IndusInd Bank Limited (INDUSINDBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the IndusInd Bank Limited Q4 FY '21 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. Good morning to people in the U.S. First of all, my apologies for the delay in the call, this was due to the technical issues which we faced in uploading of the file to the exchanges. We had to have a press meet, and then we are starting with the investor call. So my apologies for that. Thank you for joining this call. I will start with some macro commentary and then go into the bank specific details. At the macro level, as you all know, India is going through the second wave of COVID-19 currently. The economy was showing a healthy recovery to pre-COVID levels until the sharp surge of cases in April. All 3 sectors of the economy: farm, manufacturing and services showed good traction in quarter 4. The second wave of COVID-19 is likely to impact the economic recovery in near term. However, considering the vaccination drive at large scale and strategy to focus on local and regional lockdown and microcontainment zones as opposed to a national level lockdown, the impact on economic activity is believed to be limited and less severe compared to 2020. That has been the international experience too with second wave. In our assessment, the current restriction -- in our assessment of the current restriction, we've now seen a full year GDP growth at 10.4% from 11% estimated earlier on a back of a slower quarter 1. Scaling up of the vaccination drive from quarter 1 will eventually help deal with pandemic. The measures announced by the government and continued accommodative policy by RBI will support the overall economic growth. Now coming back to bank specific commentary. I completed my first year as CEO in March. We faced some internal and external challenges during the year. I can proudly say that the bank has come out stronger from these challenges. If you look at some parameters indicating the health of the bank, we are at the best level in the last several years, if not the decade. We closed the year with capital adequacy ratio of 17.38%; outsourced liquidity of INR 40,000 crore INR; credit deposit ratio below 85% and strong traction on retail deposits; PCR at 75% with significant buffer provisions outside PCR; operating profit margins at 6% of loans, all at the best levels in the last few years. Coming to quarter 4. And during the quarter, we focused on continued deposit mobilization. Our deposits saw handsome growth of 7% quarter-on-quarter and 27% year-on-year. This was led by strong growth in CASA of 11% quarter-on-quarter. The growth was driven by retail segments, resulting in our retail, as per LCR growth, of INR 9,900 crore during the quarter. This was in spite of 50 basis point reduction in the headline rates. Our cost of deposits fell by 31 basis points during the quarter and year-to-date cumulative by 102 basis points. We continue to maintain comfortable excess liquidity with overall LCR at 145%. As a group, all 3 domains, vehicles, diamonds and microfinance saw strong disbursements during the quarter. Vehicle disbursement grew 30% year-on-year and 8% quarter-on-quarter, driven by pickup in commercial vehicle. Diamonds demand globally saw good recovery resulting in working capital drawdown from it as well. Microfinance too resumed a growth journey with 15% quarter-on-quarter growth. On the corporate book, we have been reducing exposures in line with our strategy of granularizing the loan book. We have largely achieved our sell down objectives and the portfolio here on to start showing growth. We remain cautious on unsecured loans. Overall loan growth for the quarter was 3% quarter-on-quarter and year-on-year. Asset quality. Our collection efficiency improved to 98% from 97% during the quarter. Of these, secured assets have higher collection efficiency and unsecured have lower collections than average. Our retail portfolios, including unsecured, saw reduction in slippages. Corporate saw technical slippages where restructuring was under implementation as of March, and some of them are already upgraded. Corporate slippages adjusted for such technical cases were also down quarter-on-quarter. We have followed a conservative provisioning approach. We maintained our PCR at 75% despite technical NPAs in corporate. We have conservatively taken 100% provision on unsecured assets, including microfinance, even though we are already seeing recovery. We have also increased our surplus COVID provision outside the PCR from INR 966 crores to INR 1,600 crores or 0.8% of loans during the quarter. Overall loans-related provisions are 3.3% of the loan book. I will share further details later. Strong profitability of the franchise, our NII grew 9% year-on-year and 4% quarter-on-quarter. Our NIM was stable at 4.13%. Our fee reached pre-COVID levels in quarter 4, driven by strong retail fee. Retail fees crossed INR 1,000 crores per quarter for the first time ever. Our revenue was up 6% Y-o-Y, while costs were up 2% Y-o-Y, driving operating profit growth of 10% year-on-year. Our revenues have now settled comfortably above INR 5,000 crores per quarter. This has helped in improving our strong operating margin to 6% of loans, despite lower corporate fees versus the past. Scaling up of new growth areas. We continued scaling up our affluent, NRI and SME segments. Affluent AUM crossed INR 50,000 crores, including deposits of INR 30,500 crores, growing 5% quarter-on-quarter and delivered a fee of -- in the quarter of INR 100 crores. NRI liabilities grew 9% quarter-on-quarter to INR 25,800 crores. We have also added 100,000 merchants by leveraging Bharat Financial network during the quarter. We have resumed our branch expansion, adding 100 bank branches and 40 vehicle outlets during the quarter. We will continue to invest in existing as well as new business to drive our growth. Capital adequacy. During the quarter, our capital adequacy was augmented by promoter warrants conversion of INR 2,000 crores at INR 1,709 per share, implying a significant premium to market price. That demonstrates promoters steadfast commitment to the bank and relief in the management team. The warrant subscription and lower risk intensity boosted our CRAR to 17.38%. Before I go into portfolio specific summary, broadly on slippages and restructured book. During the quarter, we had business as usual and also technical slippages, as detailed in the investor presentation. Our business as usual slippages were INR 1,930 crores during the quarter, which is lower than the pro forma slippages of INR 2,500 crores last quarter. The technical slippages were INR 1,899 crores. Out of this, INR 1,602 crores is already reflected in deductions as they have become standard and the balance is happening also this quarter. The technical slippages occurred due to delay in closing the restructuring by consortium and also temporary operational issue, which was rectified in the same quarter. Bulk of these technical slippages came from 2 groups, highlighted in earlier calls. One in retail and the other in the construction industry, where resolution is under judicial process. Further details are shared in the investor presentation, and we can discuss this in the Q&A. We also recognized performance slippages of INR 2,508 crores of quarter 3 as the NPA sanction was lifted by the honorable Supreme Court. On restructured book, our restructured book was at INR 3,737 crores and stayed stable at 1.8% of loans as of March 2021. However, the mix of this book has improved towards long vintage vehicle finance customers. During this quarter, we saw a few corporates opting out of restructuring. However, due to COVID second wave, some additional retail customers out of caution opted for MSME restructuring, which was available since 31st March. Segment-wise contribution of this 1.8% would be vehicle, 65%; non-vehicle retail, 17%; and the balance from corporate banking. Now coming to individual businesses, vehicle finance. Quarter 4 saw strong traction on disbursements across the vehicle category. Overall disbursements grew 30% Y-o-Y and 8% quarter-on-quarter. As expected, commercial vehicles bounced back nicely during the quarter. The disbursement grew up by 54% year-on-year and 44% quarter-on-quarter. This segment too now has crossed pre-COVID level. Our other noticeable segments showing strong disbursement for past, up 24% year-on-year; utility vehicles up 29% year-on-year; tractors up 44% year-on-year; and construction equipment 2x year-on-year. We remain cautious on three-wheeler due to low passenger freights and disbursements are much lower than historical run rate. This segment, however form small part of the book. The overall loan book grew by 7% year-on-year and 1% quarter-on-quarter. We had loan disbursements in the first half of the year. As the disbursements have now reached pre-COVID levels, they will start reflecting in the loan book growth from next quarter onwards and subject to how COVID plays out. Collections in the vehicle portfolio are slightly lower than the pre-COVID level. The portfolio has consistently maintained its excellent track record and market leadership in all segments we operated. In fact, almost 25% of the gross NPA, customers are today at less than 60 DPD, but they will remain in NPA till all dues are clear. We have seen higher growth in two-wheelers and three-wheelers, the livelihoods are impacted by COVID. These are typical service providers like auto, newspaper delivery, et cetera, who lost earnings. We allow these customers to slip into NPA and recovery should come out as COVID plays out. Restructuring was invoked on INR 2,446 crores of portfolio. This was maybe ahead by INR 200 crores against our earlier expectations. The MSME restructuring was available 31st March. And due to onset of COVID second wave, we saw some more customers availing this facility out of caution. We have long vintage and strong collateral covers in this segment and eventual losses should be range bound. While the lockdown poses a risk to the freight transport, this segment has demonstrated to be the first one to bounce back as the economy reopens. Exceptions of strong GDP growth this year and budget announcements on scrappage policy and infrastructure spend offers well for the vehicle industry. Microfinance. This is another area of domain expertise and has proved its metal in yet another crisis. Incremental slippage during this quarter was INR 298 crores or 1.2% of loans. Performance slippages in the quarter was INR 472 crores or 2% of loans. So overall, the slippages of around 3% are lower than what we expected at the start of the year. We have also seen recovery from performance slippages of quarter 3, and this trend is continuing. Eventual credit losses, that should be lower than expectations. We have conservatively provided -- fully provided for all these NPAs. We remain watchful of any impact of COVID second wave and restrictions in some parts of the country. Overall, collection efficiency in April is lower by 1% compared to March. This should bounce back as the restrictions are relaxed. We had seen similar trends in September last year when a few states have reimposed lockdown. Strong traction on collection also enabled our [indiscernible] to align towards growth. We saw loan book growth of 9% year-on-year and 15% quarter-on-quarter. Loan book originated post initial knockdown now contributes 81% of total book and has normal collection efficiency of over 99%. This is a key metric to watch as the whole book is running off and the traction on practice versus employee improvement in the overall quality of the book in the next few months. We are now fast tracking our synergy initiatives, which took a backseat due to COVID onset. We are driving savings accounts and deposit penetration into microfinance customer base. We have crossed 51,000 Bharat Money Stores, and we scale this up further during the year. These financial transaction points across India will add meaningfully to the financial inclusion agenda that we are pursuing through people and ensuring easy access of financial products to rural India. We are also leveraging our mutual presence in Tier 1 to Tier 3 cities for merchant acquisition. We have onboarded 170,000 merchants to assist in digital group and are scaling this up too at 30,000 merchant per month. The product offers a seamless bank account, working capital and payment solutions. Overall, we are much more confident -- comfortable on the microfinance than we were 6 to 12 months back. While like any other segment, COVID remains a key risk here as well. Another good year expected for monsoons, rural spend by government adds to a comfort look. Other retail assets. This contributes 17% of the overall loan book and included secured and unsecured retail assets. In quarter 3, we had seen secured assets showing range bound slippages, whereas credit card slippages slightly worse than expectations. In quarter 4, the secured assets have maintained the traction while collections improved in the unsecured assets. In credit card, the resolution and rollover rates are better than pre-COVID levels. We also saw the -- we also saw credit card spend crossing 5% market share for the first time against a credit card market share of 2.4%. Collectively, these indicate good improvements in the quality of spend and cards. We are fortifying our retail origination asset origination team. There is, however, strong competition from secured retail assets in the market and the rates offered may sometimes may not justify risk onboarded. As the interest rates have seemed to be bottoming out, we expect pricing sanity to return. We have been selective in our underwriting, both for pricing as well as COVID concerns. We are maintaining -- we are meanwhile growing our new growth drivers. Affordable housing disbursements grew 10% quarter-on-quarter and loan book grew to INR 1,800 crores, up 36% year-on-year and 8% quarter-on-quarter. We have reactivated our gold loan business in 400 branches, and this will be scaled up in coming months. The [indiscernible] on merchant loans through IBL as well as vehicle contribution is also showing promising results. Overall, we expect secured assets to resume growth, whereas unsecured to remain capped at 5% of the loan book. The asset quality trends are now at pre-COVID level. Corporate bank. I have outlined my approach of fine-tuning the corporate underwriting towards granular, secured and annuity-based exposure. We created an empowered intervention through independent portfolio management unit. The transition to achieve this has been smooth and not disrupted. In line with our strategy, we sold down exposure worth INR 3,500 crores during the quarter. Overall, in the year, we have reduced exposure of INR 9,000 crores beyond the scheduled repayments. These exposure then meet the concentration criteria, and there was no credit issue as such. We have broadly achieved our objectives, and this exercise should be completed in the current quarter. Another focus was granularizing the corporate fee. We focus more on annuity fee rather than one-off transactional fee. Trade and FX fee now account for more than 2/3 of the corporate fee. Investment banking fees were subdued due to large -- weak market conditions as well as selective focus. Overall corporate fee adjustment too is complete, and here on, they should broadly grow in proportion to the loan book contribution. We have disclosed a few additional data points in the investor presentation showcasing improvement in portfolio quality. This was traction on aligning corporate book towards higher rated, shorter duration and granular portfolio. Average rating of profile has improved during the year. Our business as usual slippages was only INR 336 crores during the quarter. As explained earlier, we also had account aggregating to INR 1,900 crores, which were under restructuring or had technical issues. Bulk of these accounts are already standard with completion of formality. Restructuring trends in the corporate book was quite positive. In quarter 3 call, we had highlighted restructuring of INR 2,200 crores, which was invoked and under implementation. We saw a significant part of these clients withdrawing from restructuring as a business momentum picked up comfortably in quarter 4. This resulted in restructured book falling significantly to around INR 654 crores as of March '21. This shows resilient portfolio performance even in the current stress time. None of the restructured books are in sub investment rate. Portfolio in the sensitive segment such as real estate, NBFC continue to behave well with no restructuring on SMA-2 account. A bulk of our -- of the realignment of the corporate book is now complete. All the segments are geared to participate in the economic revisal. Growth will, of course, follow the revised underwriting approach institutionalized by the bank. We are extending our philosophy of building domain to corporate banks as well. We are identifying segments such as MNC, education, health care, NBFC, where we will build specialization. This would help us give better adjusted returns over long term. We have also tactically looked at co-lending -- looking at co-lending opportunities with lenders and secured retail space. Gems and jewelry. This segment is an example of specialization in corporate banking. We continue to see no NPL or even SMA-2 customers here. There was no restructuring invoked. Global diamond demand has bounced back to the pre-COVID level. We expect the momentum to continue for a while. This has resulted in strong demand for Indian diamond manufacturers. Our diamond loan book had shrunk in the first half as the working capital utilization went down due to weak global demand. You saw utilization levels in quarter 4 improving in tandem with the global up cycle. This book grew 15% quarter-on-quarter and should show decent growth in the coming quarter. Overall, on the asset side, we saw strong growth in disbursement in the areas of domain expertise, vehicles, microfinance and diamond. These portfolios have better early delinquency profile versus the industry, and we've disclosed quarter-wise trend in the investor presentation. We are positioned to participate in other retail assets, provided we get good risk-adjusted returns. Corporate book adjustments are now behind us and should start showing growth every quarter. We are watchful of the COVID second wave and its impact on the overall economy. We are, however, as of now, comfortable with the PC5 growth ambitions stated earlier. Now coming to liability. We saw acceleration in the deposit traction during the quarter. Deposits grew 7% quarter-on-quarter, driven by 11% quarter-on-quarter growth in current and savings account. Retail deposits, as per LCR, also grew by 8% and achieved over INR 9,900 crores per quarter run rate. This was despite the 50 basis point cut in the headline deposit rates. With strong deposit flows ahead of the loan growth, our CD ratio further improved to 83% from 87% quarter-on-quarter. Our cost per deposit reduced further by 31 basis points during the quarter and 102 basis points cumulatively during the year. We will look for another round of rate cuts in the coming months and comfortable acquisition momentum despite the rate cuts. Our retail fee crossed the pre-COVID levels. This was, in fact, the best-ever quarter for retail fees in our history. We saw good momentum in the distribution fee, along with loan processing fee on the back of strong disbursements. We have also resumed branch expansion, opening 100 branches during the quarter. We aim to add another 250 branches during the year. Our affluent business continued strong performance. Our deposit from this segment grew 8% quarter-on-quarter to INR 31,300 crores and AUM growth of 8% quarter-on-quarter to INR 50,900 crores. This business has also achieved a fee of INR 100 crores for quarter for the first time. Our NRI business grew to INR 25,766 crores, up 9% quarter-on-quarter or 32%. Our market share improved from 1.9% to 2.3% during the year. Market share was around 8% on incremental growth during the year. This was despite no NRI home coming and also fall in remittances this year due to COVID. Borrowings have been selective -- selectively focused on longer tenure and attractive rates. An example of this would be recent funding from Proparco, a French development financial institution supporting our microfinance business. This is a 7-year facility at a very competitive pricing. We have maintained our overall LCR at 145% and running surplus cash balance and excess investment of over INR 40,000 crores. Technology. IT in IndusInd Bank continues to be the backbone supporting business and growth ambitions. The bank has made several significant steps in improving client experiences, including an all-in-1 source in its mobile app, videogram, video KYC, WhatsApp and Alexa-based servicing supported by natural language processing. IndusInd deployed a large-scale work-from-home setup for above 15,000 staff, including e-mail on cloud with video collaboration. Several other digital applications now run off the cloud. The bank has adopted the highest standard of client data and transaction security. With a range of modern and sophisticated security tools, bank has not faced security glitches and it has been careful about controls and data protection, supported by threat intelligence. Recently, the bank has successfully implemented an early warning signal, which is an AI-based set of algorithms which measures the impact or risk to accounts assimilating various market data and internal bank data. Digital traction. Our registered user base on the mobile app increased by 39% during the year. We were ahead of the industry in terms of transaction growth. User base on emerging channels such as WhatsApp banking increased 3x to 2.3 million and is a par with large scale private bank. Bank is certainly moving on its digitally active user base, has showed an improvement by 10% during the year on its percentage of mobile access user base. The digital platform to the bank have started contributing to business during the year. Bank acquired nearly 2 lakh client account non-assisted and completely digital via online journey, undertaken by clients who visited the platform on the back of platform marketing, contribution 15% of the liability account acquisition. Bank is also launching a few new initiatives, including an end-to-end digital personal and SME loan and also an unified merchant solution app. Overall, on the liability side, we have maintained traction across the board, along with reducing cost of deposits. We will continue to calibrate our rate cut strategy going forward. Share of retail deposits, as per LCR, has improved to 38% from 31% during the year. Retail [indiscernible] of deposits remains a cornerstone our PC5 strategy. Now coming to the financial performance of the quarter. Quarter 4 witnessed a steady operating performance, with NII up 9% year-on-year and operating profit at INR 3,129 crores, which was up by 10% year-on-year. Our PPOP by loans improved to 6%. Net interest margin was stable at 4.13%. Our yields on assets fell by 19 basis points and cost of deposits fund fell by 20 basis points quarter-on-quarter. We carried INR 100,000 crores -- we carried INR 10,000 crores of higher liquidity during the quarter and also had an impact on NIM. Other income grew by 8% quarter-on-quarter and crossed pre-COVID levels due to momentum in core fees of 9% quarter-on-quarter, driven largely by retail fees. Retail fees at INR 1,015 crores grew 24 -- 3% quarter-on-quarter and crossed pre-COVID level by 10% year-on-year growth. Operating costs were up by 2% year-on-year at against 5% quarter-on-quarter. Our cost-to-income ratio improved slightly to 41%. Now coming to provision. Our provision for the quarter was INR 1,866 crores. We continue to follow conservative provisioning approach. We have fully provided for unsecured retail and microfinance loans. Our GNPA has reduced to 2.67% from pro forma GNPA of 2.93% last quarter, and net NPA was stable at 0.69%. We have maintained our PCR at 75% despite some technical NPAs in corporate. We have around INR 1,600 crores or 0.8 of loans as customer COVID provisions not accounted for in the PCR. We sold out some delinquent portfolios during the quarter. They were already well -- very well provided and resulted in increase of the net security received by 20 basis points quarter-on-quarter. Total loan-related provisions are 3.3% of loans or 122% of the gross NPA. Our overall provision for the full year '21 was at 3.7% of the loan book. Of this, almost half were either one-off or prudent in nature, such as contingent buffer with a PCR ramp-up from 63 to 75 and corporate NPA recognition in quarter 1. The remaining provisions are less than 200 basis points, but for business as usual as well as COVID slippages and should normalize going forward. We will also see 25 to 40 basis points recovery as well as from the prior slippages. Our SMA-2 book as of March '21 was 31 basis points versus 39 basis points in December 2020. Our PAT continues -- profit after tax continues to show a strong upward momentum of growing 12% quarter-on-quarter, even though we have made provisions conservatively. Profits for the quarter were at INR 926 crores. Our CRAR improved to 17.38% due to promoter warrant conversion and lower-risk intensity quarter-on-quarter. RWA to asset ratio has fallen from 84% to 75% during the year. Overall, I think we have navigated well otherwise turbulence and came stronger than before. Couple of rating agencies too updated their outlook ahead of the scheduled review. We have given an update on the progress on all key initiatives of PC5 in our investor presentation and can get into details in question and answers. We are now geared towards achieving our PC5 remission, while keeping an eye on the pandemic situation. Some of the focus areas for financial year '22 are as follows: continued focus on collections. Our domains have outperformed the industry and corporate slippages has been small post cleanup. We have -- we, however, remain focused on ensuring healthy collections in the week of second wave. [indiscernible] loan growth. We have seen strong tractions and disbursement in our areas of strength. We are gaining market share in our domain, and these account for 45% of the loan growth. Growth will now be broad-based into the corporate where realignment is almost over and secured retail products. Maintaining traction on liability. Deposits should lead the asset growth and will be driven by granular flows. We are investing in both physical and digital infrastructure. We are already crossed 500 virtual RMs and will expand this further. We will add 200 branches during the year. New boosters like affluent, NRI, merchant acquisitions are on track to scale up as per PC5 plan. Overall cost of deposits has been falling every quarter, and we will do further rate cuts in a calibrated manner. Improving profitability of the franchise. Our operating profit margins have been strong even though -- even in the half last year. The provisions were elevated due to the prudent approach and almost half of these are nonrecurring in nature. As the provisions normalize going forward, it should start reflecting in earnings and ROE. These focus areas, of course, will be subject to how COVID plays out. We have seen collections only marginally lower in April so far. The disbursement too got impacted due to lockdowns in few states. However, the threat of second wave and policy response have been different compared to the first wave. The economy is operating at a higher level compared to the first lockdown, even in the most affected areas. Interstate freight movement is also allowed. Vaccination drive is accelerating every month, and we will get further boost from higher participation by private sector. These factors, coupled with strengthened balance sheet, give us some comfort on executing our strategy of scaling up with sustainability. While we have locked a few weeks in this financial year due to COVID's second wave, we remain committed to the PC5 growth ambition. We can now open the floor for question and answers.

[Operator Instructions] The first question is from the line of Abhishek Murarka from IIFL Capital.

So just a few questions. The first one is regarding retail growth outlook. So of course, you said that, because of the second wave, a few weeks have been lost, but the outlook still remains pretty strong. But just in the backdrop of relatively higher NPA, higher delinquencies and higher credit costs in retail, do you think it is prudent to grow in this year? How are you approaching it? And specifically, if you can comment on the disbursement outlook in MFI, whether that will continue or that has been reined in for now because of the second wave. That's the first question.

So can I answer that first, Abhishek, [indiscernible]?

Yes, sure.

We remain committed to our domain specialization. We've said that. And if you look at our business, I think -- in the microfinance business, I think we have outperformed the industry. And our credit card -- our gross NPA slippages are 3% of the book. We've just given that data. I think it -- 100 districts are affected because of this -- of the -- these state-level lockdowns as of now. And during this -- these months, I think the accessibility is key on growth for microfinance business. So I think we will have to wait. And what -- having said that, I think we have reduced our ticket sizes. We will see when the lockdown -- if it gets opened and we are able to access these villages, but there are other districts where we are able to do businesses right now. And we will continue to do that business, and it's happening as we talk, yes. The growth may be a little bit shade lower, but I think that's something which we are willing to live [ that ]. Having said that, also you must remember that the rural economy is doing fantastically well because of the good crop season for summer as well as the winter crop season; as well as there are good monsoons which are expected, which is also demonstrated by the [ tractor ] growth which is happening in the country. And I think we will -- I don't think that -- we will not be able to do disbursements in districts where there is a lockdown and we have no accessibility because the center meetings cannot happen. And -- but in other areas, we continue to do the business because we are comfortable that this lockdown is not as severe as what the first lockdown is, and I said that [ in my -- previously ]. On the vehicle finance business, I think, if you look at our book, only 35% to 40% of our book is now commercial vehicle. And the rest are scooter loans, car loans, tractors. And I think the dealer showrooms are closed as of now. And in -- during these lockdowns, it is difficult to get the dealer -- to access lines because of -- the dealer showrooms are closed. We are -- so we are waiting for the April month maybe a very slow disbursement month, but I think slowly and steadily, during the quarter, we'll have to wait and watch as it comes back. In unsecured, we made our intentions very clear. The book has de-grown. And we continue to say that unsecured, while we will grow, we will be very cautious. And this is -- this will remain less than 5% of our retail book and -- of the overall book and has remained less than 5% of our overall book.

Sir, a quick question on unsecured. In credit cards, can you share the proportion of corporate cards that you would have?

We don't have -- I think we do commercial cards. And the commercial card is a very, very tiny business. I think it's very, very small for us because we do not push that business so much. In fact, we have 2.4% market share on personal cards of the business. And [ our spreads ] are greater than 5% of the portfolio, although overall [ spread ] on that is in the -- on the RBI side.

Okay, okay, great. And sir, the second question...

[indiscernible] -- commercial card is a small business for us.

Okay, right. And the second question, sir, is basically on fees. So if we see the growth in retail fees, would that be roughly in line with the disbursement growth? So if retail fees have grown X, we will -- we can surmise that disbursement growth would also be X.

No, not at all. That is the beauty about retail fees. And of course, you can link that in the commercial vehicle segment or in the microfinance segment, but you can't link it in the consumer bank segment. In the consumer bank, you will see trade effects. You will see of -- general banking, you will see it. You will see distribution fees. They are not linked to any asset growth of the business.

Okay, sure. And just, sir, finally, just I'm squeezing in one more. In terms of yields, another sequential increase in yields, is it just an outcome of asset mix change? Or is there something else over there which has led to the yields going up both in corporate and retail?

So Abhishek, last quarter, we had this reversal of 185 crores, as you'll recollect. So that's the main driver.

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

Sir, if you -- on the retail slippages. So if I were to look at the last -- this quarter and the previous quarter, that is effectively most of the full year. So it shows the 16 billion and around [ this ] 21 billion, so roughly around 35 billion, 36 billion is the retail slippages. If you can break that up into various products.

Yes. So let me give you the sector-wide slippages. And I think it is very important. I think, on the vehicle finance business, we had a pro forma of 502 crores, and we have incremental slippages of 687 crores during the quarter. I think -- then I must give this clarification. I think, what has happened, the honorable supreme court lifted its stay on the classification of accounts on NPA on March 24. Some of these clients, they feel that they would -- they are classified as NPA post that only. Or the DPD counter will start post that. And I think we actually follow the IRAC norms and we classify them as an NPA, and as a consequence, they moved into NPA. 25% of this portfolio is in 30 or 60 DPD -- less than 60 DPD today, and I think that is the reason. The second thing which we did is on the personal vehicle -- personal vehicle side, which is scooter and car loans, we did not offer any restructuring, as when -- we were convinced that the restructuring is not required in this segment and we rather take a hit. And if a client comes back -- and I think he will go through the recovery process. That is the way we wanted to do that, and that is one of the reasons why [ they close are ] a little higher. On the secured retail side, I think there was incremental in quarter 4 of 226 crores. This came from business banking as well as the LAP portfolio. And that -- unsecured retail was 383 crores, which came from cards, PL, business loans. And I think that was the portfolio [indiscernible]. And MFI, which is the micro, is 298 crores which was there in quarter 4. So that's the incremental slippages on quarter 4. Is it -- [ clear that up ]?

Yes, yes. That's helpful, sir.

Yes.

Yes. And the second question is, sir, of this portfolio, as you have said, that maybe -- you've said that things are improving and the situation is mainly impacted in some 100 districts, but out of these [ 4, 5 ] key drivers of slippages, where would you be more confident in terms of the slippages having peaked? And where you would be slightly more watchful.

So I think we have to be watchful because we don't know how COVID 2 will play out. So I don't have a crystal ball to say how COVID 2 will play out and how it will affect the business. Having said that, I'll continue to remain very confident about my domain specialization businesses, whether it's diamond, whether it's vehicle finance or whether it's microfinance. I also am very, very comfortable on my large corporate business and the corporate side because I think we see the actual slippage on the corporate side incremental for the quarter is only INR 336 crores. If you go and see the data, and you will have seen the gross NPA data, you will see the whole [ accelerator ]. It's only INR 336 crores. And our corporate book has started performing very, very well.

All right. And sir, on Slide 14, we have this chart which shows the rating breakup, but somehow, I mean, it would have been even more useful if you can tell the absolute amount in whichever form because it is very difficult to conclude the number that -- how much is BB and below or maybe BBB, how much is sitting. We have qualified that now we are cutting down on BBB, but what is the number as of now? If you have that. Maybe ballpark numbers will also help [ in answer at the moment ].

So I can only tell you that our A-rated book and above has improved by 500 basis points during last year. So that's a number which I can tell you that we are focusing. And our business disbursements are moving towards in that direction which we set. Of course, we will do BBB-rated book because our diamond business continues to do on the BBB-rated book. And so I think on the BB I can tell you either we will improve or remain stable, yes.

[ So yes. And ] it has slightly come down from 6% to 5.8%. And if you look at the more chunky exposures, we have given a disclosure in the investor presentation, wherein the BBB exposures have come down by 13%. It's an index number. Our top 20 exposures, funded and nonfunded put together, have come down by 16%. And the duration of the book greater than 3 years has come down by 24%. And the composition of the field, I think we mentioned it in the opening remarks as well, is largely composed of trade and FX. And the proportion of investment banking and the episodic type of fees has substantially come down. So all the vectors are moving in the right direction and so we will continue that momentum. And just to give you a sense of the disbursements: In the large corporate book, in the full year, the A and above rated clients, we had 81% of disbursements for A and above. And in the last quarter, 95% were A and above.

Right. And sir, just a clarification, sir. 5.8% is a percentage of corporate loan. Or this is a percentage of exposure, I mean, meaning fund, nonfund, everything put together.

[indiscernible].

Yes. I said to -- I was just asking Sanjay, sir. This 5.8% is -- I mean, what is the denominator? Is this the corporate advances? Or this is corporate exposure or the entire bank...

Yes. This 5.8% is of the corporate exposure, funded plus nonfunded, and therefore, it would be a much smaller part of the bank. And I think, as you are well aware, there is -- of that 5.8%, there will be approximately a little over 1/3 which is accounted for by one telecom account. And I think, when you see some progress, this number will dramatically come down.

Right, sir. And the last question from my side is a clarification, I think, on the restructuring book. In the opening remarks, sir has mentioned that 60% is vehicle and 17% is non-vehicle retail, but I think the -- I mean, just to confirm: How does that tie up with the slippages and the consequent restructuring and upgrade? So this INR 1,600 crores must be sitting in the restructuring as well, right?

Part of that, yes. You're right. [ Part of the one slips has ] also got upgrade and restructuring, so yes, on corporate large account of 650 crores...

[indiscernible].

[ This moderate ] [indiscernible] got upgraded also because it's -- yes, because it will have taken [indiscernible] OTR [ segment ], correct.

Right, so what is the corporate restructured number then?

See, we just told you the corporate restructured number is about 654 crores.

Yes. So that is the confusion, sir, because I believe this number should be around 1,000, 1,100 or higher number, right, because...

There is another number of 300 crores which is awaiting the OTR resolution because it's going through the process. And I think the OTR approval has already come, yes. This -- it will get upgraded this quarter from the NPA.

The next question is from the line of Kunal Shah from ICICI Securities. As there's no response, we'll take the next question from the line of Nishant Shah from Macquarie.

Sir, I had a couple of questions on the cards business. So earlier in the call, you mentioned that the share of corporate or commercial cards is very little. [ Could you, sir, just like ] explain like some of these [ conflicting ] data points. Like -- so I look at the RBI data [ as a monthly database function ]. The average spend per transaction for you [indiscernible]. This is like...

I can't hear you clearly. I can't hear you clearly. I think your voice is breaking.

Sorry. Is this better now?

Yes, yes, yes.

So just on this, the cards business. If I look the RBI datas, like the spend -- or like the transaction size for each of the credit card spends, it was [ close to ] something like INR 7,000 to INR 8,000, that versus the industry average being somewhere between INR 2,000 to INR 3,000. So what explains -- like you have this -- like the -- a higher kind of spend per card -- spend per transaction, rather. I would have assumed this would have been a function of the corporate cards business [ on a larger share ].

[indiscernible]. Corporate cards contribution to [ spends ] is not more than 150 crores to 200 crores. So you can back that out if you want to. I think the real value for us is if we have [ prepaying ] cards. We don't have any free cards. Not more than 3% of the book is free cards. That is number one. Number two, if you look at our portfolio towards premium cards, I think it will be higher than the industry on the premium card. And that is the reason why we are different on the industry, of course. And the third reason is 75% to 78% of our portfolio is self-employed business. And that is a -- of course, there are risks associated with it, but it's also a differentiator because our spends are higher. Our [ revolve rates ] are around 54% to 56% now. And I think our ROA on that business, in spite of these losses, last year was about 3% to 3.5%. And I think, in good time, it can even get 6% to 7%.

Understood, sir. And what would be the proportion of like travel within the total spends?

Travel [indiscernible] travel...

Travel [indiscernible].

Yes, I don't have that much of data. I can put you to my card expert. I will -- I don't have category-wise trends on the data, but I can put you to my card expert, and it will -- he can help you. Because I don't have that data right now. If I give you something, it will be guess estimate.

Perfect. Okay. And just one last related question. Would you be open to any inorganic opportunity in the cards business?

I've always said that we've always acquired businesses which are complementary to our businesses and ROA [ future ]. We are not -- we are very keen to evaluate opportunities which add value and are accretive to our businesses. And as we said, unsecured business is less than 5% of our business, but if we get salaried customers and category A-class customers, as a consequence, we will be open to an acquisition provided it meets all the criterias which we have laid out, which is accretive to our ROA, accretive to our customer base. And that's where we will -- the right customer base, and that's where we will evaluate the [ option ]. And of course, the right pricing.

The next question is from the line of Anand Bhavnani from White Oak.

My question pertains to the microfinance book. I just wanted to double check. You said the slippages in the microfinance book for the full year was 3%. Did I hear you correct?

Yes, absolutely right.

Okay. And secondly there -- yes. So 3% [ as of ] the denominator would be FY '20 closing book, right? And slippages will be [indiscernible].

[indiscernible] [ somewhat ] 25,000 crores, and it's available in the investor presentation. And our overall [ floor ] was 473 crores plus 298 crores. Quarter 4 is 298 crores. And quarter 3, when the pro forma, was 473 crores.

Okay, wonderful. And sir, you also mentioned that 81% of our microfinance book is post the lockdown. So you have run-down a significant part of the book and a lot of fresh loans have been issued. So...

Correct. And that happens in every microfinance business. The tenors are short. So what happens is we've already run the 12 months, so what had to come has come. Of course, there will be something which will keep on coming. I can't say like how the COVID -- but it runs down in 12 months. My -- every microfinance book actually runs off, so the run-off factor is very high in microfinance.

If I can add one more...

Yes, yes. Sir, a question, follow-up question, on that -- am I audible?

Yes, you are.

Yes. Sir, what percentage of our microfinance customers would have opted for a top-up or [ net-off ] loan?

So we have a program for top-up or -- but I think it is very selective and we don't do it. We first make sure that the client has repaid a book, and there is a gap before we do any fresh disbursement. We follow that as a process. We don't -- because it can be evergreening of the book. We are very careful about evergreening. And that is why Bharat Financial stands out against the others. We do not go and start giving top-ups. We want the client to fully pay the loans and then wait for our cooling period before we start with [indiscernible] disbursements. This has been our strategy. This has been the philosophy of Bharat finance.

Great, sir. Sir, do you have a figure handy as to what percentage of clients could have been given this top-up or [ net-off ] loan option?

I don't know. I can check it up with Bharat. I don't think that it will be too much. Maybe 600 crores of book is there, 500 crores. There is nothing else. And that too, it has been given to clients, yes, who have an ability to pay too. That's the book which we have, 1% or 2% of the book, but it's not evergreen. That's all I want to tell you.

Sir, that's very helpful. 1%, 2% kind of figure is very encouraging. And it will create discipline on [ your part ].

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

Congratulations on a great set of results. Just a couple of questions from my side. One is, given the situation of the loan book from an asset quality perspective, how are you now positioned for next year in terms of growth? That's number one. Second one is, how have you now progressed on the deposit rates? And how do you see the convergence happening with the frontline banks out there?

Can you, Mahesh, repeat the second question? I just missed it. Sorry.

Yes. On the deposit rates that you have right now, we can see a pretty good flow both coming on current account, savings account as well as term deposits. Do you think you have now -- you can take a slightly more aggressive stance on cutting deposit rates further?

So watch the space, Mahesh. That's all I can tell you. I committed last quarter that we will drop the rates. We dropped rates. Now watch the space. I concur with you right now that I think we can look at easing of deposit rates in certain segments because I think we've already dropped 50 basis points. I think the time for transaction account dropping, specifically in the savings account side, has come up. And I think you will see some dropping in rates. And I've always said, Mahesh, one thing, that we will be about 50 to 75 basis points higher than the best in class in the industry. That, you must have it in your mind because we are still growing retail. So that's going to happen. So that's one. On the growth...

Growth [ of ] financial year '22.

See, Mahesh, as of now, I'm not going to [ paint ] my PC5 ambitions because I feel that the country will -- this fear psychosis or the -- saying that everything is going wrong, I don't agree. I think, yes, we have issues, and I think that the country will get out of it. And in my opinion, what we did when the COVID 1.0 was out -- I think, yes, there are learnings, but we came out of it very fast. And there was a pent-up demand which got -- we saw the movement in the book. I think -- in my view, I think we have to wait and watch. I don't have a crystal ball to give you the right figure, but I think there is an opportunity in this market specifically in our domain specialization, specifically in the large corporate books. And I think you -- and in the SME side. And I think we will capitalize on the opportunities, and we will not let go of our market share in the domain specialization. And we will not let go of our strategy on the large corporate towards working capital and A-rated people. We will not lose deals at any cost. [ Of course ], the investment banking business will suffer. And we have -- and you've seen the results. We have [ slowed down ] that business, and I think that one could happen during these times.

Sorry, just one clarification. In this adjustment that you are doing on the corporate side, do you think there is further room for the reduction in your loan book yields on the corporate side?

See, if you -- the only thing I can say, Mahesh: When you get into working capital and the -- and what we've grown also -- see, when you see the book, you are seeing net-offs, selloffs which we've done 9,000 crores. It's not that we've not grown. So that is part of the run rate. And working capital loans were going at a very competitive pricing, and it will continue to go at competitive pricing. What you are seeing is you've got to see the corporate in a different way because the fees business of the corporate; and the trade, FX as well as the transaction banking fees have suddenly started showing up on the corporate banking. And I think our ability to structure it well has [indiscernible]. Also I believe, the way we are playing the game, I don't think we will see the way which we've seen earlier. These are granular disbursements. They are not [ multi disbursed ]. We are not giving it at higher tenors. So we -- like Sanjay said, our tenor has reduced dramatically. And I think you will continue to see that book -- of course, we may lose a bit of yield. And that's driven out of what's the pricing in the market, but I can tell you, of course, term deposits will also fall. Secondly, if the movement is happening -- and I've said always we're already at 55% to 57% retail. And I think we have very good interest-yielding businesses, and they we will continue to be. And I've always said we will continue to be at a NIM of 4.15% to 4.25%. If I [ just go my ] yield on the consumer, we can be 4.5%, 4.75%. The corporate bank is where I want to balance the book and [ get the fences ]. Having said that, I must also say that I'm evaluating mortgage business because I think I want to balance my secured book more and more in the retail side. So we will evaluate the mortgage business also by second or third quarter of this year.

Ladies and gentlemen, we'll take the last question from the line of Anand Bhavnani from White Oak Capital.

Sir, with respect to microfinance, what will be the top 3 states for us? And what will be the percentage of book coming from that -- from those states?

I don't have...

[indiscernible] he's online. M. R. is online.

M. R., can you answer this question? Are you there?

Yes. [indiscernible].

Yes, yes. So the top 3 states are Bihar, Orissa and West Bengal; all put together, the 3 states. I think that was the question, right?

Yes. So what will be the individual percentage exposure [ after the ] 26,000 crore booked in each of these states?

Yes, all put together, but...

[ My point being ]...

Yes, we don't give such granular data on the book at all. I think we've told you the states. We don't give granular data on each of these states as of now.

Yes, Sumant, we are not giving the details...

All together combined, all 3...

At a very broad level, we have state-wide caps, district-wise caps, even branch-wise caps on the amount that we can get. I mean [indiscernible]. And...

Can you give me the top 3 states together as a whole, how much do they contribute?

Yes.

I think it will be about -- if we can give that detail -- can we give that detail, Sumant?

Yes. Please Go ahead.

About 33%, 32%.

Yes, okay. That's quite helpful. And when we speak about our product, a key product would be a 2-year product. Is that right understanding in the microfinance space?

No, no. It's a 1-year product. Most of the people prefer 1-year product. And we have [ decreased installments. So it's a 50-week ] installments. We do have 18 months product and 24 months products that we offer to people who are taking higher loan amounts greater than 30,000 and stuff like that, but anybody who's taking [indiscernible] 30,000 is given a 1-year loan.

So what percentage of our book will be 1 year, 18 months and 24 months? Approximate split.

I don't think we can give that number. I think -- we don't give those numbers. I, we've just told you that we have -- about 81% of our book has got churned all during this year. And we have a collection percentage of about 99% in that churn book. So you can compute that.

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

First of all, my apologies again to have kept you waiting. This was not deliberate. This was a technical issue at our end and it took time to resolve it. Having said that, I think we are committed towards -- we have become more resilient, much more stronger in our business. And I think that's the message which I wanted to give. I think, if the COVID 2 plays out, we are committed towards pivoting towards growth. We still are committed towards our PC5 strategy and growth plans. And we believe that India will come out of this sooner or later. Having said that, if you have any further questions, whether you need more details on microfinance, I think we can do a one-on-one and get into details to each of these questions. And Sanjay, me or [ Indrajeet ] are available at any point of time to answer any of your issues. Thank you so much for your time.

Thank you very much. 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.