Capri Global Capital Limited (531595) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Pavitra, moderator for the conference call. Welcome to Capri Global Capital Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note this conference is recorded. I would now like to hand over the floor to Mr. Rajat Gupta of Go India Advisors. Thank you, and over to you, sir.

Thank you, Pavitra. Good afternoon, everybody, and welcome to Capri Global Capital Limited earnings call to discuss the Q1 FY '21 results. We have on the call Mr. Rajesh Sharma, Managing Director; Mr. Ashok Agarwal, Associate Director of Finance, Accounts, Legal and Compliance; and Mr. Hardik Shah, Vice President, Corporate Strategies. We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risk that the company faces. May I now request Mr. Rajesh Sharma to take us through the company's business outlook and financial highlights, subsequent to which we'll open the floor for Q&A session. Thank you, and over to you, sir.

Thank you, Rajat. Good afternoon, everyone, and thank you all for joining us on this call. I would like to start by saying that all of us at Capri Global Capital hope you, your friends and your families remain safe and healthy during this unprecedented global health crisis. As I stayed back and thought about talking to you this quarter, I thought back to our discussions of last quarter's results. We had thousands of customers who had already approached us in April asking for assistance in terms of paying their loans and new loan requests out of panic. Against this extremely challenging backdrop, I'm very proud of my colleagues the way they managed to support our clients in the midst of crisis and through massive uncertainty is indeed commendable. I would now like to discuss some key metrics of our first quarter financial performance for FY '21. First and foremost, I would like to provide you all with the moratorium update. When Reserve Bank of India announced loan moratorium, initially for 3 months, the customers were under confusion that moratorium implies interest waiver during the period of loan moratorium, and they have to pay exact EMI, which they are not paying now, later, and hence, opted for moratorium. To tackle this misunderstanding, we circulated Excel calculator, which are easy to use, to each of our customer relationship manager to educate customers about adverse impact of opting for moratorium on their financials by sharp shoot up in the loan tenor. Post reaching out to customers and educating them about adverse impact of opting moratorium had resulted into customers who had earlier opted for moratorium also started paying their EMIs who had the money. This number of customers under effective moratorium, the customer who opted initially moratorium, but later on started servicing their EMI, dropped across our all business verticals. When customers realized that by opting a 3-month moratorium, depending on their tenor of the loan and rate of interest, they might end up paying 9, 10, 12, even some 15 EMIs, and it means 3 to 5x money than they are not to pay now. There's a sharp change in their repayments. So in MSME, the effective moratorium cases in terms of count came down to 28% in June versus 45% in April. And in terms of POS, it came down to 38% versus 53% in April. In housing finance, the effective moratorium cases in terms of count came down to 20% in June versus 30% in April, and in terms of POS, down to 24% in June versus 33% in April. In Construction Finance and direct lending combined, the moratorium cases came down in terms of count to 35% versus 50% in April, and in terms of POS, came down to 46% in June versus 56% in April. Also, our relentless focus on collection has resulted in sharp improvement in customers, including moratorium cases, servicing EMI month-to-month basis. MSME in terms of count, customers, including -- assuming that there's a moratorium given, servicing EMI for current month or earlier month increased to 72% in June from 55% in April. In terms of POS, customers servicing EMI for current month and early month increased to 62% in June from 47% in April. As regards home loans, in terms of count, customers, including moratorium, servicing EMI for current month or earlier month increased to 80% in June from 70% in April. In terms of POS, customers servicing EMI increased to 76% in June from 67% in April. Based on the interaction with our customers, we have gathered that most of the enterprises in semi-urban and rural area are already back on track. They started resuming their operations by end of May and June, depending on the lockdown guidelines, while those in major urban centers, which are epic centers of COVID case in India, should hopefully normalize by starting -- improving from the mid of August and by October end or so, we expect them also to be normalized. Hence, customers servicing EMI should also improve further going forward. During the period, we maintained a robust level of liquidity and capital to tackle through the COVID crisis with almost INR 4.9 billion of cash and cash equivalents and healthy capital adequacy ratio of 41%. Additionally, we managed to raise incremental bank line of roughly INR 10.5 billion with INR 10.7 billion of undrawn lines at the end of the quarter. We believe that -- so here, the important point to note, from April to June quarter, we have raised fresh bank line about INR 10.5 billion. We believe the granularity and retail nature of our loan assets is assuring to our banks, while largely these lenders are finding it difficult for incremental liquidity. At the back of strong liquidity, the company has not sought any moratorium from any of the lenders. On the contrary, Capri has made a prepayment of loans ahead of its repayment schedule of INR 311 crores in Q1 FY '21 to reduce the overall cost of funds. Given the uncertainty over the potential macroeconomic impact, we have made extra provision for expected credit loss on financial assets in Q1 FY '21 of INR 203 million, which is over and above INR 136 million COVID-related provisions made during quarter 4 FY '20. Effectively, the total COVID-related provisions stood at about INR 339 million. And based on the current indicators of future economic conditions, we consider these provisions [ are to be increased ]. As we continue to navigate the challenging and uncertain environment, this quarter's performance once again demonstrates the benefit of the diversification and scale of our platform. Also, as a result of our stringent cost control and strong risk management framework, we reported a strong and healthy Q1 FY '21. I will just touch on a few highlights here. Our net interest income stood at about INR 929 million for Q1 FY '21 with NIMS at about 9.2%. We identified areas where discretionary method has started curtailing those expenses, along with rationalizing our branch network, leading to a substantial reduction in our cost-to-income ratio of about 25% in Q1 FY '21 as compared to 36.7% in Q4 FY '20. Hence, our pre-provision operating profit stood at about INR 731 million for Q1 FY '21, registering a growth of about 27% year-on-year. Our profit after tax for Q1 FY '21 stood at INR 396 million after considering INR 203 million contingency provision for COVID. Asset quality remained healthy with GNPA 90-plus DPD portfolio at 2.33% and net NPA about 0.25%. We maintained a strong portfolio yield about 16.3% in Q1 FY '21 against 16% in Q1 FY '20. Our AUM ending Q1 FY '21 stood at about INR 40.48 billion. MSME lending continues to be the key focus area and constitutes about 51% of the book, while the rest of the contributes come from Construction Finance and Housing Finance constituting about 24% and 23% of overall portfolio, respectively. We have maintained our credit rating of A+ from CARE, AA- from Brickwork amid uncertainty and peer downgrades. Our return on equity stood at about 10.2%, while our retail markets stood at about 3.5% for Q1 FY '21. With our continued focus on the long-term borrowing, our ALM is comfortable in light of the fact that option of availing moratorium for customers has been extended up to August 31, 2020. We have significantly ramped up our digital payment infrastructure and launched several technological initiatives, adding benefits in collection, underwriting, disbursement, risk, et cetera. The NBFC industry has been adversely impacted due to the COVID crisis, and I would briefly explain how we are positioned in the current scenario. Talking about our major portfolio, that is MSME, which has been severely impacted due to the lockdown, at Capri, we have been focusing on semi-urban and rural areas, where the impact of COVID so far has been minimal, and we have resumed business in all branches. Subject to criteria that number of active COVID-19 cases in respective districts are less than thousand and business activities back to normal in those districts. We are also seeing new loan demand coming up, which we are cautiously analyzing before disbursement. As of now, we have started offering top-up loan to -- on existing loans, which were standard pre-COVID, and those customers have not opted for moratorium. Additionally, we are planning to disburse about INR 1,500 million to MSME under government-guaranteed emergency credit line by October end 2020. Our Construction Finance book is catering to small developers with an average ticket size of about INR 74 million per borrower, almost 130 customers paid across 11 cities. Our developers don't get credit from banks in a timely matter, and that is why they come to us. Hence, I believe our strategic focus on mid- and small-sized developers focusing on catering affordable housing segment in Tier 3, Tier 4 towns put us in a good stride compared to other financial institutions whose focus area is largely Construction Finance loans. Further, as per our internal survey of developers, around 70% of them have resumed work at their project sites, and they exhibited confidence that more labors are expected to return to projects post Kharif season sowing. Also, they expect demand for affordable segment to return to pre-COVID level by October and November, when normalcy is expected within Indian economy. Under the affordable housing finance business, we are targeting Tier 2 and Tier 3 cities, where we have already empowered over 9,600 families to realize their dream of owning a home. In terms of demand for affordable housing as per ANAROCK's Consumer Sentiment Survey, demand is undented for affordable housing post COVID-19. Hence, we expect this segment will continue to register a strong traction going forward. As we go forward, we continue to prepare for the prolonged economic challenges and look beyond market valuation in overall assessment of risk. We maintain a strong financial profile and remain agile with our balance sheet as we continue to serve our clients. Against this backdrop of unprecedented environment, the range of outcome is broader than ever before. But our priorities remain unchanged. We are focused on supporting our employees, customers, clients and communities on being good stewards of the capital entrusted to us by our shareholders. So to wrap up, I would like to mention that I'm proud of the people at Capri Global as we have worked tirelessly during this time to engage in serving our clients, leverage technology to ensure our resiliency and prudently manage our risk and financial resources. With that, we may open the line for Q&A.

[Operator Instructions] You have first question from Raghav Kabra from Excel Investments.

I have a couple of questions. So the first one is, just wanted to understand, like, what sort of measures have you taken on the cost side as your cost-to-income ratio have come down significantly in this quarter. And how would the same react over the rest of the financial year? If you could provide us with some guidance over this.

Yes. First question related to cost measures, what we have done that we analyzed some of the branches where the productivity was lower. We have realigned those branches to nearby branches, and instead of keeping the branches -- at a full-fledged branch, we have started resident branching. Some of the places, we have reduced our rents. And also during this time when our disbursements were not happening, we have realigned some of the nonproductive staff. So we have trimmed the staff strength where -- at the ground where the productivity was low. So based on the January to March quarter performance parameters, we do this exercise every year. And you have seen that year after year, we are improving our cost-to-income ratio. I expect that this year, cost-to-income ratio may not remain in the next quarter the same. It was 24%, but we'll try to maintain below 30%, as against the last year about 45%.

Okay. And sir, one more question. With MSME business resuming, what sort of growth are we targeting in this segment in coming couple of quarters? And also, how cautious are you on lending in your Construction Finance portfolio?

So as regards our MSME consumer segment and what growth we can target, I would like to answer that out of 144 branch managers across our 81 branches, out of that, 99 are situated where the number of COVID patients are less than 500. They are in Tier 3, Tier 4 towns. So you can imagine the business is back to normal. The demand of the loan is coming back. And from these branches, we have already launched the new business sourcing. The top-up to our existing customers, those customers who were standard account pre-COVID plus they are paying all the EMIs due from March, April, May, June period, those customers we are offering top-up loans. And same customer category, we are offering also emergency credit line. So these 3 products, we already started working in these 99 branch managers, which are in Tier 3, Tier 4 towns. So I expect these will grow further based on the lockdown opening and normalcy coming back. Second, MSME is going to be our key growth driver. Now as regards Construction Finance, we are doing this Construction Finance business in a very retail and granular way. We are catering to small developers who acquire the land, take all the approval, and they require about INR 7 crores to INR 15 crores kind of a loan, where loan is released after approval linked to the construction. So these Tier 3, Tier 4 town small developers, they are building affordable homes. Their sales is also not a problem. We -- during this COVID time also, we analyzed that from the June end onwards, about 70% of our developers have already resumed the operation at their site, and we expect them to do well. Construction Finance, if you've seen the last year to this year, we have de-grown our book. Our major focus is going to be MSME in affordable housing, but we expect our Construction Finance to remain at the same level what it is now. So whatever the repayments are coming, to that extent we'll grow. In absolute terms, book may not grow in Construction Finance. Book will continue to grow in MSME and affordable housing.

[Operator Instructions] We have next question from [ Ravikant Bhat ], an individual investor.

Just 2 questions from my end. One is, I will just pick up from the answer which you gave to the previous question, which is more of -- more to gain a qualitative understanding as to if you have surveyed your customers or done some channel checks as to how their businesses are, you did mention about Tier 3 and Tier 4 towns, so between February this year, which was the last full month of operations before the lockdown set in, and May, when we had a full lockdown till now, how have businesses done as in how -- when do your customers expect their businesses to be normalized? What level are they vis-à-vis '20 level? And any impact assessment that you have done? If you could just comment a bit more on this.

So customers, which are -- it is based on the location. So customers which are based in MMR, Pune, Aurangabad, Indore, Bhopal, Jaipur, Ahmedabad, where COVID impact was more, have -- are impacted more. And among them, the worst affected is Mumbai, Mumbai Metropolitan Region because of the 2 reasons that lowdown lasted longer plus unless the local trains are not resumed, the impact is going to be continued. However, we have very less activity in MMR region. Our entire branch network, if you look at, they are based out of Tier 3, Tier 4 town. It can be a Akola, it can be Amravati; in Madhya Pradesh, it can be like, Satna, it can be -- so these are kind of towns we are situated. So our 99 out of 144, as I said, are located in Tier 3, Tier 4 towns, where a number of active COVID patients are less than 500, and there, normalcy is back. So there is not going to be an impact. So they are already -- full-fledged they are back. When we connect our sales team, our collection team, I mean, they go to market, sometimes we will check -- ask them to do a WhatsApp call live and show us how the activity and the market to test check, and we found they are back to normalcy. So these are the places, locations where business -- doing business will not be a problem. The collection is showing the same trend that our collection efficiency is coming back to better in the smaller town branches and new business demand is coming back. So I expect that, yes, about 50%, 60% capacity of us we are able to disburse. And this -- we should get back this capacity to about 80% from -- by October end or so.

So sir, this -- the customers, which are still under effective moratorium, will it be fair to say that these are also in the more worse affected areas of COVID? Or are these distributed again into the Tier 3, Tier 4 towns, where they might still be observing some bit of caution and might actually start repaying once things are more normalized?

So I think the July month, July end, we will see -- the trend is improving. If you see the trend, clearly, in terms of MSME, in POS terms in April, about 53% customers were under effective moratorium, which has now come down to 38%. It means, in absolute terms, 68% customers have paid their EMI and 38% are still under moratorium. But depending on the business, I think July and August, these are the 2 months where many lockdown is getting relaxed, and their business will come back to normalcy. Thus, many banks are also offering money in the market in the emergency credit line. We are also giving on a selective basis. That will also improve the credit flow to them and their business will come back to normalcy in terms of -- if anybody needs liquidity also. So collectively, we see -- because of all these efforts, moratorium month after month is reducing. In April, it was 53%, then in May, it came 48%; June, it came 38%; July, it will come further down. So we see the collection efficiency is improving. In home loan, if you talk about, in terms of POS, it was 33% customers who were not paying in April. It has come down to 24% in June. It will go down further. So effectively, with the relaxation in lockdown and business coming back, I'm sure these small customers are very cautious not to increase their interest burden. All their account, important property of theirs is mortgaged with us. The loan-to-value in MSME is about 50%; in home loan, it's about 70%. With that kind of a loan-to-value, they will not take any chance. Our repayment will always be their priority, it has been in the past. And we believe that a substantial improvement in the next 2 months will happen. The trend is also showing this.

Sure. And sir, one last question. I'm looking at Slide #23, where you give the asset-liability split. You have basically shown bucket-wise net inflow or outflow. I think it's -- for all that is in buckets, it's net cumulative inflow that we have. How is moratorium factored in when calculating the inflows in this particular construction?

These are the numbers which have been taken after considering moratorium numbers. The same number we are also required to submit to Reserve Bank of India. So that -- same numbers are there. Yes. So moratorium...

Okay. So in case your collection trends continue to improve, which I'm sure they should, you are going to see a better inflow. So this will only show an improvement, correct?

This is the most -- in worst scenario, our ALM is in any case positive. If the collection improve further, it is going to make it better only. But in any case, inflow versus outflow, all our buckets are positive, reason being -- we have 40% capital adequacy, reason being that our -- all the liabilities are long term.

[Operator Instructions] We have next question from [ Preeti Singh ] from [ Value Investments ].

I just wanted to know that we have seen varied opinions regarding the economy. So on one side, the SBI Chairman is saying that it's the best time to invest, while Mr. Kotak is cautious at the moment. So what's your view on the ongoing situation in terms of lending and disbursement? And what's your big picture view on the economy?

So yes, we are cautious. So what we have done in the fresh lending, the valuation of the property we have trimmed down by 10%. And plus, we are only lending to those customers whose business has started operation. We can see the activity is nearly normal. So we are conservative on the valuation. We are conservative on the assessment side. And to our existing customers who have not opted for moratorium and paid all the 4 EMIs, if they are looking for any money for expansion, we are considering them. So collectively, while we are cautious, but we are seeing the demand of the money in the Tier 3, Tier 4 towns and semi-urban areas. We are more cautious in the region, the metro cities like Ahmedabad, Baroda, Jaipur, Pune, Bombay. So few towns we are cautious, but semi-urban and urban areas, demand is back. And with the conservative valuation of property and loan-to-value keeping at about 50%, we have started the business, and we are seeing the traction. That is all I can say.

Okay. Sir, another question was, can you throw some light in regard to ECGLS (sic) [ ECLGS ]? Are you lending to all your borrowers? What's your strategy out there? How much have you sanctioned till now under the scheme?

So emergency credit line we launched the product, but not that we want to give everybody. So we have made the 3 category of criteria. Customers who are standard on April 29 and have not opted for moratorium and paid all the 4 EMIs, category one. Category two is customers who are standard account in Feb end, but out of 4 EMIs, he has paid 3 -- sorry, 2. So this is the second category. And third category is customers who are standard and has paid at least 1 EMI. We are not going to those customers who were, while the emergency credit line allowed that we can lend even to customers who are in the 1 to 60 DPD on [ February ] 29, but we are more conservative. We are not giving to them. We are giving only to customers who are standard and paid at least 1 EMI. So we categorize in those different categories. And plus their business should have resumed, then only we are lending. We are more comfortable giving top-up to our existing customers, for the reason being that emergency credit line tenor is only 4 years, so their EMI amount will be much higher. The same customer, if I give the top-up under the -- our top-up scheme, then the tenor can be 10 years, their EMI will be lower. So there will be less pressure on their cash flow. So we are preferring more our top-up loan than the emergency credit line.

Okay, sir. Sir, my last question would be, what's your strategy on the small finance bank going forward?

So going forward, I think our Board has authorized us for the -- to explore and to prepare. So they have given in-principle approval for small finance bank. We internally work out the plan, take the help -- appoint the adviser to advise us, maybe some good accounting firm or maybe somebody else. We'll evaluate that, and we'll make a business plan. We believe in the long run, that is the way we can control our liabilities and raise the deposits from customers. Plus we can do a lot of cross-sale of other products. So looking at the long term, this is what we want to do, this is the one step towards where we want to do in the banking side. So I think...

We have next question from Nischint Chawathe from Kotak Securities.

Just a couple of questions. Now if I look at your slide on moratorium, what is very clearly visible is -- if you look at Slide #7, your loans under effective moratorium have come down from 45% in April to 38% in May and, I think, 28% in June, which I guess is a function of the fact that you have been educating the customers and telling them that they should not opt for a moratorium. Having said that, when you look at the percentage of loans under moratorium, which is the third line, that's actually been kind of going up from 50% to 55% and to 57%. So I was wondering why people are -- kind of on one side more people are signing up for moratorium on a month-on-month basis, although after signing up for moratorium, they are paying the EMIs as well?

So that is a trend we have also seen. So on our total -- at the moment, they write a letter to us. We -- for the regulatory compliance purpose, we record them under moratorium. However, the moment we receive the letter, then our relationship manager makes a call, our customer care makes a call that in case you choose this moratorium of 3 EMIs or 6 EMIs, you have to pay maybe 10 EMIs or maybe 15 EMIs. So when they realize this, then they start paying based on their capability. So initially, I think they may not be aware, that may be the reason, but we follow a simple procedure, that anybody who has written us a letter or a mail officially with us that I want to opt for moratorium. As per RBI directive, we put them on a moratorium, but we persuade them to pay. So that is the reason we came out with an effective moratorium calculation.

But I wonder why were people -- more people kind of write letters for signing up as a month progresses because if ideally collections are picking up or things are getting better, you would have lesser people signing up, right? So why are people approaching you in the first place and as a month progresses, more and more people are approaching?

The kind of customers we deal with, they are not that savvy on -- in financial terminology, and we deal with all the customers who don't have income proof. So I do not -- we are not able to figure out this way, but we clearly see they simply -- we receive a mail or simply we receive a letter that they wanted moratorium. Maybe they think by not paying, they have to pay exact number of same EMI, but once they are educated, we have clearly seen the difference that even after a customer who opted for moratorium, they have started repaying the EMI. So perhaps they are not aware of this mechanism, so they write the mail and letter. But as a matter of RBI compliance, we have to register them -- the moment we receive a mail, we have to record in moratorium and report to RBI numbers also.

Sir, this advanced EMI that they are paying, 1 EMI, 2 EMIs, 3 EMIs and I think you've explained it well in your -- in one of the slides, sir, can these EMIs later on be adjusted against the installment for September, October, November?

If somebody is paying, then we don't want to give a message to the customer that, okay, we will give moratorium now and then we will adjust later. We are clearly seeing that in Tier 3, Tier 4 towns, they are drastically different than the major towns. Their business operations are back to normalcy. So if they are paying, then why we should educate the customer [Foreign Language] you don't pay now, we'll adjust in the future EMI, and we'll continue in the moratorium. We are not doing that.

Fair point. Just moving on to the undrawn lines of credit, which is Slide #12, I think, just wondering how much was the undrawn line of credit, let's say, last quarter? Let me put it this way, how much was the sanctioned line of credit last quarter as against around INR 6,000 crores this time around?

So which slide you're referring to?

12.

12. So we have given -- so about INR 799 crores in CGCL and about INR 275 crores in Capri Global Housing, it is about INR 1,074 crore is undrawn line.

So how much would the number be like last quarter? That's what is my question.

You mean to say in the March ending?

That's right. That's right.

Yes. Just a minute.

I'm just trying to understand how much was the increase in sanctioned limit line between the March and the June quarter.

We'll explain that also. The new line sanctioned, limit sanctioned in Q1 is about INR 1,050 crore, INR 650 crore in new line we received in CGCL, INR 400 crores is new line we received in the Capri Global Housing during this COVID time. And that is the reason that we decided rather than keeping the money in mutual fund at 5.5%, let us repay to the banks advance. So what we did is, effectively, we paid ahead of its schedule to the banks their future EMI up to April 1, 2021. One bank, which was Yes Bank, their rate was high. The entire amount we have prepaid to them. So that is the reason we have done the prepayment because we got healthy credit line during this quarter. In terms of Q4, we had about INR 605 crore credit line. Undrawn credit line at the end of the March '20 was INR 605 crore.

And gross, I mean, sanctioned -- total sanctioned amount?

Sanctioned amount, you mean to say this...

As against INR 6,000 crores -- yes, as against INR 5,900 crores, how much was the sanctioned amount in March?

So March -- you are asking new sanction, March quarter.

Yes, outstanding. Sir, this is the outstanding number, right, the limit sanctioned INR 6,000 crores is outstanding...

No, no. You have asked what is the undrawn line.

No, no, I was -- sorry -- I understood that. I'm just saying that I wanted to ask, actually, what is the gross sanctioned amount. As against INR 6,000 crores, how much was in the March quarter or the March end?

So as against INR 1,050 crores sanctioned during this April to June quarter, what was the sanctioned limit in Jan to March. That is what you're asking, right?

That's right. That's right.

Just a moment.

Sure.

Just -- our retails, they are taking out. So I will come back to answer this question.

Sure. So just then kind of moving on, on the emergency line of credit, sir, you mentioned that you are disbursing around INR 1,500 crores or you have already disbursed INR 1,500 crores. I didn't get that.

Not INR 1,500 crores, INR 150 crores. INR 1,500 million I said.

Yes, I was just wondering. Okay. Yes, that's right. And this is something that you've already disbursed or you planning to disburse from the year? Or this is something that you've got permission from SIDBI? Or how does it work?

So it is like this. These are the amount we expect to disburse because, as we said, we have a INR 2,000 crore of portfolio of MSME and INR 1,000 crore is home loans. So if we come to MSME, INR 400 crore comes as per the government regulations. However, we have decided that we will offer this pool to about INR 180 crore to INR 200 crore to customers. 50% customer will not be offering this product. Now among this eligible customers, we hope 2/3 will take, but it will depend on the customers, whether they really need the money. We expect about INR 150 crores we may do under emergency credit line, assuming that now individual borrowers are also allowed. Now on a consolidated basis, against INR 1,050 crores new sanction in April to June quarter, last quarter, it was about INR 485 crores. Yes. So again, I want to clarify to you that this money which we raised, INR 1,050 crores, lot of money came via TLTRO. Now TLTRO money gets disbursed immediately. Rather than keeping the money in mutual funds, we decided to prepay through our loans. So we have done that, and we have utilized judicially our credit line to pay ahead. That has also resulted us to negotiate with the lenders a better interest rate. So there is a drastic difference you will see in our cost of funds coming down.

Okay. Sir, just coming to the emergency -- the MSME credit line, I was just wondering how does the system work? Do you need to -- especially for individuals now, do you need to go to SIDBI and take a permission? Or how does it really work?

No, no, no. We need not take permission, we have to upload the data on their portal. To whomsoever we are sanctioning, we have to upload on the portal and what -- how we have done that, with the technology help. This money we can disburse within 3 working days. So it doesn't require any security creation. It is a simple, how -- whom we want to give, we send an offer letter, our relationship manager make them a call. In case client needs the money, then immediately we sign the agreement, which is a very simple agreement, and we disburse the money. And then up to -- these data are uploaded on the portal of National Credit Guarantee Trust Company.

Sure. And -- okay. So this is just based on the criteria that -- whatever -- I mean based on the internal criteria, you will approve or, whatever, disapprove the loan types. And just one last question was on the -- on your loans, are the MSME loans guaranteed by real estate? Or are these LAP kind of loans? Or what is the underlying security over here?

Yes. Can you repeat the question again, please?

Yes, yes, sorry. The last question is on the MSME loans, these are guaranteed by -- I mean, are these LAP kind of loans? Are they guaranteed by underlying security? Or what is the underlying guarantee in the MSME loans?

By the government?

No, no, for your MSME loans.

Every loan of MSME is secured by underlying property of self-occupied house or self-occupied business premises. However, if you give emergency credit line to these customers, that is guaranteed by government. The additional top-up loan under ECLGS may not be having that security cover.

Sure. Got it. And just one final one. Are the repayment terms on your loans MSME, and I'm not talking about the government scheme right now. But generally, the repayment terms of your MSME, do they have a flexi component or -- where you can change the repayment schedule if the customer has been an honest customer? Or is it kind of watertight?

So we give our loan to MSME customers, which ranges from 7 years to 15 years. However, we have seen the trend that most of the loans get closed within 5 years' time. Either they are transferred because they have a clear repayment track record to a lower rate of interest or because their income level are so small that their change is very fast, and they're able to prepay their loan. Now we have seen a clear trend that these MSME customers -- if you talk about our 2014 book, 2014 book is 98% rundown today. So no loan stays in our books more than 5 years.

Okay. But if the customer is good, would you change the term of the loan in terms of increasing your duration or...

We cannot increase their tenor because the moment we increase the tenor, it tantamount to restructuring.

Okay, even for a good customer?

You cannot increase. You can reduce the tenor, you cannot increase the tenor. So suppose a good customer needs, he wants to prepay you or he is trying to repay you more than what is due. You cannot give a loan for 8 years and then convert into 11 years, reducing the EMI burden because that tantamount, in RBI accounting view, is a restructuring of a loan.

[Operator Instructions] Next, we have a follow-up question from Mr. Raghav Kabra from Excel Investments.

I just need to ask one last question. Like what sort of asset quality stress do you see building in your book over the next couple of quarters when the moratorium is over?

So it's very difficult to predict what could be the stress, but being our portfolio is entire secured by collateral of property and loan-to-value is about 50% in MSME, about 70% in home loans, even though for a temporary period if some loan becomes shift into the NPA, maybe the moment business operation comes back, we should be able to bring it back to normalcy. There may be a temporary spike in the NPA by 0.5% or 1%. At this moment, we are not able to judge it. I think clear picture will emerge in September. But we are not expecting that it will be very disproportionate, it will be something which we cannot tolerate. We have already made the adequate provision of about INR 339 million towards COVID provisions. We consider that whatever provisions we have made, the new spike of the loan will be well within this range, and we should be able to handle this.

We have the next question from Shreepal Doshi from Equirus Securities.

My question is with our collection efficiency. So we have highlighted what is our moratorium book and how that has sort of changed your move. But what was our collection efficiency vis-à-vis our receivables? So what was your monthly receivable for April, May and June, against which how much you have received?

Yes. So assuming that no customer has opted for any moratorium, let us reassume that, in that case, in MSME, out of whatever was due, we received 47% in terms of POS in April, which have improved to 62% in June. In home loan, April, it was 67%, which has improved to 76%. So in terms of MSME, 38% customers are not paying. And in the home loan, about 24% customers are not paying. Rest all are paying. This is assuming no moratorium has been given. If you give the moratorium effect, that will be much higher.

Yes, yes, yes. Okay. So this is, okay, assuming no moratorium is given.

Assuming there is no moratorium concept, then how many customers are not paying. It's 38% in MSME and then 24% in home loans.

Okay, okay, okay. And sir, what would be that sort of a scenario for our Construction Finance segment?

Construction Finance segment, about 54% customers are paying. So 46% customers are not paying.

Okay, okay, okay. And sir, how are we seeing the trend there, like from, say, April to May to June in the Construction Finance book that I'm talking about...

So Construction Finance, in April, it was 56% who were not paying. So another 10% customers improvement there, 46% not paying. So from 56%, it has come down to 46%. We expect that July and August month, it will go down further.

And then just one data that I'm seeing here on Slide #7 and also on Slide #8, I see the total number of customers dropping say -- I mean marginal drop. So is it just a closure of loan account or something else?

Yes. They -- some -- few loans account have been closed, and that is the reason there's a fall in the number of count of the customers.

Okay, okay, okay. Sir, my next question is on the Construction Finance segment. So I mean as I know that we are broadly present in the Western geography wherein the impact of COVID has been high, and although we are in, like, let's say, smaller sort of -- Tier 2, Tier 3 geographies, but how has been the trend there? I understand 70% construction activity has resumed, but -- so like, what are our coverage levels for our exposures? How are we seeing the new inquiries for our developers? So what are some of the trends that you will be getting to know post your interaction with the developers?

So we have realized that the -- location specific, these are the trends. So MMR and Pune is the worst affected, but all other centers like Chennai, Vijayawada, Surat, Baroda, Ahmedabad, Jaipur, these are the places where construction activity on the site have resumed. They are able to mobilize the workers. They are resuming the operation. With the progress happening, and those customers we have sanctioned and part disbursed. And when we see their activities there, and they are getting inquiry of the loans, on verification of that, we are disbursing those customers towards the further construction activity. So we are supporting them also in terms of -- so they can start the construction and complete the project quickly. It is only Bombay-based and selectively Pune it has affected more. But rest of the location, the resumption of the work on the sites have already started.

Sir -- so like since we are one of those lenders who are into last-mile financing, right, for construction finance, so -- but -- so how is it different for somebody who has, say -- who is in the advanced stage of construction vis-à-vis somebody who is at, say, 50%, 60% of construction of the site. So are we seeing some difference in terms of inquiries or conversion of actual sale happening in those sort of scenarios from the developers?

So actual sales, we are -- project-to-project, if we analyze, differ from town to town and site-on-site and location to location. But some of the customers are seeing some inquiry and the sales have started. But I think that is not much. What is important for the customers and for our customers, that once the work starts on the project, then the inquiries convert into the sales. So what is really important is that they should see consistently on the site work is going on, then only inquiry will convert into the sales transaction. And we are ensuring that the locations, which are not impacted, which is the work is started, we should support them so after 1 month or so, they start work, all the inquiries they will be able to convince and convert into the sale.

[Operator Instructions] Since there are no further questions, I now hand over the floor to management team for closing comments. Over to you, sir.

Yes. Thank you all. Thank you for joining the call. I think at Capri, we'll continue to remain focused on lending on MSME and Affordable Housing segment. They are the same category of customers, same income level, same geographies, and we have built the expertise in ground understanding of them. Our focus is going to remain the same. We have -- as I mentioned, with the various technological initiative and with the sharp focus on bringing our cost-to-income ratio down, we see that we'll continue to do the eval, and we'll continue to work on our strategies. Thank you so much.

Thank you, sir. Ladies and gentlemen, this concludes your conference for today. Thank you for your participation and for using Door Sabha's conference call service. You may disconnect your lines now. Thank you, and have a pleasant day.