L&T Finance Limited (LTF) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the L&T Finance Holdings Q4 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us today Mr. Dinanath Dubhashi, Managing Director and CEO, and other members of the senior management team. Before we proceed, as a standard disclaimer, some of the statements made on today's call may be forward-looking in nature, and a note to that effect is provided in the Q4 results presentation sent out to you all earlier. I would now like to invite Mr. Dinanath Dubhashi to share his thoughts on the company's performance and the strategy of the company going forward. Thank you, and over to you, sir.

Thank you. So thank you, and good morning to all of you. Thank you for joining this results call. I would like to apologize, first of all, because instead of meeting each other, like we usually do at the end of each financial year, the current social distancing norms require that we communicate over the phone. Let's hope that we get an opportunity of meeting each other shortly. I also hope that each one of you, your colleagues, your family, friends are safe and continue to remain so. Throughout the last financial year, we witnessed challenging times one after another. These challenges were not only intrinsic to NBFC sector like liquidity or solvency issues, but also challenges in the overall business environment like lack of demand across major sectors. The slowdown in manufacturing activity and the moderated growth in services resulted in India forecasted GDP growth being estimated at around 5% for FY '20. The final growth may actually be well way lower than that. The only green shoots, though early green shoots, were seen in the rural economy towards the end of Q3 FY '20, driven by the healthy water reservoir levels and increased sowing of rabi crops. The Q4 FY '20 and FY '21 growth of Indian economy were expected at that point of time to be guided by the rural demand. Now all this sounds so distant in the past because nothing could have prepared all of us for what was to come. The challenges with the industry, country and perhaps even the whole world is going through are unprecedented, at least for our generation. I appreciate that my generation may be different than many of you. You're all young people. But I'm 54, and at least I have never experienced a crisis like this before, which is so all pervasive across the globe. It affects your personal and professional life and can really and truly put fear of present and the future in the minds of each one of us. I think everybody's confidence about life, about career, about just health, about family has been tested. It's truly unprecedented. While we suffer from the effects of the lockdown, we are also painfully aware that the post-lockdown situation is likely to be even worse for each one of us. In such a scenario, I can only humbly say that the quarterly financial results of a company seems like such a nonevent. Also, I can definitely give you a very clear picture of Q4 results, but I wonder whether I can truly answer, with any measure of accuracy, any questions about what the future holds. Any amount of data analytics we do, and we do a lot, to try and predict the future might understandably be inadequate because of the sheer unprecedented nature of this event. I mean, data analytics works if the past is going to be a reasonable indicator of the future. At this point of time, one wonders. Still, I will try and do my best, that I can promise. I humbly put forward to you that LTFH has posted reasonably good results in Q4 FY '20, considering that the last fortnight of March, which normally sees extremely heightened activity, both for disbursements and collection, was so badly affected. I believe what made it possible were the inherent strengths that we built over a time, simply going by first principles. If I have to list the 5 pillars which would make any financial institution, and definitely an NBFC, strong to face events like this, and I'm not going to pretend that when we built our strategy and framework we had actually foreseen an event like this, I'm not going to pretend that. But yes, for having said that, these 5 pillars genuinely helped us to deal with this situation: number one, ALM, liquidity and the liability franchise; number two, asset quality and collection strengths; number three, provisioning policy, providing protections for any shocks in the future; number four, of course, business trends; and number five, which I'm adding right now, is a very different one, it's not normal financial analysis, it is the ability to change operating models very quickly based on circumstances. I believe that these pillars will always help us handle and survive a crisis of this proportion but also put us in an excellent position to recover quickly and take advantages of opportunities in the post-crisis period as they emerge. Let me now quickly demonstrate how we have done on these 5 pillars by giving some numbers. In the days following the announcement, the first, ALM and liquidity and liability franchise, we have tried and put that in details in the presentation. By the way, I must also say that we took special efforts in this investor presentation to be even more detailed in giving you some more details about Q4 so that in this extremely uncertain times you can actually make up your mind about how each sector is behaving and how we are doing on each of our business. So ALM, in the days following the announcement of the lockdown, the debt market was characterized by a severe drying up of liquidity. The closure of certain debt schemes by a mutual fund house accentuated the problem in the debt market. The various TLTROs announced by the regulator, we must admit helped, but helped only partly. In such times, what worked for us are our conservative policies on the topic of ALM and liquidity. While there is no denying that our treasury had to work extra hard to cope with the situation and it's becoming a practice, I mean it was IL&FS first and various other things and now this, we always remained confident of dealing with the situation as a result of our conservative practices. And that's the most important thing. We always remain confident. We had to work extra hard, but there was never a firefight. I would like to start this topic by mentioning that LTFH and all its lending subsidiaries have been assigned, total 3 of them, a AAA rating by CRISIL, India rating, ICRA and CARE, notwithstanding multiple downgrades across the sector. At this point, I would also like to highlight that India Ratings and CRISIL recently reaffirmed our AAA ratings during March '20 and post lockdown and May '20, respectively. So this has happened after considering the early effects of lockdown. As far as ALM is concerned, as per our prudent ALM policy, LTFH maintained positive liquidity gaps in all buckets till 1 year, after factoring in the effect of moratorium, given to part of its lending portfolio. So we already had positive gaps and we maintained positive gaps even after factoring the effects of the moratorium that we have. I must here specifically mention that while there were a lot of discussion on this, we never asked for any moratorium from our banks for our borrowings. Given the uncertainties in the market, we also maintained higher-than-usual liquidity of INR 15,485 crores on 31st March, including pure liquid assets of close to INR 8,500 crores. Now on the balance sheet of INR 1 lakh crores, whether INR 8,500 crores, maintaining cash and cash light, is it efficient management? I would myself say, no. Is it prudent in the current situation? Definitely. And not knowing how April will be, I think it was absolutely not only prudent, but absolutely necessity to keep this kind of liquidity. I'm also happy to report that LTFH demonstrated its ability to raise long-term funding from a broad-based sourcing, garnering more than INR 28,000 crores in FY '20. This is our highest ever annual long-term borrowing, highest ever. The company focused on further diversifying the funding sources. And this is nothing new. I've been talking about positive ALM, I've been talking about liquidity, I've been talking about moving to long term and we have raised INR 9,400 crores, a little more than that from new sources, which includes priority sector, retail NCDs, ECBs, et cetera. In Q4 itself, we were able to raise close to INR 7,250 crores on long-term funds, thus demonstrating our liability franchise. And you would have noticed that our CP percentage is now down to 6%, which is, I think, all-time low for us. I don't think, again -- once again, that it is purely efficient to maintain CP so less when especially we are having such a good retail portfolio, but so be it at this point of time. The most -- and most importantly, we increased -- as we increased the proportion of long-term funds, still the weighted average cost of funds was actually lower in Q4 than in Q3 by 10 basis points at 8.43%. So that -- with that, these few numbers, which are already there in the investor presentation, I thought I will just reemphasize them to establish our liability franchise. Let us come on the other side of the balance sheet, the asset quality. It is well-known that for an NBFC, especially in one having a substantially retail and rural base, the last 15 days of a quarter and especially of the March quarter, are very crucial. We can argue whether it is good or bad. I mean there are lots of projects, lots of theories going on to make it more uniform throughout the quarter, et cetera, but teams seem to get a completely new energy in this period, both for business and collections, which reach a forward pace. So that's the truth. And you guys study so many other companies. It just remains true across. This year, most of that period, the last 15 days of March, overlapped with either partial or full lockdown. And hence, we were not able to make that final sprint on the home stretch. I'm glad to report that despite that, our GS3 as well as NS3 ratios have improved sequentially as well as on a Y-o-Y basis. We have shown that in the investor presentation. And in fact, even if we take -- don't take the DPD freeze into account, it still shows a small reduction over last December, so which shows that we have done quite well in this matter. In fact, in our rural business, we have reached the NS3 of sub-1% level, 0.89% to be exact, which is clearly a benchmark in this segment. We believe that our heavy investment in data analytics, enabling early warning signals and our emphasis on 0 DPD book has now given good results in this situation. Third pillar is provisioning. Since the adoption of Ind AS 2 years back, we have been constantly stress-testing our ECL model, that is expected credit loss model, to make sure that we are always well protected by the level of provisions we take. Close to 60% PCR protects our P&L from future shocks. We also recognized that the current situation is totally unprecedented. And hence, we need to be prepared for a fairly negative scenario in the post-lockdown period. That is given. How negative it will be, whether out there are hopes, et cetera, we will discuss, but we need to be prepared. Based on this, we have taken the following additional special provisions. INR 209 crores of COVID-19 provisions, equivalent to 5% of the portfolio availing moratorium, which was between 1 to 90 days on 29th of February. This is purely according to RBI guidelines. So there is nothing great here. It's INR 209 crores, 5% portfolio availing moratorium and between 1 to 90 days. In addition to this, we have taken another INR 105 crores of additional provisions on our stage 2 assets due to the possibility of higher LGD in post-lockdown period. Thus, along with -- and you have to take both these together because I believe that if RBI wouldn't have come up with this, our model would have thrown up the overall higher level of provisions recorded and we would have taken it. So INR 314 crores total is the important number. Thus, along with the INR 350 crores macroprudential provisions already made, we carry a total of INR 664 crores of additional non-GS3 provisions corresponding to about 0.75 of the non-GS3 book. These are, of course, in addition to the normal standard asset provisions and GS3 provisions. If we include the standard asset provision, the total provisions on non-GS3 book are more than INR 1,000 crores, INR 1,061 crores to be exact, and about 1.2% of the book. It is not possible, surely, to exactly estimate the impact on the repayment capacity, repayment behavior, ability to collect all those things. However, we believe that these additional provisions will make us fairly well prepared to face a possible negative scenario. Business trends, the fourth pillar, the company remained definitely, even after losing the last 15 days among the leading financiers across its focused businesses in FY '20, where we not only maintained our market share but also gained share in Two-Wheelers and Farm Equipment segment. In Farm Equipment, we continue to be the second largest player, with an increase in market share to 15% in quarter 4. Disbursements grew by 5% and the book grew by 15% as compared to market degrowth of 9%. I must mention here that till the last quarter we were calling out a 10% growth in the tractor market in FY '21. Considering that the first 45 days have seen no sale, it will now be more like a negative growth next year and -- for the industry. That we must take into consideration. Two-Wheeler finance, we are amongst the top 5 Two-Wheeler financiers across the country, where we increased market share to 11% in Q4 on the back of a superior service proposition. The focus here has been on capturing higher counter share of our chosen dealers. And all this, I'm speaking up to, say, 20th of March, okay, 20th to 31st March, almost close to 0 volumes other than, of course, the trade advances we had given and conversion of that. For Micro Loans, we are the third largest financier. The book, however, remained flat with our increased focus on increasing share of good customers. It remained flat. Naturally, we didn't disburse much in Assam. We were rebalancing some portfolios in other parts of the country. But now you remember, I had quoted our old customers, our repeat rate in 30s. We have launched various schemes and good customers. We have now increased our repeat rate to almost 51% and completely unleveraged new to credit customers to 17%. We are quite happy with these numbers for us. The portfolio in Assam now stood at INR 534 crores, achieving INR 280 crores reduction on Y-o-Y basis. In infrastructure finance, we continue to be market leaders, in renewable energy financing, roads and transmission, apart from renewable energy, completely remaining our focus areas as of now. Having said that, we certainly held back certain disbursements towards the end of March. We will speak about it in a minute. The market share and rankings, I have mentioned, includes both banks and NBFCs. The housing business, where we are not leaders, we have moved ahead in line with our strategy and our share of salaried customers in home loan disbursements have also increased from 48% last year to 64%. And our LAP disbursements, as you see, continue to be continuously coming down, respecting the changing scenario. You will even see our real estate book, there is hardly any addition for the last 4 quarters. In fact, there is a slight decline. So that's how the whole portfolio now looks like. The whole idea is even given that Q4 was a difficult quarter because out of 90 days around 15 days were lost, businesses have done reasonably, thus indicating the business strengths that we have. Fifth, I would add this fifth pillar, which is ability to quickly change business models, and this really shows the inherent strengths of the organization. There won't be any numbers to quote here, but bear with me. Quarter 4, in fact, even quarter 1 of -- till the 48 days or whatever -- 48 days of quarter 1 was and is characterized by continuously changing business situations, right? While the period -- I mean, you would ask me to comment whether situation on ground is positive or negative, if I have to use one word, I would call it mixed. And in fact, as I have to be fairly nonparliamentary, I will say confused on the ground. So that is how business situations are changing on the ground. While the period, and I'm referring -- not referring necessarily to the company, I'm referring to how things are happening on the ground when I say confused. While the period till March 10 was fairly positive, it became very uncertain and with application of partial lockdowns, we had to adjust to a very new way of working, operating with lower on-site manpower, higher load on IT platforms, enhanced IT security, realigning work priorities towards higher risk controls and collections, preparing a BCP for a lockdown situation and most importantly, taking care of the health of our people and their families actually became the order of the day. It was a very different working. It was quite unsettling, I must say. After March 25, it was time actually to show further ability to change tactics quickly. Operating instructions from various authorities on the ground in our vast network were confusing, to say the least. It was important that while we work from home and especially when new business is not happening, the teams don't lose seriousness and focus, right? It was important that we establish to the team, work from home, means genuinely work from home. Work and home both are important worlds. People are supposed to work, and the management is supposed to ensure that people work. And we actually gave different projects, different tasks to teams, even head office teams to do that. And home is important because we are supposed to stay at home and not go out. So establishing that to the team was a very new experience. Our investments in digital technology and data analytics, I believe, stood us in good stead at this crisis time. The usage of data analytics for portfolio management and strong early warning signals, which have always underlined our risk control measures in the retail segment. For wholesale segment now, we have always focused on cash flow-based underwriting to strong corporate partners, along with continuous project monitoring to manage portfolio quality. In addition to the current risk management framework now, which focuses on data-driven approach, we have now implemented, in the lockdown period, additional portfolio actions to deal with the current scenario. Clearly, impact assessment on business-wise portfolios, we did using lots of stringent stress case scenarios. So on retail as well as on project finance, whether it is in infra or real estate, detailed analysis has been done and is being done continuously with stringent risk case -- stress case synergies. Tightening of LTV grid and reduction of maximum LTV offered across products under the regular schemes will hopefully improve portfolio quality, whenever, obviously, business starts. Usage of analytics and bureau information to strengthen collections in adverse scenario. I mean, one of my favorite used case in this is using analytics and especially bureau information to find alternate contacts of people, especially as people -- some people may move across district or even state boundaries, finding alternate contacts becomes extremely important, and we are actually very happy about the contact trades that we have by using this. A disproportionate focus on setting up and increasing and utilizing digital payment framework for collections, it's nothing to frankly write home about. But in rural India, every percentage increase in digital collections indicates actually a new beginning, a new dawn. And hopefully, as we go ahead -- I mean perhaps to change habits, it requires a crisis. As we go ahead, this will help us tremendously. And then in wholesale, in infra and real estate, monitoring projects remotely with heavy use of technology and reassessment of cash flow positions in construction finance and infrastructure projects [ versus ] current market conditions to ensure project completions whenever the projects construction starts. So try and keep very close watch on where construction has started, how many workers are there on the site, using technology heavily, and we have to thank our parent. We have used their knowledge a lot in actually monitoring this. The intent has been to adopt a multipronged approach to mitigate risk and ensure that the asset quality remains stable post lockdown. Now after talking about this, let me come to financial performance for Q4. The results of Q4 FY '20 need to be viewed keeping in perspective the impact of COVID-19 on business activities. While the lockdown obviously had a minimal impact on the operating performance of Q4 '20, I mean some impact was there but not much, the profitability of the quarter was impacted largely due to the incremental provisions taken to strengthen the balance sheet. And I would humbly put that at this point of time, the balance sheet, and frankly, for a financial institution is always is, but especially at this point of time, strength of balance sheet is disproportionately more important than quarterly profits. And that's what we have tried and done. As far as disbursements are concerned, substantial preplanned disbursements in infrastructure finance were paused due to lockdown-related difficulties and increasing risk perception. Retail disbursement completely stopped in the end of March '20 due to point of sales is still being closed down. So construction sites, apartments were not being sold, vehicles were not being sold, obviously, disbursement stopped. Excluding the COVID-19 impact, disbursements were broadly in line with the expected run rate. Book growth, the book obviously remained largely flat. The impact of COVID-19 on the book was mainly to the extent of reduction in disbursement post lockdown. The focus book grew by 5%, whereas the reduction in defocus book was close to 50% on a Y-o-Y basis. And we are happy. We had promised you that the defocus book will reduce to about INR 5,000 crores. And despite problems, we have been able to establish that. And yes, it perhaps hopefully further reduces as quarters go in FY '21. As far as cost of funds is concerned, the weighted average cost of funds improved significantly to 8.43% versus 8.53% in last year same quarter and 8.54% sequentially from Q3 despite the year-on-year reduction in share of commercial papers, increasing long-term borrowing and maintaining enhanced liquidity. NIMs plus fees, coming to that. Despite lower fees due to lower disbursements, obviously, NIMs plus fees have remained in our guidance range of 6.5% to 7% at about 6.87%. Now we come to credit cost. As I have said before, GS3 improved sequentially as well as Y-o-Y from 5.94% in Q3 FY '20 and 5.9% in Q4 FY '19 to 5.36%. NS3 has also improved in the same lines. In line with RBI moratorium -- and PCR is now close to 60%. In line with RBI moratorium guidelines, LTFH created additional COVID-19 provisions. I'm repeating this, I realize I want people to understand it quite well, of about INR 209 crores, corresponding to 5% of the 1 to 90 book availing moratorium in March '20. The company also created enhanced ECL provisions of INR 105 crores on stage 2 assets, considering possible emerging stress in the economy after the lockdown. Largely, these additional provisions of INR 314 crores alone can explain the variance over our normal financial performance run rate. I would like to conclude with a few of my free-flowing thoughts, and it is perhaps a little long for typical conclusion, but bear with me. Who knows because, I believe, also that you will have lots of questions about the future. And hence, I would like to humbly raise my hands and say, this is so unprecedented that who can truly predict, bang the table and say, I know what the future is like. I mean, whoever can do that can become a rich man, rich person very quickly. But it is difficult. I will try and do my best. Who knows what FY '21 is going to be like, nearly 1/8 of the year is already gone in periods of full or partial lockdown, having its own effect on business and collections, that is very obvious. But perhaps even on the inherent credit quality and credit behavior of various sections of the society, and this we will have to see as it comes, we don't know. We will be able to model the effect on business, effect on collections, all those things. But are there going to be inherent changes in credit behavior of society, we will have to see. Disbursements have been negligible in the first 45 days in the quarter. As you know that vehicle sales have been actually 0 in April. So obviously, disbursements have been negligible. This is natural as most points of sales of the underlying assets were shut and also project progress for infra and real estate asset has been next to nothing, naturally. There are indeed some green shoots. I will keep talking negative and positive and don't call me ambivalent at this point of time. That's truly what is happening. This is natural as most points -- I'm sorry, there are indeed some green shoots with a few areas opening up throughout the country. Also, thank God, NBFCs being classified as essential services is of tremendous help even in red zones. I can confirm that at least in head office, not that head office does some collections, but we are sitting right now in the head office and talking to you. Like that, many of our meeting centers and branches have been open. And we really thank God and the government to recognize that NBFC is a part of essential services, and we have been able to do that. Dealerships are slowly opening up and project construction is also starting slowly in some places. Lest I sound too sanguine already, I must also state that management of people on ground goes beyond the red, orange, green classification. It is very simplistic. There are a lot of people who ask me how many of your customers are in red, orange, green. We have all the answers, and some of them we can give answers also on how many of your branches are there, but that will be very simplistic. The actual ability to operate on ground varies based on local rules at a hyper-local level and some of these so-called "rules" are just individual interpretations made by local authorities, down to Gram Panchayat Pradhans and subject to change on a day-to-day basis. I can confirm that in my housing society, the watchman at the gate decides who can come in. So it is actually that hyper local, irrespective of whether it is green, orange, et cetera. I mean, even the secretary of the society has no power. So that's -- it is something that we need to take into account. I must, however, share why -- again -- and once again, I'm shifting, I must, however, share that things today, on 18th of May, are definitely better than what they were on 18th of April. There is no doubt about that. And that gives us hope that 18th of June will be even better and so on and so forth. So another positive is rabi crop is -- I mean, now it is not expected, but it is established that it is going to be a bumper rabi crop. We had predicted that. There are, of course, some difficulties in harvesting and selling the produce also in some areas, but it's okay. We continue to watch this very carefully. One thing we are positive that when -- we don't know when the recovery will come. And I will be -- I mean I will be just sounding like some gyani if I sort of try and predict. But one thing we can see that when the recovery comes we have no doubt that it will be once again be led by rural India. While the overall Farm Equipment and Two-Wheeler sales growth for FY '21 will definitely be negative, because nothing can make up for the last 2 months, right, but still we believe that the recovery will come definitely from rural India, and our established franchise in rural India makes us very hopeful and very positive about how we will do. The infra sector seems to be getting back on its track with renewable receipts continuing to be good. It has always been good because MNRE wrote a specific letter. Toll receipts back to 35% to 40%, even on toll-operating routes, which actually recovered faster than what we had thought. And the potential improvement in cash flows due to the government liquidity package to the ECBs. The real estate sector, special sector as it was having problems even before COVID. We have done a very heavy exercise of analyzing with a heavily stressed scenario, and it continues to indicate a decent health for majority of our project. We continue to work very closely with our parent to try and see what proactive solutions we can form. And as you would have seen in the last year, we have found proactive solutions like some projects changing hands, couple of projects being taken up by the parent, some additional collateral being sold to bring more equity into the project. We have done that. Large part of our portfolio should be okay even under the heavily stressed scenario. And heavily stressed meaning we have assumed 0 sales till September, et cetera. So that kind of view, that kind of heavy stressing we have done. And I say that most of our portfolio looks okay. We may have to use the DCCO extension option very sparingly for cases where genuine delays beyond the promoter's control are there, but this will be used extremely sparingly. Things in the very short term, especially in quarter 1, definitely look quite bad. Half the quarter is already gone, and even if many areas open up now, we will definitely be very cautious and any new sanctions and disbursement will be under much stricter risk controls. Collections are slowly picking up, but will certainly take time to get back to normal levels. And I'm happy to say that even almost day-to-day basis they are picking up and improving. There will also be the added cost of maintaining high level of liquidity, which will be higher in Q1 than Q4 because Q4, we started maintaining high level of liquidity only in the middle of March, whereas Q1, it will be throughout the quarter, and we need to model that. And definitely, we will also be taking the remaining additional provisions of 5% of 1 to 90 DPD outstanding availing the moratorium in Q1 of FY '21. That another 5% we will have to take. This probably will be true, not only about us but about the entire industry. How the economy will look Q2 onwards will depend on many factors, and I would not like to take a guess here. A lot will depend on demand pickup, credit culture and repayment capacities and willingness behavior. Many experts have already written off not only the Indian economy but even the world economy, even in the medium or long term. I will only say that the situation is so unprecedented that we cannot be sure that the future is only bleak. Human endeavor and motivation have surprised the world before, and hopefully, it will do so again. But as company management, we cannot let ourselves be affected by the financial results of a couple of quarters. In fact, they are hardly important. We need to be humble enough to acknowledge that it's almost impossible to predict how the economy will do even in as near a term as the second half of FY '21. So what is important is how we prepare the company completely for either situations. We need to be careful and build all fortifications in terms of stronger risk controls, ample liquidity, good capital adequacy and adequate provisioning levels, if the situation worsens. At the same time, it is necessary that we do not go into a shell and miss any opportunities. We will have to conserve our core strength intact to grab any opportunities that the buildup phase of the economy as it comes out of this bad spot throughout. A good crisis -- I always say this to my team, a good crisis should never be wasted. A good crisis also gives us an opportunity to have a completely fresh look at our processes, our cost structures and draw every ounce of efficiency from them. Reduction of costs while conserving our core strengths will be order of the day in FY '21. And please spare me if any one of you is not interested in cricket, I am very much. Many times I take life lessons out of them. So I will just give one example and end my opening remarks that our endeavor will be to be like a good batsman who is perfectly balanced on his feet at the crease, well positioned to go back and play a backward defensive short or even duck under the ball if it is a fearsome bouncer and at the same time, always ready and capable of going on the front foot and hitting the ball for a boundary if it's a juicy half volley. Also, like in cricket, a good batsman realizes when the ball is swinging wildly and concentrates on keeping his wicket intact at that, and I believe Q4 and Q1 are those periods, realizing that at some point of time the ball is going to stop swinging and knowing very well that he has built the capacity to start scoring freely once the conditions become a little more suitable. Life too is a bit like that. Thank you for your patient listening. We can now open for the Q&A session.

[Operator Instructions] The first question is from the line of Karthik Chellappa from Buena Vista Fund Management.

Two questions from my side, sir. First is the comments that you made on microfinance that you're going to be focusing on good customers that is 51% of your book and new to credit unleveraged customers, which is 17%. So the balance 32%, can you talk us through apart from Assam because you have spoken about it at length in the last quarter, what are all the other pressure points that you see in the book for you to be cautious on the balance 32%?

Okay. If I understood your question correctly, which are -- are you talking about geographic areas?

Yes. Geographical areas and if any other color on the activity or is it just migrants or those kind of things?

Okay. Okay. Okay. So first of all, just to clarify what I mean, I don't mean that the rest is bad, okay? So I will first clarify that. It is just what are we concentrating on growing. And I will explain both these things that when you concentrate on completely new to credit customers, naturally, your expenses go up a little bit. It's costly to go deeper and concentrate on new to credit customers, though it is very good for your portfolio, right? So you balance also that by low expense customers by saying that my own customers, I will not lose and you will have to do certain actions for them because if our own customers have, in the meanwhile, gone and overleverage themselves, I will not give the new loan to them. So you have to do certain proactive actions for them to make sure that at the time of our renewals they are not overleveraged. So that's -- those are the focal areas which does not mean the rest is bad. I mean that's the point I'm trying to make. We will try and increase these percentages continuously, but that doesn't mean that the rest is bad. The rest is what? The rest is people with more than one relationship, not only ours, but the -- and the leveraging is less than what we put as limit. We had increased the limit to almost 80,000, 85,000. We are bringing it back to around 70,000. So with that, and with our very strict sticking to that kind of limit of 70,000, we believe we should be okay. Now answering your specific questions, we go beyond pressure points. We also have our own internal risk controls as to what each state or each district based on the color-coding of that district. And now color-coding I have to use very carefully. This is our color-coding, not Ministry of Home Affairs color coding. Depending on the color-coding of the -- how much part of the portfolio we would like to be. And hence, continuously, and I'm not talking about Assam here, everywhere else, continuously, we keep rebalancing that portfolio to make sure that what we classify as green is always increasing; what we classify as amber, remains the same; what we classify as red, the percentage comes down. So it would be great sometimes to have a personal chat with you, either myself, Sunil or Anuj and take you more through this, which is very fascinating. It will take a lot of time on a call -- on a public call like this, but you are welcome. We have always been very transparent on what we do to you, and you are welcome to have a detailed discussion.

Sure. Fair enough, sir. But at this point, you don't see the need to highlight any specific geographies as such, apart from, let's say, Assam or...

We wouldn't know because till May everything is under moratorium till May end. So we can talk about very early trends, et cetera, which are okay. Some -- as I say, March -- by the way, I hope that everybody noticed that asterisks in our presentation, where we talk about moratorium, that for March, even though 100% moratorium was given, that happened on 27th of March. So almost 99% of our collection was done. So we have actually gone by the spirit of the moratorium and adjusted that payment against as advanced collection for June. So actually, our June collection is almost done. I mean, let me very frankly say that, right? And now what we are doing actually is wherever microfinance customers are willing to pay, and we are contacting them and they are willing to pay, actually collecting advances for July. Too early to say because we can't push them beyond a particular time, it is moratorium. So too early to talk about trends. So we do a lot of data analytics, but too early to talk about trends. I will tell you one particular factor that we took special care is that people don't go missing. And that is where we launched this project of finding various alternate contact numbers, addresses, et cetera, used bureau tremendously for that, and we have been quite happy with the results. So right now, we are actually quite happy in remaining in touch with people. And that result is -- I mean, it was a very high percentage, very close to 100% kind of percentage that where we can contact our people, so we will not -- I mean, our customers. So at least, I can confirm that we will not have any sizable problem of customers going missing completely, which there were some talks at some point of time. So I'm sorry I can't give you early trends because they are really very early, right? I mean, hopefully, in Q1 call, I will be able to tell you this very confidently.

Okay. Great. Sir, my second question is essentially on the merger of the housing finance and the infrastructure business into the L&T Finance Hold. I'm just curious to hear from you what has changed fundamentally for the company to actually forego the successful status and the other benefits that come with even infrastructure financing to fold it into the company? And tangibly, what benefits do you see and over what period of time will that accrue?

Sure. So nothing has changed fundamentally, that is the point. In fact, from FY '16, when the new management took over, we actually -- in our first presentation, we said that we will go for absolute simplification of the structure. This was -- if you take out my first presentation, I believe it was May 2 or something 2016, that presentation which talked about, of course, Q4 of FY '16, but also the new strategy. This finds an important place there. I would, in fact, say that till now we did some, and you know that we drew a lot of tax benefit out of some mergers that we do. But yes, we were studying a lot, and we were, frankly, dillydallying whether we should go with the rest of the merger for the reasons that you have said that housing finance has a particular advantage, infrastructure finance has a particular advantage. And I'm sure that when we started the company, we had very intelligent and important reasons to start those companies, right? We have not -- we didn't start just like that and because we just thought it was a good idea at that point of time, and those reasons still remain. So there are very, very good reasons for keeping these companies as separate companies. So there is no doubt about it, okay? So -- and I will be the first one to admit that. But now let us see -- and nothing has changed. As I said, finally, we got the complete conviction that we should go ahead with this. The main conviction came after the IL&FS debacle. And if I may say so, the increased level of suspicion of everybody looking at various NBFCs, NBFC structures, CICs, et cetera. We always have been very transparent, and we would like to actually, first say that transparency and clarity comes before anything else, okay? Business trends should come from business trends and not from regulatory forbearances, and that is what we have always said. And finally, I would think that we got the conviction and the calculations right as to see what all will come from it. So what all will come from it is simplicity. And hopefully, you guys will look at us a little more kindly when you give us the multiples as we go ahead because of the simplicity and everything else that you have to judge, but just because of simplicity. That is number one. As rating agencies look, as lending institutions look to us, the simplicity and the transparency will be very obvious. Then, of course, duplications of cost, duplications of regulatory compliances. I mean it can become a mess. I mean maintaining -- just telling you, maintaining positive ALMs in every bucket is one thing, maintaining positive ALM in every bucket of every subsidiary that we have is another thing altogether, right? How the hell do I maintain a positive ALM in an infrastructure company when primarily you lend long term, right? So there are -- and the regulator -- for the regulators, they are right. They say, every company is a separate company, and you have to maintain. Just the cost of that is inefficient. I can tell you this INR 8,500 crores that I have kept would have been INR 5,000 crores maybe for giving me the equal amount of protection if it was one company. I have to maintain additional cash balances in every company just to maintain positive ALMs, positive gaps in every company in every -- excuse me, every time bucket, right, just merging this. That advantage itself will be quite a bit. Then, of course, efficiencies of Board, efficiencies of Board processes, internal processes, all those things. So to answer your question very differently, actually, what has changed is our, I would say, guts to say, okay, there will be some short-term loss, let us take it, and long term, it will add a lot to simplicity, to trust, to transparency and, most importantly, efficiencies in managing businesses.

The next question is from the line of Piran Engineer from Motilal Oswal.

Congrats on the quarter. I just have a couple of questions. What explains the strong improvement in asset quality in the Infra Finance book on a Q-o-Q basis?

Okay. You have to see the NS3 improvement, actually. The GS3 improvement will always be a mix. So I will tell you, we wanted to, very clearly, in the Infra Finance company, IFC, one of the things that I was just referring to Karthik's question that you have to maintain ratios across companies. So we also needed to reduce the NS3 -- or the GS3 ratio in that particular company. I must confirm that all these NPAs are FY '12 and below -- behind. There are no new NPAs there. But we wanted to reduce it. So the reduction is a mix of ARC sales, of write-offs and of, I think, a couple of resolutions. So that's -- it's the mix. And hence, I would invite you to actually see the NS3 reduction. So NS3 reduction, along with the PCR going up, is the sign that the portfolio quality has actually improved. But does this mean that we have resolved INR 1,000 crores? No, we have not resolved. It is a mix of sale to ARC, some write-offs and some resolutions. I can put it that way. But that -- what goes very clear is the actual NS3 has improved, which is important. So there is a INR 400 crore or so reduction in NS3, which would largely actually correspond to the resolutions, frankly, and the increase in PCR. So that -- I would point that more as improvement in asset quality than the INR 1,000 crore reduction in GS3.

Okay. Okay. Understood. And sir, within our defocus book, how much of that is structured finance? And do you see a risk in that book now given the COVID situation?

No, nothing new. The 2 large exposures, we have covered to a large extent now. One is a housing finance company and another is, I would say, a measure in power generation whose promoter is now in London. We have taken mostly there quite a bit of provisions. You would also see that we have closed our wealth transaction in Q1. And we will use that also to create additional provisions in Q1. So we should be okay there. So DCM book and the SFG book will not give us shocks. That doesn't mean provisions are not required, but we will have some good extraordinary profit in Q1 to take care of it.

Okay. And sir, if I just heard you right, if a client made a payment in March, EMI, that will be treated as an advance for the June EMI?

For micro loans only.

Only for micro loans?

Yes, yes, because it is 100% moratorium. Everywhere else, the moratoriums are not 100%. So it is March EMI.

Sir, but what if a client made a March EMI payment in the beginning of March and then took a moratorium...

Then we will not give them moratorium other than micro loans.

No, no. Let's say, in tractors you also moratorium for April and May and he's paid the March EMI. That comes as a collection, right? That is not...

Yes, yes. And then he will get moratorium only for April and May, not for March.

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

So 2 questions from my end. Firstly, in terms of the focus and the defocus business, does it change any way in which we were looking at a few of the segments given this kind of a situation or maybe our focus across all these product segments will be equally there in the near and the medium term? So any change in focus and defocus at least for the medium term?

Not strategically. Tactically, obviously, what -- first answer is clear no. So there should not be any misunderstanding it. No, there is no change in focus. So that is first answer, okay? Then, of course, as we read the risk in the economy, certain credit screens will be obviously toughened in many of the segments. Actually, in all the segments, but at various levels, and which may make doing business more or less difficult. And hence, tactically, you may see certain different speeds of doing business at various places. But strategically, the focus statements remain the same. Does that answer your question?

Yes. So maybe the way during the structured credit, we got it into defocus, but there are no initial indicators which suggest any of the areas, okay, wherein we should grow slow or...

Not at all. There is just one thing, which I think may be relevant to you, is the new launch of unsecured business loans we have postponed to next year, but it is a postponement of...

Yes, it's there in the presentation. And secondly -- and second in terms of fee income, how do we see the impact on the fee income side, so we had seen a substantial reduction? So if you can give some color in terms of how much is related to business origination and with slowdown we will see some significant impact on the fee income trend?

It will be a significant impact for Q1 because Q1 -- the first half of Q1 at least disbursements are next to nothing. I would have liked to be very clear and say 0, but they are not 0. I mean a little bit. They are in hundreds, not in thousands as they should be. And it will have an impact on the fees because part of fees, as we -- so our fees are mainly processing fees and cross-selling fees which are mainly insurance and things like that, which also, to the large extent, depend on disbursements, right? They're cross-sold at the time of disbursing a particular loan, advisory fees, which are also a part of that. So to the extent of disbursement getting affected, they will be affected. And hence, I would advise you to take a much lower percentage of fees in Q1 at least. And Q2, we will see, hopefully, business will come back to normal.

Okay. Sure. And last one data point...

Some part which is obviously under Ind AS the amortization of fees from previous quarters, which will come.

Yes. Yes, that will be there, amortization will be there.

And then, of course, mutual fund is there. So the mutual fund fees will continue to come.

True. And lastly, in terms of the data point, sir, the moratorium you have shared, okay, that as of March, but how is the trend, if you have to look at it on 30th of April, no doubt you highlighted in the previous question, but what would it be in terms of the numbers? If I have to look this as March, what would ideally be across the business segments in April?

So the only number which has remained same is microloans because it is 100%. So that has remained the same in April.

Yes, but other areas, how it could have moved...

Come on, let me joke [Foreign Language], very little to find something for laughing right now here. Anyway, Kunal, I will answer your question to the best of my abilities. We don't want to give you specific numbers at this point of time as we are still into it. And obviously, you will have precise numbers at the end of Q1. But yes, there is a -- I would say there are small increases across segments every month. But the good thing is somebody taking moratorium in April will be only getting 2 months and somebody taking it in May will only get 1 month. And I will tell you even more confusing thing, that it is not necessarily that somebody who has taken moratorium in March has taken moratorium in April. Some people have come and paid in April. So it is both ways, right? And that is more why I am not answering rather than trying to hide any information or not giving information. So some people who have taken moratorium in March and April are paying in May. So it's all sorts of things. But on the whole, yes, you are right, April is slightly higher than March and May is slightly higher than April, but it is not like some life-changing. I mean, not from 37 -- the weighted average is from 36%. 36%, right? From 36%, it would have gone up by a few percentage points, and it won't be like doubling or something like that.

No, just the 2 segments because Farm Equipment and Two-Wheelers, the sense which we were getting from the market is much on the higher side in these 2 segments. So it seems we are much lower compared to the industry. So just want to get the sense in this 2 particular pockets on the moratorium.

So in fact, I will give you some other way our number which will actually be perhaps be more useful, right? We started collections, actual on-ground collections. See, moratorium is also a function of how much is on ground, right, because if we have the mandate, we have the checks, unless or until somebody has opted in to the moratorium we bank the checks and those gets passed. So that is number one. The bounce rates certainly have actually gone up from February to March to April. So bounce rates have gone up. So as I said, it's a mix of a lot of things. If I can tell you, we started collections in -- what, really around 15th of April, 20th of April. In the beginning of April, in our entire customer base, we were doing 20, 25 collections per day. I'm feeling sorry to give you that number. We are already to above 20,000 a day on field collections, in all this mess, right? How that translates to ultimate collections, we will have to wait and see. Already Farm, we are up to 33% of collections. And in Two-Wheelers, we are touching close to 50% of collections, actually on ground collections. So which is very different than what is the moratorium. The 2 segments you talked about, I can confirm that moratorium percentage have not changed drastically. They've gone up certainly, but not drastically.

The next question is from the line of Aditya from Citigroup.

Just a quick question, so you mentioned that the option to use the DCCO extension could be exercised for some projects. Just curious, as of the current situation, how many projects have been given, let's say, even the 1-year DCCO extension and not the second year?

No, right now, we have not done -- not worked on that at all. So we have not given the DCCO at this point of time. We expect that out of our total portfolio, not much more than 10% of projects will have to be done that. But right now, we have not done.

Got it. Got it. And then the INR 209 crore or which is 5% of loans -- of moratorium loan is, from what I understand, it will be loans under moratorium as in March. So the remaining 5% will be a different number than INR 209 crores depending on how the moratorium will be?

Yes. We will know that and it can be. But as I said, it may not be a drastically differently number. So instead of INR 209 crores, can it be INR 240 crores? Yes. Will it be INR 300 crores? No. So I mean it is still 12 days to go in May, no? So that is at best what I can say. If you ask my estimate, it would be around INR 240 crores or so, which actually, to some extent, answers Kunal's question also, right? Yes. You will confirm that, that it answers Kunal's question also to some extent.

Yes, it gives us clarification like you're not expecting moratorium...

Yes, INR 240 crores to INR 260 crores, it will be around that.

Got it. And then lastly, I hope I didn't miss it, my connection was a little poor. Did you mention the branches and AUM in orange and green zones?

We are not giving out that information, but almost 70% of our -- 76% of our portfolio will be in orange and green. Yes, around that -- one minute. Yes, around 75% will be in orange and green. Branches genuinely doesn't matter. So I can confirm that 95% of our microloan meeting centers are already open. And almost -- more than 50% of our branches are already open, okay? But we would like to come to a state where branches don't matter. I mean we have always been proudly stating that each person with a mobile device is a branch. So physical branches don't matter. But I can confirm that if you take the -- our percentage in red zones, it is way less than the India's population, naturally, because we are a rural company. So only -- mostly urban areas are in red zones.

The next question is from the line of Subrat Dwibedy from SBI Life Insurance.

This relates to the real estate portfolio, where you have indicated that only around 28% of borrowers by count have been granted moratorium. This seems slightly on the lower side given that sales would be hardly anything during the lockdown period. So it's because already a large portion of the book was under moratorium and this would be on the part that moratorium was not there?

No, no, it is not because of that. It is because of prepayments. So a lot of our portfolio, since we put a very strong, what is called, sweeping mechanism, there are lots of prepayments. And hence, in March, we took a call that people who have done prepayments already, we will not give moratorium. And hence, in March, it is less. But yes, this is one segment where moratorium would increase substantially in April and May and quite substantially, actually. It will reach maybe even 80% of the portfolio, which will be given moratorium for the remaining 2 months.

Okay. Sure. And if I may, then how much of the portfolio was already under moratorium before all this COVID-19 situation?

No, no, this moratorium is very different than the moratorium that you are talking about. Our definition for project finance is always under moratorium. So let us not talk about those 2 situations. When a project is under construction, this moratorium is something -- I mean, at least I have learned, but I admit that I went to college 30 years back, so -- and things may have changed. But in project finance, what you get is interest during the project -- and in fact, I was told that time that even interest should be capitalized during the construction, but now we make sure that at least interest comes in every project. Principal starts after the project construction. Within real estate is conceptually a better segment because there given -- during construction you will start getting inflows and you start -- out of that inflows, we start sweeping in. And we had always given these numbers that close to 90 to 95 projects out of our total 114, the sweeping mechanism has already started and prepayments have already started. So that's the number that we give. I can confirm that there is no interest moratorium on any of our project actually -- until now. I mean, this moratorium, obviously, these 2 months will be interest and principal both. But till now, there was no interest moratorium. So when we say moratorium, there is one moratorium and there is RBI moratorium. These are these 2 different moratoriums. I give you a number which is very simple, that under a stress test, that construction doesn't start for another 2 to 3 months and 0 sales for -- till September and then also very slow sales, close to 95 -- 90% of our portfolio doesn't need a DCCO extension. So I'm making that statement very confidently and clear. That doesn't mean that you don't need other actions. So we are -- what we are doing -- the other actions are also equally important. Does that mean that all our portfolio -- 90% of portfolio things will get sold and money will nicely come back? No, certainly not. We are not living in a fool's paradise. Yes, we have additional portfolio collateral which we are in the process of selling. Yes, that the sale was going to happen in 2 months, will it take 6 months? Yes, perhaps. But there is -- there are some which are already done. Some projects which we are making sure that they change hands, either to our parent or some other strong developer. So we are doing all this very proactive management of the portfolio, and that puts us in this decent situation. If we were -- we would have played a spectator sport of just writing a check and sitting on it, yes, we will be in difficulty because obviously the sector is in difficulty.

The next question is from the line of Abhijeet S from Goldman Sachs.

Sir, a question on merger. Sir, if I recall correctly, the last time you had a merger, there were like significant tax benefits which we utilized to create provisions. Are we sort of looking forward to a similar situation today? And if possible, could you sort of just quantify the benefit?

Simple answer, no, under Ind AS, it is not allowed. Simple, but disappointing answer. We would have allowed it, but not available. So the last time it was done was before Ind AS.

Okay. And sir, second question is, there seems to be a net worth reallocation towards the infrastructure business this quarter. The rural and housing business has seen probably a decline quarter-on-quarter, which is a surprise given that the disbursement slowdown is more severe in the infra business. So how...

Another reason for the merger that -- for that particular entity we actually did equity infusion. So these are actually answering the questions on why merger. We have to keep doing these things. So is it logical that we should put equity in infra business at this point of time? Not only surprising, it is actually stupid. You were nice in saying surprising. What you should have said is, it is stupid to put equity there. I agree. But unfortunately, having different companies, you have to maintain ratios of different companies and that's the precise reason why we have decided to do that.

The next question is from the line of Nischint Chawathe from Kotak.

Sir, 2 questions. One was -- so what really happens to IDF now? Do you sell it off or what?

As we have said, obviously, we are looking at various options. So let me just take you through this, okay? Why was it that IDF said that only infrastructure companies can own IDF is because it was a new baby, it was a new animal. And at that point of time, it was -- we thought that only people with experience in infrastructure will be allowed to promote the IDF, which was right. Now IDF itself has the history of a number of years -- our IDF has a history of a number of years. And hence, our first choice will be to go back to the regulator, explain to them that how it is regulatorily better that we have 1 NBFC. They -- by the time forget it. When I'm explaining to them, they are very happy with it, that we are reducing the sort of CIC structure and -- I mean still the CIC will be there because they have some other companies, but reducing the number of NBFCs and asking for their forbearance or permission, that's subject to maintaining certain infrastructure ratio in our overall book. Can we get the permission for continuing with the IFC -- the IDF. That would be our first choice. And then, of course, if we don't do that, then there will be several other choices, including merger, sale, et cetera. But after being so transparent in the presentation, if you have said, we are actually seeing various options, we actually are. So at this point of time, the regulator has many other important things to do. So once this always -- lockdown, et cetera, is over, we will strongly present to the regulator that we -- even in the merger form, we are a good promoter of IDF.

Sure. The only thing is how much of security fees do you have? I think you've shared it in the past.

Can I get back to you? I don't remember the precise number.

Sure. Sure. No problem. And just one last thing now was, if I look at the housing slide, the credit cost for COVID-19 provision is almost INR 133 crores, I guess, out of total INR 205 crores. So large part of the provision actually is sitting on the housing business. Maybe individually, I would have thought it should be in the rural business, et cetera, but yes, I think we discussed that part of the business. But just curious why is the number so high over here? And is it like across housing or LAP or real estate, whether is it that this INR 133 crores comes from?

No, no, it is quite simple. Actually, you should look at the INR 314 crores together and then you will see [Foreign Language] in -- actually what we did, we looked at the whole book. There is a LAP, there is SENP, there is real estate. We actually sort of modeled what additional one we will have to do and we found out that 5% of everything which was between 1 to 90 is actually higher than that provision. So we have taken only that. In rural, we saw what was 5% of 1 to 90, mainly because microfinance is almost 100% collection efficiency. That amount was low at INR 57 crores. And because of that in rural, we took another INR 105 crores. So rural, for example, that amount has been INR 165 crores. We would not have taken the INR 105 crores additional one. Did you get what I'm saying? So it was higher of the 2.

Understood. And then if I have to think about it, I mean, between this INR 133 crores, one intuitively assume that home loans would be lower, right? I mean...

Yes. Of course, salaried home loans will be the least. Then LAP, real estate together. Because it is not -- that is why I was trying to explain that you will ask [Foreign Language] real estate [Foreign Language] you get prepayments, then how it is 1 to 60, 1 to 90. And that question will be right. And that is why I'm clarifying that it is the, let us say, higher of our LGD calculation and 5% of 1 to 90 with moratorium. Got it no?

Sure. Sure. Yes.

The next question is from the line of Rohan Mandora from Equirus Securities.

Sir, on Slide 15, where we're discussing on the ALM. Sir, just want to get some clarity [ investments ] not adjusted for the moratorium, right?

It is adjusted for moratorium.

It is -- the payouts -- the inflows are adjusted for the moratorium amounts?

Yes. Yes.

Okay. Because, sir, April moratorium will be higher than May -- March, so that adjustment would need to be done further.

Yes. Adjusted for moratorium as of 31st of March, this is structure on liquidity. [indiscernible] what is April moratorium at that point of time.

Sure. And sir, just if you look at the data cumulative up till the first month is INR 12,000 crores and for first -- second month it is around INR 15,900 crores. So the collections incremental inflow in the second month is around INR 3,800 crores, vis-à-vis INR 12,000-odd crores for the first month.

No, no, no. It is also -- [Foreign Language] INR 8,500 crores of cash on your balance sheet, it also depends on the tenor of the FD they've kept. So that's what matching these 2 is difficult. But mainly, that will be the answer.

Sure, sir. Sure, sir. Got it. And sir, like we have been creating some macro-prudential provisions for previous few quarters. So if you can share what is the cumulative amount on the balance sheet as of now which is not allocated against any of the NPAs or any other assets?

INR 350 crores, we said that. We have given it already.

Sir, INR 350 crores is outstanding amount?

Yes. Yes.

Even if there were...

Yes, yes, INR 350 crores. So in fact, slide 21 [Foreign Language] clarity [Foreign Language].

[Foreign Language] I was under -- okay, sure, sir. Got it. And sir, lastly, sir, like if you look at last year, we had done some tightening of the credit norms and obviously the disbursement growth was lesser. And as we are going into FY '21, any further credit -- tightening of the norms on other -- I mean, any specific product segments that you are expecting?

Everywhere, across the boards. LTVs will be lower, credit norms will be tighter across the board, at least till we get an idea of how the economy and the segment is behaving. We will be safer than more aggressive across the board. That is across the board idea. After that, you know that we never take these broad calls. So every product, then we will -- our data analytics will show which product, which particular HP or tractor in which region is better. So those -- that detailed analysis we will do. But average, simple answer [Foreign Language] everywhere LTVs will be lower.

Right. Right. And sir, like in your opening comments -- lastly, sir, in your opening comments, you had made a comment that during the data analytics, given the [indiscernible] in which we are in, it becomes [indiscernible] to use that as a prediction for the future. With the volatility that is going to be expected for the next 2 to 3 quarters in terms of the data flow, so how are -- how -- what kind of credit mechanisms or filters or tuning we would use because most of our credit underwriting on the rural business is based on the data analytics. So how confident will we on the output of that model -- predictive model will be?

So that is why I gave this cricket [Foreign Language] answer. [Foreign Language] -- so I will once again give that answer, that -- what the bowler tries to do, intimidate the batman by putting 2, 3 bouncers, [Foreign Language], right? And hence, a good batsman keeps balanced on every ball. So to answer the same in business, we will have to wait and watch and be very, very, very, I would say, light on your feet to adjust almost on a weekly basis. So [Foreign Language] so now this decision holds for another 3 months or 6 months, we'll be very -- it will not be humble at all. Important thing is to be very humble. To understand, as you rightly said, that any model that we make can go wrong and correct it as soon as possible. So that's what actually I have kept my data analytics and risk teams busy with. Business teams can be busy going on the ground. These teams have to be busy, actually working, reworking the model. So very frankly, INR 105 crores, for example, additional -- or INR 105 crores or INR 57 crores going to be enough in rural? Don't know. But we think at this point of time, it will be. But if situation get worse, we can increase that at that point of time. We may further strengthen our credit amount. So I don't want to sound like I know all the answers. I only want to sound like that we will not pre-decide anything. We will not become arrogant that anything is right. We will just remain humble to even acknowledge that you are getting data and information almost on a daily basis, and we will like to change based on that. And the digital way of giving this decision down to the ground makes it easier because since now every decision is on a black box. The moment you change the black box, automatic decisions start getting changed. So you don't have to retrain the team and things like that. So you can actually change quite dynamically. I hope that answers your question [Foreign Language].

Yes, sir.

Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Dinanath Dubhashi for closing comments.

Okay. I mean, what closing comments, I have to say only that we have to hope for the best and be ready for the worst. So have all the fortifications ready to prepare the worst of attacks from the economy and at the same time be ready to grab every opportunity which comes up. And I always say that I've never thought, I'm an avid reader of Gita and I always thought that all the gyan in the world is in the Gita. But till the last cricket World Cup, when Mr. Kane Williamson said -- who's captain of New Zealand after losing the World Cup said something which was as profound as Lord Krishna. He said that it could have been this and it could have been that, but this is it. And I think it is very profound words. And that is what we have to say that it could have been this, it could have been that. But every day, this is it. And we have to make sure that we adjust to that as fast as possible. The only thing that I can assure you is we will make sure that the company, the team, the management team is working extra hard, super hard at work besides cleaning our utensils and bathrooms at home also at work and making sure that we make the best out of this situation. Thank you very much. Thank you very much for your patience. We really hope and wish that we continue to have your support and you keep thinking good of us. Thank you. And all the best. Stay healthy, stay safe.

Thank you. On behalf of L&T Finance Holdings Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.