhs, INR 21 lakhs. So now we are also focusing on slightly higher ticket size, and therefore, these tickets will be maintained. But in terms of profile, not much of a difference.

Sir but like, I supposed the change would be with respect to higher percentage coming from semi-urban and urban locations versus when we had a different strategy earlier.

I would say we would continue to source from small towns that is semi-urban and small towns. And in big cities and metros, we source some outskirts. Even today, we do that. The only thing is when our pricing was slow, we were able to also source from within the city. So now since we have increased price, there could be slight gap there, which might now extend to other segments. Otherwise, there is no change in the geography or the profile. Because even in big cities, we find opportunity to source affordable loans.

The next question is from the line of Chandrasekhar Sridhar from Fidelity International.

Can you just tell me what is your average on lending spread right now is will it be funding?

Our incremental spread is 2.68% on portfolio...

No, no. Just on NHB, what's your average spreads, there's obviously a cap of 6% overall and there are different themes of the NHB. So just for an -- where it is clearly for NHB.

Yes. Okay. Okay. Okay. I got it. Yes. So for NHB, wherever we do -- they have different segmentations. So 3.95% is the average.

3.95% is the average.

Yes, because of certain -- because we get a better margin in NHB refinance.

And there was a question also earlier about when you are at a certain book size now when the book size is double or triple when you can't -- do you think you can run NHB borrowings at this contribution to your liability side? And if not, just trying to understand as early to AA book size, can you actually maintain the spreads which you have today?

So what I understand is that allocation what NHB gets for refinance and if you see the pool available in the market, I think still there is some short fall and Government of India's commitment to promote affordable housing. And if you see in that context, this allocation has to probably increase year-on-year from here onwards and not many -- not too many recipients are into this segment at least at this point in time. So at least I don't see any challenge in terms of meeting the allocation at least for the next 4 to 5 years' time.

So even effectively you are saying that even at more the AA book size, we'll have about 25% in NHB.

Allocation to cancel depends on total allocation work probably NHB gets from government. But as of now, we have a decent share, and we feel that in next 2, 3 years' time, we would continue to have this kind of share.

Right. And second, just sorry to harp on this questions around the CP again. So when you're running it at 19%, why are you taking a call on interest rate, you are effectively taking a call that right now, wherever the income is you have CP borrowings below 4% because the more that is, very well go up to 5% in that just post to sort of increased interest rates, and pass it on to customers and in the process, either you have a margin compression or in this business.

No. If suppose, let's say, if they change from CP to other source of borrowing, then I'll not be able to maintain this kind of margin or if the increased need they had the loss of -- losing customers to other banks and institutions. So it's a fine balance. So I have to balance the risk and also take the advantage of costs. And therefore, to balance the risk, we have buffer liquidity buffer and to manage cost to use CP and this will also ensure me to a retail, which will enable me to grow on book as well as give you a sense. So this is the fine balance. So we can always play with this by clicking on either side. But this is something which is working for us without any incremental risk. And therefore, we thought we should continue with this.

Sir, just -- and the last question, just on the -- can you give us some context of the restructuring, which we have given in this quarter. Just either duration or what have you done and another competitor has earlier had got some interest over, just some controls on restructuring, if you could correct.

Yes. So total restructuring is about INR 645 crores, and we have provided INR 65 crores for this. And the tenure varies from 3 months right over 24 months depending on the customer needs. So we have a set of customers. We have different, different tenures, the max is about 24 months and starting from 3 months. In terms of what we have done is we've also seen that we also brief it out. We have bracketed customers into different buckets, depending on the loss or maybe what is the need of the customer so that all the EMIs due will start, which would fall into every single quarter for the next few quarters. And it doesn't bunch up in just 1 or 2 quarters. So it will also give us space for us to manage our restructured pool better, a; b, in terms of profile mix of the geographies, we don't see much of a difference. But yes, we see that self-employed restructured pool in terms of percentage is obviously higher compared to salaried because we saw more pain in self-employed as a segment due to COVID in our country. Now out of this INR 650 crores, we expect 7% to 8%. It's an estimate we have done this based on profiles, based on geography, based on loan vintage based on loan product, and we have used our own business intelligence to arrive at this. And we feel that at max, 7% to 8% of this pool could fall into NPA. And therefore, the EBIT so that comes to about INR 51 crores, and we have provided INR 65 crores now. So it's fully covered. Now to add buffer to this, we also have plan of recovering about INR 60-odd crores in next few quarters from the NPA pool, which are fully provided or more than 50% provided. So these 2 buckets we plan to pull back about INR 60-odd crores, so that this entire thing is covered. So if you see over a period of time or we at any given point in time for the next, let's say, 18 months, for example, which is about 6 quarters from now. So our NPAs would ideally be less than 1%. And it's also because in last 4, 5 quarters, we have not initiated legal and SARFAESI. So now we are pretty active on both SARFAESI and OTS. And we saw this in last quarter where we have recovered from NPA pool, which saw 0.9% coming down to about 0.78%.

Our next question is from the line of Karan Agarwal from Tusk Investments.

My question is around the rise in average ticket size which was earlier INR 18 lakhs, which is driven to close to INR 20 lakhs now. Is there any change in our strategy? Are we targeting customers which are more creditworthy?

So whenever the ticket size goes up, the portfolio would tend to improve. So we want to slightly increase our ticket size but we want to remain focused on affordable so that we can get refinance from NHB. Yes, from INR 18 lakh, INR 21 lakhs because when we want to grow, it's not enough, only if I increase by number of customer on board. I should also focus on ticket size, and therefore, to a certain extent, we would increase ticket size, but it not go up drastically maybe once in 2 to 3 quarters, you'll see our tickets sizes inching by about INR 1 lakh or so. So I think it must settled down eventually at about INR 23 lakhs, INR 24 lakhs.

Our next question is from the line of Rohan Advant from Multi-Act.

Yes. [Technical Difficulty]

Rohan, you are not clearly audible.

It's not very clear. If you could please keep the...

Is it clear now?

Request you to please use the handset if possible. Because it is not coming clear.

Is this clear?

Yes, this is better.

Is it? Yes. Sir, my question is on NHB, which is 25% of our funding mix which would be around INR 5,000 crores. And you said that you expect INR 2,000 crores to INR 2,500 crores of incremental funding, which is 50% growth over what we have. Wouldn't that actually increase NHB as a part of the liability mix in the coming years?

If you look at 2 years back, our liability mix for NHB showed much lower percentage. That is because NHB loan was coming at a much higher rate. And therefore, we were not keen to avail from NHB. Now rates are competitive and therefore we are availing. So we will -- if it fits into a cost structure, we are agnostic about the source to a certain extent. So because this is at a portfolio level, what I mentioned was on an incremental basis. So it's possible that this 25% can go up. It's also possible that this 25% can go down. It depends on at what rate we will get loan from NHB.

Okay. Okay. Sir, and my second question is on our average repayment believe you tend to be 18% to 20% of our loan book versus lesser for some of our larger HFC peers. Is that to do with more prepayments that we get or the tenure of our loans by design are shorter than peers. If you could just help us understand that.

I understand your first part, but what I understood was, see the average loan on book is about 8.5% to 9%, which is in line with the market. So that is there. But BT out, as I mentioned, BT as a market is about 20%. And if I see net of BT in and BT out. For example, every quarter, we would lose about, so if I have to see only BT out, it will be about INR 40 crores to INR 50 crores, that's all. So I'm not sure whether I answered your first question because I couldn't hear your first question properly.

No. Sir, my question was related to our larger HFC peers is our tenure of loans which you said next, then do we have more prepayments than others, if not BT out, which is not much.

Last year we had. Last year, we had more BT out, it rose up to about 80. Prepayments, no. No, you're talking about BT out or prepayments.

He is talking about both.

Okay. In terms of BT, we saw more BT outs last year during COVID time. That's why we had to change our pricing strategy. Now it is back to pre-COVID levels. Now we see normal BT outs and normal BT ins. Whereas during COVID time, we saw less of BT ins and more of BT outs. And in terms of prepayment, the trend is the same throughout. There is no change pre-COVID, during COVID, post-COVID.

The next question is from the line of Nilesh Jethani from Envision Capital.

Sir, I only had 1 question. So in the presentation, it mentions that incrementally, 82% of the loans were for housing versus our historical trend of 90%. So is there anything to read into or it is just a one-off?

Just a minute, I think 82% was from salaried if I'm wrong.

And 82% has to be incremental salaried.

Okay. Yes so 80% -- yes, you're right. 82% of fresh fund approvals during FY were for housing because typically, what we do is that personal loan or top-up, even though it has the characteristics of housing, it is termed as nonhousing. So if you take that into account, this could be 90% otherwise it is 80%. Introduced pure housing without top up and personal loans. I mean if you look at the portfolio mix, then 5% is lapsed LRD and LRP, 5% is top up and personal loan and 90% is home.

The next question is from the line of Darshan Shah from White Equity.

I just have 1 bookkeeping question. What is the absolute level of Stage 2 assets as of September end?

Just a minute. So on book, it will be about 3.5%. So normally, if you look at the entire SMA, it will be about 7-odd percent to the portfolio. But what happens is that this is -- end of the month, it will be hardly anything, it would have come down, but again, opening would be highest closing would be lower. But on an average, it will be in the range of about 3.2% to 3.5%.

Our next question is from the line of Nikhil Chowdhary from Kriis PMS.

Sir, am I audible?

Yes, you are audible.

Yes. Sir, congrats on a decent set of numbers. I had just 1 question. Sir, what -- currently, if you go to raise out like raise money through NCDs, what would be our cost?

We will be able to raise at about anywhere between 6 to 6.05, 6.07.

Okay. And it was like -- what was it last year? Like when the COVID was...

Last year, it was about 6.5% to 6.75%.

Okay. Okay. So it hasn't changed materially.

No it has come down. It has come down by at least 50.

Okay. And we will be -- our intent is to curtail the CPs and probably as and when we try to raise NCD, right?

No, our retention is not to curtail CP. Our intention is to raise NCD because now it is more of regulatory thing. So we will raise the NCDs of INR 750 crores this year because that's our incremental borrowing plan. NCD raise itself is equal to 25% of total incremental borrowing, CP we will try and operate this in the limit to leverage cost.

Got it, sir. Understood. That's it. That's it from my side. And sir, wish you happy Diwali in advance.

Thank you. Thank you. Wish you the same. Wish you -- wish all the investors happy Diwali from Can Fin -- from team Can Fin.

Our next question is from the line of Nitin Jain from Fairview Investments.

So last quarter, you mentioned that about 70% of your book has been repriced to 7.5%. So I just wanted to know where that number was this quarter?

So it's actually ongoing. So now I think the repricing, most of it on the downside is over. Now since we have increased rates in the last 6 months, any repricing would be on the higher side.

Yes. No. So last quarter, you had clarified that about 70% has been repriced on the higher side to 7.5%.

No, no, no. It is not in the higher side. Repricing actually, March it happened in the lower side. From April, it happened on the higher side.

Yes. So -- okay. So the way I understood is that from Q1 onwards, we have been repricing at 7.5%, right?

Yes. Correct. Correct. You're right.

Right. So again, last quarter, you had clarified that about 70% you had a reprice to 7.5%. Is that right? Or is there a change in that?

No, no, not that. I had mentioned that 70% of our book is repriced. So when I talk about reprice, till March it was on the lower side because the rack rate was lower till March, and the rack rate from people is increased. So anything which comes for repricing would be at the new rack rate. Since we have decreased the rate, it would be at that rate.

Okay. Got it. And sir, a follow-up question is actually -- so if I am a customer in like 1 of your major markets say Bangalore, where there are competitors like Kotak who is offering at 6%, 6.5% home loan, HDFC is offering at 6.7%. So why would I be willing to pay ISM 7% to Can Fin. So if you can just throw some light on that competitive intensity?

Yes. So even today, while we talk about Can Fin raising -- building book at about 7.75% we have so many HFCs, which are building book at 12%, 13% and some even at 14%, 15%. And if you look at their cost, it will be upwards of 10%. And so I think today, market is quite large, and there are segments, there are profiles who are willing to pay premium for the sheer trade availability and the service what they get. So we focus on new segments, different segments, we got outskirts, we offer it in small towns. We take that kind of risk. We try to balance that risk by focusing more on salaries denominator more at 70-30 at portfolio now maybe 74-26 at portfolio level. So this opportunity available. And before in terms of branch network, I think banks are not able to go beyond the point, where HFCs can go. I think that differential existed in the past, even now it exists and even in future, you will have a differential in terms of geography as well as service. So these are the differentiators. And also, we give doorstep service. We give ready-made approved projects readily made available to customers to choose from 1 of the properties, and we give consultation on legal and technical aspect. So there are so many things which customers think is our USP, which we feel is our USP, and therefore we're able to build this kind of book. And if you look at the book growth, it has been pretty well in the last couple of quarters.

Our next question is from the line of Pravin Mule from Prabhudas Lilladher.

Yes. So this is Shweta Daptardar here. So a couple of questions from my side. You just mentioned a while ago that your average tenure on the loan side is 8 years. And you also mentioned that the repayments are very much in line with the industry. So in such a scenario, doesn't it warrant that your CP share -- I'm sorry, I'm harping on the same CP share should definitely be coming down because then it would be potential ALM mismatch in a scenario where interest rates are -- hardening of interest rates is imminent.

No, we can do that. If I do this now my costs will go up. If I can manage utilizing CP only for leveraging costs without the ALM getting disturbed, and if it can help the company and the investors in terms of return. Why shouldn't 1 look at this option today we have an opportunity, today we have an opportunity of high liquidity, and therefore, we are replacing that. God forbid if interest rate goes up and it CP becomes expensive, then we would not take CP. And today, we're taking CP only as -- only against back of this, not for funding purpose, someone -- somebody asked in this call, why don't you use CP, why are you so defensive about CP? Why don't you use CP for funding? We feel CP for funding is a very risky proposition at this point in time, post ILFS and various other companies, which had to go through tough times. And therefore, we don't want to choose that option, but cost leverage, CPs cost leverage is a very good strategy, which would help all of us without any risk and therefore we want to continue with this strategy.

Our next question is from the line of Piran Engineer from CLSA.

Yes, I just had a clarification, sir, when you said about INR 40 crores, INR 50 crores BT out, sorry, on was that every quarter or every month?

For this every quarter net.

Okay. But what is the gross?

So gross, now on a normalized state, it would be about INR 85 crores to INR 90 crores. That's the BT out. And the net would be -- yes.

So on an annualized basis, only about 1.5% to 2% per year, the gross BT out. That sounds quite low, isn't it.

No, it's about INR 90 crores. Yes, you're right. Correct. You're right.

Okay. Only 1.5% to 2%. And what about foreclosures, how much would there be?

Foreclosure would be again gross -- excluding foreclosure, I just put it in 2 brackets, one is the normal reason that I'm keeping that out. Normal EMI repayment that I'm keeping it out, which will be about 2.5%. So if I leave that all put together, it comes to about INR 360 crores. So which we ease every month, my book deplete by INR 360 crores. This includes 3 parts. One is BT. Second is the pre-closure and the third 1 is normal repayments and collections.

What would in that INR 360 crores, how much was foreclosure? About INR 30 crores BT. And how much was foreclosure?

Foreclosure is INR 60 crores per month.

Okay. I didn't hear that. Yes. Okay. That's all from my side.

Next question is from the line of Nirmal Bari from Sameeksha Capital.

My question is on what rate are we -- yes, am I audible?

Yes, you are audible.

Yes. So 8.5% since 1st September, right, as per our website. So are we repricing at 8.25% or 7.75% at present. Hello?

See repricing will be -- it depends on different segments, right, because we do risk rating. And depending on the risk we reprice. But it could happen anywhere between 8.25% or it could be 8.5% depending on the segment, starting from 8.25%.

Yes. So the minimum at present is 8.25%, right?

Repricing is 8.25%, yes.

Yes. And sir, in the last one, specifically from Q3 onwards definitely we revised our rates downward, we bought a very typical set of clients which we didn't use to get earlier. The higher average ticket size and higher income clients. So when their loans get repriced to 8.25%, why would they stick -- as in what are we offering them that they would continue to stick with us because these clients can very well move to the bank and still get a 7.25% or 7% rate, right.

See, customer has an option of switching if we have to retain the customer. So we take small see and we switch the rate. And this is a common practice across all the HFCs.

Yes. But are we starting to see some -- I think what has been the response in the last 1 month since...

Definitely, it has been pretty good, last, if you look at last 6 months, our BT out has come down to pre-COVID levels. So we've been able to control that part.

And it was the same for the month of September, actually?

Yes, September also, yes. And this we have done for many, many years, till COVID started. And only when COVID started, we saw pressure on book depletion.

Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Kousgi for closing comments. Thank you, and over to you sir.

On behalf of the Can Fin, we thank all the investors for participating in this con call. As in Can Fin, we always try to increase the shareholder wealth by our proactive business strategies. And in coming days, we will continue with the same strategy. Thank you.

Thank you very much.

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