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

Good morning, ladies and gentlemen. Welcome to the LIC Housing Finance Q4 FY '23 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you, sir.

Thank you, Lizan. Good morning, everyone, and welcome to this earnings call of LIC Housing Finance. We have with us the management team of LIC Housing backed by Mr. Y. Viswanatha Gowd, MD and CEO; Mr. Ashwani Ghai, COO; and Mr. Sudipto Sil, CFO. I would request Mr. Viswanatha to share his initial remarks. Post which, we'll open the floor for Q&A. Over to you, sir.

Yes. Good morning. Thank you, Praveen. Thank you. Very good morning to all of you. I extend a hearty welcome every one of you to the post-Earnings Conference Call of our LIC Housing Finance Limited. As you are aware, LICHFL declared its Q4 FY '23 results yesterday. During the year '22-'23, we have seen significant movement in interest rate scenario due to increase in repo rates by RBI. In the April policy, RBI have signaled a pause, post which there have been some improvement in the interest rate scenario. Now I would like to share the key highlights of the quarter, which are as follows: total revenue from operations, INR 6,415 crore as against INR 5,300 crore for the corresponding quarter of the previous year, with a growth rate of 21%. Outstanding loan portfolio stood at INR 2,75,047 crore as against INR 2,51,120 crore as on March 31, '22 reflecting a growth of 10%. The individual home loan portfolio stood at INR 2,28,730 crore as against INR 2,04,098 crore as on March 31, '22, and it is up by 12%. It is now comprising 83% of our total loan book. Total disbursement for the quarter were INR 16,027 crore as against INR 19,315 crore for Q4 FY '22. Out of that, disbursement in the individual home loans were INR 12,406 crore as against INR 16,341 crore for Q4 FY '22. Project loans were INR 1,554 crore as compared to INR 428 crore in Q4 of last year. On the net interest income front, the NII was INR 1,990.30 crore for the quarter against INR 1,629.87 crore for Q4 of FY '22 on the initial growth of 22%. Net interest margin for the quarter stood at 2.93% as against 2.64% for Q4 of FY '22. Profit before tax, PBT, for the quarter stood at INR 1,444.78 crore as against INR 1,314.41 crore, showing a growth of 10%. Profit after tax for the quarter stood at INR 1,180.28 crore as against INR 1,118.64 crore for the same period of previous year, reflecting a growth of 5.5%. Dividend declared was 425%. That is INR 8.50 per share. In terms of asset quality, the Stage 3 exposure at default stood at 4.37% as against 4.64% as on March 31, '22 and 4.75% as on December 31, '22, reflecting a sequential improvement in the same. Total provisions as on 31/03/23 is INR 7,230.26 crore, with Stage 3 provisioning cover of 44%. During the quarter, we have written off loans to the tune of approximately INR 350 crore, taking the total write-off to around INR 540 crore for the full year. Going forward, the credit cards are also likely to be lower than past years. Also with the continued focus on recovery, the asset quality has become stable with an improving trend quarter-over-quarter, which has helped us in much better visibility. On the funding side, we have witnessed an increase in overall cost of funds by 111 basis points during last year against repo rate increase of 250 basis points by RBI during the same period. Incremental cost of funds stood at 7.38% for the full year and 7.84% for the quarter. Net interest margin for the year stood at 2.41% as against 2.28% both year-on-year and also quarter-on-quarter, the improvement in spreads has been registered. During the most part of the year, the yields remained at elevated levels. However, in the past 1 month or so, we have witnessed reduction in the yields across tenors, especially at the longer end of the yield curve. This augurs well very well for the company in terms of our total management of liability. In terms of asset pricing, we have passed on 210 basis points of rate hikes during the year and a further 25 basis points in April '23. In terms of business operations, on a full year basis, there has been a growth. Though asset growth was tempered due to successive hikes in interest rates impacting trade offtake, especially towards the second half of the year, with the greater stability in interest rates, we are confident of a very good year ahead. Further, I would like to bring your attention to a large number of initiatives, which have undertaken and proposed to be undertaken for the current year, we are also expanding our presence in the geographic areas across the country by opening our new offices across all offices -- all our area offices. Then a specialized team has been formed for appraise of high value cases at corporate office, an implementation of SAP has been fully completed, we also implemented a new core loan management system, LMS, to improve and smoothen the loan management process also. With all these initiatives, we are certain that the year will be far better than the earlier years. With this brief introduction, I would like to invite you for your queries. Thank you.

[Operator Instructions] The first quest is from the line of Vivek Ramakrishnan from DSP Mutual Fund.

This is Kunal from DSP Mutual Fund. So I just have two questions. First was on the retail disbursements, which is your individual housing loans. So we have seen 2 consecutive quarters of sequential decline. So is it just on the account of base effect? Or are we seeing any real slowdown happening over there? And second question was on the NIM trajectory. So first thing is obviously, like you mentioned that your long term cost of funding has also come down, and you have also passed around 210 basis points of rate increases on your asset side. So what portion of your book has completely seen the impact of these rate resets? And how do you see your NIM panning out in the upcoming quarters?

Yes. Okay. Okay. Actually, it's a very good question. As far as disbursements are concerned, if you look at what happened, the book has -- of course, the overall portfolio has gone up by more than 10%, I agree. Only thing is in some pockets the disbursements were not to the extent we expected actually or else we would have scored better there also. Even then what happened, of course, what do you say also has got some impact because the interest rate hike. In some pockets, actually people that wait and watch more also was continuing. In that what happened, the disbursement across, if you see from regions, especially 1 or 2 pockets, we could not see that much of what you called the traction compared to other regions. Or else what happened, the base effect also earlier years was slightly was there. That also one reason because last year, the rates were nearly almost at 200 basis points less than the current level, especially in affordable segment that would have taken some sort of hit. And with all these things put together, I think now what happened more or less the rates have stabilized. Now the visibility is very clear that in the days to come, the traction even now we are already witnessing a very good improvement in every pocket, even those areas which we could not do earlier. Now there also good traction is there. With that, we are very confident of actually very good progress in our disbursements in the Individual home loan book. Yes, NIM you will...

Yes, Kunal, regarding the margins, yes, as far as the asset side is concerned, we have affected one more rate hike, which is WEF, April 1, 2023. So that is yet to I mean get impacted because all the others were in the previous financial year, in this financial year we have done 25 basis points, which will be coming in Q1.

The next question is from the line of Avinash Singh from Emkay Global.

Yes. So first question is like from what you said over in quarter 3 call I'm taking it from there, so two things have just sort of reversed? So if I look at the Stage 3 provisioning coverage ratio, you had increased it to 50% in Q3 and said that, okay, you would like to be there. But again, you have lowered it to 44%. And the second, in that quarter also that, okay, you were kind of going slow towards the project finance as a percent is concerned. Again in Q4, that has gone up. So I mean what has changed from Q3 to Q4 to sort of -- that made you change the stance on these two things? That's my question number one. And second, if you can just help me with Slide 18, where you have disclosed the spread and NIMs. So if I see on the annual basis, the spread seems to have improved by almost like 50 basis points but the NIMs improvement is just, I mean, 12%, 13% basis points. So what sort of -- I mean kind of -- why is there [indiscernible]. So these are my 2 questions.

Yes, I will start with the query on the provision. See actually, if you look at it during the year, we have written off INR 540 crores. That's in the opening statement we have mentioned. Now if you add that INR 540 crores to the existing provisions on book, it will work out to almost 50%, 49-point-something percent. So it is not to say that the provision cover has been reduced or some things. There were some cases on which 100% provisioning was done, so they have been removed. So there is no change in stance per se, number one. Number two was the query regarding the margins on a full year basis see on a full year basis at the...

[indiscernible].

Sorry?

Project finance disbursement also, that has accelerated in Q4.

Yes. That...

Yes, as per the project finance is concerned, you see what happened we do a selective. Even earlier also in the beginning of the year also we are targeting that the year before, that is '21, '22, we could not do well. Of course, the small uptick was there. But last year, what happened actually on a selective basis, we have done very well, both in terms of our construction finance the line of trade items and all. So there was a good improvement in that book that also one thing which added to our portfolio and it is very healthy product we added to that.

And that is actually probably the number is appearing increased because of the base effect. A year before that, there was hardly any disbursement.

Correct.

Even now, even now after the disbursements of third quarter or fourth quarter, if you see the overall composition to the book is hardly 3% or 4%. Second point is pertaining to the margins. Margins at the beginning of this year in the first quarter call, I think we had very clearly said on a full year basis we will certainly improve. If you see in one of the quarters, that was second quarter, there was abnormal dip in the margins, which fell down to 1.8%. Even that point in time, also, we were very confident that we maintained the outlook on a full year basis we will recover. Now you kindly compare the second half margins with the second half margins of previous year and then really you will find that there is a significant improvement.

Okay. Okay. Okay. Then moving on, so more kind of looking at if the numbers on your slide, that is spreads and margins. If they are indeed for the full year, then I mean the gap for FY '22 is close to 40 basis points as far as the NIM versus spread is concerned...

In fact, if you see -- again, I'm just repeating, second quarter, we had some reversals on the income side, which you will find details of in the con-call transcript. It is because of those reversals which have happened in the second quarter, it has depressed. That is the reason why I'm saying that if you compare the second half to -- with the second half, then actually, you will get to see the real -- it will reflect.

Earlier, our guidance was more or less 2.4%, 2.5% as I was saying...

On a full year basis. That is.

On a full year basis that is our guidance...

By guidance we had held right from the beginning of the year.

Yes, that is always held up.

Okay, okay. And any reason for sort of a...

Sorry to interrupt Mr. Singh, may we request that you return to the question queue. The next question is from the line of Gaurav Kochar from Mirae Asset.

I have 3 questions. Sir, firstly, on this margin expansion, just to clarify, there are no one-offs, right? This is -- the 1.93% we have reported is -- does not have any one-off?

There are no one offs.

No, no, no.

No one-offs.

Sure. Sure. Great. Great. So sir, from an ongoing basis, let's say taking FY '24 full year, the reported margins for FY '23 was 2.41%. And if I remove the impact of that second quarter, what I think Sudipto alluded to in the previous question, there was a reversal of INR 275 crore because of fixed to floating conversion. If I remove that, the NIM -- broadly 2.55% is the full year NIM for 2023. Now going ahead, given that we have exited the quarter at 2.93% the cost of fund, if I look at it, at 7.63% on the portfolio versus incremental 7.8%. So I mean, there should not be any material increase in cost of funds from here on. On the other hand, full year -- the full benefit of yield will come in this year because the yield improvement, whatever we took were more back ended. So taking those cues and given that the margins at 2.9%, probably would settle at 2.6%, 2.7% on a steady-state basis. So for the full year '24, any sort of guidance you'd like to give or maybe is it reasonable to expect the 2.6%, 2.7% margins for full year FY '24? That was the first question.

Yes, I think we will not put the word guidance but certainly going by the numbers 2.5% at the base certainly looks achievable at the base.

Okay. So 2.55% is what you did in the previous year, and going by that year was marred with lot of challenges on cost of fund.

Correct. correct.

So is it reasonable to expect some improvement from that level...?

Yes. It is. And we are also positive on the improvement in the margins ahead of 2.5% minimum.

Yes. And given the 2.93% does not have any one-off that you've delivered, I mean some rub-off of that will also translate in the next few quarters?

Generally that happens.

Sure, sure. Sure. The second question is with respect to the Stage 2. So there has been an increase of almost 130 bps in Stage 2. Just wanted to understand, is it due to restructured book which is coming out of moratorium and now probably starting to fall in the overdue bucket? Is that the reason or there is some other reason?

No. Restructured book earlier also was the same only. No, there was no change in that one. Now what you call now by end of June, everything will be getting over, more or less.

Okay. Then why has there been a jump in Stage 2 assets? Stage 2 asset has gone up to 5.2%, 3.9% in the previous quarter. What is the reason behind that, sir?

Mostly, what actually we were looking into that here and there, what we would find is that because of the increase in EMI now some increment now because of rate increases, EMI also increased across. So what happened when this NACH payment were hitting here and there, probably what we noticed is that the amounts were not fully adequate enough to get it. That's why instead of Stage 1, we have slightly come to Stage 2. But now efforts are fully on. What happened now it has been, once again, we are looking at a system. So now recovery is kept in place. So with that, again, they move up to Stage 1. That's quite going to happen. I think 10% or even 20% efforts will be there on the -- which ever [indiscernible]. And we're confident that in this quarter, this effect will not be there.

Mostly.

Okay. Okay. So you're saying that...

It is more of a technical impact, and that has now been addressed.

Okay. So maybe in the June quarter, this number will move back to the December quarter.

Yes. Yes. Yes, if you see steady state basis, it has never been this number, this number has never been in this level on a steady-state basis, I mean even during COVID period yes. So this is more of a technical glitch.

So large part of this will be pulled back by the next quarter.

Yes, yes, certainly. Certainly. And accounts are all paying accounts, yes. There are no delinquencies. They're all paying accounts.

Yes, yes, all paying accounts only. There is...

They are regular and paying accounts.

Okay. Got it. Got it. And sir, just to clarify on the credit cost, the earlier participant asked. The Stage 3 cover is 44%. So going forward, we should look at Stage 3 PCR to be maintained at this 40%, 45% level? Or this will be inched up to 50% going forward? If there are no write-offs, would you like to increase it 50%, or this is what you maintain 40%, 45% PCR on the Stage 3.

I think we look at this matter from the credit cost point of view. Credit cost point of view, it is likely to be in the range of around 45, 50 basis points. And it will be probably across all the stages as and when required to create more balance.

Okay. So you will maintain 45 basis point credit cost for full year FY '24.

Yes.

And moreover now resolutions for all the cases also we are seeing something positive. So that probably this year, there will be some good number of resolutions also. So that something will definitely -- asset quality will improve also.

Okay. You are saying on the developer side?

Developer side also actually efforts are on there to what we call to reduce the NPAs. I think some good -- or at least 4, 5 good resolutions are being worked out.

Also pipeline in NCLT...

Yes. And pipeline, NCLT almost [indiscernible] also is in NCLT.

Okay. Sir, any number, I mean, quantum of resolutions that you expect in this year broadly?

This year out of the things, I think at least INR 400 crores to INR 500 crores minimum we are expecting.

Okay, INR 400 crore to INR 500 crore recovery in this year. Sure. Sure. And sir, just last question on the disbursement side, again, I think one of the participants earlier also asked, the disbursement had slowed down. So do you see any pickup in FY '24? And if any target that you would like to give for full year FY '24 now that interest rates [indiscernible].

Yes, yes, yes, correct, correct. No, this is only a setback for some parts of the -- in our regions, not across India, but what happened some pockets we could not do very well due to some regions there. Otherwise, for the whole of this current year, that is FY '24, we are certain that our growth rates will be -- in the Individual home loan book should be at least minimum of 12%, 15% going ahead. Then overall, we can show a growth rate of 10%, 12%. That's what we're looking at and according to that target is also worked out and book growth will be very healthy this year.

Sir, 10%, 12% disbursement growth is...?

Yes, in the individual home loan book we are minimum expecting around 12% to 15% range.

Sorry, this is AUM or disbursement, sir just to clarify.

Disbursement, this is on the disbursement.

Okay, disbursement showing 12% to 15% growth on individual loan book.

Yes. Yes. And overall book also now already we are growing at 10%, that will be better than 10%, at least, it should go to 12% at least.

Okay. Got it. Got it, sir. And on project loan sir this quarter, we did some disbursals, so this run rate will continue 3, 4 percentage of total...?

Our loan book project finance consisting around 3% to 4% only. And will slight -- a small uptick, maybe there not very, what you call, a great growth rate will be there, but anyhow we are also very selective basis. We are actually disbursing loans and also selecting the good clients and good projects for our construction finance.

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

Two questions that I have. One is just recalling our commentary in the second quarter conference call, where we did indicate that there was some competitive pressures and due to which, we had to kind of restrict pass on in terms of transmission of rates, right? If we now look at the current situation, clearly, the competitive intensity doesn't seem to have stopped and visibly, the demand appears be lower, which is reflecting into a disbursement growth as well. In this scenario, what gives us the confidence that we would be able to hold on to our yields or margins, and there will be no pressure on us to kind of further probably lower our yields or probably lower our growth aspirations?

Yes. As far as the disbursement are concerned, of course, one thing is this year also, overall growth in the book is around 10% across. And then in the Individual home loan also 12% is there. What confidence -- actually, we are very confident that as far as disbursements are concerned, mainly in Individual home loan book because now the rates are almost have stabilized. We are also -- now everywhere we also what you call now implemented new systems. What we have done is now earlier to maintain a very good -- to improve our TAT actually we have come up -- actually we have implemented a very good system of supporting even grassroot level people, and we also have now implemented SAP and also we have implemented very good software also where the -- as I told you earlier our own management system is now being improved with the new software. With all these things actually, even we are also increasing our penetration outreach by opening new offices also across all the geographies. So these things anyhow will give us a cushion that growth rate what we are expecting minimum has to come from there only and it will come also. So with all these things in place, we are very sure that as far as the book size is concerned, we'll grow at a very healthy rate of around 12% to 15% as I told you already. Then in asset quality-wise, if you look at what happened now because of good efforts made so far. Apart from the Individual home loan, your other loans also, were able to show progress. And very good resolutions are in place. With that, I think the next 2, 3 quarters at least, we can witness a very good improvement in asset quality also. So with these things we are very sure that all our promises like our NIMs as well as the margins we certainly maintain.

We -- if I can just add just one more thing is that if you look at the prepayment rate that has actually come down. So that is indicative of a different competitive intensity as what was seen in the last maybe 2 years or so.

Right. My second question is, again, pertaining to margins, right? I mean it -- not looking at the current quarter margins but if I look at last 5 years, margins typically have been in a band. And although while we appreciate that on a full year basis, we have delivered the margins that we were looking at, the margin volatility on a quarterly basis in last 2 years, particularly, has increased significantly. So just wanted to understand that fundamentally, has there been any change into our business, which is leading to this sort of a quarterly margin volatility? Because in the past also, we have remained in the band of about 230, 240 basis points of margins, but the quarterly volatility wasn't so high.

See as far as the quarterly volatility is concerned, if you see the exit margins of every financial year has always been on the highest among the 4 quarters. So that I would attribute it to be a usual phenomena, which has been there for several years. So that is one thing. Second thing, if you look at it on a full year basis, there has been stability, and barring last financial year, barring '21, '22, it has been more or less increasing by few basis points. In '22, '23, we had indicated that it will be on a full year basis, much better than what we had seen in the whole of '21, '22, and it has come out that way. So going forward, you will see some stability in the margins, and we have indicated also the band in which it is likely to be there. So stability will certainly be there.

And one more the earlier 1 or 2 quarters, what happened there was a delay in transmission of the rate hikes that probably also would have effected that margins only. But going forward now, I think the visibility is very clear. I think such volatility will not at all will [indiscernible] at all. We are very much confident of that.

Sure. And sir, just one last question, if I can squeeze in. At what frequency do we kind of relook or revise our PD, LGD assumptions given the fact that across buckets our provision coverage ratio be it Stage 1, 2 or 3 has been, again, a bit too volatile. And again, I'm not looking at the fourth quarter numbers. I'm looking at probably a much longer frame, maybe about 2 to 3 years. So just wanted to understand at what frequency do we change our assumptions?

See, it is actually a dynamic model. On a rolling basis, every quarter when we sit down to draw the numbers, it is on the past 120 quarters -- 120 months. That is 10 years.

The historical, our own performance...

So for example, when we sit for, let's say, March, then it will be the previous 120 months, when we sit for June, it will be the previous 120 months from June backwards just like that. So it's on a rolling basis. So you can say in effect, it gets reviewed every quarter.

But Sudipto something as a standard -- I mean something like a Stage 1 provision, right, a standard effect provision typically in that line also, we have seen a bit of a volatility right I mean...

So that is precisely what I'm saying now. Now we have ensured that there is -- earlier it was completely, I would say, a very objective model now management overlays also there, which ensures this we will get to see, from this quarter onwards you have already started seeing that from Stage 1 et cetera also we have created sufficient buffer to ensure that there is no such volatility even if one particular account moves from one bucket to another.

The next question is from the line of [ Harsh Vardhan from Bandhan AMC ].

Sir, just a couple of questions. Wanted to understand of CET1 ratio as of March '23.

Pardon that?

Can you please speak a little loudly.

Sorry to interrupt [ Mr. Harsh Vardhan ] sir we are not able to hear you clearly.

I want to understand the CET1 ratio for the financial year.

So for the financial year, it is -- yesterday only numbers have come, so we'll have to first report it to the regulator, but it is right now expected to be in the range of around 16% to 17%. And the total capital adequacy will be 18%-plus.

Sure. And sir, what is the NHB allocation for the financial year, the total disbursement that you got on NHB?

For which '23-'24 or '22-'23?

'22, '23?

Last financial year, last financial year around say INR 5,000 crores we have taken some NHB.

And we expect a similar amount to come this year also?

Sightly more possibly.

Okay. And sir, just one last question on recent cost of funds. You mentioned that we are -- in quarter 4, we raised somewhere at around 7.8%. So what would be the rate of say in quarter 1 -- of -- is it around that number or it has further reached up?

Q1 for this -- I mean current '23, '24. Q1?

Yes, yes...

Yes. Yes, sir.

It has come down by around 25 basis points.

Okay. Our incremental costs have come down?

Yes. 20 -- around 20 basis points you can say.

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

Sir, I mean obviously, we kind of continue to surprise and the good thing is that this time around we have a pleasant surprise on margins and credit cost and asset quality. And while we have I mean, largely answered all the question just wanted to understand that when we said there are no one-offs in the margins of 2.9%, 3% that we reported, sir, I mean just wanted to understand given that we follow a quarterly reset on the first day of every quarter, how is it that the computed means basically what we compute using the interest income number that you report have expanded by close to 60 basis points on a Q-o-Q basis. That's the first question that I kind of wanted to understand. The thing is sir, I mean maybe when we look at your disbursements in this quarter, I mean -- I think I mean maybe you were the first corporate at even last quarter to acknowledge that there is some sentimental moderation that you're seeing on the demand, particularly in the higher ticket size segment. Sir, this quarter, you could have chosen to deliver a slightly higher growth rather than deliver such high margins. So what is your thought there? And secondly, sir, we have kind of acknowledged that going forward, developer finance will start it, maybe increasing or increasing a little bit from here. Just wanted to understand for a product segment, where we last reported a 45% kind of NPAs, I mean what is the rationale of again growing that book?

Now as far as the project finance is concerned, what happened, of course, as I told you earlier, so we're in selective basis we're giving in some pockets where our own loan customers who are having very good experience with us, number one. And that book also we have to look into that because as you know, that books offer some sort of better margins for us. That is there. Then your second question was about the disbursements and all, I agree, what happened actually, I told same thing what happened. We are also -- at the time, demand also was very good. We could see that there's substantial increase in the demand also, improvement sentiments and all. Actually, the performance across India if we measure. What happened, 1 or 2 regions could not do very well. That's why the numbers aren't that much what you call comparable, or we could not do very well overall. Or else in other pockets we have shown excellent growth. The demand is fully utilized. The demand is fully met. That's why we're very confident that in the days to come, even this current year, the disbursement certainly will be, as I promised you, that it will be around -- in the Individual home loan book at least should be in the range of 12 % to 15%. NIMs.

Yes. You had a query on NIMs, Abhijit? Can you kindly repeat?

Yes, sir, sir, what I wanted to understand is, you have acknowledged that there are no one-offs in the margin...

I got you. I remember. See actually, the very simple. You can actually add back if you at the fact that we have increased by 25 basis points which is effective from January 1 itself on the entire book of almost INR 2,70,000 or INR 2,60,000. Plus the incremental disbursement which we had done. You remember that we have also increased on our incremental pricing from January. That also if you see the incremental net, I would say, addition to the assets. I think you will be able to come very close to the figure of the current quarter's interest income. And there are certain lags also, certain lags certain portfolios because of NPLs, et cetera, could have not been impacted in the previous quarter. They have come in this quarter. There has been improvement in the NPAs also. So there -- that way you can I think, very easily reconcile, there is no one-offs in the current quarter as far as the interest income is concerned.

And one more input on your disbursement point what happened. Of course, as I mentioned earlier also, the partly what we call the base effect also was there because the year '21, '22 was -- if you compare to that. Then secondly, of course, rate hike that also is partly attributable in some pockets of the -- our geographic locations. Then in the project finance or construction finance, if you ask me, nowadays, we are focusing on even some LRDs and again some sort of line of credits. So what happened there the margins we are able to pick up.

And there is the risk is much less as compared to a core construction finance.

Got it, sir. Sir, this is useful and maybe one last data-keeping question. If you've already shared in the presentation, I can look it up. But you wish to share your Stage 3 numbers for IHL, NHC, NHI and project loans?

Yes, I can share with you just the first, okay, as far as the Stage 3 numbers for IHL it is 1.6%. Then for NHI, that is 6.6%, NHC is 22% and project it is 40%. And I would just like to add that in each of these 4 categories it is reduction from the December numbers.

Got it, sir. Sir, which means that -- I mean, at least in your Stage 3, there has been some resolutions or upgrades that you have seen? Because what you were explaining...

Stage 3 across, we have collected more than INR 500 crores of the -- in the NPA accounts itself, which includes both the principal and interest...

Good resolution over there actually.

Got it. And sir, this INR 540 crores of write offs in FY '23, what was the write-off number in Q4?

The Q4 number was INR 352 crore approximately plus the one that we have done in I think Q2 was INR 191 crore.

Yes, Q2.

So put together, it's INR 540 crores.

The next question is from the line of Kunal Shah from Citigroup.

Yes. So first, in terms of the proportion of the customers wherein there would have been the EMIs increase versus the tenor increase if you can just highlight that, maybe if it EBITDA pass on in the rates, so that would be helpful.

So total about, say, number-wise, it will be around 12,000 customers.

1%.

Which is about -- customer number-wise, it is less than 1% of the total outstanding number of live loans.

Correct, correct.

Live loans is around 15 lakhs, so it less than 1%.

Wherein there would have been the increase in EMI?

Yes, yes. 13,000 is the number if you need more...

Current number 13,000?

13,000.

Okay, okay. Okay. And in absolute terms, if you have to look at it in terms of the exposure?

Exposure-wise, it will be closer to around, say, INR 3,000 crores, INR 2,000 crores to INR 3,000 crores.

Average ticket size...

Average ticket size will be on INR 30 lakhs.

INR 25 lakhs to 30 lakhs.

INR 30 lakhs.

Okay. No, because the way you highlighted in terms of this increase in Stage 2, maybe a part of it is because of this...

It is. Exactly what we said in our opening remarks also, if you actually see this. So it is not that these accounts are not paying. But the full EMI has not been recovered because of some technical matters. Now we have addressed the issue. So now onwards, this will not be recurring.

Okay. Because that delta was almost like 1.3%, 1.4%, so just like...

Yes, so this actually, it's a 1.1% in terms of the number of accounts also as a percent of our total live loans.

1.1%.

Okay. Okay. Got it. And secondly, maybe with respect to the growth, so you mentioned in terms of the prepayment rates actually coming off, but maybe because of the competitive intensity, is it that also which is leading to relatively lower disbursement growth particularly in 4Q? Otherwise, generally, seasonally, 4Q is quite strong for us. So was it yearly on account of rate compared to the competitors? Or how is it?

No, it is not rate per se. Actually, if you look at it, interest rates have been going up in the system for the last 3 quarters, right, from the month of June onwards up to February. And every time there's been an increase in this and every -- so what actually happens is that if the interest rate on the home loans or any finance product increases very sharply within a very small space of time, then it is sometimes pushing the customers into a deferment mode. It is not that the person has canceled the decision to purchase. It is just a deferment maybe for 1 quarter, maybe for 2 quarters. But actually, if you see now interest rate as it looks like it has peaked, and we've already seen that impact on bond yields which has come down by 30, 40 basis points at least. So taking that cue, it is likely that going forward, interest rate stability will be there and the customers have already shown indications that they have come back to the market. The other thing is that on the real estate side, you have seen price points moving up, which is also a positive factor, which actually gives you an indication that demand is picking up.

No, absolutely. So compared -- but still in terms of the market share, it seems to be a loss. So maybe [indiscernible] but we are seeing so many other players growing home loan here...

No it is not a loss. If you see it is not a loss because if you see. Up to the third quarter, we were clocking home loan growth of around 15%. And if you actually see the data in terms of housing finance sector growth, till I think November or December, it was not growing more than 15%. It was more or less in that range.

No particularly for this quarter, 4Q.

Yes, I don't think one quarter gives any indication of any market share loss.

And it is only here and there are some point. What you call not across, even some regions have done even far, far better than it is. Some region's growth rates are more than even 30% also.

And on a quarterly base of say INR 15,000 crores even INR 1,000 crores extra business would have translated to a much, much higher number in terms of real numbers.

Correct...

So if you look at it per se, it is not that there has been a drastic reduction or drastic decline in the disbursement...

And moreover, what happened, to address it even more significantly, we have also expanded our reach. As I told you that our new expansion of the branches across all the regions, that also will give us more footprints across that we will show good growth in all regions this year.

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

Yes. Can you sort of highlight which segments have seen maximum write-offs this year?

Can you kindly repeat the last part of your question?

The write-off has been in which...

Write-off? Yes, write off we have done in the -- see, we have -- there are 3 categories of assets. As you know, IHL, the individual home loans, and there the write-off has been around INR 200 crores. In the nonhousing corporate, which includes the project loans where the write-off has been around 300 -- a little more than INR 300 crores. And in the nonhousing individual, the write-off has been around INR 30 crores, totally around INR 540 crores.

Yes, sure. You mentioned that your incremental cost of borrowing is 7.84%, which is probably coming down maybe 20 basis points or so in this quarter.

Yes.

What would be the incremental lending rate?

Incremental lending rate, the lowest rate is 8.6% today for the highest rated CIBIL score.

I mean 8.6% as quoted, right? So the IRR could be a little higher?

Yes. IRR will be higher, plus it is at the premium segment in terms of CIBIL score.

And you have raised 25 basis points across the board, is it? Or I mean, even for new customers from this quarter or just...

No, no, not for new customers. It is on the PLR from April 1.

Sure. So basically, I think what we are trying to say is that probably 8.6% is what is your incremental -- what you're saying is the incremental lending rate?

No, it is not. 8.6% is not the IRR.

Okay. Okay, probably -- okay, 8.8% or something like that. And as against that, you'll probably have an incremental...

That is for the that is for the best customer and only for the individual home loans.

And your incremental rate for -- on the book would be how much -- sorry, as in the disbursements will be how much?

Sorry?

Incremental rate on the entire block of disbursements on the individual side would be how much?

Well, including all types of assets -- I mean, all types of credit scores put together?

No. I mean to say that the best customer gets 8.6%.

Yes, it goes up to 9%, 9.1%. So 9.1% means that if you annualize it, it will be around 9.3%.

Got it. 9.3 and -- okay, 9.3% versus your incremental cost of around 7.6% or so?

Yes. That is only on the individual.

Which is a healthy spread, right? So when you are giving a margin guidance of 2.5%.

Yes, it is.

I'm just trying to say that probably you are kind of maybe building in some sort of a decline in yield or compression in yield.

It is not that way. If you see last year also, we were very clear that there will be an improvement on a year-on-year basis. This year also, we have indicated there will be an improvement on a year-on-year basis. And obviously, the numbers are -- I mean, whatever you have seen in terms of cost of funds and lending rates.

The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.

If I'm audible...

Sorry to interrupt Mr. Dave we are not able to hear you. There is a lot of disturbance in your line.

Is it better?

Yes, it is clear.

Yes, sir please go ahead.

Yes. Sorry, most of my questions have been answered. One question would be on the -- over the last 1, 1.5 years, we've been seeing increasing dependence on banks versus NCDs that we used to have. I just want to understand why has that happened and because the cost of funding for banks is reasonably higher versus in NCDs and with now rate of interest going out of the market, AAA entities like us should benefit from the NCD market there. And that's the understanding we have. Just want to understand, can this mix shift back in terms of the NCDs versus banks with the way it happened over the last 1, 1.5 years, can that reverse in FY '24 is that a fair assumption?

We were not able to hear you clearly, but I just got a I mean, the understanding of what you are trying to query. So this is part of an overall diversification plan. There was a -- some 5 years back, there was a huge dependence on the wholesale debt market to the extent of 80%, number one. Number two is if you see the asset profile, 90% of the assets are in the floating rate side. And our exposure in the -- our funding was almost 80% on the fixed side. So in a declining interest rate scenario our spreads are getting severely compressed. So one of the reasons why we wanted to diversify was to reduce the dependence on any market segment. So now it is very diversified. We are not dependent on any market segment. Number two, it is a natural hedge that we are building into the balance sheet. We have got 90% plus of assets on the floating side. Now we have got a decent amount of liabilities also in the floating side, which will come to our help significantly when the rate cycle reverses, and we are sure that the rate cycle will reverse maybe in the next 6 months, maybe in the next 12 months, maybe in the next 18 months. So it is a part of a well thought out strategy. It has nothing to do per se only with the cost of funds. If you've seen many of the occasion the banks were offering significantly lower because of the liquidity that they were holding with them and they were not able to lend to other segments. So this keeps on shifting, but it is a well thought out strategy, and it is designed to insulate the balance sheet from 2 large risks. One is a concentration risk in terms of sourcing of funds from any one particular source. And the second one is to diversify and mitigate against the interest rate risk.

And the bank funding would be like 1-year MCLR rate majority of it?

No, no, no. It is the combination of link to repo rate. It's a combination of the external benchmarks like T-bills as well as MCLR where we are generally making it with the 3-month MCLR. There also, we have interest hedged. So any one of the benchmark moves, we'll get a benefit.

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

Yes, congrats on the quarter. Sir, my first question is on basically what -- how much of your loan book is still under moratorium, which is the restructuring 2.0 moratorium?

Yes. Yes. Now I think it is around INR 748 crores this only thing.

INR 748 crores is yet to come out of moratorium now. All others have come out.

Okay. And out of -- we had restructured, I think, around INR 7,200 crore or so if you can just break up now INR 748 crore is still in moratorium. So the remaining, say, INR 6,500 crores, how much of that would have moved to Stage 1, how much to Stage 2 and how much to Stage 3? Just a bifurcation of whatever has come out of restructuring.

Yes. I got your point. Out of around INR 7,000-odd crores, which have been implemented, about INR 1,000 crores account have been closed, so fully repaid and closed INR 968 crores, or INR 1,000 crores. INR 748 crores is yet to be -- yet to come out. Yet to come out of the moratorium. And out of them, the NPA is around INR 1,500 crores.

And Stage 2, sir?

Stage 2, everything else, we have kept them in stage 2, irrespective of the fact whether they are Stage 1 or Stage 2. We have kept all of them in Stage 2 as a part of prudence.

But they are all provided for no...?

And we have provided for also them.

So that almost INR 4,000 crores roughly will be in Stage 2 out of that.

Yes, irrespective of the fact that some of them are actually fully regular. But still, we have, as a matter of caution, placed them in Stage 2 so that we are able to provide higher provisioning rate.

And what is the rule from either your own board or RBI's that if they pay, let's say, for 12 months regularly or 24 months regularly, they get upgraded or they never get upgraded throughout their life?

No, no, no. They -- it doesn't get upgraded. See obviously, if the loan gets closed, if the provision gets released, so it is a obvious interpretation. Secondly, if that -- if it is there for 1 year standard then also it comes out of this provisioning requirement.

Waiting period.

Waiting period of 1 year from the point it actually comes out of the moratorium.

Correct.

Okay. Got it, 12 months. Okay. That's very clear. Second question is, our new -- our project [ finance ] INR 1,500 crores. How much of that would be to existing projects where we already have lent to the lender and how much are brand-new project?

I will not say brand new project per se because in that INR 1,500 crores, we have also lent to a line of credit also. So the line of credit is -- it's not project finance per se. And balance mostly is to existing customers.

Existing customers will be around 60%, more or less.

Yes, 60% of the balance. So maybe fresh customers may be hardly INR 100 crores or INR 200 crores.

Okay. That's good. And line of credit would be how much out of INR 1,500 crores?

Line of credit around INR 700-odd crores.

And this is to the corporate, not to the project, correct?

No line of credit is to housing finance companies.

Housing finance company. HFC.

HFC.

To HFCs you'll have given.

Yes.

Okay. Okay. And sir, lastly on...

For onward lending.

I'm sorry.

For onward lending.

For onward and -- okay, okay, makes sense. And lastly, sir, what is your LCR today?

LCR is around average for the quarter of month -- of quarter of March, 147.

140.

140 Plus.

The next question is from the line of Ankit Agrawal from Yellowstone Equity.

Yes, my questions have been answered. Thank you.

Okay, fine. Thank you.

We will move on to the next question that is from the line of Renish from ICICI.

Just one question [ for side ]. So in your opening remarks, you did mention about some of the pockets not seeing the good disbursement demand. So if you can just give some more color on which geography, which pockets are seeing stress in terms of the credit offtakes?

I mean mostly what happened if you look at the -- our traction, actually, traction was good across regions like south, then again to some extent Central and a proper here. And again, only thing is we could not see much traction mainly in North and to some extent in east also.

So any specific states or districts or I mean...?

Not states, our metros are doing well, but all the others some sort of what you call Tier 2 cities there we could not get good traction that it is because mostly, we operate in a salary structure, no, in the sense. Our [ 50% ] business comes from the salary segment. So because of this rate increase and all probably they would have taken a small [indiscernible] I think.

I mean, if you -- if I go by the presentation, wherein 60% comes from metro and 40% comes from the nonmetro. So basically, you're saying the nonmetro piece not at pan-India level but maybe some pockets are seen trying to be lower grade offtake.

Small, small, it's not a very big dent, it is very minor.

Okay. Okay. And I'm sorry, sir, just again on the NIM side. So our exit quarter NIM at 2.93% and the kind of commentary or the highlights we have given in terms of the incremental cost of borrowing in the lending yields. Our first half '24, you expect NIM to sustain at this level of 2.9%? Or how one should look at? I mean a first half perspective.

No, it is -- it cannot be compared with an exit NIM of any year. That is something we have discussed I mean, just a few minutes back exit NIMs are always on the higher side. But on a full year basis, it will be better than last year. Full year of last year. And if you look at it even on a first half basis also, the first half will be better than first half of last year.

Right. But practically, your exit NIM should have captured all the rate hikes on the both the sides, I mean, asset liabilities. So I was just wondering why that should not extrapolate to first half '24?

See part of it gets extrapolated, but if you look at it, there will be -- in some pockets of business, it may not have got fully translated. So that might come with a lag. There is always a lagged impact in both the sides, increase or decrease. And we are -- there is a possibility that towards the end of the financial year, one could also see a rate decline in terms of a rate cut from the RBI. But that will happen only in the fourth quarter towards the end of the year.

Got it. Got it. So ideally, one should go by 2.55% the base NIM what takes.

Base, base that will be base.

The next question is from the line of Sanket Chheda from DAM Capital.

So my question was on, again, the increase in the Stage 2 for this quarter where we said that there was a technical thing wherein sprew in NACH got bounced. So then my question is that once it bounces for such technical reason, maybe it appears in bounce rates or maybe 1 plus DPD, but usually gets resolved in, say, 10, 15 days for it to appear in Stage 2, it has crossed 30-plus DPD. So is there any action which was not taken in 30 days and you follow up only after that? Or how do we read that?

No, it is not that no action has been taken, but we have been able to address it to a significant extent because very technical matters takes time, but it is now more or less it is, I would say, in Q1, you will not see this happening. That has now been fully addressed.

And moreover due dates will be spread across now entirely...

Due dates might be spread across...

Entire month, not 1 day in...

Okay. And on ECL provisioning, we said that we have created buffers. But on Stage 1, we have just reached about 26, 27 bps. Isn't that a regulatory requirement? Or you think it's a buffer on Stage 2 and Stage 1?

No, I'm not able to understand. If you kindly can explain it, your query.

So there has been reclassification in -- from, say, Stage 3 provisions to Stage 2 and Stage 1 this quarter. We saw a quite sharp jump in Stage 1 provisions also. So from, say, 5 bps to, say, 26, 27 bps. So wasn't that necessary rather than say in a measure of buffer...?

No, there is no regulatory intervention as far as the IndAS is concerned. IndAS is clearly a model based -- model driven -- it is kindly a model-driven output. But this was something we had voluntarily done because we felt that the Stage 1 provisioning is very less at around 4 basis points up to 3 basis points. So from there, we have increased it. It is to ensure that there is a buffer.

Isn't that a provision in, say, upper layer -- for upper layer NBFCs?

No, no, no. There is nothing of that sort for IndAS.

Okay.

IndAS there is no regulatory mandates. IndAS means it's a model which is based upon PD and LGD, which is the ECL that is the expected credit loss.

I'm not talking about IndAS, sir, I'm talking about the scale-based regulations, which are there...

No there is nothing of that, there is nothing...

No, it's only our own computation will clear the thing.

Okay. So we maintain that take a buffer that way.

Yes, yes, certainly.

Ladies and gentlemen, we'll be taking the last question. That is from the line of Bhaskar Basu from Jefferies.

I just had one clarification around the restructure book. So I think the restructured book under moratorium was about INR 1,1,400 crores (sic) [ INR 1,400 crores ] last quarter and about INR 740s crore now. Would -- I mean, was the entire INR 1,400 crores already sitting in Stage 2 or the part of the book, which has come out of moratorium now moves to Stage 2? I mean is the movement in Stage 2, anything to do with the movement in restructured book?

No. They are already in Stage 2.

They were -- the entire book was already in Stage 2?

That -- we have clarified, I think in the last quarter or quarter before that, we had moved all these OTR accounts to Stage 2.

Okay. Okay. And secondly, just hopping back on the yield question. So basically, when we look at the portfolio spread's exit, there has been a 33 bps of increase on a sequential basis versus say the calculated increase of about 60 bps. Was there any additional income recognition because of recoveries or new -- some accounts getting resolved et cetera in this quarter?

No, there was no one-offs.

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

So I thank every one of you for this [indiscernible] arrangement of the analyst call, and we wish you all the best, a very promising and also very performing the year ahead, '23, '24. Wish you all the best. Thank you once again.

Thank you [indiscernible] the management team. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you. Thank you. Thank you, Praveen. Thank you, ma'am.

Thank you.