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

Ladies and gentlemen, good day, and welcome to the L&T Finance Holdings Q4 -- Q1 FY '21 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 Q1 result presentation sent out to all of you earlier. We would now like to invite Mr. Dinanath Dubhashi to share his thoughts on the company performance and strategy of the company going forward. Thank you, and over to you, sir.

Thank you. Thank you all for joining this results call. I hope and wish and pray that each one of you, your colleagues, your family, friends are safe and continue to remain so. I will take this opportunity to indeed thank the almighty for keeping all of us safe in these strange times. Most importantly, I think I will be failing in my duty, I cannot start this call without thanking each one of my 20,000-odd colleagues for being in the field during these difficult times. These results, disbursements, collections, risk monitoring, project monitoring, conducting transactions and even the act of finalizing the results, nothing would have been possible without them venturing out of the safety of their homes, while taking due care, of course, and doing their best. I'm grateful to them and especially for their families for allowing them to do so. I know how tense my family is every time I leave and come to office. And there is no reason to believe that each one of my colleagues will not be facing the same issues at home. So genuinely, each one of them, I'm extremely, extremely grateful for the -- for whatever you have been able to do during this quarter. Q1 FY '21 has been a quarter that had experiences which all of us would have had for the first time: a pandemic with a constant fear of health of oneself and the near and dear ones; many of our fellow citizens losing their livelihoods; locust attack; cyclones; maybe possibility of a war. In short, a quarter which we would like to forget quickly. On the other hand, it's also a quarter which taught us some very valuable lessons. I think to my team, myself, it has taught grit, it has taught courage, ability to fight against adverse circumstances, and most importantly, it has also taught us that every dark cloud has a silver lining. As the quarter proceeded, it taught us hope. In fact, it gave us belief that in life, we should always hope for a better future, and at the same time, build the strengths to face the worst difficulties. I'm sorry if I'm sounding like a philosopher or like a grandfather giving [Foreign Language], but these are the -- these are some of the deepest feelings that I have myself experienced over the last 90-odd days or a little more than that. Let's come to business now. Performance of the economy and various industries are also -- can also be looked in various ways. If we look at the quarter as a whole and compare it with the previous year, there will be gloom and doom. All predictions about the GDP growth are in the minus 3% to minus 7% range. Yesterday, somebody actually said minus 8% or 9%, something like that. Most industries, unemployment statistics are all in the deep negative territory. But let us just look at it a little differently. I'm not saying things are not bad, I will be stupid to say that things are not bad, things are great. No. I'm just inviting you to look at the quarter little differently, progressively from April to May to June. I believe there is some cause for hope. The biggest silver lining is emerging from the rural sector. Last time, we had expressed some initial fears that whether there will be harvesting of the rabi crop. The rabi crop was bumper, that we knew. But there were doubts about the monetization of the crop, but by and large, the rabi crop has been harvested, reached the [Foreign Language] and has got good prices. The monetization of a crop, albeit a bit late, spells hope for the rural economy. And some more important metrics have already started looking up, some basic metrics that we follow. Monsoon has progressed reasonably well. Early days, no doubt. Things can change very quickly, but reasonably well. Reservoir levels are quite healthy. Kharif sowing is doing well. Does this mean the end of bad times? No, surely not, definitely not. But it certainly means that we see some green shoots and can dare to hope for a better tomorrow. The same paradigm, I would say, is true for our results of Q1 FY '21. If you look at the quarter as a whole, our disbursements are down 76%. Book is static. NIMs and fees are down. Provisions have increased. And most importantly, PAT is down by 73% as compared to the previous year. If we look at it with this lens, I can finish the call, and we can all go home. It has been certainly in terms of absolute numbers, as compared to last year whole quarter, the numbers are there to see, majorly down over -- everything, over last quarter, except for GS3. I will speak about that. But I submit that instead of this, we need to look at this performance from 2 other lenses. One, are the performance as well as the financial parameters improving month-on-month from April to May to June and perhaps even July, giving reasons for hope? And two, while we are hoping for the best and getting ready to advantage of every opportunity, are we adequately preparing ourselves for the uncertainties of the future? The moratorium period prescribed by the regulator ends in August, as of now at least. And while we remain in close touch with our borrowers, it is important to fortify ourselves against some deterioration in their repayment behavior as they come out of the moratorium. Also, we are now entering a phase of temporary local lockdowns as various state governments fight to contain a second outbreak of the dreaded pandemic. This -- all this has the potential of slowing down any recovery considerably. And these uncertainties in the environment have to be reckoned with and to be prepared for. So these are the 2 lenses that I will suggest to look at these results. One is, are performance improving April to May to June? And second, is the company getting ready for any possible uncertainty in the environment, which there are a lot? The performance of this quarter looks very different when seen through these lenses. I humbly submit that when we are facing with a totally unprecedented situation, a profit number for a quarter is perhaps less important, and some of you had said that on the last call, than looking at the performance parameters to establish whether we have the chops to gain from the emerging green shoots in the economy, and at the same time, are we fortifying our balance sheet for dealing with the worst that the environment can throw at us in the coming months? So my -- rest of my comments, I will talk about these 2 lenses. The numbers and the negative growth, all that is in the presentation, you all know that. So I will just talk about these 2 lenses. Let us see how the situation on the ground has improved month-on-month this quarter. When I last interacted with you, it was 15th of May, just 2 months back. I had guided that time that we are unsure how markets will behave. I mean if you can call it a guidance. I was actually saying that there cannot be a guidance in an unsure environment. The reason was hyper local variations in rules, in laws and everything. As we stand today, we are much more in control of the situation, much surer about the recovery pathways than we were in May, especially with the rural segment being early torchbearer of some good news. This control that we are gaining will only increase as we move forward, and we become more sure, more and more sure that we are in an excellent position to gain from this early green shoots. I would like to demonstrate this by calling out certain metrics, which clearly indicate an improving situation as well as -- I mean ours as well as the environment and our ground strengths. I'm not trying to project a message that everything is hunky-dory here, which it is certainly not, or even trying to be a contrarian when everybody is speaking about gloom and doom. I'm not doing any of these things. I'm not trying to convince you that the country is out of problems or everything is all well. But I will not be doing justice to this interaction if I don't share my insights on some early good trends. As the country entered into an unlock phase, our rural footprint has helped us tremendously as many of our rural branches where in zones classified as green and orange early enough. Majority of the farm and micro loan branches opened up in late May itself and have now reached 95%. 95% branches of farm and ML are already open. Opening up of home loans and 2-wheeler branches have been relatively slower, as many of them fall in urban, semi-urban areas, but even that have been reaching now good levels. Even dealership of tractors have now opened almost 100%. While dealership of 2-wheelers, the trend is good as number of open dealerships have doubled in June over May and opening rapidly across the country, though some major cities still remain largely closed. The most positive statistic is even while we followed local rules and employee safety standards, 99% of our on-field workforce started operating in June. And this is not only our workforce, it is also our collection agents and things like that. In May, the reverse migration has really worked against this. But now, slowly, the workforce is fully there. And that makes us hope that Q2 will be even better performance than Q1. This, of course, resulted in several other performance trends, which I will talk about now. Let's talk about disbursements first. While the overall disbursements for the quarter remained only 1/4 of the same period last year, we have seen an excellent pickup in rural disbursements in June. Our June '20 performance in rural far exceeded our initial expectations. Just tractors, LTFS financed over 10,000 tractors in June, which is actually increase of 19% on Y-o-Y basis in the first full month, actually, of kickstarting our operations. Actually, this number of 10,000-plus is a few notches below our highest ever disbursement number actually. In Micro Loans, which is our largest rural business, after observing the collection trends slowly for about 1.5 months now, half of May and June, and on the back of strong analytics and credit parameters, we restarted disbursements at the very fag end of June, and these will contribute substantially to disbursements in Q2. As we actually look at -- so we follow in Micro Loans a very clear collection-led strategy, that collections will have to pick up first, give us confidence that this area, this particular pin code has started well, the behavior is showing very good trends and then we will start disbursements in that place. And that now we have started at the end of June. So you will see some INR 7 crores or something number in this quarter. Don't pay attention to it, take it as 0. We will -- it is -- genuinely will properly start in Q2. We believe that we are well placed to further gain in the coming quarters on the back of strong positioning in the rural market as that part of the economy picks up faster. In our infra and real estate business, we were more circumspect, limiting ourselves to tranche disbursements after tracking closely the progress of our existing projects. We will calibrate these in the coming quarters based on a very detailed study of how risk parameters develop in these markets. 2-wheelers. I think, yes, Q2, hopefully, will be better than Q1. But it is unlikely to be a positive growth over last year because the industry was not doing so well even before COVID. So that's the way we will go as we go ahead in the further quarters. Definite guidance I can give you is progressively, disbursements will only keep looking up as we go ahead. Let me now talk about a more important topic perhaps in the current circumstance, that is collections, where the trends are even more encouraging. First, the topic of moratorium. As we went into moratorium 2.0, we went into a very strong customer connect program, explaining to clients the advantages of not opting for moratorium. This was quite successful as the reduction of numbers of moratorium cases across products is a testimony to this. Our retail customers, moratorium -- customers in moratorium, and this is number of customers, reduced from 79% to 44% in June, 79% in March. If you take the weighted average of this based on amounts, actually, that is based on amount, this comes to even lower, which is 34% now in June. This also needs to be looked at [Foreign Language] differently. Even out of these, about 4% clients have paid part installments. And whoever has paid part installments, we have continued to count them in moratorium. Moreover, in the first 15 months of July...

15 days.

15 days of July, 30% of the retail customers who were in morat in June, have already paid their installments. So we are seeing a fairly rapid improvement in the moratorium numbers, as we go -- we are able to and now are going into a strong customer connect. As far as infra and real estate businesses are concerned, about 40% of the clients are under morat, but the good thing is because these are -- we monitor our projects, many of them are operating projects, even the under-construction projects, we are monitoring the DSRA, TRA very strongly, each one of them is largely covered by amount in DSRA and TRA till the end of the financial year. So actually, this is -- very ironically, this is one portion where we are completely not worried till the end of the financial year. Of course, things will have to improve beyond that. But right now, we are fully protected. If we take collection statistics, another topic, our total debtors have fallen during the quarter by about INR 1,300 crores. And more importantly, GS3 has fallen by about INR 100 crores. While total collections for the quarter, and we are giving these numbers now, were only 45% of last year's level, this has improved to about 70% of last year's levels in June, naturally because April was not 0, but very small. So June over last June is 70% of last June, against 45%, if you take the whole quarter. This excellent collection trend has further improved in July. As an indicator, I will also give the number of customers, that daily average number of customers, number of customers paying daily average in April were 1,300 only per day, which has improved to 1.2 lakhs in June and is likely to be much higher in July. I mean, actually, the current number is more than 2 lakhs. But before giving the final number for July, July has to be over, but it will definitely be more than 1.2 lakhs per day. Another encouraging trend, and this is very close to our heart, is the digital -- adoption of digital payments in rural India. While absolute numbers are still low, and this time in the presentation, we have given those numbers also, the trend is very encouraging. Talking about other businesses, let's talk about infra, real estate, et cetera, renewable energy. We keep hearing that there are problems, et cetera. Renewable energy generation in June was 355 million units over 255 million units in March as operational green projects have now been confirmed must run status. Most Discoms now have remitted their dues, thanks to the government scheme of helping their liquidity, including Andhra Pradesh, which has now paid all its due up to March. Toll levels of our operational road projects are up to 80% of pre-COVID levels in June. And this is -- this was the most surprising statistic for me, that all of a sudden from near 0 towards the end of March, increasing to 80% of pre-COVID levels in June. Even in real estate, the much beaten down sector, 86% of our under-construction projects have resumed activity in June with large number of them with full manpower. While sales, of course, remains subdued, they have reached 33% of pre-COVID levels by June. So it's -- you can say, 33% is low, but 33% is 33% more than 0, which many people think that the sales are 0. So things are slowly improving. More encouraging is we are actually -- I am more encouraged by our strong ability of monitoring our collections and projects so closely and monitor and collect such micro level data. Never waste a good crisis they say and I think the first month, April, where actual activity was next to nothing, we have rediscovered many of the abilities, rebuild many of the strengths to be monitoring and gathering all this data and feel -- that's why initially I said, we feel much more in control of where we are going. Speaking about GS3. While acknowledging that GS3 will normally not increase in a DPD-freeze scenario, okay? So we don't take any marks for GS3 not increasing naturally because there is a DPD freeze. So generally speaking, without -- I mean, with one or two exceptions, GS3 will not increase. But we have actually reduced GS3 by close to INR 100 crores in a climate like this. PCR has also increased to 69% from 59% last quarter due to 2 reasons. One, just shows the strength of our model as mainly rural GS3, the PCR going up drastically to, one, of course, as a prudent measure, but, two, also acknowledging the aging of 90 days more of the GS3 -- of the existing GS3. So leaving out the GS3 which has rolled back, the rest of the GS3 would have aged more by 90 days. And we acknowledge that. And hence, we have increased PCR to actually very high levels. We may not need this as we go ahead, but it is prudent at this point of time. The second reason is we -- as you all know that we sold our wealth business and the profit from that, we used entirely to provide for one of the old defocused asset fully. So that's about INR 225 crores. This also explains -- some of you who have been asking questions about our results format. Obviously, the profit comes in exceptional items and that INR 225 crores provision comes in provisions. So very clearly, some of the old -- these notorious assets are now fully behind us. As we have always promised, these sales will be used to shore up provision coverage, we have kept that. With this, our Net Stage 3 is at 1.7%, the lowest we have ever reached. I would also like to especially point out the farm performance where NS3 has reached an industry best level of 0.26%. Our farm NS3 is absolutely negligible at 0.26%. Absolutely great performance, and we also believe that this is necessary to prepare if something goes wrong in the environment as we come out of moratorium. On that topic, even as these positive -- with these positive developments around us, it will be imprudent on our part to be sanguine about the overall macro and economic challenges. While LTFS will be banking on its strength to gain the most from the current environment and the developing environment, it would be sensible for us to utilize the time in hand to strengthen our balance sheet further. Thus in addition to the above GS3 provisions, we have made the following provisions during the quarter. One, the COVID-19 provision of INR 278 crores according to RBI guideline. This takes our total COVID provision -- so we provided INR 209 crores in the first quarter and INR 207 crores in the fourth quarter last year and INR 278 crores now, it takes to INR 487 crores total COVID provision, which is 10% of -- according to RBI guideline. In addition to that, we have further added to our macro-prudential provision. You remember, this is a practice we started at the time when going was good to provide for the bad times. And who knew that the bad times will come. But even in spite of that, right now, instead of utilizing that today, we have further created INR 300 crores at this point of time, again, just to prepare for any possible deterioration in the environment, and specifically, any change in the borrower's repayment behavior once the moratorium gets over. These 2 add up to INR 577 crores for this quarter itself, INR 578 crores to be exact. And the PAT for the Q1 has to be taken in that perspective. That would be my only request. Thus, now we carry a total of INR 1,244 crores of additional provisions for standard assets. This doesn't include the normal standard asset provision, which is about INR 400 crores, okay, which is according to our model, the normal standard asset provision. In addition to that, we carry INR 1,244 crores. I will just give you the breakup: INR 650 crores of macro-prudential provisions, INR 486 crores of COVID-19 provisions and INR 108 crores of enhanced provisions on Stage 2, which you remember, we did in Q2 -- Q4. Okay. Let us now talk a bit about liquidity. The quarter started with a big impact on NBFCs with uncertain collection volumes, one particular mutual fund stopping some scheme, drying up of market liquidity. Even the government schemes, the trickle-down effect on liquidity was fairly limited. We worked on our being AAA and on our franchise and on our parentage. This gives us the inherent strength, at the cost of repetition, I will keep saying that, to tide over successfully over the situation. We continued the practice of maintaining positive liquidity in all buckets till 1 year, even after taking into account the impact of moratorium. As on June 30, we maintained a liquidity buffer of more than INR 16,500 crores, out of which INR 9,000 crores were pure liquid assets, cash, bank balance, liquid mutual funds held on the balance sheet. While this is a prudent measure in current circumstances, this has indeed led to certain incremental negative cash. So I will explain this. Normally, we carry around INR 3,500 crores to INR 4,000 crores cash on our balance sheet anyway given our size of INR 1 lakh crores. This INR 5,000 crores, INR 5,500 crores that we carried, cost had an incremental negative carry of INR 84 crores before tax in this quarter. Now how will this look going ahead? We believe that as certainty in liquidity increases over time, and I don't want to say next quarter, the quarter after that, but slowly, we believe that this negative carry will start reducing and trending back to normal as we go ahead. When that will happen? We don't know. We will be -- now first event that we will see is when the moratorium gets over, how the collection behavior changes. And we will see whether this practice needs to change. But right now, enough liquidity is kept for quite a few months of repayments. Even in this dried-up liquidity market, LTFS has raised long-term resources of more than INR 3,500 crores in last quarter, highlighting the strength of our liability franchise. The borrowings -- of course, the borrowings were less than the previous quarter, simply because there were hardly any disbursements. Our overall collections in first quarter were higher than disbursements. So we didn't need to raise as much as we raised in Q4. But whatever we needed to raise, we could raise properly. One particular transaction I would like to highlight is that we received the first tranche of $50 million of a total $100 million ECB from AIIB. And why we need to highlight this is it is AIIB's first loan to an NBFC in India. Cost of funds. While it has reduced year-on-year, we saw 6 basis points increase over last quarter as we moved more and more long term. Again, guidance to that, yes, interest rates in the system are coming down, our CPs are already at a very low percentage. So it is unlikely that we will increase the percentage of long-term funds even more now than this. And hence, the costs should normally trend same or slightly start coming downwards. Add to that, if the negative carry comes down, depending on how fast it will come down, I think we are well placed at this point on this count. Let me now talk about -- specifically about the financial performance of this Q1 and try and give some guidances. Even with the best of efforts and all the lenses that I talked about, we need to acknowledge that the fact that the large majority of the quarter was lost in lockdown and restricted our efforts to deliver the best results. Let me -- there are a few key points that I would highlight which would put our results in the best context. Disbursements, as I said, there were 24% of previous year's volumes. We initiated disbursements in farm, to some extent, in home loans and 2-wheelers in mid-May and micro loans and consumer loans in end June with enhanced risk guardrails. Idea of disbursements were also undertaken against fixed lines, fixed funding lines. And infra and real estate were limited to tranche disbursements. In future quarters, we hope to see an improving trend in disbursements, but we'll also be watchful as ever to make sure that our risk guardrails remain strong. I would also like to point out that in our mutual fund also, the overall AUM were down over last quarter. We have shown strong growth in our equity AUMs as well as the high-quality debt AUMs. And where we lost was the credit funds after the development in the mutual fund market, even though our credit fund, we didn't have any of doubtful assets. But obviously, we lost AUMs as credit funds market, the whole industry lost AUM. But equity and high-quality debt, where it matters, we have actually gained AUM. Book growth. Book largely remained flat at about INR 99,000 crores, mainly to the extent of reduction of disbursements and also moratorium stopping very fast book rundown. I mean normally, if the disbursements would have been so low, the book rundown would have been faster. I have to admit that, to some extent, the moratorium helped us to keep the same book. But what will happen as disbursements go up and moratorium comes out, disbursements will take over as we go ahead. The good thing is, even within this, the focused book grew 4% Y-o-Y and defocused book actually reduced by 45% Y-o-Y. I've already talked about the cost of funds, so let me not repeat that except for, again, repeating the comment that it is possible -- probable that this will trend downwards as we go ahead. Let me talk about NIMs plus fees. The interest income from businesses remained stable on a quarter-on-quarter basis. The incremental liquidity on our book, however, created a drag, obviously. And as we said, we maintained additional liquidity, which led to an additional increase of interest cost of INR 140 crores and a negative carry of close to INR 84 crores. Another thing for this, this will trend down. And as we pick up disbursement in high NIM products like Micro Loans, we hope to see NIMs trending up. Fee income also took a hit from 1.17% in Q4, which was already down to 0.77% in Q1. The obvious reason is new disbursements were low, and naturally, that would come to this. It would have been close to 0, in fact, if not for Ind AS. For Ind AS, this is more the apportioned portion of the fees that gives us these levels also. But again, as disbursements pick up, we hope that this will pick up. I think one of the good feature of this quarter, just this quarter results, is the operating cost. And you will see that operating cost is majorly down as we tighten our belts. Now it is down by about INR 100 crores, but I don't want you to project like that in the future, naturally, because these costs had 2 parts. One is the variable cost, which is dependent on business activity, which are commissions, which are payment payable to agents, et cetera. These variable costs are down proportionate to business activity and will rise -- hopefully, rise in the future as business activity goes up. But obviously, the value added by this will be much more than the cost increase. The real meat will come out of the fixed cost reduction measures that we have undertaken, which will bear results even more in the coming quarter. The last part of the P&L, we have talked about the credit cost a lot already. And I would only repeat that while we are confident of our book quality, with a view of preparing for uncertain macroeconomic environment, we have taken additional provisions of INR 577 crores this quarter. All of the above take our net profit to INR 148 crores for this quarter. Just a post-tax adjustment of these incremental provisions of INR 577 crores takes it to INR 580 crores run rate and ROE of 15.25%. Now let me warn you the calculation is not that simple. I've already told you many adjustments. There is an INR 84 crore negative carry, there may be an increase in cost as business picks up, there will be increase in fees. Most importantly, our normal provisions, which are down substantially from previous quarters, will again go up as GS3 starts rolling forward. So lots of pluses and minuses, but this one item stands straight and stands out, which is this INR 577 crores and adjusted for tax, that comes to INR 580 crores. Now when this will be reversed, et cetera, there will be questions. Most certainly, the COVID-related provisions -- sorry, which is that INR 486 crores. By the end of the year, they will have to be reversed, either they get utilized if some of them become GS3 or they will be reversed at the end of the year. The macro-prudential provisions, we will take calls as we go ahead. I would just point out that the previous INR 350 crores, even though the situation is bad, we have not used it. We will take calls depending on how situation develops. With that, I will quickly come to the conclusion without taking much of your time now. Based on our experience in the market in the last weeks of June and early July, we can safely state that the first green shoots of recovery is being shown in the rural economy. The lead indicators for growth, like water reservoir levels, employment rate in rural, rabi crop output, kharif sowing support prices are all moving in the right direction. Even [Foreign Language] prices are higher than MSPs, providing us with a ready-mix for growth opportunities. We will continue to build on our strength in the rural portfolio to gain maximum market share, though within stringent risk guardrails. The strength of our collections came to the fore in the last quarter with significant reduction in debtors, significant reduction in GS3, and of course, the strength of our prudential practices came to the fore with increase in PCR and increase in non-GS3 provisions. We believe that while we will continue to build firepower, but we have reasonably good firepower now to meet any challenges as we go ahead. I would -- here last time I had given you the example of cricket, I don't understand football that much or hockey, but I will give you an example very clearly of these 2 games. While games are often believed to be won by the forwards by hitting goals, it is equally true that it is important that you don't let your goals to happen. And hence, in a team, it is -- while forwards are extremely important, midfielders as well as defenders are perhaps more important. And very clearly, that shows that while we -- it is very, very important to be optimistic in attitude, optimistic in our actions, but at the same time, it is perhaps even more important to prepare your balance sheet for the worst to happen in the environment. In Q1, we have taken a small step towards this objective. I will leave it to you to decide whether the glass is now half full or half empty, I will completely leave it to you. More important is the fact that maybe 3 months back, none of us even had a glass in our hand. Today, at least, I can say that the glass is there. It has some water in it. It is up to you to decide whether it is half full or half empty. Thank you for your patient listening. I now open the floor to questions.

[Operator Instructions] We take the first question from the line of Dhaval Gada from DSP Investment.

Just a couple of questions. First, you talked about in the month of July, we've seen about 30% of retail customers who are under moratorium pay. I just wanted to understand what was it against the demand -- what was the demand? And how much percentage was it? So some color around bounce rate, initial signs in July? So that is the first question. Second is, what is the moratorium percentage in the real estate portfolio? And lastly, on the funding side, on Slide 26, you've given some data around incremental borrowings. I just wanted to understand if there was any support from L&T treasury during the quarter?

Okay. So I will answer one by one. Maybe the last first, the answer is simple no. The support -- it depends on what you mean support. If support is cash giving, no. Support in talking well about us, assuring people that L&T, our parent, is firmly behind us, yes. It will always remain. We belong to the family and that will always remain. In support in terms of whether we have borrowed from them during the quarter, no. Okay? That is obvious. Morat in real estate, most under-construction projects will be under morat, most definitely. And since we do construction finance, almost 80% of our projects will be under construction. All those are under morat but as I said, all of them, each one of them has enough money in the TRA accounts to ensure repayment until next March. So project finance morat has to be seen very differently than monthly installments of retailers. That is very clear -- for that, I hope it answers your question. As far as July is concerned, I think you are mixing up 2 things when you are asking demand, et cetera. Collection efficiencies of July is another matter, too early to comment about that. Frankly, I don't even know the number that in the 15 -- first 15 days, against demand, how much we have collected. The data I was trying to give is in June, the customers who were under morat, out of that, 30% have paid in July, right? It has nothing to do with the July demand.

Understood. And sir, just 1 follow-up on the first question. So just if you can give some color around bounce rate in the first 15 days of July? Are they trending similar to June, better than June, significantly better than June, some color around that?

Again, I have to admit that I don't know the precise number, but what I know is it is reasonably better than June. Actually, all collection numbers are better than June.

We take the next question from the line of Piran Engineer from Motilal Oswal Financial.

Sir, congrats on the quarter and hope you're safe. I had a couple of -- so I have 2 questions. One is more on the industry and one is particular to you all. So on the latter, the INR 225 crores provision, is that for the large HFC?

No, it's not for the large HFC. It is for a large conglomerate.

Okay, okay. So on the defocused side, we are done with all the provisioning that is needed to be done?

I would think so. We -- situation keeps changing. Some of the provisioning, we also get a chance to reverse. Some, as situation gets worse, we have to provide. This particular conglomerate, we actually believe we will end up reversing some in the next 2 quarters. It's just the matter of INR 225 crores were available, so we just provided. We didn't want to get into too much thinking as actually what is the LGD, et cetera. We provided. I can tell you with confidence that over the next 2 quarters, you would have heard also some news about takeover bids, et cetera. Now I don't want to comment on that because they are just that. They are rumors, speculations, et cetera. But something you must have read in newspapers. So we actually believe that we may actually recover some money out of that. Overall, I can say that of the defocused book, the PCR is now at 70% overall -- and which I would think should be reasonable.

Okay, okay. Understood. Sir, my next questions are on your 2-wheeler and tractors. So it's kind of similar to Dhaval's question. I just wanted to understand in tractors, what percentage of the borrowers have paid installments? Because some might have paid prior month installments also and, therefore, the collection efficiency looks high. So I just want to understand on a per farmer or per customer basis...

Tractors, no, it is actually more complex. Actually, the numbers we have given are actually in numbers, the numbers we have given in the presentation, so they are number of customers.

Okay. So when you say our collection efficiency has reached pre-COVID levels in farm, that means in terms of number of customers who are repaying loans?

No, no, no. Collection efficiency is different. [Foreign Language] When we give morat numbers in that table in the presentation, it is morat numbers. So that is customers, number of customers who are availing morat, which is 18% in June, clear? Let's talk about farm. Because farm is the most confusing. You know why? Because of 3 monthly installment [Foreign Language], 6 monthly installment [Foreign Language] all sorts of combinations are there. But I would just say, 18% of the customers are in morat. It's the same measurement, which was 75% in March. So we are talking like-to-like. 75% in April, sorry. 75% in April is now 18% in June. So just look like-to-like, okay? Collection efficiency is something different. Collection efficiency is your current demand of your -- how much of your demand for that month you are collecting. And June was our highest ever demand month, highest ever. I think the number was some INR 750 crores or something, something like that. More than INR 700 crores of demand was there, out of which we ended up collecting 88% -- 87%, 88%, something like that. So it is still below 91%, 92%, which we had reached at some point of time. But out of INR 750 crores, 88% is -- it's a good number, I can tell you, and the rest should be collected now.

But this demand will also be for that 82% of customers, right, excluding the non-morat, 82%, the demand of INR 750 crores...

[Foreign Language]

Normal billing that we do.

[Foreign Language] normal.

This is billing, yes, yes, yes.

Okay, okay. And sir, just lastly, in your assessment, how much of the 2-wheeler and tractor demand we've seen in May and especially in June, July is pent-up and how much is likely to sustain?

This demand is on the sales side. This demand -- you said demand...

Now this is on the disbursement of sales -- so now I'm on tractors.

Piran, it is very difficult to confuse me and you have done it. So thank you. Okay, how would I be able to answer that question confidently, how much is pent-up, how much is not pent-up, right?

Your best guess.

Tractor demand seems to be very genuine because genuinely, there is positivity and money both in rural India. Let us see that there are always 2 aspects of demand, right? The first aspect is the want and the need to have a particular asset. Second is the capability and the capacity to have -- to buy that asset, right? When both come together, it becomes demand. [Foreign Language] Okay? So now tractors, both these things seem to have come together. And hence, tractor demand -- overall, I mean the -- yes, there is certainly some pent-up because April, everything was closed, et cetera. But we believe that -- I still don't want to take a bet on how FY '21 will look vis-à-vis FY '20 because 1 full -- almost 1.5 months was lost, et cetera. But still, month-on-month, we believe tractor demand will keep looking up. That is number one. 2-wheelers. 2-wheeler, lots of talks about wanting to have own transport, lack of personnel -- lack of public transport, so wanting to have own transport. So certainly, the need for having -- owning a 2-wheeler is more. But here, the capability to buy one is not the same as tractors, right? So if you take any segment, if you take the urban -- employed people working in SMEs or the B category or the C category employers or you take self-employed people or you take semi-urban, the capacity to buy a 2-wheeler is relatively less. Plus progressively, first BS-III to BS-IV, then this CBS, ABS, then BS-IV to BS-VI, then insurance costs going up, progressively 2-wheeler costs have also gone up and that has caused severe amount of disruption in the market. So 2-wheeler, yes, while there may be some pent-up demand coming in a month or so, we would expect that even in the post-COVID scenario, we will see a fair bit of demand drop or negative growth, definitely a very fairly high-level negative growth in the 2-wheeler industry. What has changed is inventory levels. At some point of time, dealers had 3 months, 4 months inventory level. Now inventory levels have fallen, but for a very bad reason, it is for the supply chain disbursement -- disturbances of the manufacturers, right? So 2-wheeler is a little more complicated. It will be a confluence of all these factors, but we believe that it is not likely to turn positive the way -- even on a month-on-month basis the way tractor will turn positive.

We take the next question from the line of Prashanth Sridhar from SBI Mutual Fund.

I was just trying to understand your real estate portfolio better. So 80% would be under construction, which is anyway under morat. Of the balance 20%, how much would be under morat because of this COVID scenario?

No, no. Whatever 20% is actually paying. So that 80%, which I talked about, is -- so number one, I understand your question. Not one project, not INR 1 is under interest payment morat. We don't have interest payment morat for any of our projects. So that is -- that will actually answer your question. So this 80% that we are talking about, actually, it is 85%, not 80%, it is 83% something, 83% that we are talking about is all morats together. So it is basically the customers who are either interest due or repayment due in this time. And normally, we would be taking those interest and repayments out of money coming in the TRA account or DSRA which people would have maintained or things like that. We have been requested by those borrowers to not do that for first for 3 months, and now we are doing with month-on-month, right? And we are taking -- every month, we are taking a view on the project, project completion, various other parameters before granting that month's morat. But 1 simple criteria that we use very ironically is before granting that morat, are we sure that the flows in the TRA account and the escrow accounts, et cetera, are we sure of the payments that we need till March 21, are we sure of the whole portfolio? I have actually given this number last time, that almost close to 90% of our portfolio comes in that category. The remaining around 10% to 12% of the portfolio, yes, there will be -- because of genuine delays in the project, there will be the DCCO extension, which will be needed and will be done. So this was the same answer I gave last time that the tax situation has not changed. What has changed, though, is when we were speaking in May, though further addition to the DSRA or the TRA accounts was close to 0, now it has moved to 33% of pre-COVID levels.

Okay, okay. So if I understand, in March '20, when you disclosed 28% of the real estate portfolio borrowers were given moratorium, these are the guys that you gave a leeway on that interest payment from the escrow accounts?

Interest or principal, whatever it was [Foreign Language] simple [Foreign Language] March [Foreign Language] number [Foreign Language] because the morat came on 27th. So everybody that had to pay before that was already paid.

Okay. And that figure would be what as of today, that 28%?

83%, 85%.

It's 83% something.

83% something. Okay, okay, okay. Yes. And sir, just 1 more question on the bounce rate. If not an absolute percentages, could you give us some idea on the extent of increase or decrease since March '20 across different asset classes, sort of how has they been trending?

Sure, sure. I'll give you, 1 minute. [Foreign Language] Can I come back to you? Can we go to the next question? I will answer this. My team is just getting the -- I will answer it on this call.

We take the next question from the line of Viral Shah from Crédit Suisse.

I have 4 questions. If I could take them one by one.

Yes, please.

So I was basically looking at the COVID-19 provisions that you have created based on the RBI's provisioning requirement, which is essentially 5% each spread out in March and the June quarter. So the implied loan book, which comes out of it, which represents the loans, which would have turned NPA, if not for the morat, that has -- that seems to have increased 16% quarter-on-quarter from INR 4,180 crores to INR 4,860 crores. Could you help me understand what would be that?

I think it is -- the answer is more or less comes from the previous answer that I gave that the morat came other than micro finance, where we -- whatever payment was done before 27th of March, we simply took it as advanced payment. Given that these people were at the bottom of the pyramid, we didn't want them to pay the March installment also. But all other people, we took the March installment which was already collected as March installment. And hence, the -- naturally, for March, I mean April level was up because of that effect, that other than micro finance, March moratorium was only limited to people who had to pay in the last 4 days. So naturally, in April, it went up, and we have provided 10% for that entire thing in Q2.

Okay. Fair enough. And, sir, second question is basically...

Can I just reply the previous questions? Yes. So in farm, for example, our -- in April, bounce rates have gone to around 69%. It has now come to below 50%. But farm, of course, is not the main this thing because checks bounce are already always around 40%, and then you collect. 2-wheeler, in April, it was close to 60%. It has come down below 50%. In -- yes, home loans, et cetera, I don't think that is -- the trend is that much. Consumer loans, if at all, it has again fallen by about 10% from where it was. Yes. These are the numbers. Home loans, et cetera, bounce have not increased. Does that answer your question? Yes, yes, the previous one. Yes, go ahead.

Sir, the second question that I had was on the Tier 1. Basically, it has declined 50 basis points quarter-on-quarter, which means that the implied risk-weighted assets have grown 4% quarter-on-quarter. What would that be? Hello?

Can we get back to you on this?

We'll just check out...

Okay, okay. Sir, third question I had was basically on the MFI segment.

I will tell you, it is basically -- I know the answer, but I will -- my team will answer you more precisely on that. That Tier, when we have -- we operate through 4 subsidiaries, right? So it is normally the weighted average of the Tier 1s of each of the subsidiary. So if in 1 subsidiary, the balance sheet grows, other comes down, that is a derived number. Naturally, the holding company doesn't have a Tier 1 ratio of its own, right?

Correct, correct.

So it is more a weighted average, so that is why I was a little stumped. But Anuj will give you precise calculations.

Okay, definitely. Sir, the third question I had was on the MFI segment. So we saw the number of center meetings actually declining for us, which was the first in the last 3 years. So in which geographies did we pull back or actually close the center meetings and the MFI presence, if you could highlight that, please?

[Foreign Language] Please answer.

So I think it's a very small, but it will be very, very specific locations in some of the eastern states where we have actually reduced.

I will tell you, I will tell you, very simple. So very marginal decline. We keep doing this, especially in times like this. So I will answer our process, right? Our process is very, very data-oriented, absolutely pin code wise. So we, all the time, keep dividing our meeting centers into business meeting centers, collection meeting centers, that there we don't do business and only do collections. And then mixed meeting centers where business and collection all have equal weightage. As the collection -- in some meeting centers, as we put them into collection meeting centers, as we keep finishing the collections, and if the situation doesn't improve, either in terms of risk parameters or in terms of productivity, we go ahead and close those meeting centers. It won't be any specific geography where lot of meeting centers would have been closed as a strategy. But as we -- I talked about the expense cuts and things like that, many places, we have tightened the productivity norms. And based on that, some meeting centers, some branches would have reduced. And in fact, nobody has asked us the question about people. But even people have reduced by a little more than 1,000 in this quarter. So these are based on the belt-tightening and productivity norms, which is a continuous process. Nothing strategic. Don't read anything strategic in it. It is...

Okay. But it would be fair to say...

Additional excellence process.

Okay. But it would be fair to say that we have exited those specific micro locations?

For now.

I mean we are not disbursing any...

Yes, of course. Yes, sure. We are not disbursing there from some other meeting center, definitely not.

Okay. And in terms of the portfolio outstanding for all those meeting centers...

Those would have been fully collected. Only after that we close.

Either fully collected or you would have provided fully and you -- then you would have closed?

Even we would have provided fully, unless and until it is written off, we won't give it -- give up like that. We will always keep doing our analysis as to how much is remaining, whether it is worth it to do that expense and then do the needful. But won't just give up on something easily.

Okay. Yes, yes, definitely. Sir, last question, basically, on the -- on your AMC business, I see your average AUM has declined 18% quarter-on-quarter, wherein the broader markets have actually recovered 25% quarter-on-quarter? Like if you could give some insights in terms of inflows, outflows?

Very, very simple. So 2 numbers I will give you. So this industry, actually, most of the data is available on AMFI site. But I will still give you. The AAUM, that is the average AUM, in fourth quarter was higher because all the declines and outflows from the industry happened towards the end of March, right? So if you actually take the year-end number, the closing if you remember is INR 55,000 crores in March and now it is INR 60,000 crores, if you take the quarter end numbers. And within that also, if you take equity, okay, equity, it has actually grown by 21%. So when you say broader market, you mean equity, right? So equity increase is actually 21%. And even some 10%, 12% increase in high-quality debt. But as you would imagine, in the credit funds, our credit funds have come down to a very, very low number after the aftermath of 1 event in the mutual fund industry where credit funds were closed. So based on that, everybody's credit funds lost even AUM. And we -- the good thing about our credit funds is that we were able to service that withdrawal without a hiccup. Without borrowing, without anything, we were able to actually sell the investments, and were able to service all the exits, which, as you would recall, happened over a period of a week, the whole segment was just wiped out of credit funds.

Okay. Could you give if any details in terms of inflows and outflows during the quarter, specifically in the equity segment?

We can certainly give. As you would imagine, I don't have it by rote on the call. Most certainly, all details can be shared with you by Anuj, yes.

We take the next question from the line of Nischint Chawathe from Kotak Securities.

I'm sorry, I just got cut off. Just 2 questions. One was when we see the reduction in moratorium, and obviously, there has been a fair amount of improvement in recoveries also. Just trying to understand that on a month-on-month basis when moratorium is going down, how much of it would be because of recoveries? And how much of it would be because of the fact that you may not have extended the moratorium for the next month?

It is same, no. I don't understand. I mean moratorium not extended and it remaining debtors, that's what you mean?

Yes. So that's right. So when the moratorium number is coming down, is it all because of recoveries? Or is it because you have kind of told some customers that from next month onwards, you start paying, I'm not extending the moratorium?

Retail [Foreign Language] okay, I don't want to say [Foreign Language] hardly [Foreign Language] retail [Foreign Language] who would have said [Foreign Language] I'm not paying, but I don't want moratorium also. There will be -- nobody who would have flown to debtors. It's payment-based.

Sure, sir. So the entire reduction in moratorium is payment-based. That's what I was...

Sorry? If you are not in moratorium, you have paid your installments. It's as simple as that.

In fact, where part payment is there [Audio Gap].

Yes. In fact, there are some who have made part payments, but are still shown as moratorium. We have not taken them out of that number.

And there wouldn't be any customers where you have kind of told them that from now onwards, you may be a debtor but you start paying now. So that's where the moratorium number comes down. That's not what has happened. That's what I wanted to clarify.

The debtors number would not have come down to a number that we have quoted. That time -- this time, first time, we have quoted the debtors reduction number.

That's right, that's right. And the second question pertains to capital issuance in terms of, do you have any plans on that? I think quite a few NBFCs are looking at it. So any thoughts on your side?

I agree it absolutely. So we have to look at it from 2 points of view, right? One is sources of capital and uses of capital. Uses of capital, first of all, our capital adequacy is at 21%. So there is immediate need for capital, from that point of view is limited. Okay? But also, second point of view, growth. Do we see a runaway growth in the overall balance sheet over the next 12 months? No, because we will reduce some of the defocused. The focused will increase slowly because of book rundowns, et cetera. What we will need capital, like any other NBFC, is just fortifying yourself at times like this and which is always prudent. Discussions are on right now, what will be the right way, time, method of raising that capital, and as soon as we have something specific, we will definitely intimate.

We take the next question from the line of Karthik Chellappa from Buena Vista Fund.

Just 2 questions from my side, sir. The first one is, when you look at the collection ratios for July, which has shown improvement for both micro and 2-wheeler loans, which are the states that are still tracking below that average?

Solid googly [Foreign Language]. We will have to get back to you on this.

Okay. My second question is on the micro...

You please contact with Anuj, you'll get the answer.

Sure, sure, sir. The second question is on the micro loan book. There is a good chance of majority of the borrowers may want top-up loans before they can actually start repaying, so that they can get their business up and running. In that context, the strategy to tighten credit standards, like reducing the association norms to 2 for new customer, 3 for a repeat customer and bringing down the state-wise outstanding from INR 80,000 to INR 70,000, once this turn out to be counterproductive, especially at the time when small finance banks, I mean, like banks and microfinance are keen to lend more and enhance their customer reach?

Good question. Okay. Who knows, Karthik, what is the right answer, right, on this? One thing we can say confidently that all the collection efficiency and the collections and the morat levels that we are showing in microfinance is definitely without any of these things happening right now because I -- we have not disbursed. So there is no question of any doubts whether it is our top-up loans which are coming back, et cetera. So let us first deal with that, and that is over. You are absolutely right that there will be genuine need of customers, not for -- just for repaying our loans, but for continuation of their livelihood. And they will need some loans to tide over that period. Yes, definitely, their products are being developed for that, and we will get on to those products in Q2. The norms are for normal microfinance disbursements. What we don't want certainly is our disbursements being used for repaying our past installments. Definitely, we don't want that. And that is why good products are being developed to study the actual what you rightly captured is the need to tide over a temporary problem in their businesses. We are developing products on that. And we'll see the light of the day in Q2.

Okay. Got it. Sir, just 1 more follow-up on the data points that you shared that the check bounce rate in 2-wheelers, the 69% has come down to below 50%. What are the check bounce rates normally in pre-COVID times in 2-wheelers?

See, normally, 2-wheelers will be, what, 20 around -- yes, okay, around 25% to 30% will be the first bounce. That goes to X bucket. And X bucket collections are normally between 92% to 95%. So that's how it happens. So 2-wheeler, first bounce happens. What is X bucket is, what is collected within that month from the bounces. So if you consider both these together, then the collectible comes down to, what, 95 -- 5% of 60%, so 2%, 3%, which then moves to the next bucket and hence is collected after that.

So compared to the first bounce rate, the current bounce rates are almost double?

Yes, about 60% higher.

Next question is from the line of Alpesh Mehta from Motilal Oswal.

Sir, 2 questions. First, in the reported numbers, what would be the AUM growth because of the moratorium interest capitalization? Any ballpark number on that?

Hardly anything because we have taken a stand. At least we have capitalized only at the end of the first 3 months. We are not capitalizing daily, monthly, et cetera. Only at the end of first moratorium, we capitalized. And after that, we are again on simple interest.

Yes. But there would be the interest component, since you are recording on the P&L, there would be, obviously, on the asset side also, there would be some...

Yes, absolutely. So they are about INR 1,000 crores, INR 600 crores?

INR 600 crores to INR 650 crores.

Around INR 650 crores.

Okay. Secondly, more strategic question. First is on the rural and housing portfolio this contingency provision or a COVID-related provision, in case of rural portfolio, we are already at 3%, whereas in case of the housing portfolio, we are at around 1.7%, 1.8%. So what's your comfort level on that portfolio from a contingency perspective?

See it is -- it depends on the security level, very simple, because in housing there is a security, okay? You can now argue about the value of that security in post-COVID, et cetera. That is why the provisioning is there. Rural, most of it will be dealing with the microfinance, where there is no security, right? It is unsecured loan. That is why naturally those percentages will be higher from just reflecting the loss given default of that portfolio. Comfort levels, difficult to answer right now. I would believe that if you would have asked this question to me 3, 4 months back, I would say we are well above my comfort levels already. Today, I will say that I think before answering this question, let me wait for 6 months more. I mean just see the way the thinking has changed, right, Alpesh. We provided the first INR 350 crores when ROEs were well above 18%. They were close to 20%, 21% when we provided that and had brought down to 18%. We had put this as saying that, okay, we should save for the rainy day, provide when the going is good. From that, the thinking has changed [Foreign Language] quarter [Foreign Language] provide [Foreign Language] just to make sure that we provide for any uncertainties in the environment. So very clearly, that thinking has changed. What is comfort level? What I told my Board, I will tell you, we will take that call as quarters go, right? But at this point of time, we believe that a good fortification has been made.

Let me rephrase this. Then at the portfolio level, we are standing at around 1.4%. Is it possible that we may, by end of the year, in a sense, by the time this entire episode gets closed, we would be somewhere around between 2% to 2.5% of the portfolio?

I don't want to answer that question, Alpesh. I have no idea, because part of it may be reversed also. The -- especially the COVID-related provisions, which is INR 480 crores. By RBI norms, it will be reversed by the -- reversed or move up to GS3 if this becomes GS3. See the difference between the INR 400 crores, which is not a part of this total INR 1,244 crores, which is Stage 1, Stage 2 by formula, okay? The difference is that, that will always remain on Stage 1, Stage 2 as long as the book remains of the same size. Or if the book increases or decreases, it will change according to that. INR 1,244 crores is largely discretionary, right? And that can be reversed, can be increased. But probably some of it will also flow to GS3 as some of these assets become GS3.

That's true. Okay. Got it. And just...

First of all, even at this point of time, yes, I can only be frank [Foreign Language] As I gave the example, my job is to build a team of great defenders. [Foreign Language]

And sir, just a last question on the liability side now. We have been seeing, obviously, a sharp reduction in the CP rates over the last 2, 3 months. And the good parentage guys like yours are obviously seeing some benefit of it. So would you like to increase the CP proportion because it has a direct impact on your margins now? So -- and you also have a fairly decent proportion of the tractor book as well.

Okay. Good question. One thing I can assure you that it will not fall further from here. We are reasonably okay. But from ALM side, you see that I'm having huge positive ALMs. So there is definite scope. If I go into data analytics and technicality, it will now depend on the way standard deviation of daily liquidity availability changes, right? Right now, to arrange long-term funds, it depends on so many things, on some mutual fund causing a problem, et cetera, et cetera, banks' NBFC limits full, all those things. And hence, any bad news comes, then the market suddenly starts jumping up and down, equity analysts will also start saying that there is too much CP, all those things. So right now, till situation sort of becomes -- everybody starts breathing easy and start jumping -- stops jumping at the slightest issue, we will keep 2 things. One is CP levels at these levels, we will not increase them; and second is liquidity at this level, right? What I can say confidently that unlikely that CP will go below this and unlikely that liquidity will go above this. What does it mean? That at best now -- at worse, the cost of funds and the liquidity negative carry will remain same. But hopefully, both will trend better. How much better [Foreign Language] better, we will take the call. We always like to take the call based on data. We will take it as we go.

We take the next question from the line of Aditya Jain from Citigroup.

Just a couple of clarifications. So the INR 225 crores, which is taken on a conglomerate account, so is that 100% of the exposure to that account?

Yes. I mean with this INR 225 crores, it becomes 100%.

Got it. Okay. And then could you talk about the movement in the defocused book? So the net book, we can see is down INR 57 crores quarter-over-quarter. So underlying, what are the additional implications?

No addition. Defocused [Foreign Language]. There is only deletion.

Okay. Perfect. And on the cost cuts, and you alluded to this in the beginning. So a part is variable and some part of the decline of the INR 100 crores is fixed. Could you quantify this a bit further? So how much of this could be fixed or are sort of cuts which you'll sustain?

See, Q1, the fixed will be less because any steps that you take in Q1 will actually start working in from Q2, right? So Q1, maybe 25% of this will be fixed, 75% will be variable cut. As we go ahead, in Q2, all the steps that we have taken in Q1 will start working. And let us hope that the variable costs keep going up because we are not interested in keeping total expenses down. We are interested in increasing contribution. So INR 1 increase in variable cost will hopefully lead to several rupees increase in income.

Got it. Perfect. Just lastly, the infra P&L, which is there in the presentation. So that has a decent price additional provisions. Obviously, you've made prudential provisions across segments. But just wanted to understand the infra, I guess, it's doing much better than the other segments, in general, both road and renewable side. So where are we making the prudential provisions within infra?

Where [Foreign Language] which assets?

Which sort of assets?

That data, if we had to -- we have given so much data. So if we had to give which asset, we would have given already. But yes, there are some -- now, I will tell you, IBC is suspended for 1 year, right? So good management will always see that some of the assets to come back, the value to be realized will probably take 365 days more. And we will have to make do of that -- make good for that LGD. Each one of this, all of this, let me assure you, is from our, what we call, legacy infra portfolio. There is no increment for the last 3, 4 years or at least after the -- we moved to Ind AS to the infra GS3, no increment. No gross increment. There has been only reductions. So it is all the old portfolio. We have always been assuring you that we have made adequate provisions. But events like this, like IBC getting postponed, et cetera, many times, there is an increase in LGD. So we have taken that.

We take the last question from the line of Kunal Shah from ICICI Securities.

Yes. So 3, 4 questions. Firstly, in terms of this macro-prudential provisioning, I don't know if you answered it earlier, but this is still towards rural and I think on the real estate or entire housing segment, we are at 1.7%. And given this kind of a moratorium, would we be comfortable or maybe it would be pushed towards the kind of creation of provision mix as opposed to Q2 and Q3?

I answered that. Whatever was the COVID provision required on this portfolio...

Yes, that is done, yes.

INR 343 crores, that is done. Okay. That is number one. Number two is that portfolio comes with securities, first of all. So if you are talking about retail home loans, it is one of the most secured portfolio. In real estate also, there is the project security. As I had explained many times before, there are incremental securities. As the project gets delayed or something, we use our power to get incremental securities. There are various projects which L&T has taken over and working. So with all those things and also the most important thing is every account under moratorium having enough cash to service the interest and principal repayments, at least till March '21. We believe that this should be enough. And you know our record here. So if we believe that a particular asset or something, any problem happens or LGD increases, we will not hesitate in providing. But I can today only guide you on the trend. So I don't think we will have, I mean, touch wood, but we will have a sudden increase in NPAs in our real estate.

Okay. And secondly, in terms of the rise in the loan book, how much is it on account of maybe the funded interest getting loaded? Because if I look at the disbursement...

It's INR 600 crores to INR 650 crores.

Sorry?

INR 600 crores to INR 650 crores.

Okay. So that is the interest component, which is getting loaded on to the loan book?

Yes.

Okay. And in terms of MFI, maybe INR 7-odd crores of disbursements and even collection efficiency or the moratorium number, that is relatively lower when we compare it with the peers. Okay, everyone is talking about like 65%, 70-odd percent kind of a collection efficiency. And in fact, the disbursements have also started a bit in June. So are we much more conservative with our guardrails and not so confident and that's the reason the disbursement is low? And how to look at the 52% collection efficiency?

Sorry, I don't know, Kunal, did you come late on the call? Because I have answered this same question in great detail.

Yes, yes, yes. I came late, yes.

So do you want me to repeat the answer? It will be boring for everybody. I will -- why don't you contact Anuj and he will answer.

No worries. That is okay. And lastly, in terms of the cost side, so INR 100-odd crores kind of a reduction, of which, if I look at the segment-wise, there is only INR 40 crores, INR 45-odd crores, but I think what I heard was maybe it's more related to the volume. But otherwise, maybe INR 50 crores, INR 60-odd crores is coming outside of the business related. So is it more of an unallocated overhead which are getting reduced and that might not come back soon?

Which overhead? What?

You're referring to what, Kunal?

Expenses?

Yes, yes. Expenses, if I look at it, consolidated, that's down INR 100 crores quarter-on-quarter, okay? But if I look at it in terms of the business...

I'll allow Sachinn to answer this. This is, what, fixed expenses only?

This is fixed expense, yes.

No, no, what his answer is if you look at each segment and add up, the reduction is about INR 50 crores, whereas total reduction is...

Yes, INR 40 crores, INR 45 crores, yes.

Okay. Defocused, I think we don't give. That is one. And the other entities cost. So what we had given is the main business, 3 lines of businesses that we have.

So largely -- largely -- okay, I will explain. Largely big reductions were also there in some head office expenses, which may not have been allocated to business.

Okay, okay. And that might not come back soon now? Because you said maybe in expenses, we should see it going up.

On the contrary, some more reduction in that will be there in Q2. Because Q1 actions will, as I said, they will -- it will be more visible in Q2, right? But I think just for -- with -- at the risk of repetition, the variable expenses reductions from businesses will actually -- instead of reduction, would increase as business grows.

Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Dinanath Dubhashi for closing comments.

Thank you. Not much of the closing comments. I think I've given my conclusion before. I would like to thank all of you. We'll continue to count on your support, only expressing the thought that we are all together in this crisis. We are trying our best to use our strengths that we have in businesses trying to catch up. A lot of questions were there about disbursements, how we will catch up. The important thing is to remember that in all our businesses, maybe with just 1 or 2 exceptions, we are the leaders, we are among the top 3. And when we decide to get into that market and when the situation is better and after micro measurement of risk, we believe that we will be able to quickly regain the market position or dealer positions in those markets that we will be able to -- that we are already there. So that trend of disbursements, we expect to be positive as we go ahead. Collection trends have been better, have been improving, we expect that to improve. I would once again like you to repose your confidence in us based on that and also repose your confidence in our prudence and our being prepared for the future by making good provisions. So I just request you to look at this quarter's performance through these 2 lenses. One again -- once again, stay safe and god bless all of you. Thank you.

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