LIC Housing Finance Limited (LICHSGFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the LIC Housing Finance Q3 FY '22 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Agarwal from Axis Capital. Thank you, and over to you.

Thank you, Stanford. Good morning, everyone, and welcome to this earnings call of LIC Finance. We have with us Mr. Y. Viswanatha Gowd, MD and CEO; and Mr. Sudipto Sil, CFO, to take us through the results. In the initial round, we'll request Mr. Viswanatha to give us an understanding of the quarter gone by and then we'll open the floor for Q&A. Over to you, Mr. Viswanatha.

Thank you. Thank you, Praveen Agarwal. Thank you. A very good month to you all. Very, very good morning to all of you once again, and I also welcome to the post earnings call of our LIC Housing Finance Limited. As you are aware, LICHFL declared its Q3 FY '22 results yesterday. Before beginning, I wish you and your near and dear ones a very, very happy and healthy New Year with our meeting first time in the current new year. This quarter under review witnessed a third wave of COVID-19 due to the Omicron variant, which resulted in intermittent restrictions in some parts of the country. However, the situation got normalized and now with expectation of the pandemic receding, it is expected that the business activities will strengthen further in the Q4. All key indicators have shown improvement during Q3 over the previous quarters. The financial highlights of the quarter are as follows: total revenue from operations INR 5,054 crores as against INR 4,907 crore for the corresponding quarter of the previous year, with a growth rate of 3%. Outstanding loan portfolio stood at INR 2,43,412 crores against INR 2,20,197 crores as on 31 December 2020, reflecting a growth of 11%. Out of which, individual home loan book reported a growth of 15%, and now it comprises 80% of the total portfolio. It is up from 77% 1 year ago. Total disbursement for this quarter were INR 17,770 crores as a INR 16,857 crore in Q3 FY '21 with a growth rate of 5%. Out of that, the disbursement in the individual home loan were INR 15,341 crores as against INR 14,511 for Q3 of FY '21, with a growth rate of 6%. Also, we have achieved 135% of the pre-COVID in terms of Q3 disbursements when we compare it with Q3 FY '19/'20. On the net interest income front, NII was INR 1,455 crores for the quarter as against INR 1,281 crores in Q3 of FY '21, showing a growth of 14%. Net interest margins for the quarter stood at 2.42% as against 2.36% in Q3 of FY '21. Profit before tax for the quarter stood at INR 961.85 crores has again INR 969.64 crore. Profit tax for the quarter stood at INR 767.33 crores as against INR 727.04 crore for the same period previous year, reflecting a growth of 6%. During the quarter under review, disbursements continued its strong momentum even on a sequential and year-on-year strong quarters with the individual home loan segment. The disbursement growth is clocking 34% for the 9-month period. The growth has been across all geographies, especially in the Southeastern, Southern and Western and others supported by Northern, Central and Eastern regions. Thus, canvas of growth uses a lot of confidence of an overall pickup in economic activities as well as a strong and sustained rebound in the consumer sentiments. In terms of asset quality, the Stage 3 exposure at default stood at 5.04% as against 5.14% as on 30th September 2021, reflecting a marginal sequential improvement in the same. Total provisions as on 31st December 2021 is INR 5,715.76 crores, reflecting a provisioning cover about 40% on Stage 3. This includes INR 327.1 for COVID-19-related provisions. Assets recategorized as NPA as per RBI notification dated 12th November 2021 are about INR 2,497 crores and are placed in Stage 1 and Stage 2. ECL provision for the same is INR 230.83 crores. OTR during this quarter stood at about INR [ 290.27 ] crores. It is much lower than the Q2 figure of about INR 2,141 crores. We have continued to focus on correction efficiency. And the same has shown consistently and then it has shown very good consistency, and it stands at 99% for all the regular accounts. The overall trend in the collections and recovery side has shown improvements, which gives us the confidence of reduction in coming months. On the funding side. We have witnessed a reduction in overall cost of funds by 7 basis points during Q3 FY '22, despite hardening in the bond yields during the same period and 24 basis points during the current financial year. Incremental cost of funds stood at 5.27% for the quarter. Net interest margin for the quarter stood at 2.42% as against 2.36% over the Q3 of FY 2021. For this quarter under review, the interest income increased by 2.55% whereas the interest expenses declined by [ 1.67% ], leading to margin expansion. Project RED under digitization transformation is egressing significantly with the launch of new projects like KYC and AML solutions, deposits applications and audit [indiscernible]. More than 1 million downloads of our HOMY app have been made so far, and the company has approved more than INR 1,300 crore worth of loans received through this HOMY app. With this brief introduction, I would like to invite you for your queries. Thank you.

[Operator Instructions] The first question is from the line of Rikin Shah from Credit Suisse.

I have four questions. First one is on the margin. So the margin seems to have normalized this quarter. I wanted to check if there were any write-backs or interest income reversals in this quarter? And also, how does the incremental asset yield look like versus your overall cycle? And I also noted that the incremental funding costs has started inching up. So any outlook on the margins? That's one. Second one is on the asset quality. The state city coverage has declined by almost 350 bps to 40%. Is that a target level that you would like to intend to maintain? Third is on the growth. The LAP LRD and developer loan books continue to contract. So from here onwards, would you intend to accelerate the disbursements? And any outlook from here? And lastly, the data-keeping question. Just want to request GNPA by different segments and also outstanding book for restructured loans and ECLGS.

Four questions out there.

Seven. Okay. Actually, as far as the questions are concerned, of course, me and our CFO, both will answer in part and all. As you were asking about, see, the growth -- of course, I'll tell about what you call business front, if you're looking at. The growth what we are seeing now in the individual portfolio is really going on very well. And then, of course, I agree developer book size, ours is not very much. It's only around 6% to 7%. There, what happened, a lot of scope is there for us to expand in this quarter. We're having some positive outlook on the expansion further on this developer and also LRD books also. And then as far as the -- what do you call, asset quality is concerned, you are inquiring that really now after this, what you call, last quarter, especially momentum was good in the sense people were not like in the earlier year of Q3, where movements were not that much. And even this time, what happened, our teams also were in place to meet all the people and then recover the money. And second, what happened, most of our loans are actually in the retail segment. Mostly 80% of loans are in the retail segment. In that also, more than 70% are in the salary class. Let's say what happened, the regular income levels of people has helped us a lot. That's why our collection efficiency, hovering around 99% regular, and then more than 70%, 80% in all cases. So with these things, what happened, there was a very good recovery, especially in the Q3 that is a lot of comfort in what happened. The provisioning levels also were maintained to meet all these requirements -- margin.

Yes. Regarding the other query, pertaining to margins, yes, there has been an improvement in margins year-on-year. And if you look at sequentially also, if you see the loan asset growth has been around 1% whereas the NIM growth has been around 13%, 13.5%. So that has translated to a higher net interest margin. There is no one-off here. In fact, there was a reversal, which was there in Q2, which is not there now. But this quarter, margins are reflective of the true income from operations and cost of funds. There are no one-offs. As far as the...

On -- sorry, go ahead, sir.

Sorry?

On the asset yields, incremental...

No, I'm coming. I'm coming. I'm not finished. You've asked some 5, 6 questions I'm just, I'm noted down. I'm just coming. Yes. Asset yield. There has been a decline in the asset yield in the initial part of the financial year, but now it is stabilizing. And from January, we have also increased our lending rates. So that should help stabilizing the asset yields for incremental business. Incremental cost of fund has been increasing, as you are aware, that there has been an overall increase in the cost of funds are, I would say, in the bond yields across the entire system. In fact, in the GSEC also, there has been a very sharp increase. But until now, it has not fully translated into the higher cost of funds. If you look at the construct of our liability, we'll find that about 60%, 65% of our liabilities are fixed rate in nature. So that certainly allows us some advantage in an increasing interest rate cycle. Regarding the Stage 3 cover, that was another question that you had placed. If you now look at, there has been substantial improvement in the coverage across -- including the Stage 1, Stage 2 and Stage 3 also. So Stage 1, Stage 2 coverage has also increased and Stage 3 coverage is also around 40-odd percent, which at this point in time, it is quite improved as compared to earlier position. Other queries regarding the growth, MD said -- has already responded. Two more queries you had asked regarding some data points. The GNPA, the outstanding -- what was the query? It was the outstanding loan?

Restructured loan book and the [indiscernible] outstanding book.

Restructuring this quarter is only INR 490 crores.

Correct. Correct.

Have I answered all your queries?

And sir, GNPA by different segment and outlook?

GNPA in the individual home loan segment is 2.1%. In the project loan it's 27%, and in the nonhousing commercial, it is 15.9%. In nonhousing individual, it is 9%. Total coming to 5.04%.

Okay. And sir, on the ECLGS outstanding book?

What exactly you want ECL outstanding?

So what is the total ECLGS disbursements we have made until now?

About, I think, INR 1,000 crores or so.

The next question is from the line of Kushan Parikh from HSBC Securities.

So just hopping again on the NII growth, basically. If you could just give us some additional color in the sense that if you could let us know what the reversal was in 2Q as well as is there any improvement in yields that we are seeing in the individual housing side in 3Q or any mix change? Have we -- if you could elaborate on if we've done more of affordable housing and at what periods does affordable housing loans come in at? So just wanted to better understand the yield improvement and NII improvement in 3Q.

As I mentioned, there has been a reduction in the cost of fund also in the third quarter. Despite the fact that there has been an overall increase in the bond yields in the system, there has been improvement in the cost of funds. That also has helped in improving the interest income collect [ that has led to ] an increase in the lending rates also. So that also should give some support and some stability in the asset yields going forward. As far as the interest income reversal you are talking about, that actually was in the Q2, which had reduced the interest collection in the interest -- the revenue from operations. There is no reversal in Q3. Q3 is just a normal quarter.

What was the amount of reversal in 2Q?

It's around INR 350 crores. You can get more reference on my Q2 call transcripts.

Okay. So that -- okay, and there has been no change in individual housing yields for 3Q, right? And no change in mix as well, in terms of within individual housing to affordable or something like...

No, no, no. affordable is different. Affordable is not from this year.

Okay. Okay. So this is entirely coming out of the write-back of interest reversal that had happened in 2Q? And there are no changes in yields in 3Q? We have [ high rates ] in Jan only, right? Is my understanding correct?

See, there is -- again, I think you are mixing it up. There is no reversal in Q3.

No, no. I'm -- yes. So there was a reversal in 2Q, which is not there in 3Q, is what I'm saying.

Correct. Correct. Correct.

Okay. Okay. And no change in individual home loan yields for 3Q?

No.

Okay. Understood. Understood. And if you could just help me with the restructured book outstanding number for 3Q. We've done INR 419 crores in 3Q. Just wanted to know what the outstanding number is now.

Slightly more than INR 7,000 crores put together.

Okay.

Yes, correct. That's correct.

The next question is from the line of Abishek -- Abhijit Tibrewal from Motilal Oswal.

Sir, in your opening remarks I think you have specified this [indiscernible] securities the amount of loans which are in Stage 1 and Stage 2, but have been recategorized as NPA as per RBI notification?

Yes, we have already specified in the opening remarks.

Whatever we are taken into the book...

The provision is also disclosed.

Yes.

Yes. Sir, I wanted to know the amount of this. The provisions, you have already disclosed in the presentation. What was the quantum of [indiscernible]?

Yes, to just repeat it, it is INR 2,497 crores.

Roughly INR 2,500 crores [ you can keep ].

Okay. Sir, second question I had is what has prompted this change in provisioning policy during the quarter? What I'm trying to understand is sir, I think, last quarter, we had something like 3 bps kind of a provision of our [ onwards ] in Q1 and Stage 2 loans. And this quarter, you have increased it to about, I think, to about 38 basis points. So what has -- 36 basis points in Q3. So what has prompted this [indiscernible] provision policy during the quarter?

No, it is -- this RBI circular, if you see the RBI notification of 12th November 2021 we have implemented. And pertaining to that, whatever will be the notional provision that is required, we have created that, and we have kept it in Stage 1 and Stage 2.

Okay. Okay. Is there such a significant increase in credit risk from this -- that RBI circular, which has prompted this increase from 3 basis points to [indiscernible]...

INR 230 crores. We have given the number also, INR 230 crores.

Yes, INR 230 crores is a provision, a further exclusive additional.

Okay. And sir, lastly, if you could just help us understand, have there been some, let say, resolutions of prepayments in the developer or [ vendor ] book because we're now saying that book, during the quarter, looks pronounced. So the resolution...

Yes, there have been some closures. Some repayments have happened.

And what was the quantum in that front?

I think some INR 600 crores, INR 700 crores in totality. There have been some repayments.

Right. And sir, lastly, you talked about increasing in lending rates from January onwards. By how many basis points have increased your lending rates during January?

It's about 10 basis points.

10 basis points.

The next question is from the line of Utsav Gogirwar from ICICI Prudential Life Insurance.

Just to continue with the previous question, so as for the website, the interest rate is 6.7%. Is this the latest one after increase of 10 basis point? or the new rate is -- new rack rate is 6.8%.

No, no. It is the latest, whatever you are seeing, yes.

6.7%, is latest.

6.7% is some category, but it is actually 6.75%.

Yes, it is linked to the [ civil ], a lot of things are there -- in that quantum rates and all.

Product categories are also different. Yes.

Sure. And my, sir, second question is, is the rack rate for any particular kind of customers, 6.7% or 6.75%, are we allowed to land below this rack rate?

No.

No.

No, that is not permitted.

That is not permitted. Okay. Perfect.

The next question is from the line of Umang Shah from Kotak Mutual Fund.

Just a couple of questions on provisions. So INR 230 crores, which we have assigned to these assets which have been reclassified as NPLs as per RBI circular, will there -- do you really think is there any need to increase provision cover on these loans or INR 230 crores will be sufficient enough?

No. As far as this particular RBI [indiscernible] circular is concerned, we have already applied that and INR 230 crores is the number which has been provided for this.

Okay. So the way to look at it is that INR 230 crores would be incremental. So the total provision against these assets would be higher. Is that the right way of understanding?

Yes, certainly, certainly. Some provision will already have been done.

Okay. Okay. Understood. Understood. The second question was that on our Stage 3 provision cover. So now I understand that, obviously, last 4 to 6 quarters have been fairly uncertain for the industry as a whole. But our Stage 3 provision cover has also been fairly volatile. So under the ECL model, how should we look at a more steady-state sort of a Stage 3 provision cover for us?

Yes, certainly, yes. Now because as you have very rightly said, because in the last 2 years, there's so much of events.

Uncertainty.

And so much of uncertainty, so much of intervention by regulatory requiring so much different types of treatment. Now you are now looking at a much, much more stable provisioning, I would say, overview.

So the current 40% PCR should be like a more sort of a steady-state provision cover. Is that a fair understanding?

Yes, yes. It will be at least 40.

At least 40. Okay. Okay. Understood. Sir, the other question was that have you made any appropriations to the impairment reserve during the 9-month period in the current fiscal?

Current year, as of date, the total impairment reserve provisioning is INR 297 crores. Total. That is the total.

Okay. And which would be about INR 200-odd crores as on the previous fiscal?

Yes. Correct. Correct.

Yes.

Okay. Okay. And just the last question from my end. What proportion of our loans would be linked to any sort of external benchmark like a repo rate or something?

You're talking of the lending side or the borrowing side?

Lending side. Lending side.

Lending side, it is an internal benchmark, internal PLR benchmark. Now that PLR is also comprised of our internal cost of funds and other administrative cost. So you can say that, obviously, if there is a movement in the external rates of interest, it will also impact our PLR.

The next question is from the line of Kunal Shah from Carnelian Capital.

I had two questions. One was attaining to the growth. So in the current quarter on a year-on-year basis in individual housing loan segment, we had a good growth of 15%, and on a quarter-on-quarter basis, a good growth of 4%. But however, still you see in comparison to other players who were present in the housing market, their growth was much aggressive on both a year-on-year basis and quarter-on-quarter basis. I mean if I have to name some large private banks, they had growth of north of 18% right? So -- and also now we have taken a further rise in the interest rates. So in just wanted to understand, is it the competitive intensity that is hampering our growth? Or how should we look at growth from year on for LIC Housing Finance?

Yes, Yes. As far as the growth is concerned, really, you got a good question. I agree with you. What happened to say in the market now, it is very competitive because all our -- many players are there, even including banks and HFCs all are playing in that. And of course, looking at the size of our company, what we call growth, if you look at from that parameters, I think it will be more clear. Last year, also what happened in Q3 was very heavy because of a lot of pent-up demand in the Q1, Q2 of last year. And then the Q3 also was very nearly -- we did nearly more than [ INR 16 ] -- nearly [ INR 17-odd crores ] in that quarter itself. So over that, we have seen the growth of nearly 5% differencing in the current year. And then if you look at the overall also, overall for the 3 quarters together, that growth is more than 30%, 35% now. So in the market, I agree, there is a challenge. But now what happened even though it increased rate of interest a few basis points, it is up only. In the market, actually, we're having what we call now demand across in all areas in -- actually, geographically [ tied 2, tied 3 ] metro [indiscernible] what happened, our people are really on the field. And with that, our numbers of even channels are doing very well. And all regions are contributing this year. So with that, we are very sure that I think the growth rates will be maintained or further may improve.

Just to add to what MD has just mentioned, 15% growth on a 2 lakh growth portfolio also on the core home loans where the competition is the most intense. I think this 15% growth on this book, we are seeing after many, many quarters, and despite the so-called competition that you referred to.

But even sir...

We've lost the line for the current participant. We'll move to the next participant. We take the question from the line of Asutosh K. Mishra from Ashika Stock Broking.

Sir, my first question is towards the developer loan segment, right. We have seen good recovery in this quarter. And in the initial comment, you also mentioned that you are again start seeing growing this portfolio. So can you put some light on what is happening in this segment? We were the quite large player in the segment and was positively contributing towards that means a few quarter back. So how you really want to take this portfolio again seeing that -- no, the RIF experience?

One thing actually, I think our developer book size, you are aware that it is hovering around 6% to 7%. Because what happened, of course, after COVID, there are a lot of what you call delay and also somewhere the projects were not taking off very well and activities were slowed down almost over there. Now I think slightly it is recovering. So we also, what we call now focused a lot on this one. And already, we've got a good number of proposals with us across some different towns, cities and all. So going ahead, I think there will be a good expansion even in these projects in the developer loan book also with us in the last quarter of current year. We also look for actually even other places, even other loans like commercial lab, [indiscernible] from LRDs and all, which can yield actually better margins for us.

So what is the current incremental yield on a developer and the LAP portfolio, if you can get let us all know, compared to the home loan where we are seeing the competition. What incremental yield we are getting in these 2 other portfolio you just mentioned?

In the builder loans?

Developer loans.

Developer loans. Around, say, 12% to -- 12% to maybe 13% max. And in the loan against property, it will be ballpark around 9.5% to 10.5%, depending upon the rating.

Okay. Sir, another question is, you just mentioned that we have seen the staff improvement in NIMs. And no, the OTR number, what was the OTR number in the last quarter? And what is the OTR number in this quarter, because I think this is a large change and that may have impacted the NIMs in the quarter.

Yes, September. You're asking for September and this September, the figure was INR 2,141 crores.

Correct. Correct.

INR 2,141 crores in September quarter. This quarter that is -- December quarter is INR 490 crores.

Okay. Okay. Okay. And that interest reversal of INR 350 crores was mainly towards that OTR? If I can assume.

Q2.

Yes, in the Q2. Yes. Yes. Yes. Okay. Okay. Okay. And on a cost of fund side, how much increase do you anticipate in the next 6 months, given the way things are changing at this point of time?

The cost of fund, there is a very strong likelihood of reserve bank action on [ reverse repo, repo ]. Part of it has already been priced into the markets and the bond deals. But it has not affected too much on the longer end of the curve. It is the medium and the shorter end of the curve which has been impacted most. So if you -- and again, if you look at the construct of our liabilities, where about 60% plus of the liabilities are fixed rate in nature, that will certainly help us to cushion some of the initial increases.

Okay. Okay.

And again, if you place it in perspective, the cost of fund has been, I mean the bond deals have been hardening since October. But in the Q3 also, we have been able to get about a 7 basis points reduction in the cost of funds on a more than 2 lakh crore of liability portfolio.

Got it. Got it. Okay. Okay. And sir, last question is any more large recovery coming from the developer segment in the fourth quarter or so? Are you expecting something like that there?

Yes, if you are there in pipeline, we are all working out. Let us see how it goes because some are legal -- even now these things are there because developer books. Of course, [indiscernible] are very bigger size in volume each single case like that. But all put together, it will somewhat, actually, the volume will be a good size.

Okay. Something like what we have done in this quarter?

No, It may be better than this quarter is what we feel.

The next question is from the line of is Nidhesh Jain from Investec.

On the LCR, was there any impact on our margins or profitability in this quarter because of LCR loans?

No. Actually not. We had buffered up for the LCR in advance. So there was not too much of an impact there. And we have also disclosed it in the published numbers. You can see, the LCR is more than 20%. And we have been able to, I mean, create adequate buffers. No problems on that count.

We are fully compliant with that.

Fully compliant, yes.

Sure. And sir, can you say Stage 2 number for both individual housing as well as individual nonhousing portfolio?

Stage 2 numbers for individual housing loan is INR 5,662 crores, INR 5,600 crores.

INR 5,6OO crores. Okay. Sure.

INR 5,662 crores. Okay. And the total you already have. So you can just take it out.

The next question is from the line of Sachin Chain from Kotak Securities.

Yes. This is Nischint here. My questions are answered.

Thank you. Thank you.

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

Congratulations for a good set of numbers. So firstly, in terms of the corporate recovery of almost INR 1,500 crores of repayments have been there this quarter, any impact of that in terms of maybe the recoveries where in interest would have also come back and we would have booked something out there, which is reflecting in NIMs? Or it is your principal repayment and no one-off on the corporate side at all?

No, no, it is mostly interest. I mean it's just a principal closure, principal repayment, you can say.

Okay. So nothing in terms of either maybe interest or a penalty or something which would have -- nothing of that sort?

No, no. Nothing of that sort.

Okay. And corporate developer NPLs would have gone up by INR 130-odd crores or so during the quarter. I think to 27% suggests that there is...

There is actually, the denominator has come down, no.

The Loan book has come down.

Even on the denominator, maybe compared to 24-odd percent, so INR 3,650 goes up to INR 3,800 crores. So just want to check if there is any further slippage as well which has happened during the quarter because there seems to be INR 150-odd crores kind of an addition.

So the total Stage 3 and the project loan is INR 3,972 crores.

INR 3,972 crores.

Yes.

And in September '21, how much was it?

It was around INR 3,900 crore only.

Okay. Okay. So no increase as such?

No, no, no.

Okay. Sure. And so lastly, in terms of the overall, apart from whatever was required under the RBI, there is further [indiscernible], which is there in terms of the provisioning under Stage 1 and Stage 2 put together is almost like now at INR 830-odd crores. So would there be like a further increase, we will keep on creating the buffer under Stage 1 and Stage 2 going forward as well? Or we are more or less adequately covered now?

It is done.

Whatever is required is everything?

Yes, yes.

Yes. No, because our books are mostly in the retail segment. Retail segment, what is happening now? Recoveries are booked.

It is [indiscernible].

So now the even COVID impact, all these things are slightly now fading out. So I think that will give us a more or less same stability for us.

The next question is from the line of Rikin Shah from Credit Suisse.

Just a clarification, sir. On the -- has there been any restructured accounts that have come down of the restructured portfolio because as of last quarter, the outstanding book seems to be around INR 7,300 crores. And in one of the earlier questions, you mentioned it's just slightly about INR 7,000 crores now.

INR 7,300 crores. There has been no restructuring coming out.

So but if there was additional restructuring...

[indiscernible].

So if -- then if there's additional restructuring and no portfolio -- no account has come out, how would it be same sequentially?

No, no. Sequentially is not same. What -- I'm not able to understand. Total put together will be around INR 7,500 crores. That was the number I had taken INR 7,100 crore plus INR 100-odd.

Okay. Okay. Understood. And last quarter, you had also given...

If you want the exact number, INR 7,471 crores, INR 7,000 something like that.

Okay, okay. That is helpful. And last quarter, you had also given some split on the breakdown of this restructured between some segments. Possible to furnish it this quarter?

I think it is given in the disclosures to the notes to accounts. There is a table which is appended below.

Okay. We'll have a look, sir.

Yes, that is all things.

The next question is from the line of Param Subramanian from Macquarie.

I wanted to ask on the [ BTL ]. Is there any uptick because the prepayment that you've mentioned in the presentation that has gone up half year versus 9 months, so that's my first question. And secondly, on the loan book side, how regularly, as in how frequently does the loan book reprice since it's 99% floating? So for example, if I'll be able to raise repo rates by 25 bps at the next meeting, how long before the entire loan book on the loan side, reprices? Yes, those are my two questions.

So this will be a quarterly review, which will happen. It will be a quarterly view which will happen.

On the loan book side? So the -- so if the benchmark gets raised by, say, 25 basis points, the -- including the outstanding loan book, everything will reprice as in how long before the entire loan book reprices?

I told you quarterly, depends upon when the bank is going to increase.

Okay. And my other question on...

Consequent what will be the consequent impact of that on the cost of fund, that also is to be seen. Sometimes it might so happen that even without the repo or the -- our reverse repo action, there could be an increase, which might require us to revise the -- review the PLR and revise it accordingly.

Got it. Got it. And my other question on the prepayments. So there is an uptick..

Prepayment more or less remains stable on the individual side. In the nonindividual project loan side, there has been slightly higher prepayments.

No. So I'm looking at the presentation on the individual home loan slide, it's gone up prepayment 9 months is 10.8%. And if I look at it half year, it used to be 9.9%.

No, it is...

Ah, It is running around 10%.

Around 10%.

Around 10%. [indiscernible] Even that is even earlier quarters also the pre-COVID levels have more or less same.

Yes. It was 10.8% only. And on an annual basis, I think it was 10.5%.

It was around 10%.

On a full year basis, it will generally be between 10% to 11%.

Correct.

On a full year basis.

Got it. So there is nothing special in terms of [ BTL ] in this quarter?

If you see part of the first half, if you see, 2 months, there was almost a stoppage of business activities. Due to the second wave, there was almost a stoppage of business activities in the first 2 months, that is April and major part of May.

May. May. Correct.

So at that time, the offices were also closed. In fact, there was no business activity. People didn't prepay or things like that. So to that extent, that particular 6-month period might be skewed. Now if you look at the full year of last year, that will give you a much, much more stable and comparable base.

The next question is from the line of Vikram Subramanian from Spark Capital.

Congrats on the good set of numbers.

Thank you. Thank you.

And you have explained about the margin increase because of the reduction in the OTR run rate. But with the restructuring still happening, how do you see restructuring as well as NPAs are trending going forward? Like in individual home loans last time we had 2.25 and now it's 2.1. Do we see -- can we expect any sharp correction in the coming 2 quarters, both in the individual and any [indiscernible] resolutions or [indiscernible] in the builder book? Is that possible? Any color on that?

No. individual, actually, what you said is correct. Now what happened, actually, recoveries are good. And with that, what happened in the individual book size even people who took earlier what you call a moratorium or OTR, now they are slowly coming out of that. We have got a special task force only for that. So what happened of people can come out of their doors. That will give me a good [ headwind ] for us. So that's why slowly there is an improvement in that as far as the individual retail loans are concerned. In the developer book also what happened now because slowly, there is now momentum, then projects are taking off, then sales are happening across. So we see there will be some sort of reversal even in the developer book also. Those cases and OTR slightly can be better off in this quarter.

The overall visibility is much, much stronger today as compared to 6 months back. That is for sure.

Okay. Okay. Got it, sir. And can you please say how much of quantum of loans that came out of OTR during the quarter, which is INR 490 crores during the quarter or being made. But how much would have come off normally?

No, nothing has normalized because most of them are still within the OTR framework of the moratorium. That's not come out. It will start coming out. Maybe most of the people who have taken the OTR had taken it between, say, 1.5 to 2 years, maybe 1 to 2 years. And that period will start maybe about 6 months from now.

Okay, 1 to 2 years.

6 months to 12 months from now.

6 months or 12 months from now. Got it. Got it. One final question. Now most of our loans are floating rate business as -- if and when the benchmark rates start increasing, when do we see first set of resetting, how often is the reset?

See, it is difficult to give an exact date because obviously, the Central Bank is yet to come out with their policy announcements. But my guess is that it will not be very long. Maybe anywhere between, say, maybe a couple of months we can say. It is likely to happen across the industry. It is not the first time it is happening. It has happened earlier also several times in the past. 2, 3 years back in the past also, it has -- a regular phenomenon, and it will happen in its normal [indiscernible].

I meant in our portfolio, when does the reset happen?

Every quarter. Every quarter.

Every quarter, the reset happens every quarter. It reflects for the customers every quarter, sir?

Every quarter.

The next question is from the line of Piran Engineer from CLSA.

Sir, my first question is basically on [indiscernible] the last 1 to 2 years. [indiscernible] has been pretty slow. Just want to know how has it picked up now and how much of our resolutions in home loan and LAP in the past 2 quarters have been due to [indiscernible]

Due to?

[indiscernible].

Yes, [indiscernible] and all. No [indiscernible] actions, of course, you are aware last year, what happened because of COVID, of course, that was -- there was some sort of no take out -- in the sense -- actually were not that much enforceable [indiscernible]. So what happened. Now in this quarter, slowly, it has picked up. Now it is coming to an, actually, almost 70%, 80% of our earlier, what we call pre-COVID levels in% [ surface activities ] also. I think going ahead, once we restore the full, I think there will be good success like in the past.

Okay. Sir, typically, what percentage of our individual NPLs would we invoke [indiscernible] like out of 100 NPL accounts.

Individual side?

Individual side, yes.

Yes, of course, it depends because now people can come for [ OTLs ]. They can also come out of that. Even they can repay. All these things up there involved. I think it may not be very heavy. What I feel, I think pre-COVID levels also we used to hardly maybe around 15%, 16% range will be the amount.

See, The very -- in the [indiscernible], especially in the retail customer segment, the issuance of a notice under Section 13 by 2 itself brings forth action from the part of the borrower. So many times, you may not actually even have to take it to the level of an auction.

Okay. Got it. Got it. Sir, my next question is on yield. So I just want to understand this properly. We've increased it from Jan 1. Firstly, is increased only for the incremental disbursement post-Jan 1? Secondly, has competition also done it? And thirdly, just before Dussehra, we had sort of an interest festival offer of 6.6%. So is it just -- and that was still 31st December. So is it just that festival offer has gone and optically, the yields look higher? Have we just withdrawn that?

No, no, no. Before the offer, the rates were different, the offer the rate was 6.6%, and after the offer, we have increased the lending rates for the new loans from first week of January. It is not a removal of an offer.

New loans. okay. But the old book...

There has been other changes also internally in different segments in different roles, plans also, product categories also, there have been changes made. It is not a removal of an offer.

Got it. But is it, has the old book also been repriced by 10 bps?

No, no. No. Not yet.

Okay. And are we seeing competition start to do that?

See, we have taken an independent view depending upon our own perception of the market and our own growth trajectory. We have taken an independent decision. It is possible that some players might have taken or may not have taken.

The next question is from the line of Abhishek Khanna from Jefferies.

This is Prakhar. Just a couple of questions. First, just if I could clarify that of this credit cost during the quarter of about INR 350-odd crores, is it possible to help to break it up between what is any of the onetime here because, let's say, the INR 490-odd crores of restructuring done this quarter may have attracted a 10% provision. Any of the reclassification cost of INR 230 crores, if it was done through the P&L this quarter? So what is basically the business as usual part of INR 355 crores, and what is the onetime part of the INR 355 crores?

See, you can say that the INR 230 crores that has been created because of the RBI provisioning requirement or the RBI circular. That is something which is for the first time, it is obviously not done earlier, the first time that the circular has also been implemented. So apart from that, everything will be normal.

Even though restructuring wasn't done this time that INR 4-odd crores in case you have to make a 10% provision on INR 490 crores...

That has been done earlier also. Restructuring for provisioning related to restructuring has been done in previous quarters also.

No, no. I know. So that INR 49 crores would be part of the INR 355 crores, right? Is that fair to understand?

Yes. Yes.

And on the project loan repayments that you mentioned, INR 600 crores, INR 700 crores. Fair to assume that they were all Stage 1-type of loans, right? Because you've -- it's basically repayment of -- because of Stage 3 within project loans has declined and they practically paid just a principal so they were probably good quality loans only.

Mostly Stage 1, but could be Stage 2 also.

Okay. Understood. Perfect. And last thing is just a little bit forward-looking historically, fourth quarter for LIC tends to be a longer quarter in terms of even NII recognition, partly because some of the overdue accounts, et cetera, come and pay back. Would it be fair to assume that pattern is likely to continue? Or would we see it normalized?

No. it is difficult to actually give you any number. To be very honest, you are asking for a number, so I cannot give a number, it is forward-looking. But yes, certainly, we can say that margin stability will be there, for sure. And typically, fourth quarter is the best quarter in terms of business. It is the best quarter for recoveries as well.

The next question is from the line of Akhil Hazari from Robocapital.

So I just want to know what is the normalized credit cost for the company?

See, the normalized credit cost in the last 2 years, I can just share with you. FY '20 was 48 basis points. FY'21 was 60 basis points. And currently, if you see in the first part of the year, first half of the year, it was very high, more than 100 basis points. Q3 credit cost has come back to 60 basis points.

Okay. And going ahead, are you planning on keeping it below the 1% then?

Yes, certainly, certainly.

The next question is from the line of Mayank from [ SUD Life ].

Yes. Our loan book is linked to...

Hello. Sorry, there are some disturbance. Yes. Please tell again, sir.

Yes. So our loan book, which is [ floating ], it's linked to BPLR. So whether it is BPLR is lined to marginal cost of fund or average cost of funds?

Now what is LHPLR?

No, that is LHPLR is linked with the marginal cost of fund also has got a weightage, I will put it this way. It is not purely on the marginal cost of funds, but marginal cost of fund has got a replacement cost impact.

Okay. So greater retail is for marginal cost of or average cost of fund or LHPLR source of fund?

No, no, it is marginal.

Okay. Understood. And 30% of our borrowing is from banks and MSP. So is it fair to assume that this portion of the [indiscernible] would be linked to [ reported ]?

Some of them are with external benchmarks like T-bill also.

Okay. But most of it would be like either T-bill or [indiscernible]?

Yes.

Ladies and gentlemen, we take the last question from the line of Kunal Shah from ICICI Securities.

Yes. So on restructuring, so you said there are no reversals, but I assume we are not accruing interest on the restructuring the way we have reversed it in the previous 2 quarters. [ INR 500 crores ] interest voucher also have got reversed in this quarter as well, maybe [indiscernible]...

No. No it is not there.

It is not there?

It is not going to happen. In Q2 itself is done and finished.

Okay. Okay. So incremental restructuring, which was there that, there is no reversal which [ are part of this one ]...

There is no further restructuring, I mean, circular or instruction from government of India. It has stopped that from RBI...

No, no. The pending, which was there, okay, which would have got implemented...

Even that implementation period is over.

Yes. okay. Okay. And lastly, in terms of the outstanding restructured pool. So 5,000 is corporate and balance is individual. But within individual, can you give how much would be of home loan and how much would be left?

I don't have the full details right now. I can...

Pardon me. [indiscernible] as far the restructuring is concerned, with our loan book all if you see 80% is individual only into that.

Yes. Yes. no, if there is any difference in terms of maybe let or maybe individual nonhome loans out there. So I just wanted to get that sense here.

No, no. There is nothing.

Okay. Okay. I'll take it from here separately.

Yes, separately.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments.

Yes. Yes, I thank everyone of you for giving this opportunity once again. Our friends, actually, we or what you call very, very positive and then very strong Q4, and the company is fully geared up, what we call all my team members across the country are fully working in tandem with all our goals. All the recovery people are also putting their best. So going forward, we look for a very good double-digit growth as far as things are concerned, and at least again, recovery also will be very strong enough to bring down what we call our NPL level than the expected levels. With all these things, the company will be in a position to close the financial year, and a very strong footing. And on behalf of the entire team here, I also thank you for giving this chance to meet every one of you. Thank you. Wish you all the best.

Thank you very much, sir.

Thank you. Thank you.

Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.