IndusInd Bank Limited (INDUSINDBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the IndusInd Bank Limited Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO, IndusInd Bank. Thank you, and over to you, sir.

Good evening. Thank you for joining the call. This is my first quarter and financial year analyst call. It has been a testing time, to say the least, due to the unprecedented times which we have found ourselves over the past month or 2. I trust you all are keeping safe and would like to use this opportunity to compliment our staff for sticking to their tasks despite the disruptive period. At the macro level, the government acted swiftly to lock down the country, provide health care support and roll out initial round of fiscal expansion for the poor with the likelihood of more to follow -- come. With the IMF characterizing the economic disruption and global recession following the COVID-19 pandemic to be the worst since the Great Depression, the government will have to step in with a large -- much larger stimulus this around -- this time around. RBI became more accommodative on rates and on liquidity, and I'm sure all of you have seen the headlines on RBI initiatives. The RBI actions on CRR cut, the refinance of INR 50,000 crores through SIDBI NABARD, lower repo, reverse repo rates have been beneficial to all banks. Other benefits such as increased MSF facility is fully available today if we need. As inflation is likely to be below target zone, RBI may cut rates further to boost demand. RBI may consider unconventional measures such as repo window against corporate bonds and continuation of refinance window for banks to lend to mutual funds for easing liquidity. To begin with, I would like to give you some operational highlights in the context of COVID. One, we have offered 3-month installment moratorium to all our retail customers other than those who chose to opt out. However, over 95% of our vehicle finance customers have paid their March installment. We have maintained a standstill on NPA as at 1/3/2020 as per RBI guidelines. Of course, there are many segments where collection is coming in, and we will talk about that when we discuss our portfolios. Educational campaigns are run on collections, notwithstanding the opt out nature of the moratorium to customers. Eligible corporate customers have to opt in for the moratorium. Two, RBI requires COVID additional provisions to those who have turned NPA, that is -- were already 64 day overdue as of 1/3/2020, basis which we are required to make a provision of INR 45 crores over 2 quarters as per RBI directives. We have taken INR 23 crore provision this quarter as per this guideline and an additional floating provision of INR 260 crore upfront thus making a total provision of INR 283 crores for COVID. I repeat INR 260 crores additional floating provision for COVID in addition to the INR 23 crores, which we have taken as per RBI directive. This provision is mainly to cover any additional credit costs from the vehicle finance and microfinance portfolios. Third, we have completed our stress test sensitivity analysis based on the latest available information on the lockdown withdrawal in stages and expect time line for economic recovery. I will ask Ramu, our CRO, to talk about this -- through this later. But we have estimated the potential impact on the bank on a mild-to-moderate case COVID impact is a delta nearly 80 basis points of GNPA. Of course, this is our model. And if things get worse, it may be difficult to predict the outcomes. Other than this, our 1,911 branches have been up and running and the ATM network has 95% capacity. Call centers have seen activity at 60% of normal levels in the lockdown so far. 53 branches are in various stages of completion but were hampered by lockdown. We have ramped up our digital activities since the lockdown. Our current digital -- daily digital NTB are 2x online, FDs are 4x and payments and our digital partners volume are 1.5x pre-lockdown. Lastly, but -- last, but by no means the least, we have played a meaningful role in the contribution to the community through significant grants to the PM Fund and the state disaster relief funds. Bharat Money stores have assisted customers to avail DBT transferred by the government. We have worked through our various CSR partners to support village-level commitments -- sorry, village level communities for preparing and distributing food, assisting with sanitization, social distancing, et cetera. Next, I would like to come to the financial highlights of the quarter. Quarter 4 strong operating performance -- quarter 4 witnessed a strong operating performance, with revenues up by 32% and operating profit up by 38%. Net interest income grew by 45%, whereas fee grew slower by 14%. See, the fee was partly impacted by the year-end lockdown as a large part of a distribution income comes towards the end of quarter. NIM improved by a good 10 basis points from 4.15% to 4.25%, driven by a fall in cost of deposits sequentially. On a full year basis also, revenues were up 36% and operating profit were up 34% and PPOP over assets was healthy at 3.8%. Due to the moratorium placed on a bank, followed by some large government deposit withdrawal from private sector banks in March, we saw year-on-year deposits grew at just 4% for the year. We had also the impact of COVID-19 lockdown from March 27. To manage the gap, we resorted to IBPC, refinance, swap foreign currency loans, and use of some excess liquidities held. We maintained our liquidity as measured by LCR in the range of 110% to 120% throughout this period. Our retail deposits continued to grow, and overall deposits are stable as we speak. We have ramped up our digital sourcing of retail deposits and are opening approx. 4,500 FDs per day, of which 30% are new to bank clients. This will be further ramped up once the lockdown is eased. Our ambition is to achieve quarter-on-quarter growth on deposits. We slowed down our loan growth due to the COVID-19 towards the end of the year, resulting in a 11% year-on-year loan growth for the year. We also slowed down corporate loans during the quarter. Retail business continue to grow, resulting in retail wholesale mix of 56%, 44%. Higher retail share also benefits our NIMs. All of -- our full year provision to loans were at 2.25%. This is higher than our usual run rate due to -- during the year, we have increased our PCR from 43% to 63% over 4 quarters. Fully provided for a large infra group, at both holdco and SPV exposure translating to 65 basis points of loans for the year. We have now 100% provision on this account. Incorporated our COVID provision of INR 283 crores, INR 260 crores floating plus INR 23 crores as per RBI directive, which was statutory. Our total provisions for the year, excluding IL&FS and COVID could -- would be at 1.45%. We have made provisions this quarter on several [ pestering ] loans accounts in sectors like tea, 3 stressed groups, et cetera. One of these accounts was a broking account, and we have decided to write-off 100%. We have proactively recognized a few accounts showing weakness as a -- weakness, but for not 90 DPD. Exposure to the 3 stressed groups is now down to only 30 basis points, of which 12 basis points is cash flow back. Our overdue book has fallen sharply quarter-on-quarter. SMA-2 is, therefore, down to just 16 basis points. SMA-1 and 2 together would be around 70 basis points with or without the days count freeze versus 1.3 last quarter. The day count freeze means that the DPD was stopped as of a particular date on February 29. And if you would have taken that classified is that as an NPA what would have been your gross NPA and SMA-2 and SMA-1 book? I think it would have increased by 4 basis points. While the GNPA is slightly up from 2.18% to 2.45% due to slippages from the higher SMA-2 book last quarter, the net NPA fell significantly from 1.05% to 0.91% due to higher PCR ratio and COVID provisions. For the full year financial year '20, PAT has grown 35% year-on-year to INR 4,458 crores despite taking higher provisions. Full year ROA was at 1.6%, and the year-end capital adequacy maintained at 15.04%. RBI has canceled the ability to pay dividend for all banks as at March 31. So there is some capital conservation here. Third, I would like to now discuss some key portfolios and give you some feedback on our key portfolios. Number one, livelihood loans related to microfinance and vehicle financing. We have provided you with additional information in our investor presentation on the portfolio position of these 2 segments and subsegments. In all categories, you will find that the portfolio is well placed versus the industry. So we expect our portfolio to perform better than market in this time period. 95% of vehicle finance customers paid their March installments, and we are seeing good traction of April installments as well. Our microfinance -- on microfinance, 99% of weekly installments have been paid until lockdown, and we were predominantly rural whereas the virus impact is lower with the lockdown being removed, we do expect our customer profile to outperform on portfolio. We are in touch with our customers with over 9 million calls till date covering 85% of our unique customers. This is -- we have launched a new initiative called Sampark. Earlier even though may not be comparable, such as demonetization and plus have resulted in collections bouncing back to 96% to 98% once normalcy was restored. Gems and jewelry. Whilst the growth in the portfolio remains slow, it is an extremely profitable and robust portfolio. Some of the key markets like China, Hong Kong are recovering while other than -- others like U.S.A. and Europe are impacted. This is a very well secured book with post-shipment finance covered by pre-approved bills of higher value, pre-shipment covered by inventory, and the overall portfolio further collateralized another 54% by cash, property, and AAA financial institutional guarantees. Only 3 clients out of caution opted out in for the -- opted in for the COVID relief for the interest due till June, amounting to less than INR 10 crores of the total exposure. Corporate Bank. Our strategy is to grow in a measured way in a corporate and improve the portfolio quality. Concentration risk and returns. We are closing the year with a small SMA-2 book so that provides a degree of comfort. Meanwhile, we have strengthened policies, early warning signals and underwriting, especially in vulnerable sectors. Incremental disbursements are being placed at higher rating profiles than the current book. We are moving firmly and determinedly on this, specifically on 3 sensitive sectors. Real estate, the sector continues to behave as before with no SMA-2 overdue nor NPA. No account has approached the bank for a loan extension, but we still keep RE at a moderated level. NBFC, all accounts are standard, but we are supporting those NBFC where at least 2/3 of the lenders provide continued support. Telecom, 1 account needs relief in particular, and there is a government proposal before the court for a moratorium over 20 years, which if approved, brings the potential risk to the bank down quite considerably. We have created a telecom provision of INR 75 crores by way of standard asset provision. This is not counted in the PCR. Unsecured credit cards, [ public ] personal loans. Although the cards and [ public ] personal loan book is the smallest 4.5% or 5% of the overall book, for both products, over 90% of the book falls in the CIBIL crime category and above. The key driver is demographic, income, debt capacity, and various other scorecard inputs. Bureau rating is separate and not part of the scorecard assessment. Overall, well over 70% is salaried segment, and the balance is self-employed with a variance of 30 basis point on 90-plus DPD versus salary. We had 96% plus collections in March to end February dues. And even though we have a moratorium offered to all, we continued to run educational campaigns to drive disciplined client behavior. In April too, we have seen considerable flow-throughs in the cards and the PL portfolio. MSME, business banking, and LAP. Our LAP and BB book, which is 10% of our loans, is stable so far. As you are aware, that we have stopped the growth of these businesses 2 years back, and we were growing at about 8% to 10% only. This was because post demonetization we felt that these books needed to be stabilized before we press the accelerator on growth. Both these products are cash flow backed with LAP having a 49% mortgage book LTV, and business banking is typically 100% collateral, of which significant portion is property collateral. As per CIBIL data, both products have delinquencies considerably below the average of the market. The BB book is mostly sole bank revolver, whereas the LAP book has fixed installments where we run campaigns for opting out of moratorium. There is some tightening in underwriting on debt burden, more selective on sectors, tightening of LTV due to real estate valuation. I would now like to hand over to Ramu to talk about the corona test and what are the -- what have we done and what is our implication to us on our portfolio.

Thank you. So we have frequently conducted stress tests [indiscernible] countrywide lockdown as lifted by -- will be totally lifted by...

Excuse me, this is the operator. I'm sorry to interrupt, sir, may we request you to come a little closer to the phone, please.

You have to come, yes. One second, sorry. I think we'll have to just get...

Can you hear me better? So we conducted a stress test based on assumption that the countrywide lockdown will be lifted entirely by June 30. This assumption is about 50% based on the districts and their impacts that we have seen. We assume that by May 15 to the May 21 that period about 50% of the country, especially in the rural part of the country where the COVID impact has been minimal compared to the urban areas, they will come back to normal economic activity to at least a reasonable level of economic activity. Another 25% in semi-urban areas will come to between May 31 and June 1 week will come back. This is, again, depending upon how this plays-off. And finally, the urban areas will see towards the end of June. This is the assumptions that we had seen and done about 10 days ago based on what developments are and these are -- these assumptions will have to be looked at once in every fortnight depending on what the government decisions happen. The next critical date being May 3 when this lockdown is supposed to end and what the central government will direct and what state governments will take actions on. Basis this, we look at our portfolio both at the corporate level and at the retail level. We look at the key scenarios of mild, medium impact and the impact due to the cash flows and revenues of our borrowers and also the time that may be taken for recovery. For example, in microfinance, how long will it take to get back with all the social norms on, how will the meetings happen at the microfinance centers, how will the collections happen, similar with vehicle finance. And also, we have looked at how these sectors have reacted sometimes in the past, where there's not been an event of this nature across the country, but in its pockets. So we have those experience over the years built up in our specialized verticals like microfinance and vehicles. If you look at also, what are the chances of -- what are we rating downgrades possibilities so that that's just the impact on our capital. So we had made certain assumptions there. And basis all of this, we looked at our book, and I feel -- in the corporate sector, we specifically look at the sectors which are going to be highly impacted, which is like hotels -- their exposure to hotels, anything within the services sector. If you had a LRD in a mall, for example, or if it was a multiplex operator, wherever there's going to be a large gathering of public which will not be allowed for quite some time because of the social distancing norms and what we've seen, how countries around the world are reacting, so those we consider high risk. And then we look at other industries medium risk. In the corporate side, most of the borrowers -- most of the large borrowers have been spoken to by the relationship teams. We have done reviews of the portfolio. And we have assessed the likely impact, and we classified those as high, medium. If you look at the probability of default, we have applied higher probability of default for those sectors which are in the category of high risk. We have considered no further RBI concessions as at this point in time in our estimates, though it's believed that RBI will give further concession, but in its workings, we have not considered any of those, and that's how we made estimate of the factor. Considering all of this, we came up with a number which if -- this is the assumption is about 80 basis points incurred in GNPA, credit costs would be up about 50 basis point is the number that we have worked out. We will -- we have presented this to our Board, to our risk management company. We'll every fortnight revise these data and accordingly, we made an estimate and took INR 260 crores provision as our MD mentioned earlier in this -- for floating provision in this quarter that ended. We'll then reassess and depending on what the decisions are, we will continue to -- to protect the balance sheet being the main reason, we look at further provisioning is required to be taken.

Thanks, Ramu. Finally, before we open the floor for questions, I would like to highlight some key elements around our business model and how we plan to take it forward. PC5 strategy. We have completed our strategic plan for the Planning Cycle 5 and covering the 3-year period for financial year '23. While we have similar themes of 4D as in the last 3 years, digitization, focus on domains, building differentiation and some identified areas of diversification, we have added sustainability as one of our key strategic imperative, not only from an ESG perspective but from the perspective of how we will build out the business that we can stand the downturns. We will articulate our strategy on PC5 after quarter 2 in more detail when the visibility on setting the ambition is possible. Right now, I want to talk about the business sustainability. On sustainability, we are focused on granularity of deposits through initiatives on digital distribution, merchant acquiring, nonresident and built segments. This will increase the retail component of our deposits and also further improve the liquidity profile of the bank to facilitate slightly higher excess liquidity level for the bank. Also, if we don't get the granular deposit, we will align growth accordingly. Similarly, we are well on our way to sharpen our risk focus on corporate and moderate concentrations of all sites. Our 20 exposure -- top 20 exposures are already sharply down to 10% of advances from 15% year-on-year. We will improve the overall portfolio behavior, including exposure to sensitive sectors, exposure to all centers and sectors such as real estate, NBFC, et cetera, is down quarter-on-quarter. We will keep the bank well capitalized and have more conservative balance sheet buffers to PCR. I don't want to articulate targets, but you will see it in our actions. Change of structure. We have announced the management team that will drive the organization forward. Broadly, it is more of the same, except some tweaks to take on responsibilities that I previously managed and others that will drive accountability in areas where we want to ensure the bank will be sustainably positioned. A very senior hire of CDO has been completed to drive our digital ambitions. We have split consumer division into 3 segments: affluent, other than affluent, and wealth and para-banking. As my direct span has widened, we have consolidated certain positions, including appointment of Arun Khurana in the role of Deputy CEO as we've expanded the scope of all transaction banking products added to this management of global market clients, trading and ALM. A new portfolio management unit has been set up for sharpening corporate RoRWA and focusing more on granular and annuity business. This is going to be driven by Sanjay Malik. I can also assure you that the team is engaged, agile and will also suit -- we will also suitably incentivize management to drive our agenda. In conclusion, I would like to highlight that we have proactively taken a lot of provisions in quarter 4, including COVID provisions. This is the way we will work. We'll be more conservative. We'll be more transparent in the way we will approach things. Over this year, we will pace our growth as COVID-19 impact unveils. But deposits should grow faster than loans. Number two, NII will be the driver of our revenue. Efficient cost management resulting instability of PPOP margins. Also, I mentioned earlier, we will come back post quarter 2 with clear ambitions when visibility should have improved. So that's all for now, and we can open the floor for questions.

[Operator Instructions] The first question is from the line of Nikhil Agarwal from Steadview Capital. As there's no response, we take the next question from the line of Manish Ostwal from Nirmal Bang Securities.

My question is on the moratorium of the loan side. Of the -- our total loan book, what percentage of the loan book under moratorium as of now from our borrowers?

15 basis points.

15 basis point. Both the corporate, retail put together, sir, right?

No, no. One second, one second. No, no. On the moratorium, I think we have -- sorry, I was thinking on the DPD. I think on the moratorium, I think on the retail side, we've put all our accounts on to moratorium, but we are receiving payments and 95% of our clients are giving us repayments. On the corporate side, we don't follow the moratorium, the clients have to opt in. And I think very few clients have opted in and I think it's only 1 month over. I think very, very few clients have opted in. So we are not seeing large moratorium in the corporate side, including BBG.

Just to add, the second part of the question is that for this period, we saw INR 460 crores and the required provision against that in terms of what could have been the DPD is INR 23 crores, which is 5%. So we need to make 10%, which is 5% over 2 quarters. And this is without factoring in any collections that would have happened in the ordinary cost. And just having said that, even though we made a provision of INR 23 crores, we have taken a floating provision of INR 260 crores on top of that, I think as Sumant mentioned earlier, particularly for the vehicle finance and the microfinance portfolio. So altogether for this quarter, we have taken significantly higher provisions of INR 283 crores. And that has been part of the reason why our PCR has moved up by 10% in this quarter and 20% for the year, and we stand at 63% -- 63.3% today.

Right. Second, sir, you talked about the -- more granularization of the balance sheet or the deposit and loan side and you were reducing concentration of the loans also. So do you expect our investment banking fees can see a material downside on a yearly basis since we are changing our business model?

No. I think investment banking fees is dependent on deals which will come over, and the environment is not conducive right now to structure deals right now. I think we have said that our corporate bank will grow at 8% to 9%, and our loan mix will change to 56-44 in the coming year. So that's what we have said. And I think our ambition is to go to 60-40.

I just want to also add, I think when you look at our fee income, we give you a breakup of the fees. So if you look at the fees in our investor presentation, the trading and other income fee is 21%, consumer banking is 52% and the corporate banking is 27%. Now if you take out the other -- the trading income, if you just look at the core fee, then 2/3 of our total fee comes today from the consumer banking side. So 1/3 comes from the corporate banking side. The consumer banking side is going well except for the fact that we had this lockdown. So the year-end sort of fee got impacted. But if you look at the 1/3, which is corporate, the syndication and the investment banking fee is actually a pretty small part. More than half of the corporate banking fee, which is 1/3, is just the flow business of trade remittances and FX. So in the other residual part, there may be a slightly slower growth, but the overall fee income is still being driven by consumer.

The next question is from the line of Kunal Shah from HDFC Securities.

Hello?

Yes, we can hear you.

Yes. So Kunal from ICICI Securities. So firstly, maybe just a more granular detail in terms of few of the accounts like LRD for us is, say, relatively on a higher side. So how do we expect given that maybe in terms of the commercial spaces or even the malls, how should we see the behavior of this portfolio in particular? So maybe if you can highlight in terms of LRD. And the other one is on the nonfund-based side. [Technical Difficulty]

Excuse me, this is the operator. The line for the participant has dropped. We take the next question from the line of Nishant Shah from Macquarie.

Just 2 qualitative questions, if you can answer. On microfinance, what is the plan -- what is the game plan for like conducting group meetings or instructing collections after the lockdown opens up? And secondly, within your commercial vehicle portfolio, could that split -- could you split that into large fleet operator and small fleet operators? And any comments if you can make on the small fleet operator income pools because as far as I understand the freight rates and all that have dropped, activity has dropped. So how are their financials looking like? And basically, just any qualitative comments about what you expect in those segments?

So first, we'll take the microfinance. We told you that our microfinance portfolio has also seen a lot of downturns, about 4 or 5, and as always bounced back from the downturn. I think if you look at it, they have recovered very fast from a 4% default rate, 96% efficiency on the collection, they moved up to 98% to 99% as soon as the normalcy was restored. I think we've also said that there are 2 differentiations which we have on our microfinance portfolio. We give loans to -- for economic purposes. And if you look at our portfolio, a lot of our portfolio comes from livelihood financing in the microfinance piece and we insist on that. And the second is we have a weekly collection scenario. If you look at the delinquency on the CIBIL or the credit bureau and we have put that portfolio thing on the investor presentation also, you will see that the delinquencies on these type of portfolios is far lower than what you see on the normal portfolio. We have M.R. with us. I think M.R. can pull [indiscernible] on the collection strategy. I also note that the Sampark program has been commenced, and already 9 million clients have been contacted through the Sampark program in his -- through his digital engagement, but I think I'll let him speak.

Thanks, Sumant. I mean one of our advantages is that 80% of our book is from the rural side of the business as against the industry which is heavily skewed on the urban side. So we have just 2 cases of COVID reported so far amongst our borrowers base. The second advantage we have is our low ticket size, which is about 28% lower than the industry ticket size. And as Sumant mentioned, we have a weekly model. We have a trained staff. We have seen the 2008 global financial crisis, 2010 AP microfinance crisis, 2016 demonetization, and we have come out of all these because of our process discipline. And now we have the technology support, and as Sumant was mentioning, we downloaded an app to all our 17,000 loan officers in 24 hours, and they are able to get in touch. We have made INR 2 crores so far and got in touch with 98% of our borrower base. We exactly know what is the status of each borrower. Is her business running, not running, will she be able to pay the installment. And just like in the past, we are fairly confident that we'll come back on our feet and the regular collection of 98%, 99% very soon. The other aspects of the business is the fact that most of the loans that we give, they are the net producers in that village. So if a woman has bought a buffalo, she sells the milk within that village itself. And if it's trading of vegetables, they are selling the vegetables and it is consumed within the village. I think all these are the advantages that we have and a seasoned staff right from our loan officers to our senior managers. 7 out of our 10 senior management people have seen all the 3 crisis. 92% of our field leadership, that is unit managers who manage 3 to 5 branches, have been with the company for more than 12 years. I think these are the strengths that we have, which gives us the confidence that we'll bounce back very quickly once the lockdown is lifted.

Yes. And on the commercial vehicle side, I think this is a business which we are in for 30 years. It was known as a Ashok Leyland Finance. I think it has seen more downturns than all of us combined together. And I think, one of the businesses which will come down post -- we believe that one of the businesses [ revised ] post the lockdown is the commercial vehicle business. I think we have the business head here. I think he can give you more insight into the last mile vehicle and the -- and what happens on the freight, I think, Partha?

Sumant, are you able to hear me?

Yes.

Okay. See, there was a specific question that what percentage of our portfolio consists of fleet operators and others, okay. Fleet operators should be less than 25%, and we specialize on what we call as SRTO or livelihood operators. These operators are operators who have been tuckers for generation. And I have been personally dealing with persons for possibly the third-generation or so. Even though I would rather think that right now, one of the first industry possibly to get out of COVID situation would be the transportation, primarily because industry, agriculture, whole economy is starved of mobility. Immediately upon announcing the opening of economy, I think these persons should start moving faster. And the livelihood operators know how to operate, and most of them are by family transporter. And many of them are driver cum owners also. Therefore, they would, according to me, adopt it much faster than a fleet operator. Therefore, according to us, we have also seen, even in the past, last-mile connectivity as well as a small road transport operator, are much more versatile and much more alive to the situation than the others. And these are the persons who would respond to this situation much faster than the others. Therefore, according -- I mean -- the moratorium period of 3 months which has been given, as Sumant had already pointed out, a substantial portion of the persons have paid March installments. Therefore, if -- should the moratorium not continue also, people need not have to pay for June -- till June. Therefore, from July onwards, I don't think there should be any problem or we do not foresee a major disruption in terms of mobility as well as payment. I suppose it addresses your queries?

Yes, yes.

One more point to add to what Partha and, I think, M.R. had mentioned, we have made a sort of new disclosure in our investor presentation. So one is the qualitative aspect as to what might play out. The other is what is the stock, how do things stand today vis-à-vis the rest of the financing industry. And we have given you a pretty good flavor covering the last many months on how our portfolio stacks up on all the retail products, whether it's tractors or it's CV or microfinance or any of the other retail asset classes versus the rest of the financing industry. So I think one is the starting position and the second is how do you sort of execute on the ground when things come back to normalcy. I think on both counts, we are quite well placed. So we are quite hopeful that whatever the outcomes it should be superior to our competition.

The next question is from the line of Anand Dama from Emkay Global.

Sumant, during the call, you mentioned about that the GNPA ratio might go up by about 80 basis points and provisioning about 50 basis points or so. So what is a broad breakup of this entry moment that you would see, whether it will largely come from the consumer piece or there is that addition to the corporate also that we are seeing? And another was basically that the provision coverage ratio has now already gone past about 60%. So do we intend to take it closer to about 70-odd percent or we are largely done with the overall providing now on the top of the book?

So I'll answer the second question first, and then I'll have Ramu answer the -- how we have -- see, the first question, let me answer the second question, and then I'll answer the first and I have Ramu add to that. I think the second question, we have always said that we want the PCR to be 70%. I think 60% was the start because I think we were way behind, we wanted to get above 60%. Now our ambition is to get to 70%. I think -- but that may not happen in a quarter. It may now be spread out over the year, yes, and I don't think we will do that immediately. But I think you will see us getting to above -- to about 70%. And that's something which we believe in. And I think, in these times, I think we said one of our themes was sustainability. And I think PCR is one of the vectors we want to contain -- control on sustainability. So that I hope, answers your second question. I think the first question is around the provisions. And I think, if you look at -- if you're talking about future, we don't give future guidance, but let me tell you if you look at our SMA-2 book now and on the corporate side, I think, last quarter when we were at 53 basis points, a lot of people said that the flow will happen and they were right because a lot of items flowed out from the SMA-2 book into the gross NPA. And some of them were not 90 DPD, but we identified them as a weak account and we let them flow in. And I think we are down to now 16 basis points. And I am very comfortable with that. I can say that I think, next year, our credit costs on a BAU basis, which is business as usual basis, our total provisions actually look at 120 to 130 basis points. And if you add to that the COVID provision, which Ramu talked about, I think, which is about 50 basis points, then, I think, we should be lower than what we are on the -- on today. We ended this year at about 225 basis point. Normalize it for the IL&FS exposure, you would be around 144 basis point. So I think there is an improvement which will happen next month -- next year also. So I think we are slowly now seeing an improvement in our corporate book. And I think COVID is an unknown, but we are cautiously taking provisions, and we'll continue to take provisions because we retest our assumptions every fortnight and we'll continuously add -- if required, continuously add to that provision so that we normalize our flow that we don't have a big bump at some point. So I think we are very cautious about that.

Yes. And another thing was about these telecom accounts where we have made some provisions in this quarter of about INR 75-odd crores. So do you think that the kind of exposure that we carry to this account, is this INR 75 crores sufficient, or is it just a start and we will have to make some more provisions over there?

So I don't know what is the basis of why we should make provision. I think we have some very good relationship in Airtel, in Vodafone. I think -- I don't think Airtel is an issue. I think there is one telco company which is in stress right now, but we are expecting the government to intervene and give it a moratorium for 20 years. If that happens, I think we have no issue. But I think what we did was we took a telecom sectoral view and we said on our funded exposure we should take some provision, and we took that provision right now. So that's all what we did. And I think if it's required, we will assess the situation on an ongoing basis and if required, we will take the provision. So it's an ongoing scenario. Today, I don't believe anyone in the industry except 1 bank has taken the Vodafone exposure or a telco exposure as an NPA. Yes, and that was an unsecured exposure. We are completely secured in a -- and that was also on a bond and not on a funded exposure. So I think, I just want to leave it at that. I'm very confident that if we -- that it should work out. If it doesn't, you will see us making very aggressive positions on that -- provisions on that.

And your risk-weighted assets have gone up about 20% versus an asset growth of about 11% Y-o-Y. Any reasons for that? And any plans for capital raising?

Come again? I didn't get you.

So your risk-weighted assets for FY '20 have actually gone up by about 20% versus your asset growth of about 11% or so. So what is the reason for this jump in...

Yes, yes. There are 2 or 3 reasons for it. And just hold on, I'll just give you the reasons for that. Yes. So I think -- RWAs increase is driven by higher credit RWAs due to rating migration of certain and a few accounts. I think that's happened. Two, we said that we have done some IBPC deals, and these were higher-rated paper where we had to do the higher [ base ]. I think higher CVA on derivatives due to market volatility, which will reverse as the transaction mature and for -- additional to operational risk which happened on the quarter 4 of every year.

Okay. Okay. And so any plans to raise capital? So you were talking about some...

I think when we have, we will inform the market vis-à-vis. I think we keep on evaluating, but as of now, there are no plans.

The next question is from the line of Sandeep Nanda from Bharti AXA Life. As there's no response, we take the next question from the line of Amit Kumar Premchandani from UTI.

What is the current status of deposits and liquidity, April? We had known the March numbers earlier only, so how is it panning out?

So the way you have to look at deposits is in 3 places, and I'll tell you. On the retail side, I think we are seeing inflows on a daily basis about INR 50 crores to INR 60 crores of net inflows are happening. I think last week onwards we started seeing government flows coming in, and I think we were able to mobilize about INR 600 crores to INR 700 crores on the deposit inflows from the government, and we believe we have another INR 2,000 crores in pipeline. So I think we are seeing some deposit inflow. I think we were able to mobilize INR 6,000 crores of corporate deposits in the last 15 days, yes. So I think deposits are back. So the runoff is -- I think we are seeing great tractional deposits. And I think we will surprise the market on a quarter-to-quarter growth. That's all what we will leave it.

And so basically, you are saying this INR 2,02,000 crores deposit of March, that number...

I didn't get you. I think there's a lot of mixup which is happening.

Sir, what I meant was this -- that INR 2,02,000 crores deposit number has moved up as of now.

Excuse me, this is the operator. I'm sorry to interrupt. Sir, may we request you to use your handset, please. There's a lot of echo sound coming.

Yes. What I meant was that this INR 2,02,000 crore deposit as of March. As of today, the number has actually moved up and there is no outflow.

We will not -- I tell you, we don't disclose numbers mid-quarter. What I've told you is where we are, and you will see a growth in the quarter. I can assure you that we're not going down the way we went up.

And sir, the current -- and generally, the LCR position you are holding above 100% even for the...

We are holding above 110%. We are in the range of 110% to 120% on a daily basis. And we have an SLR excess of 5% now.

Okay. So you don't need the repo window for liquidity right now, right?

Not as of now. We'll not use it.

And sir, finally, on the moratorium side, what percentage of the loan book you expect to go for moratorium?

I just answered that question sometime back. I think you may have missed out. I think it depends on which segment you are offering what. So on the retail segment, we have offered moratorium to all our clients, but fortunately for us, our clients want to pay us back, and we are educating our clients to pay us back because of the interest burden. So in the month of March, we got 96% of our repayments back in the nonvehicle part of our business and 95% of the vehicle part of our business. On the MFI part of our business, 99% of the payment -- of the March payments came in before the lockdown was announced. And I think in that, the moratorium is working. And right now, the payments are not coming in on the month of April. As far as the corporate side of the book, we have an opt in, and I think very few clients have opted in for that moratorium right now. I don't know the percent, but very, very few.

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

Just 3 questions from my side. One is if you could just kind of give some clarity on what would be the maturity profile of your telecom exposure?

Ramu will be able to answer.

So our funded exposures due in about -- there is about 3.5 years before it gets repaid. The guarantees are usually for a year at a time. So that's the usual tenure. BGs are usually between a year to 18 months, not more than that.

And it automatically gets rolled over or you have the option here?

No. We don't have the automatic rollover. It's a question of decision. We will have -- if we don't rollout, there'll be demand from the DoT, but they can substitute to those others. So we did -- if maybe in the quarter of December, we did see a reduction. If you look at our last quarter, now we've seen some reduction, that's because some BGs have fallen off because 1 or 2 of our telecom companies did pay up or they did get the BGs back.

Second question, sir, on the asset quality front, for the last 2, 3 quarters, the SMA data that you report and the slippages, they just kind of don't move in tandem because you report very low SMA data, but eventually the slippages turns out to be much higher. Any broad assessment as to how should we look at this number for FY '20? Second, a question to you again on the growth part. Given what the liquidity conditions of the balance sheet is what you're seeing today, how are you looking at the business for FY '20? And also on the asset side, given the conditions on the ground, how are you -- asked Partha to look at the loan growth for FY '20 as such?

So I think let me answer the third part of the question, and then we'll take the second part of the question which is the SMA-2 slippage and why is the slippages between the SMA-2 and this? I think on the growth part, I think we've said that our retail will grow faster than the corporate book, and I think we eventually want to move to 65-35 in 2 years' time, but at least, we will be 60-40 this year. We want to move towards 60-40. Having said that, I think, which means that we'll not stop the corporate growth, but I think the corporate will grow slower at about 6% to 9% range, whereas our consumer will grow at about 10% to 15% range. And in those, there are various products which will grow. So I think 12% to 14% will be the commercial vehicle. We expect the second half of recovery in the commercial vehicle segment. And I think by that time, the COVID, as well as the BS-IV, BS-VI norms, would have been cleared by that time. I think the vehicle finance recovery will happen at that time. I think on the microfinance, I think like M.R. was explaining, I think the recovery in the rural, we expect to be faster. And I think, the microfinance institution of the NBFCs will have a difficult job of lending at that point of time. And I think we have a huge opportunity at that point of time in the places in which we operate. And I think we'll be back to the late 20s in our growth in the microfinance portfolio. Our vehicle finance -- nonvehicle finance portfolio grows at about 20% to 22% and continues to grow as that. We'll continue to grow with our unsecured portfolio being not greater than 4% to 5% of the portfolio. We don't grow that portfolio so fast. So that's on the retail part of this. On the corporate side, I told you that we will moderate, we will see how we have to grow, and we will granularize the book rather than -- so you may not see large growth, but you will see moderation in growth because of granularization which is happening. It doesn't mean that the business is stopping, the number of cases is growing but the ticket sizes will be smaller. So you can see a 6% to 8% growth in the corporate as a consequence.

Perfect, sir. And your question on the SMA data and the slippages.

Yes. Sure. So this is Ramu here. So we have looked at accounts closely, I mean, we reviewed it. There is an inherent weakness. Obviously, a potential issue that's coming up. It may not be due to DPD and not SMA or if it's part of a group where we think the exposure is -- or the group is in trouble or other issues. We have recognized them. And to that extent, I think you're seeing that slippage. But I think towards the end of this now, we are end of the cycle. So now we believe that most of this, what we have to review, the names that have come to me, are reviewed already. I think this is addressed earlier when Sumant spoke about it. So we've kind of looked at that part, but maybe in future, it will be a more -- you can correlate better between the SMA and with the data, but now we're just trying to accelerate some of the provisioning and take that ahead.

What you will see, and I think which I can -- I think you will see us being much more conservative in the way we take our provisions and I think we want to be on top of our business rather than carrying this load for a later date, that's number one. Number two, I think you would have seen this quarter also, as you see the data -- retail data, we have taken 2 accounts into NPA reserve, which actually were not NPA, were not in the SMA-2 -- it was actually not an NPA account, but we took them because we felt that they will flow into the NPA. So I think we are being a little bit more conservative. And third, I think as we look at our growth now, I think balance sheet protection becomes a very big concern for me. And I think the quality of the book is much more important to me than growth right now. And I think our focus will be to protect the quality of growth and how we grow our businesses. And specifically, given that we want to grow our liabilities also at this point of time.

Perfect, sir, useful. If I can ask one question, I will ask. Otherwise, I'll come back in the queue.

And what you will -- you will also see is that we will always be protecting our PPOP. So even if we have to reduce our expenses, we will reduce expenses judiciously to make sure that our PPOP is protected.

Perfect, sir. That's useful. Sir, just one question. These provisions that you reported of -- for the quarter INR 1,400 crores, you reported for corporate and about INR 344 crores for the retail. There's still a shortfall of about -- a difference of about INR 650-odd crores. I think INR 260 crores pertains to contingent provisions and INR 240 crores pertains to the net-worth adjustment that you're doing on a account. There is still INR 150 crores shortfall.

Yes. I think there was a...

I think there is -- this is a...

This is the telecom provision, right? INR 75 crores? And standard asset provisions. And you also had the breakup for the fraud accounts where we are taking a 1/4 hit. So there are 2 accounts where we have taken a hit of almost INR 250 crores in the current quarter. So all of that will be the balance, Mahesh.

So INR 260 crores pertains to the COVID provision, INR 240 crores pertains to the fraud and INR 150 crores?

Telecom is INR 75 crores.

INR 75 crores telecom.

And then there is some standard asset provisioning. And then there is INR 23 crores of statutory COVID provision in addition to the INR 260 crores floating provision.

Ladies and gentlemen, we'll take the last question from the line of Gaurav Kochar from Mirae Asset.

Sir, the slippage in the retail book was at around [ INR 8 billion ]. If I'm assuming this correctly, this is effectively for 2 months, because in March month you would not have seen any slippages because of the morat. This is in contrast, I mean, INR 708 crores which was there for the whole quarter in Q3. This number seems a bit elevated. Am I reading this correctly?

You're looking at one side of the equation. The net slippages for the quarter was much lower. It was around INR 200 crores.

So that's INR 606 crores, how much of that is recoveries and how much of that is write-off?

I think most of it is recovery, but I'll give that number to you off-line. I don't have it in front of me right now.

Okay, okay. Sure. And on the corporate side, slippages of around INR 1,150-odd crores came in from the 4 accounts that you mentioned. These were largely I'm assuming from the SMA-1 and 2 which were there in the 3Q. Any other account apart from the SMA-1 and 2 you have disclosed which could be in watch list, any stress that you're seeing which could slip in?

Yes, yes. There were 2 accounts that we recognized, even though they were not in SMA-1 or SMA-2. One of them is a tea-related company and one is, I think, real estate/services.

Okay. Any other account that you might see may be slipping in the next couple of quarters? Any stress that you're seeing?

No. I think what you should look at is a gradual reduction over the year in terms of -- if I were to just separate business as usual with COVID, if you were in a business as usual mode, I think this would be the worst period in terms of our slippages. There will be a gradual improvement in slippages as we go through the year on a BAU basis, without counting the COVID impact.

Okay, okay. I have not seen any change in the rating mix that you disclosed. I mean Q3 versus Q4, very minor change. Does that mean the Voda exposure is -- Voda-Idea exposure, the $3 billion -- the $30 billion sort of nonfund exposure that you have is still considered as investment grade?

No, no, no. It is sub-investment grade.

Okay. It is sub-investment grade.

RWA is up. So there is a -- it has fallen to sub-investment grade. It's reflected in our rating profile. You'll see a little bit of a blip there in terms of the funded, nonfunded secured book. But also in the standard investment grade book, there's a little bit of rating migration which can be expected in this period. All banks will have a little bit of negative rating migration.

All right. All right. Sure. And last question. I mean you mentioned that around INR 6,000 crores of corporate deposits came in -- came back in the month of April, and there were some government deposits too. So are we still looking at the chunky deposits?

No, no, no. The government deposits, the ticket size is of INR 50 crores to INR 100 crores. And the corporate deposits, I think there is one deposit which has come of INR 1,000 crores. But otherwise, it's about INR 150 crores, INR 200 crores, INR 250 crores. So in corporate, in public sector undertakings, you bid for it, right? And sometimes ticket sizes are INR 1,000 crores and above. So I won't stop that from coming in right now.

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Kathpalia for closing comments.

Thank you. I think as usual, if there are any questions, Sanjay Mallik, me and Arun as well as Indrajit are always available. We can take all your questions. Thanks a lot for participating, and talk to you soon.

Thank you very much, sir. Ladies and gentlemen, on behalf of IndusInd Bank Limited, we hereby conclude this conference. Thank you for joining us, and you may now disconnect your lines.