Indian Bank (INDIANB) Earnings Call Transcript & Summary

Ladies and gentlemen, good day. And welcome to the Indian Bank Q1 FY '22 Conference Call, hosted by Emkay Global Financial Services Ltd. We have with us today Ms. Padmaja Chunduru, MD and CEO; and the top management team. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Anand Dama from Emkay Global Financial Services Ltd. Thank you, and over to you, sir.

Yes. Thank you. Good evening, everyone. We are pleased to have Indian Bank, MD and CEO, Ms. Padmaja Chunduru; and the entire top management team, including [ Independent ] Director and the CFO. I would first request madam to start with her opening remarks, where we would want madam to comment on the first quarter results in brief as well as another [ result that the bank has concluded ]. Apart from that, we also want personally from you, ma'am, the outlook on the growth and the asset quality, particularly we have [indiscernible]. Also, we can have a Q&A portion. Over to you, madam, [indiscernible].

Yes. Thank you, Anand. So again, welcome to all the participants of this analyst call. This Q1 FY '22 of Indian Bank, I think, is a record [ during 1 day ] that within 3 weeks, we could come with these results. And that was part of the operational efficiencies that we are driving in the bank. So I'm very satisfied with the progress being made on a quarter-to-quarter basis, not only in terms of time, but also in terms of bringing the whole thing together to present to you. So the Q1, again, has been a steady performance even during a very challenging quarter. As we mentioned last year or last financial year closing and even during the earlier results announcement, I think that the synergies of amalgamation, which we have been talking about and also taking up on a sales manner that is coming to [ fruition ] during the current year. And the first quarter results also are a reflection of these advantages and the synergies flowing into the bank. So I think the -- before I go into the figures part, I say I would like to again say that this is because of the combined efforts across the board of all the staff of the bank. And that is -- otherwise this kind of seamless transition and this kind of results on a sustained basis would not have been possible. So thanks to all our team for that. Now coming to the quarter under review, we saw that this quarter has been a very challenging one with almost 2 months -- more than 1.5 months gone in the COVID second wave. And even other staff members across the country, many of them and their family members are also impacted. So the focus was on maintaining the health and the safety of the staff and arranging whatever we could in terms of help to them. Unfortunately, we also lost quite a few numbers in terms of our colleagues, and that's very sad to see. The second wave was very, very intense, and the impact will impact the bank. In fact, despite that, I think the bank -- the fact that the bank could perform and also reach the levels that it has reached in the quarter one is very satisfying. The overall business growth, as you can see from the figure has been on a year-on-year basis. Yes, it has improved 9%, the overall business, the deposits at 10% and the advances at 6%. But on a quarter-on-quarter basis, it has been a bit muted. The March quarter was much better in terms of the opening up of the various parts of the country. And again, with this lockdown in this quarter, this was a bit difficult. So I think that this is an industry-wide phenomenon that business was a bit muted, essentially the corporate book has been plateaued. Otherwise, the RAM sector grew by 13% year-on-year and even during the quarter, [indiscernible]. The CASA, which was 42% last quarter, this quarter has come to 41%, which again happened because there was a stronger growth in terms of this 12% compared to degrowth of 8% and the current account actually [ degrew ] during the quarter. So this, I think, is a phenomenon that usually happens in the first quarter and especially the government business that was flowing through the current account has taken a sort of a dip in the current quarter, we expect that this will come back. There are many digital initiatives the bank is taking to get the tie-in from the government -- various government so that this CASA becomes a steady stream for the bank. In terms of the advances to the RAM sector, as I said, [ degrew ] and corporate, we expect it would pick up in the in the current quarter and much more stronger in the coming quarters. In terms of the earnings, the net interest income and the noninterest income, I think we are on a -- we have the visibility of the various teams that would contribute, and I'm very happy that there is a diversification in terms of the sources of income also if investment -- for some reason, the investment book is not performing to the -- the yields have come down, it would be the advances that would come in or some of the nonfunded business or the PSLC commission. So there are various ways of bringing in the income for the bank. And we are very aware of various cases that can be finalized. That said, I think the operating profit at INR 3,472 crores is -- I would like to say it is something that is a steady state. I think this is something which would be given the circumstances today and barring any big whatever platform event, as they call it. I think this is a figure or this is a level around which the bank should be able to deliver in the coming year. The next one, this -- again, operating profit, I think another major contribution has been the cost savings or the cost optimization. If the cost to income ratio has really come down, very substantially, that is because of all the rationalization that has happened which has contributed very significantly to the cost coming down, operational expenses, even the staff cost. So last year, about a year of amalgamation and quarter-to-quarter, there was a lot of volatility and because of the moratorium, because of so many things in the economy. This time, I think this quarter 1 is much more [ impacted that way ], there are no external factors that are directing it, except the COVID, which has hit us during the quarter, otherwise, this is steady. I mean in terms of the results, I think this is quite a steady performance. The net profit at INR 1,182 crores also is around -- it has significantly improved compared to the last year's first quarter, almost tripled. And I think this is also one figure, which -- again, it's not just a figure. It is something that the bank has the potential and has the foundation to earn on a quarter-to-quarter basis. The ROE all have shown significant improvement, flowing from the higher income levels. The domestic NIM, we could maintain at 2.85% though our projection is still to reach 3%, and that is a work in progress. The cost of funds has significantly come down year-on-year to 4.08%, and this is because of again the CASA and the various other initiatives that have been resulting in the infrastructure expenditure coming down. Even the term deposit growth has come from the deposits that are taken at a very low interest rate. These are not the high cost deposits. So whether it's down deposit of CASA, the cost of funds has come down for the bank. Expense ratio, as I already mentioned, the operational expenses and actually driving the operational efficiency through the system, through centralization, the reorganization of the bank, there are so many initiatives that have been taken as part of the amalgamation. And that is now paying off. I think that this is only the starting and this particular flow of synergies will happen during the next 2 to 3 years and will fully play out during the current year and the next year. The capital at 15.92% is one of the highest in the industry. It is a 247 bps improvement over the last year. And this has, in no small measure, being contributed by the capital raise that has happened in terms of Tier 1 and Tier 2, but more so in terms of the QIP very recently. As you are all aware, the QIP we had done for the INR 1,650 crores, the subscription was almost double -- or more than double of that. And we have taken our call that it will be at par and no discount was really offered because we feel the drive itself was a big discount to the book value. We would like the share price to reach the book value, which is today INR 284. So we are striving towards that. Other than that, I think about the growth in the current -- I think asset quality is another area which is a big concern to everyone. And while the gross NPAs were reduced, so the net NPA inched up by 10 bps. And that is, I think, expected in this quarter. And I would feel that out of the changes that have happened, unless any book really was the vulnerable one and that is expected. The restructuring that is in the offering is -- maybe part of it, maybe some INR 400 crores or INR 500 crores, we expect will be upgraded in the quarter to come because we have time up to September. But that said, I think wherever there was no viability or the unit itself was not in existence, we have taken a call not to extend and go on. It would be better to book the [indiscernible]. So that was the point taken on MSME. The other part is retail and agriculture I think are performing quite well and corporate also. So since the corporate book is sort of stabilized, and there are no great surprises in the offering, we feel that this asset quality is manageable. And we still would move towards [indiscernible] ratio below 3%, and keeping it below 3% and also the [ credit for the below 3% ]. This is the figure that we had earlier given, and we have been working for this for the current year also. Again, barring the one-off event, I think the bank is poised to reach those levels. In terms of growth, as I mentioned, the corporate book is expected to grow after the second quarter, partly during second quarter also. And we have approvals in place to results. Once the documentation and the other formalities are completed, this would be dispersed during the current quarter and the quarters to come. So we expect that this year, again, the corporate book will contribute to the growth. And so we do anticipate a 10% minimum growth on the advances side, given all the way it is functioning. Agriculture has been a good contributor in terms of our business growth, especially in the [ gross AD -- in the agriculture gross AD ]. This time, we want to focus also on the investment credit for agriculture. Since we have the current pieces and all the structure in place, it is now left to us to leverage. And there is, as part of the amalgamation, we have also submitted a strategic plan to the Board, a 5-year plan, which we monitor every quarter, and we go to the Board [ with big strategic initiatives ] being taken and what is the progress made on them. There is also a synergy tracker, a dashboard that captures all the cost to benefits that are coming or even the expenditure that is being made. So that gives us a very good visibility about where we are and where we want to be. So I think in a very tightly Board-controlled setup, we are leveraging the full benefit of this merger. Yes, there are headwinds in terms of the COVID and the fears about the uncertainty around the third wave. But I think given the vaccination drive and the fact that even in the bank and among the families, everyone has been vaccinated, everyone -- individual has been vaccinated, I expect that we would be able to handle the disruption even if it comes under [ to a ] very major one. So I think the bank is -- again, I repeat myself and I say that the bank is a steady performer. And quarter-on-quarter, I think we are proving that. And that, I think, would [ sold the bank as very strong ] in terms of balance sheet resilience, in terms of capital, in terms of asset quality as [indiscernible]. We have been saying and we have been doing [ what we see ], so I think that is what will pull the bank in a -- at a higher level in the quarters to come. So that would be my opening remarks, and we would welcome any questions from all of you. Thank you.

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

Can you just mention about the collection efficiency in Q1 and how it is currently, let's say, even in first 15, 19 days in July? And how do you see -- let's say, if there is no third wave, how do you see the asset quality going forward?

So thank you. I think as you mentioned, the collection efficiency took a dip during the May and June definitely. But it has started improving in the last week of May. And now in July, it is showing a better uptick. In terms of the month-on-month collection efficiency, I think in June, it was -- retail was around 85% and agri 88%. MSME was the worst hit with us and obviously, the most impacted. It was at 78%. And corporate remained at 97%. But these figures are inching up in the month of July. And maybe the -- maybe towards end of July, again, we think it would be back to above 90% on a simulated basis also. So in terms of that, I mean, as I said, as you also mentioned, barring a third wave or whatever happens under that, I think we should be able to register good recovery and good upgradation in the quarters to come. Not much of field work could happen in this quarter. Obviously, people could not go out, and nor are the borrowers ready to give information of it and discuss and all that. And so neither restructuring to the extent that it was anticipated could happen except in retail because that was more like a necessary request and getting it done. It was [ whole loans ] and all that. But in MSME, it is an issue that you need to actually engage with them. So that should happen in the current quarter. So we expect some upgrades there. So as I said, I think we are taking this as a temporary phenomenon, and we will work towards resolving this in the current quarter. So we should be back to, as I mentioned, [indiscernible] ratio of less than 3% by March '22. So even given the [indiscernible] during this year, I think that is something we can be [ funding about ]. So that was issue about the asset quality.

Okay. So barring if there is no third wave, you feel that the upgradation [ in recruiting ] will be better going forward? And therefore, you don't expect much deterioration in terms of gross NPA from here and onwards?

Yes, because we monitor it on an almost on a very weekly basis at the ED level also, and that is actually giving us a very good insight into what to expect. And what we see is what we are projecting more or less is another factor about the KCC, the renewals that were there for agriculture, slippages have come down very, very significantly. And I think that would, again, help the bank -- that's a big portfolio, almost INR 80,000 crores. And if that performs to its fullest, I think there is enough diversification in the book to take care of -- even if the MSME is vulnerable to a certain extent.

Okay. Now sir -- ma'am, third question was just a clarification. You mentioned that this INR 3,470 crores of operating profit, there is no major one-off in the [ same -- their volume ] mentioned that it is more like a sustainable operating profit we can expect going forward?

I'll ask our ED, Mr. Shenoy, to give the components and explain.

I think those are maybe -- it's not one-off components. It's normally one quarter the profits will be more than the other -- sorry, the income revenue will be more by the quarter even if -- in the case of latency, varying almost [indiscernible]. I think we expect this in the next quarter, also a couple of quarters. Even in the case of the investment profit, we were at least around 40% in the first quarter. The second quarter, [ we don't see ]. But hopefully, what we feel is that presently, [ what are the reduces there ], we are deploying at a very cheap rate. Once the scenario improves, the economy improves, we'll be able to refer to higher rate. So I don't think there's -- any one-off items are there, but its compensating items are there. I don't think it's gotten that way.

Okay. And just last one question from my side.

Mr. Doshi, sir, I request you to rejoin the queue, sir.

Okay. Okay.

The next question is from the line of Deepak Poddar from Sapphire Capital.

My question relates to your credit cost. Now you did mention in your opening remarks that we are looking at credit cost of below 2% for this year. Now in the first quarter, I think our credit cost was more than 2%, 2.5%. So for that to achieve, we need credit cost of 1.8% around for the remaining 9 months, so yes. So is that what we are looking at?

So I think credit cost, I think, in the first quarter has been high. That is because the major chunk has been -- has anticipate [ further hike ] and so the provisions naturally happen in this quarter. But I think, again, as I mentioned, this is a -- this is not a typical quarter for the bank in terms of the figures. Whatever we used to do in terms of recovery, soft recovery and all, we could not do this quarter. And going forward, I think that would help us into the recovery, improve the, I think, the contagious part. And we don't see a similar situation going forward. And there would also be upgradations and recovery, which we are focusing on and which we have some visibility about quarter-on-quarter basis. So we took it back to working as a backup only, we are talking of a credit cost of less than 2%.

Fair enough. Understood. And ma'am, on the medium term, is there any in kind of thought process on kind of credit cost of 1%? Is that something -- or any kind of aspirational number in terms of all the thing stabilizes [ in there ] of this pandemic? And so any kind of thought process on that would be helpful.

Definitely, we would like to bring it down below 1%. We are -- yes, we have projected some -- given some projections. But I think for now, we would stick to less than 2% for this year. Going forward, yes, I think it can come down below that. But I would not hazard a projection beyond this year. Maybe next 2 or 3 years, it might come below 1.6%. [ One second, I think our ED on credit will say. ]

Credit cost, normally, we don't think we will be able to bring below 2 for a couple of years because our ultimate aim is to bring the net NPA growth in positive. So our focus is first on bringing on the net NPA to be a little positive. So what we have is we will have exposure so that has better pitch, the credit cost may not be okay. Post that, it should be able to show better credit cost.

So sir, do -- your PCR will keep on inching up, right?

It's almost the same compared to last quarter.

The next question is from the line of Rishikesh Oza from RoboCapital.

Ma'am, my question was related to your provision for taxes. So -- like is it going to continue for the next coming quarters also? Can it be open items on the same?

Yes, our CFO will answer about the taxes part.

So about the taxation, earlier, we used to do the DTA adjustment at the end of the year. So every quarter there, during the Q4 only, we need to do it. So now in line with other bank, we have shifted into quarterly. So now [indiscernible] we can see that the -- this amount will be evened out, and we will be having on a quarterly basis only, these DTA figures will be there. So far by tax liability, whereas earlier also, we have pointed out since there are accumulated losses in ESG balance sheet. So still -- around INR 26,000 crores still is there, which is on the negative side and set of benefits are available. So tax line will be for the next 2, 2.5 years, we don't foresee any things in that part.

[ Overly adjusted rolling it, we will be ] [indiscernible]?

So DTA is on the higher side due to that [ excess provisions made in this -- our net there ] has already pointed out, we endeavored to bring our net NPA to 2%. So we are making provisions aggressively. So part of that goes to the DTA team.

The next question is from the line of Jai Mundhra from B&K Securities.

First, on slippages, ma'am. This quarter, the slippages from MSME -- I mean MSME has been the key driver of slippages. And if I see the collection efficiency from the month of June has also trended lower. At the same time, MSME, SMA 2 is -- and SMA 1, 2 is also on the higher side. So how should one look at the MSME slippages going ahead? And within your 83% kind of a number for full year, I mean, are you assuming that most of the [ pain ] would be driven by MSME? Or how should one look at it?

So I think, as I mentioned earlier, this quarter, MSME was high, and it is, again, because of the way the external factors were working. I think I'll ask our GM Credit Monitoring to give details about what is the projections ahead.

Good afternoon, sir, this is [ Maya ] here. As you rightly pointed out, we agree that slippages were on the higher side. That the SMA 2 is a -- are a little higher, 3%, nearly more. And correction efficiency has dropped by nearly 2% to 3% better. At the same time, it is not only the lockdowns have been liberalized. We are able to approach the borrowers, and they are able to give us the financials. We can have units as it's done. And the restructuring part of it is yet to actually gain momentum under the RP 2.0 scheme, under MSME segment. And even the ones which are slipped to NPA, there is possibility to do restructuring because there's good stock there also. So with all these combined factors, we have done under MSME considerably, less only, so far, retail has been good. But we are seeing the signals of -- good signs there happening in the following months before September. So we are confident that we can have the regular range of having it below 10% maximum within that. Usually, it is -- are in that stage. But now our SMA 0 follow-up also is being tightened. So we hope to have the collection efficiencies [ shoot up ] and also bring it back to normal.

Understood, ma'am. And second question, ma'am -- and first off -- I mean, before that, congratulations on the retail disclosure on this collection efficiency and restructuring, this slide also. But just to -- if I were to read this restructuring, Slide 34. So what we are saying is that RP 1.0 -- let's say, for the example of retail, the amount was INR 320 crores. RP 2.0 is INR 2,483. And the third table, how do I read the third table? Is it the sum or -- because then INR 2,053 number [indiscernible], what is this number? Is it the sum of first table and second table? Or is this the outstanding which includes everything? And how do I read the third table or the total restructuring?

I think the first table is only RP 1.0, wherein -- which is again invoked and implemented in the -- as of 31st March and 30th June. The second table is RP 2.0, which is again invoked and implemented. And as third table indicates, all the restructuring that has been done, including the [indiscernible] and the present the transfer in [ August date ], that is the third table.

Right. So let us take then for example...

[indiscernible] for today and [ also in June ].

Right. So I thought as much. But if I were to total, let's say, Table 1 and Table 2, then it should be -- I mean, look, for example, retail INR 320 plus INR 2,483 that is not matching with retail of INR 2,053. So I was at a complete loss to -- is this the addition? Or there is -- what is [ the peak you think ]?

So that is actually what is eligible or what we expected to be restructured and what has happened as on day. And the time limit is still available at RP 2.0 until September. As far as RP 1.0 is concerned, the time period for invocation is over. But the implementation time period is still available. That is why we have depicted both.

The question is implemented. Implemented for RP 1.0, RP 2.0 is not [ set to public -- as ] one table. We implemented this INR 320 in the case of RP 1.0; secondly, INR 2,483 is...

But that is because of certain recoveries and closures, which have happened that it has not reduced. It is fully implemented. As far as retail and MSME is concerned, it is fully implemented, but the numbers are reduced because of certain closures or because of recurring.

[indiscernible], if any issue, sir, then I think it's [indiscernible].

No worries, sir. And the 2 data point thing, sir, this ECLGS, if you can -- is there a number handy for 1, 2, 3, 4 or the total or if you have any breakup there?

Table 3 is [ for -- complete ]. The Table 3 indicates the entire [ additional ] book of the bank as of 30th June, [indiscernible] the difference. [indiscernible] [ INR 11,837 ]. But look at RP 1.0 and RP 2.0, [ that -- for the current one is, I think, current RP 2.0 will get ] the clarification whether how much is implemented and [indiscernible] the case in particular.

[ Sir ], I was asking on ECLGS or your GECLS. If you have the outstanding number pension disbursed under the ECLGS scheme.

Can you please repeat?

Sir, ECLGS disbursement. Emergency credit line guarantee scheme, if you have the number, what is the outstanding tension or outstanding disbursement?

ECLGS. ECLGS.

Hang on. INR 5,330 crore. I am [indiscernible], GM MSME. This is regarding ECLGS, 1.0, the disbursement was INR 5,330 crores. And under the additional one, that is another 10% additional they have given. There it is sanctioned and it was a small amount. It is only INR 9 crores. It's under progress.

Right. And anything on 2, 3, 4, sir? I mean what is the total number, if you have?

Yes, yes. Under 3, eligible are INR 288 crores. And so far, we have sanctioned INR 20 crores and disbursement INR 16 crores, still [ timing that ]. Under subordinate debt also, we have sanctioned INR 14 crores and entire thing has been disbursed.

[ We have true figure ], INR 145 crores has been disbursed in corporate.

The next question is from the line of Anand Laddha from HDFC Mutual Fund.

Ma'am, I just understand that you guided for a 3% slippages for the full year. If you can also give some color on the recovery and upgrade we are looking out in the current year and also recovery from return of asset.

So recovery, we have projected INR 5,000 crores this year, including NCLT and non-NCLT and upgradation of our trust, INR 2,500 crores. So I'll ask [ Arun surely ] [indiscernible]. So I'll ask [ Arun, Mr. Imran ] to give the details.

Yes. For this year, we have projected a recovery of INR 5,000 crores and another upgradation of INR 2,500 crores. Out of which INR 2,000 crores recovery will come from the account less than INR 1 crore, and INR 3,000 crore will come -- account more than INR 1 crores. And upgradation will be INR 500 crores from less INR 1 crore, and INR 2,000 crore will be from the more than INR 1 crore. And expected recovery from NCLT for full year is INR 1,205 crores. And nonimparity accounts, it will come around INR 3,795 crores.

Sir, the NCLT recovery will be the comp which we are -- which would have provided 100%?

Our NCLT provision is 99%, so it's almost 100%.

Okay. So if I had to put up -- of the INR 5,000 crore of recovery, we expect -- how much we are expecting from accounts where we have made 100% provisioning on the return of account?

NCLT, I told that we are expecting INR 1,205 crores. And it's almost 100% provided only.

Okay. Okay. And on the tax side, sir, if you can give us some color, like how much of a deferred tax asset we are carrying so that we can set it off against the probable profit we are expecting.

Anand, it's Arun. [indiscernible] we are creating for this quarter, INR 1,400 crore. Apart from that, we were having around INR 2,800 crore at [indiscernible]. So together, both we are having -- and on the deferred tax actions, these [ INR 330 ] is what we have taken the tax amount on that part. So now in our books, we are having INR 3,175 crores.

[indiscernible] then we can utilize this. So when we would move to the -- when we are expected to move to the new tax season?

We are already in the new tax season from [ December 20 ] onwards. So at this time also, [ even happen, the DTA ] anniversary is an ongoing process, creation and reversal. This time also, there was a reversal of around INR 90 crore quarterly. So as and when it is due, time lines are over, we are doing the reversal part also. So both are there. As the amount outstanding of [ DTA ], INR 3,175 crores.

The next question is from the line of Mahrukh Adajania from Elara Capital.

Firstly, in upgrades, there's an amount of -- in the moment in NPLs, in upgrades, the amount shown is for future retail? I mean it would be the upgrade of the retail account?

The future retail is included there.

Okay. So that will be a major portion, right, of upgrade, that will be the only upgrade?

That is the major portion. There's also MMTC that's about INR 200 crores.

Got it, ma'am. And this channel, so there was a corporate slippage of INR 600 crores. So which sector? Was it just 1 or 2 accounts or just one account? And if you could specify the sector.

There were 2, 3. One is jeweler or one road asset.

One jeweler and Bhushan Steel.

Yes. INR 700 crores.

Sorry, sorry?

One account of INR 200 crores, another of about INR 150 crores. So these are the major. The rest are the smaller accounts.

[indiscernible] INR 250 crores.

Sorry? Sir, can you -- I cannot hear the answer.

One jeweler account of INR 200 crores and then another steel account of INR 150 crores. Then there were 2 road assets which together are about INR 250 crores. The rest are very small accounts.

Got it, ma'am. Got it. And the other question I wanted to check is that just can I repeat the ECLGS amount that you mentioned between 1, 2, 3, 4 and 5 disburses? So why 330 was ECLGS one, INR 14 crores...

So we can give SME first, I think...

You can -- around 1.0, we have disbursed INR 5,330 crores. And 3.0, that is INR 15 crores disbursed. Then recently announced additional add-on, additional 10%, that is INR 8.5 crores. And the subject -- there's is a subject for stressed MSMEs that is INR 13 crores. And 4.0, we are yet do that because it's recently announced. So before 30th, we are yet to do. And the fifth -- 2.0, my colleague will brief us. [indiscernible]?

Yes. As far as the corporate is concerned, it's -- total sanction amount is INR 1,041 crores, ECLGS 2. And out of it, disbursed is INR 741 crores.

INR 740?

INR 741 crores. Sanctioned, INR 1,041 crores. Disbursed is INR 741 crores.

Got it. Got it. And ma'am, in the health infrastructure scheme, how much have you lent?

Health infrastructure are you asking?

Yes. There was -- the RBI came up with some...

I assume we have lent something below INR 100 crores, but there are proposals in the pipeline. This is for the hospitals, the oxygen plan. So about INR 300 crores to INR 400 crores proposals will be probably going through this month. On the individual health, the approach to individuals for their medical expenses and hospitalization expenses, that has been up INR 500 crores.

INR 580 crores.

INR 580 crores that has been disbursed so far. This is the COVID portfolio that we are building.

And are there any slippage in the ECLGS so far? With either the ECLGS or the base loan slipping, was there any slippage in MSME from ECLGS?

No slippage so far.

Got it. And then one last question on MSME collection efficiency. So why has it trended down in June? Because, of course, May was peak. And then June, at least in the second half, there was opening up. So why did the collection efficiency declined in June over May?

I think as soon as the lockdown is lifted, the unit doesn't start getting cash. It needs to stabilize. And we also saw how difficult it was for people to even move out or take any services or any purchases. So I think we need to give the MSME -- I expect that in July, it is picking up. So end of June, not every city was up and running. So I think there was a slight hesitation in terms of opening up also. So I think we can give that benefit of doubt upon June for MSMEs especially. And even in the banks, the staff or the way they have been impacted, it takes time for people to feel confident to move into the field and do their routine job. So I think July will be -- we already see in the first fortnight of July the collection efficiency picking up. I think that would all go well for the coming quarters.

But ma'am, any time during the call, could you give a breakdown of slippage for FY '21? So we have 4Q, but for the fuller FY '21, if you could give the breakdown if that is available.

We'll give you -- I think that was probably there for us, but we'll definitely...

Is it 4Q? Is it for full year FY '21?

Yes. We'll give you the full year FY '21 slippage if you want it. We have it.

We have full year '21, March '21.

Yes.

Do you want the full year, March '21? Or it's...

'21, full year.

Full year, full year.

Yes. Total full year was INR 9,429.55 crores, and [ recovery was ] INR 850 crores.

Sir, just a breakdown of slippage into agri, retail, MSME? I have got...

Okay. [indiscernible] will give separately.

Shall I give the breakup? FY '21, retail was INR 1,113 crores; agri, INR 1,348 crores; MSME is INR 2,924 crores; and corporate sector is INR 3,430 crores.

The next question is from the line of Amaan Elahi from Investec India.

Yes. So firstly, with respect to the MSME, again, so we have given collection efficiency as of June. So just wanted to understand, how is that number vis-a-vis the collection efficiency in March, which would be the number from where you started seeing a decline?

As of now, it is 78%. We are seeing that it will be definitely improved over the coming periods. And you want it by March. Is it...

He wants from March '21, going back.

MSME March '21, 90%, it was.

Between April, May and June, it...

Tapered from 85% -- it was around 85% -- no, no, just from -- he is asking from March '21. It was -- MSME was 90%, and it has come in April, 85%. And surely, it has been tapering down. But we hope that it will be not so soon, and we hope that it can come back to at least 80% to 89% before September, definitely, 90%. But receivables are also stuck everywhere. So that is why they could not come back with the collection efficiency. And restructuring remodel is available, so they are making use of that more.

The next question is from the line of Amit Mehendale from RoboCapital.

I wanted to understand a little bit about interest reversal for this quarter. If I remember last quarter, the interest reversal was about INR 1,200. And prior to that, we were doing about INR 10,000 crores of interest income for the quarter, which has now dropped to INR 9,600 crores. So I just wanted to know a little bit more on this.

Interest income.

Interest income, it only gets run on the accounts which are CapEx standard, where all the charges are [indiscernible]. But the figure is that -- that's INR 200 crores -- INR 400 crores. Because [indiscernible] CapEx standard, so whatever is charged in the quarter, we are reversing it and rolling it fully. But actually, if you know, the yields on [indiscernible] also come down when compared to last year. Hence, our overall interest income is low.

Okay. Sure. And any guidance on the loan book growth for next 3 quarters?

Yes. As I already mentioned, I think given that we expect the corporate book to grow in this current year, we are looking at a 10% -- around 10% growth in the current year. Earlier, we had budgeted a higher growth, but I think we will take it as it -- as the economy opens up. And RAM, especially, I think, is growing quite -- at a good clip. And overall, between 10% to 12% is what we expect.

The next question is from the line of Mona Khetan from Dolat Capital.

Sir, the first question is pertaining to the corporate account. So is the infra NBFC still standard in your books, Srei Infra?

Srei Infra is standard in the book because of the NCLAT orders, but we have already provided 20%. So INR 400 crores is provided instead.

Got it. And the recoveries of DHFL, that's likely to come in Q2?

Hopefully, Q2 we're expecting. However, it may be later, Q3. We have already told you that.

Got it. And so what is your exposure on DHFL?

INR 1,300 crores.

INR 1,300 crores.

I think it's INR 1,300 crores.

Sure. And on the tax write-back, while you did give some details on the DTA that you're already carrying, what sort of tax rate could one expect over the next 2 years given the better tax assets that we have?

As we already told, we are in the new tax regime only, it is 25.14%. And...

Right, sir. But because of this...

As we told, we are already in the new tax regime, which is 25.168%. And we also informed that seeing the cumulative losses and set up, it is -- so there is more tax liability for next 2 to 3 years period. 2 to 3 years.

Okay. Got it. And lastly, if you could share the breakup of slippages for this quarter, the INR 4,400 crores slippages into corporate and SME, retail?

I think the overall slippage is INR 4,204 crores, of which agri is INR 375 crores; retail is INR 627 crores; MSME, INR 2,456 crores; and corporate, INR 745 crores.

The next question is from the line of Antariksha Banerjee from ICICI Prudential Asset Management Company.

Just 2 questions. One is in the MSME, can you tell me what percentage of your collections would involve a physical person or are in cash?

I didn't get your question. What did you ask about recovery in MSME?

Yes. How many -- what percentage of your book, the collections have been physically, I mean, there is manual involvement?

No. Collection in MSME, does it happen physically, manually? Or does it happen by remitting phone calls?

Collection is by both modes. We do by call centers. We do by our VCC, our personal contact. And it is limited physically -- or it's become limited physically also. Or if they come, then physically also. Or they do it online also. It's a mixed rate.

The reason I was asking, ma'am, is because during this lockdown, the physical collections would have been more difficult, right, compared to remitting directly. So is the physical collection a big chunk of the book and that is contributing to this elevated spend? In this case, it's...

I don't think -- financing, it's a physical part, yes, part of it is physical. But that -- we're assuming that, that has the money to pay. If MSME units are not continuing because of various factors impacting them, then the cash flows are impacted. So the repayments are not coming in. It's also because of the unit not able to generate the cash to pay. So I think it's both. The physical part is part of it. But the more important one is whether they are able to earn to pay the bank. So that's why this restructuring is done on this scheme.

Sure. I think whenever the receivables are coming, they get credited to the current account or the account they have with us. And then the balance is available, which we recorded. It's booked. The collections are there. There should not be an issue as such.

Got it. Okay. And the second is of the new amalgamated entity, sir, what percentage of the book currently lies in South? The reason I'm asking is because South, I mean very broadly speaking, entered into the lockdown and restrictions later compared to the North and West. And that somehow reflects in your collection numbers as well because in retail SME, all your collections are lower in June versus May. So just a non-South and South state, is that a matter? Do you have a number?

I don't think -- I mean, yes, to some extent, that is true. But in the South, again, most of the places were impacted. And there was a lockdown, as you mentioned, somewhat later. But I think it is more about the impact on the industry itself. So this is evenly spread across, especially in MSME. That one that is paying or one geography paying is not the case. I think it is evenly distributed, but we should get into that kind of, yes, granular -- would you ask the question because we'll get this data [indiscernible].

The next question is from the line of Mahesh from Kotak Securities.

Ma'am, just a couple of questions. One, in terms of the INR 2,600-odd crores of restructuring, which happened on the corporate side, could you give us some color on which sectors and segments which have taken this restructure?

I can tell you that retail group is there in Mumbai, and then one power group is there, so it's mainly coming from 7 accounts.

Okay. Perfect. The second question is, in your QIP document, you had indicated that Bhushan Power & Steel was still an NPL in the books as of March 31. Was -- why was this not upgraded? And have you upgraded it this quarter?

So what we have indicated is Bhushan Power & Steel, it is subject to conditional payment. So what we have done is to the extent of the recovery we have taken to our income account and balance amount was outstanding as a part, that is fully provided 100%. This quarter, we are technically writing off.

Okay. So it was not an upgrade?

It's not an upgrade. It's a recovery that we've taken into our income [indiscernible] income account. This quarter, the balance amount was taken out technically. So if and any direction comes in addition in terms of the court, we will take accordingly, handle it accordingly.

Okay. And there are some other accounts like this Chenani-Nashri and all. Have you seen resolution from those accounts as well?

Actually, in this particular account, the collections are coming. It is lying [indiscernible] account. But because of that order, they are not releasing the payment. But Chenani-Nashri, at least we are hopeful of getting the associated recovery in that. And we are trying to sell that to Cube Highways. I think one of the [indiscernible].

The next question is from the line of Sri Karthik from Investec.

Madam, there are several disclosures on the restructured book. I just wanted to know if there is any overlap between the 3, 4 disclosures that you have given. And what is the non-overlap outstanding restructure advances as of Q1?

Overlap between what, restructured in SMA?

Yes. So there is, yes, RP1. There is RP2. And then you also have another disclosure, which sort of gives the total restructure at INR 17,138 crores, of which INR 11,837 crores is standard. So is the INR 11,837 crores the cumulative amount of total restructuring that has happened?

Overall restructured book of the bank, there is -- which is standard.

But it will be standard SMA 0, 1 or 2. But it will be standard SMA 0 or 1 or 2.

1 or 2?

More than 90%, it is standard SMA 0 or maybe a little bit higher than -- maybe under SMA 1 or 2.

Okay. And from our SMA disclosure, that is the special mention account disclosure, about 22% of your MSME book is currently in overdue position. That is actually sounding a very, very high number. Traditionally, I wanted to get what is -- how high this number went up to.

[indiscernible]

Sir, normally, our SMA portfolio will be around -- totally around INR 17,000 crores, of which...

Talk about MSME only.

In MSME, the general trend is to have about 30% to 40% in total SMA, which is -- actually, if we compare with the 31/3/2021, the MSME totally has come down, the SMA part of it. It is more of the SMA 0, and it has come up a little higher on the SMA 2. SMA 1 has, in fact, come down to 29% from 33%. And normally, the range is 50% moves from SMA 0 to SMA 1. Then 20%, it moves. But now because of these factors, it is moving in this direction.

And do you anticipate a high level of slippages from this INR 12,000-odd crores amount in MSME for the next 2, 3 quarters?

No, we are expecting a decline only, a fair decline.

The SMA book, I understand, but would there be significant slippages from this INR 12,200 crores? Or as you said, there could be restructure and -- probably in the moratoria period, and hence, no risk of default yet?

Definitely, there would be an uptick in the slippages from MSME. But when we calculated the overall slippage ratio, we have taken the other segments into account. Even in MSME, I think restructuring will bring in a certain level of upgradation. And these figures are, again, very difficult to this quarter. So going forward, we don't see such a high percentage there. But definitely compared to the pre-COVID times, so this time the MSME book is going to be more vulnerable. And there would be a slightly higher, maybe 10 to 12 bps higher, slippage in MSME.

The next question is from the line of Jai Mundhra from B&K Securities.

Two questions. One on this retail collection efficiency, right? So in April, it was 88%. Then in May, it went up. And then in June, [ corporate due diligence ] looks like it has -- I mean, it has gone down, which is slightly counterintuitive. So any reason, ma'am, I mean, why this is the case that retail collection efficiency has gone down?

Efficiency has gone down in retail sector, mainly under mortgage loan and educational loans. Primarily, the mortgage loan part of it is business and MSME segment only who are facing stress now due to the lockdown and second wave and all. And education loans for us also in stress because -- either due to loss of employment or salary cut or difficulty to securing an employment. So the collection efficiency dropped down for these reasons only in retail segment. Slowly picking up. Both retail and MSME now, July, beginning of the first half, it is picking up. Slowly, but it is picking up.

And the last thing, ma'am, on BB below, right, so we have given additional disclosure this quarter as well. But I mean if you look at the Slide 21, where we have given INR 14,455 crores of corporates which are below -- BB and below and having more than INR 100 crores exposure, these corporates are definitely not there in SMA 1 or SMA 2 because that number is very small, so as to say. Or at least the SMA 2 is small and SMA 1 is slightly higher, INR 4,000 crores. But how to look at this number, ma'am, which are not sovereign, having BB and below rating? How to look at this number, INR 14,400 crores in terms of riskiness?

So we did as much analysis as possible on the BB and below. I think -- yes, as we start breaking it. So this quarter is -- what you're asking is about INR 14,455 crores?

Right, ma'am. Is there any embedded riskiness? Because while the SMA 2 number in corporate is small, SMA 1 number is reasonable. But it looks like within corporate, this is the most riskiest piece. How do you assess the riskiness?

Some of it is MSMEs. And even if they are good companies with good collaterals, they would still not get BBB rating. So we have many of those companies. And then, of course, government, we have given separately. Even this corporate includes the [ SLA ] figure. That itself is INR 2,000 crores. So I think more or less, when we do the breakup -- further breakup, they are BB or B also. But many of these are hospitals, educational institutions...

CRE and [indiscernible].

CRE, LRD exposure. So we have the security and the collateral, and the cash flows are good enough, and the bank has a very good relationship with many of these companies. So I see at least -- from the breakup, I see at least another INR 5,000 crores to INR 6,000 crores of very good accounts. They may not get a BBB rating for whatever reason, but for the bank, they are well-established customers. And I don't see any unusual risk in that portfolio.

Right. And the recently upgraded future will also be sitting here, right? Or that will be outside of this?

The future is also sitting there. Even [indiscernible] is sitting there. [ Arcane ] is sitting there, and [indiscernible] is sitting there.

Right, right. Understood. And the last thing, sir, on restructuring, if you can give a range as to by September, how much are you expecting the total restructuring? It looks like -- you have given fairly good details as of today, but what this number could be by as and when this window is closed?

We had originally predicted an expected amount of INR 9,000 crores, which will be somewhere around 2.5% to 3% of the standard advances. So far, we have already done [ under last Q ] INR 3,575 crores. And as on date, it has even touched nearly INR 4,300 crores. So I think we will be within that 3% maximum.

So 3% for RP 2, right?

Yes, 3% of standard advances, which may come up to about nearly INR 6,000 crores, INR 6,000 crores to INR 6,500 crores.

Okay. So INR 6,000 crores to INR 6,500 crores, of which, let's say, INR 3,600 crores almost is already done, right? So additional, let's say, INR 2,500 crores to INR 3,000 crores. Is that what you're implying here?

Yes, yes.

One more thing would like to tell you, it is a double-digit group book. What is happening is even the company has included this. One maybe BBB and above, the other may be BB, then what we do is we've taken the loss already. So this also is consisting of INR 12,000 crores, including government guarantee and corporates also. So we have taken the lowest of [indiscernible], that is INR 7,100 crores -- odd crores.

The next question is from the line of Sushil from Indus Equity.

Congratulations on stable numbers, ma'am. I have small questions. Your outlook on treasury, cost of funds -- hello? Hello?

Please continue. Please continue.

Yes, please. Yes. Can you repeat the question?

Yes. First is your outlook on treasury and cost of funds.

Yes. So as far as the cost of funds is concerned, INR 408 crores. But again, all are waiting whether -- we are seeing whether the third wave will come or not. Even RBI do use [indiscernible] in the case of the new cities, the rate has gone up. So hopefully, in case the economy picks up, the case to come ahead, the cost of funds are going to go. Same with the loan advances. So I think it's a balancing figure, both the [indiscernible].

Okay. Are we likely to get a major benefit of RBI supporting Visa from the book? Or we are happy with the deposit rate and the growth rate, what we are concluding right now in our vision of 10% growth?

Yes. Presently, all the banks are having excess liquidity, and there is no scope for investment. Either it is getting invested in sub-6%, maybe sub-5% also for short-term duration and T-bill. Once the economy picks up, if there's a demand for trade, almost all efforts should be shifted to the loan growth. So that will be compensating factor. So whatever the additional margin from the advances, we make account the interest income and also the treasury gains.

Second thing is, what percentage of agriculture loans are backed by gold?

What percentage of?

Your agriculture loans are backed by gold?

Gold. 50%, actually. INR 41,000 out of INR 82,00 crores.

So INR 41,000 crores is backed by gold?

So about 50% is backed by gold.

So your agriculture advance is INR 80,000 crores. So I'm assuming INR 40,000 crores.

Yes. INR 41,000 crores, I think, is gold -- jewel agriculture loan book. Am I right, [indiscernible]?

Yes.

And my last question, as this is your vision on the last slide, which is shared about strategy and focus area. What kind of initiative and expenses are you taking up for digitization and leveraging your balance sheet with all the data points which you highlighted on strategy and focus area? And what are the initiatives you've already started? And how much time would you think the bank would take to reach that?

There are a lot of initiatives we are taking on digitization. I would request our GM in charge of the transformation office to give you the details.

In fact, we got this strategy initiative approved in the Board meeting in November. In that, mainly there are 25 -- 24 high-level initiatives and 150 maybe at lower level. In fact, we are going out with 4 core areas. One is digital transformation, then operating model, and then we have PMS and the LDP, Leadership Development Plan. These are the 4 core areas where we are going ahead with the initiatives. Initially, we are going with the consultants. And then maybe going forward, the expansion and all will be internal. But initially, we are going with the consultant only. As of now, the figures and all, we have not yet decided how much we are going to spend. But initially, we are going with the consultant.

Yes. And the consultant, you have to make a road map or you identified the role?

Yes. So as Mr. [ Bajaj ] mentioned, actually, as part of the amalgamation, when we did the amalgamation itself, we had plans to -- 2, 3 things we did. One is the IT architecture itself, the hardware, software everything, we had a relook. And now what we have taken licenses for or bought the hardware or used the ones that are there, it is now state of the art. So more than INR 1,000 crores was invested in IT itself to reap the benefits over the next 4 to 5 years. So it was a onetime investment as part of the amalgamation. That includes the digital infrastructure because we need to have this digital lending platform and also the back-end, end-to-end digitization. All these initiatives have already been initiated. We have the Board approvals. We have the approval to incur the amount. The implementation of the loan -- LOS is already on our -- MSME, we have completed. And for retail, also it is going on. In September, it will be completed. Already digital models analytics we are using to pre-sanction loans. So this is -- because the amalgamation took some doing to first get the CBS integrated. But once that is done, this is a ready platform to take off. And as we mentioned, the digital initiatives have all been put up to the Board for a broad approval. We have those approvals. We are working with the RFP. And very soon, we will have this rolling out. But simultaneously, the work is already going on, on this initiative because we believe that now the bank has to transform itself fully into both the physical -- we cannot leave the physical mode where we are very strong in some of the areas, but also the digital has to come in, in a big way. I think the results will be seen from the quarter starting maybe December once the entire rollout is complete. But this is a huge expenditure and also a huge investment for the bank. So I hope I've answered your question.

Yes. I've got the feeling but I needed to know. Ma'am, on the broad business measures...

We can give details about the project.

Yes. I'll speak still to Mr. [ Bajaj ] offline if required for further details. Ma'am, second thing is this business network, thanks to amalgamation, you are concentrated on East, Central and South with almost 4,500 branches, where its Western and Northern are limited by branch. But business-wise, you may be large. What kind of initiatives -- because you will remain in the strategic 5 or 6 banks which government will retain. What initiatives you are taking for becoming a pan-India with more balanced approach for West and North?

Your observation is correct. I think, yes, the concentration has been in the South earlier, but now it is pan-India. And today, also East and even UP. We have a big presence in UP. So it's not as -- but yes, not to some extent western. Western, Bombay, I mean, all the corporate accounts are there. So it gets a big share of the business. But in terms of the spread of branches across Maharashtra and Gujarat, there is still a lot of area to cover. So I think, we will open -- we have plans to open branches in those areas where the potential is there to take. And also the other alternative presence, whether it is a kiosk or it is a BC, I think we will be -- we have a plan to make the presence there, whether which model and which work for the bank better will be worked on from a case-to-case basis. But the plan is also to roll out more BC. And whether it's a BC or a kiosk to have the -- connect with the rural and the urban areas like some other private banks are doing right now.

The next question is from the line of Mahrukh Adajania from Elara Capital.

Ma'am, I have a couple of follow-up questions. Firstly, you said that your one-on-one power account was also restructured. So is there a power account in the restructuring pipeline? We thought it was only a few state-owned accounts, if you're not later restructured and [indiscernible]?

Power asset program, that was belonging to the [indiscernible]. That is there. That was there in the [indiscernible].

[indiscernible]

No, no it's only the [indiscernible], nothing more than that.

Sorry?

There was no other bargain. See, in the case of corporate, whatever is given, that's completed. And so there's no more accounts in the corporate book [indiscernible].

But there was a power account as well is what you said?

Yes, there was the power set that we showed in the last call.

That restructuring was only an extension of the repayment. There was no NPV loss or anything like that. It was a big group.

Sorry then, ma'am, because the future resolution is being delayed, how much time do you have before the account slips into NPL? Because the resolution with Reliance is important for the account to see standard, right? So that's why I'm asking.

[ GM credit on that, we guide 3 2 ].

[indiscernible] this future. This is a plan where Reliance deal is not taken. This is taking -- this is not taking into account the Reliance piece and the [ Amazon ] issue. We found that the group or the company has a survey for that only the lenders have worked out the plan. It does not rely -- I mean it's not with a Reliance on the [ right hand ] because basically, it is there on internal cash accrual.

So ma'am, did you have any recoveries from Kingfisher and Gurgaon Metro? Did you have exposure to these accounts?

Gurgaon Metro and...

Kingfisher.

We don't have -- neither, neither.

Thank you. As there are no further questions, I would now like to hand the conference over to the management for closing comments.

So thank you very much. We enjoyed the interaction. Actually, your questions make us more granular into the details, and it's always very interesting. Thank you very much, and we hope and we are confident that whatever projections we are giving, we have the visibility of those working out. Hope to see you again soon. Thank you very much.

Thank you. On behalf of Emkay Global Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.