PNB Housing Finance Limited (PNBHOUSING) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the PNB Housing Finance Limited Q1 FY '21 Earnings Conference Call. [Operator Instructions] Please note, that this conference is being recorded. I now hand the conference over to Ms. Deepika Gupta Padhi. Thank you, and over to you, ma'am.

Thank you, Raymond. Good evening and welcome, everyone. We are here to discuss PNB Housing Finance Q1 Financial Year 2021 results. You must have seen our business and financial numbers in the presentation and the press release as shared with the stock exchanges and is also available on our website. With me, we have our leadership team represented by Mr. Neeraj Vyas, Managing Director and CEO; Mr. Ajay Gupta, Executive Director, Risk Management; Mr. Kapish Jain, Chief Financial Officer; Mr. Anshul Bhargava, Chief People Officer; Mr. Nitant Desai, Chief Centralized Operations and Technology Officer; Mr. Sanjay Jain, Company Secretary and Head of Compliance. We will begin this call with the overview and performance update by the Management Director, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on Slide 2 of the investor presentation available on our website. Now I would like to hand over the call to Mr. Neeraj Vyas for his remarks. Over to you, sir.

Thank you, Deepika. Good evening, everyone, and welcome to quarter 1 financial year 2021 earnings call. I hope you all are safe and healthy and taking due precautions of COVID-19. Let me start with the update for the quarter. The disbursement during the quarter was INR 694 crores, impacted due to lockdown on account of COVID-19 pandemic. However, on a month-on-month basis, the disbursement registered an increasing trend. Retail segment contributed 97% of the total disbursement with 65% disbursed towards lower risk-weighted individual housing loan segment. As on 30 June, the asset under management of the company is maintained at INR 83,495 crores with retail AUM at 82% and corporate at 18% of the assets under management. On RBI moratorium, we adopted Opt-in route for accepting customers' request. Our AUM under moratorium in Phase 1 was 56%, which has got reduced substantially to 39% in Phase 2 as on 30 June 2020. A sharp drop was witnessed in the retail segment also ended the moratorium under Phase 1 was 49%, it got reduced to 29% in Phase 2. The company adopted a proactive communication strategy with their customer on moratorium, advising each of the customer about their increased liability in case they avail the moratorium and overall amount that they are going to pay on the remaining period of life of the loan. As a result of that, we can see the result, it has come down from 49% to 29% in Phase 2. In addition to that, few calls were made to the customer who had availed for a moratorium 2. And on account of these calls, which were almost around roughly 40,000 calls made to the customer who had availed for moratorium 2, around 5,000 customers had reversed their decision on moratorium. In addition to this, we had also tied up with certain registered customers on the benefits and pitfalls of the moratorium and are witnessing some of our employees from the customer on our call centers. To be future ready and working on so-called new normal, the company undertook various measures in sourcing, underwriting and collections during the quarter. With the lockdown in April '20 is extended, teams were all involved in the recovery of delinquent accounts. The company also initiated in-principle online sanction of loans and in developing a new digital channel for sourcing and reviewing the loan application. We have also tightened our credit guidelines to further strengthen the underwriting process including norms on target customer industries, methods of receiving income and tightening our key policy parameters. We are also working on AI-based voice bot system in the existing resolution setup to facilitate timely EMI repayments. This is -- as I mentioned, AI-based bot system will make calls to the customer who have availed moratorium 2 and also the customers who are into Stage 1, 2 and 3. And therefore, this would help us improving the collection methods. Similarly, on the corporate book, the company has created a remedial management group under direct supervision of the Managing Director to focus on faster resolution and effective monitoring of corporate book accounts. The group employees or the employees on various verticals was amended to identify, discuss, plan and resolve accounts through various available option. A newly formed group has already started showcasing results through resolution of a few corporate accounts. Let me give you a brief on a few corporate accounts about which I think I had mentioned in my last earnings calls. Starting with Ireo Private Limited, we had disbursed INR 150 crores to this and outstanding was INR 101 crores. This showed a reduction in outstanding by roughly INR 49 crores. As we mentioned in June, the company has successfully got 1 part of a mortgage land auction and received 25% earnest money. However, before the second auction of the remaining piece of land, the developer approached the company, requested us not to auction the land and resolve the account. As a part of resolution, the developer has already paid INR 25 crore in July '20, and balance amount is expected to come in the next 3 months' time. As on date, the principal outstandings have gone down to INR 69 crores. In another account, Supertech, we had given the date for auction under SARFAESI. We are still -- I mean, we are expecting some kind of interest from the market. Promoter himself came to us. He is showing some interest to resolve the account. In addition to promoter, some other people have come and promoter has also joined with them and they are showing interest to buy 1 piece of land, which would help to reduce the outstanding in Supertech, but these are the issues, which will take some time. As I mentioned, RMD has been set up only a month back, and therefore, these are the offers of RMD. But in case of ideal, the real effects have been shown and amount has been recovered. Amount outstandings have been brought down. One major account, which I mentioned last time is Vipul. There, again, we had a strong battle with the promoter in court. The promoter was trying to take a stay on our scheduled auction. With our intervention, timely intervention and arguments in the court, we have been successful in not letting the court grant stay on our action and auction, which is scheduled. As a result of that, we are experiencing some interest in the market, people are coming to talk to us. And they are interested either by way of development -- taking development right or settling the account. Let's see what happens before 6th of August because that is the option that we have made it very clear that we will not postpone the auction unless some concrete issues or development happen. Another big account was Radius, where the outstanding is more than INR 250 crores. We are in close consultation and discussion with the co-lender as they are also a partner in the project. In the meanwhile, the company has initiated legal proceeding against the company under SARFAESI. In another big account, the Ornate, the outstanding is INR 181 crores, and we have initiated legal proceeding under SARFAESI. The case is now admitted to NCLT, and we have to join the process under IBC for resolution of the case. In case of Radius, we have seen -- as we got interest from 2 developers also, we are talking to them. But right now, nothing concrete is there to report. On that we will come to the market whenever we have something to report there and if the resolution is done. There was another small account of Pate Developer. We entered into an agreement with one of these developer. He has already paid us 10% of the amount and the last date to clear the outstanding is 30 August. Otherwise, we are right to adjust the amount paid to us by the developer. In addition to this, there was a small account of INR 1.56 crores, which we declared last time, has been fully recovered and closed without any haircut during the quarter. Apart from this key corporate account, the company has been -- has been able to resolve one of the another account in Ireo Group, which was under Stage 1, which -- with SICR we had put it under Stage 2. Here, also the developer has -- the promoter has paid the entire amount of over dues and has promised to pay another INR 5 crores by 15th of August. As of today, the account is 0 DPD. So in other words, the account is out of SICR as of today. But we accepted at the same place without touching the project, maybe we'll take a call on 5th of August, the another installment as we're promised comes. But as I told you -- as of today, the account is under 0 DPD. As on 30th June, 60% of our corporate book is under principal moratorium and that should be a flavor of this book. We have collected almost around INR 600 crores under moratorium of this book that we hold as the accounts are under moratorium, the amount has come under escrow fund and the promoters have been permitted to utilize this amount. As mentioned last quarter, we are looking to sell down our corporate book. We are in discussion with the 2 banks on the same. We have received sanctions from 2 banks amounting to INR 352 crores, but again because of COVID, the issue is there, the documentation is not happening, stamp duty is not payable. Some of the states, where the noting of interest in the books of registrar of the company, that could not happen because offices are not functioning. All these are causing delay, but we have sanctioned and going forward probably will be able transfer these outstandings to corporate account. Out of the construction finance book of INR 10,300 crores, INR 3,422 crores under construction with less than 50% completion. Out of this, roughly INR 1,000 crore is under NPA whereas a large part of this book, that is roughly INR 2,290 crores, either 0 DPD book, where the interest is being serviced regularly by the promoters. On AUM basis, the gross NPA as on 30 June is INR 2.32 crores and around INR 2.76 crores on the loan book. The life-to-date write-off of the 2 companies is just 10 basis points on the cumulative disbursement. The company has created additional provision at books resulting in total provision to total asset of 2.7%. The overall provision coverage ratio is 98% and Stage 3 provision coverage ratio is 43% -- 40%. I may mention that our corporate book is covered more than 100%, we are sitting at 103% of PCR in our corporate book. Now changing over to liabilities of the quarter. During the quarter, the company mobilized INR 5,484 crores through NHB, bank term loan, ECB, CP and deposits. We are second largest deposit taking HFC in the country. And during quarter 1, we mobilized around INR 990 crore of deposits, majority of which are public deposits. These deposits are sticky in nature with average tenure of 42 months on outstanding basis. Deposit as on 30 June stand at INR 16,203 crores. This is roughly 20% of our total financial resources. With our continued focus on the long-term borrowing, the ALM is comfortable in light of fact that option of owning moratorium for customer has been extended up to August 31, 2020. But we have not availed the option of moratorium with respect to our payment obligation to all lenders during the moratorium period. The company has maintained adequate cash and liquid investments of INR 7,000 crores as on June 30, along with undrawn sanctioned lines of INR 5,000 crores. This will surface us sufficiently till the end of Q2 FY '21, by which time, liquidity situation shall further ease out. Not to mention, we also have built a good pipeline of new prospective borrowings from diverse resources. For a period of time, our CRAR as on June 30, '20, increased to 18.05% with Tire 1 at 15.33%, much beyond the minimum regulatory Tier 1 requirement of 10%. Let me remind you that when we closed our year as on March 31, 2019, our CRAR was 17.98%, which today is at 18.05% with Tier 1 comfortably at 15.33%. This improved -- so this has improved CRAR from 15.13% with Tier 1 of 12.04% as on June 30, 2019. Please note that CRAR numbers are IGAAP, net own funds and do not consider any impact on either side, plus or minus of net worth arising out of IndAS adjustments. The gearing of the company is 8.2% as on 30 June, which has improved from 9.2% as on June 30, 2019. Then a summary of financial results of Q1 is as under. Pre-provision operating profit for Q1 is INR 404.6 crore as compared to INR 427.6 crore for Q4 FY 2020, showing a decline of 5%. Impairment of financial instruments and write-offs in the quarter are at INR 75 crores. The additional provisions have further strengthened the balance sheet and overall provision coverage ratio. Profit after tax for the quarter stood at INR 257 crores as compared to net loss of INR 242 crores for Q4 FY '20. The spread on loans is 219 basis points, excluding the assignment income and other IndAS adjustment, that is as per IGAAP, the spread on loans for Q1 is 228 basis points compared to 213 basis points for Q4 and more than 15 basis points above what we reported in Q4. Net interest margin for Q1 is 266 basis points against 261 basis points for Q4 '19/'20. Gross margin, net of acquisition cost and including fee for Q1 '20/'21, stood at 261 basis points against 288 basis points during Q4 '19/'20 due to lower fee and other operating income during Q1 as compared to Q4. The OpEx to average of total assets for the quarter, excluding ESOP cost of INR 1.24 crores, being more on account of accounting provisions stood at 50 basis points. Return on assets for Q1 is 1.33% and return on equity for Q1 '20/'21 is 12.62%. The closing net worth as per IndAS calculation is INR 8,170 crores. We have a employee strength of 1,494 full-time employee as on June 30, '20. As mentioned last quarter, we approached our promoter PNB to participate in the capital raise plan of the company, if you hear an issue, I know most of you are interested to know. As discussed with our promoter, PNB, is evening this and is expected to discuss in their Board meeting, which may be scheduled during this month or early next month. PNB being a foreign bank, it would need approval of Reserve Bank of India and Government of India and that is the reason, as I mentioned, that we are -- that PNB is discussing internally, and they'll take the matter to their Board to take a call on this. Once there is some clarity that emerges post PNB Board meeting, we'll come back to the market to inform the decision taken by the PNB. The Board of the company during the quarter approved its business plan for financial '20/'21. As per the same, company continues to focus on lower risk-weighted assets. The AUM is expected to be maintained in the similar trajectory in FY '20/'21 as was the case in financial year '19/'20. The retail book AUM is expected to increase more than 85%, where the corporate book AUM to reduce less than 15%. This is due to various reasons, as I mentioned, focused on retail book and sell-down and resolution in the corporate book. The spread is expected to be in the range of 210 to 220 basis points and gross margin of 300 to 315 basis points. With the cost reduction measures, the operating expenditure is expected to reduce by 5% to 10% in absolute terms. The return on asset is expected to be in the range of 140 to 160 basis point, with a gearing -- with a lower gearing and higher capital risk assets ratio. With this, I would throw the session open to question and answer. But before that, I know that there would be questions on one issue, which I mentioned in the last earnings call, one was about the CEO and about the corporate sell down. As far as CEO is concerned, the bank has -- the company had authorized the Nomination -- not Nomination -- Stakeholder Relationship Committee -- no, NRC, sorry, the Nomination and Remuneration Committee to -- both are identifying the candidate suitable for CEO of the company. The NRC is actively looking for the prospective candidate in the direction. And I think an announcement would be made very shortly in this connection. But as I mentioned, the NRC has to interview the prospective candidates and give on the best candidate, but the vision is going to -- they have already made further in the direction. But very soon, they will make an announcement, but we'll have to wait till the process is completed. As far as sell down is concerned, as I mentioned, we already have sanction of INR 340 crores in our hand. But because of COVID, certain officers are not working, even the problem is there with the banks who are going to take power, their offices are working, sometimes their offices are closed due to COVID issues. Some case if diagnosed, the entire office is closed. That is creating problem. Another INR 350 crore is in very advanced stage of discussion. But definitely, it is taking time. But going forward, I think we should be able to sell down our corporate book as our discussions are revealing as per discussion with the banks. So here, I think I would say that now I think the floor is open for any questions that you have on the issue.

[Operator Instructions] We have the first question from the line of Viral Shah from Credit Suisse.

I have 2 questions. Basically on the moratorium book, while you've given the number based on the morat under Phase 1 and there is a moratorium as of 30 June. Sir, you had also disclosed in the previous results on moratorium as of 5th June. And the moratorium numbers seems to have increased from there. Basically, the retail -- on the retail book, it has increased from 20% to 29% and on an overall basis from 31% to 39%. So if you could explain what is being the reason behind this increase there? Because, generally, we are seeing a decline in trend in moratorium across different players. I will ask the second question after this.

Yes. Okay. Yes, about the moratorium 2, we had -- we issued the opt-in instructions, but some of the customers going by trend by the bank, they thought that people opt-out and even across the counter. When we have interacted with the customers, they were interested in taking moratorium, and that is the reason, subsequently, they applied for the moratorium after we declared it to the market, and that is the reason, it has gone up from 29% to 20% -- 20% to 29%. But again, as I mentioned, when we had another round of interaction with the customers, some of the customers, who had taken the moratorium, they withdrew out of it. So almost around 5,000 customers, they have withdrawn their request out of moratorium 2. So that is the reason when we gave the figure to you and the figure that I am giving now, there is a slight variance in that.

Right. And if you could give a sense of moratorium maybe as of date or mid-July to get a sense in terms of June to mid-July, what are we seeing?

There is no change in the moratorium 2. Whatever I mentioned just now, it continues to be there. But as I mentioned, that 5,000 customers have withdrawn the moratorium. I'd give another flavor to the people who have not taken moratorium 2, I mentioned that those people have taken moratorium 1, our collections have improved. And if you see my collection efficiency, it was 95%, then it improved to 97%. And as I talk to you today, it is -- just 2 days back, it was 98.15%. It includes people who have taken moratorium 1 also where it was 95-plus.

Okay, sir. Sir, my second question is on the margins. Basically, your margins seems to have gone up sequentially, I'm calculating it based on a calculated number. And on a quarter-on-quarter basis, it seems to be driven by an increase in view. So what is happening over here because, largely, the loan book has been flat and we haven't disbursed anything to change the loan mix? So what could have driven that? Because we are seeing usually pressure on margins generally for housing financial companies. So why was it not the case this time around?

Kapish Jain, you are on, can you just share what these numbers? So I can give a straight answer to you. Are you talking about retail or corporate?

No, on a blended basis.

Okay. On a blended basis, it has gone up because rate of interest on corporate book has been changed by us. We have increased rate of interest on our corporate book on CRE, that is residential housing by 1%. And on corporate fund loan, that is around -- which is not a residential housing, by 1.25%.

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

Sir, just wanted to understand the collections in a bit more detail. In terms of absolute value, if you could give the trend, total collections in April, May and June?

Okay. In April, May and June, on an average, we are collecting roughly INR 500 crores in the 3 months. April, as you know, the lockdown was there, so collections were low. But on an average, if I take it, it is roughly INR 400 crores, INR 500 crores. And this is for retail. Corporate, we have collected roughly INR 125 crore in April. In May, it went up. In June, also, it went up. But as I mentioned, the corporate book is under moratorium, these collections are under our escrow account, and we gave the -- released to the promoter to be utilized it for their expenses and construction activity.

Okay. So INR 400 crores was the amount for June you mentioned for retail?

Yes. INR 500 crores. June is more, INR 500 crores.

INR 500 crores. And for May, it would have been?

More, I think, INR 400-odd crores. You want an exact number?

INR 400 crores.

Okay. So if we just refer to the Q4 presentation, then total collections, which were expected for Q1, was supposed to be around INR 7,500 crores or INR 8,000-odd crores. So the moratorium numbers, if you see then, would it be that high? As out of INR 7,000 crores, INR 8,000 crores, if you would have received in terms of collections, maybe around INR 1,000-odd crores in Q1, then...

See, roughly, we collect INR 1,600 crores for retail and 400 -- [ INR 2,000 crores ] per month we collect. This is our collection per month [indiscernible] the year. So for quarter, it should be INR 6,000 crores. But as I mentioned, corporate, we are not accounting anything in the account, whatever we are collecting, we're giving back to promotor or the builders for construction activities and collected INR 600 crores during the period, but it was basically in the escrow account, which were released back to the promoter.

The next question is from the line of Abhijit Tibrewal from ICICI Securities.

Just to extend the previous question, you suggested that, I mean, in your corporate book, you have collected about INR 600 crores, but you let it stay in the escrow account so that developers can use it for their expenses and construction?

Yes.

So sir, when you say that you just disbursed about INR 20 crores in the quarter, does it effectively mean that you have disbursed about INR 600 crores plus INR 20 crores in the quarter?

No, no, no. They're not disbursed. This is not disbursal. This is collection, which came in the escrow account. And because they've taken moratorium on interest and principal both, so that has been released back to them. These are not disbursal.

Okay.

These are not disbursal. Yes.

Into escrow account.

Yes.

These were not your collections.

No, no -- see, otherwise, it was going to my interest that I could not appreciate because the moratorium has been granted.

Okay. Okay. All right. And sir, the second question is, I mean, because you are one among the first HFCs to report your Q1 results. Just wanted to understand what is the thought process about, I mean, thought process around the COVID provisions about INR 71 crores in the quarter?

See COVID provision, if you see our last presentation, we have made a COVID provision of INR 471 crores. This provision INR 71 crores, we have made additionally this quarter to build a cushion in our balance sheet and to make the balance sheet stronger. We have not touched our COVID provision of INR 471 crores because COVID is still going to take some time when the moratorium gets lifted in the month of September. And thereafter, the impact would be known. So we have not touched COVID provision that continues to remain at INR 471 crores.

Correct. And in addition to that, we had made another additional provision of about INR 71 crores in Q2.

Yes, Q1.

In Q1, you're right, you're right. Sorry.

Yes, correct.

So what I'm trying to understand is now that the total additional COVID provision stand at about INR 540 crores, I mean, what was the rationale for taking in lower additional provisions of only about INR 71 crores in the quarter?

No, provision is not lower. The provision is not lower. Sorry, go ahead, go ahead, sorry.

Sir, are we saying that -- I mean, this is our evaluation, we think that whatever we had provided until now is more than adequate, and we won't need to provide any more in the coming quarters of the financial year?

See whatever we have provided so far is adequate that is what we know. I made the statement in last quarter also and we had a hit in our third quarterly profit. We have covered our corporate book adequately a product of our retail book. But as I mentioned, going forward, it appears to be edited provision. We are talking to the builder, we are talking to our customers and our borrowers who have taken construction finance from us. Whatever issues are there, one-to-one, we talk to them. But going forward, predicting the third quarter down the line, the full year provision, nobody can predict like that. But as of today, depending on the situation in the ground, depending on the feelers on the ground, collection in the escrow account of the vendors, option put on one to one, their past track record, I feel that this provision is adequate. Let me give a flavor to you that under moratorium, book on construction is around 60% or 58% as of today. The amount, as I mentioned in my script also, is -- out of that, less than 50% is INR 3,400 crore. Out of that INR 1,000 crore is NPA. Out of INR 2,400 crores remaining, INR 2,200 crores is 0 DPD accounts. So I think we will make out the quality of book based on this. So as of today, I find the provisions adequate.

Okay, sir. And just one last question, sir. I mean even during your opening comments, you gave us color on that 1 existing account, which was identified for SICR, I think that was Ireo account -- from Ireo. What about the remaining 3 accounts which you had classified under SICR in the last quarter?

Yes, they continue to remain under Stage 2. And we are trying to resolve those accounts too. But right now, they continue to remain Stage 2.

Okay. And they are all under moratorium as well. So...

Yes.

I mean, those essentially are DPD free?

Yes.

The next question is from the line of Aakriti Kakkar from Goldman Sachs.

I have 2 questions. First is, if you could please provide any details around the bounce rates that you've been seeing in this quarter? And second question is on the moratorium. What is the overlap between moratorium Phase 1 and Phase 2, if you can give any direction around that?

You're talking about the bounce rate?

Yes.

First is the bounce rate and then what else?

Bounce rate and then the overlap between moratorium Phase 1 and Phase 2?

Okay. So as far the bounce rate is concerned, it was roughly, as I told you, in May, it was around 5%. If you see our collection efficiency, it is 95% in May. June, again, it was hovering around 96 to -- somewhere around 96%. Now as I talk to you, today, it is 98-plus. So around 2% or 3%, you can say the bounce rate.

All right. Okay.

And the next is?

The overlap between moratorium...

Common customer from moratorium?

Yes. What is the overlap between moratorium Phase 1 and Phase 2?

[ Jatin ], would you like to give the overlap?

90%.

90%, about 90% of people who are there in morat 2, they are there in morat 2 also -- morat 1. Only 9% customers have opted Phase 2, but they were not there in Phase 1.

All right. Okay. And just one confirmation, sir. The collection efficiency excluding the moratorium customers, right?

Yes. It is based on the billing. Whatever we are billing, and obviously, the one which is under moratorium is not getting billed.

The next question is from the line of [ Omkar ], who is an individual investor.

Sir, my question was regarding post-COVID scenario. As a second largest deposit taking NBFC, how do you plan to utilize this crisis as an opportunity? Because there would be funds available to you at a cheaper cost.

Okay. So the positive concern is, see, we have a GST in terms of our delivery system, which will strengthen further by providing an app, which has been done a few days back, where it is seamless exercise, we are trying to do, customer doesn't have to visit the branch, sitting at home, he can complete the application, digitally sign it, it flows to us and based on that, we can provide the sanction because in the new scenario where people are not coming out of their homes, but they do want their houses to be purchased, we have provided this utility, which was put on trial basis 3 days back. And maybe in next 7 days' time, we'll try and test it. Based on what our experiences and feedback we get from the customers, we'll try to roll out fully. That is one thing that we will try to do because the demand we see, demand is coming from mass housing sector, and we are well positioned in that because we have presence in almost all important cities from where the demand is coming. And that is where we want to utilize this opportunity by capturing the demand through the app that I mentioned. In addition to that, we have a strong force of connectors and DMPs roughly around 15,000. That force is already available on ground that has been activated by us. And with that, I think we'll capture the least. And as I mentioned, we were not expecting that we'll touch a disbursement figure of INR 500 crores during June, but we already started the disbursement figure of INR 500 crores in June, and this is mostly outcome out of the sanction we accorded post 1st of April. It is not that the undrawn line prior to 1st of April we have disbursed and we achieved the disbursement. The most of the disbursements have come out of new sanction that we gave during this quarter. So this is where we are. As far as, rate of interest is concerned, we are trying with our banks to get the rate of interest reduced on the borrowings that we have. But let me tell you, most of the borrowings happen in the second quarter of the financial year. So last year, the second quarter of financial year, we had taken loan from the banks. And as you know, the rate of interest, the policy rates have moved downwards. Most of the banks we've used were the MCLRs and condition in these kind of loan is that the reset happens on the anniversary of the drawdowns. Most of the loans we've taken during second half of the last year, they'll come for the reset in the half -- in the second half, and then we'd be able to reduce our borrowing cost on that.

Okay. So you expect a margin expansion because of that in the upcoming quarters, you see?

Yes. To some extent, we will, but we'll have to pass on the benefit to the customer also. Because if you see in the market by rate of interest and the rate of interest available to the customer from bank -- both private and public sector banks are lower the differential roughly around 1%. We'll try to bridge the gap, so that the runoff which happens in my book is avoided.

So slight margin expansion or the steady state, which we can expect?

Yes, slight margin expansion, we will retain, but we will try to pass it on to the customer also.

The second question is on the gearing and the capital adequacy. You have sufficiently capitalized, and gearing is also around 8.2%. So I mean, what is the thinking behind raising capital then? Where do you plan to take it to the gearing ratio?

See because we have a parcel book also, in my opinion, this gearing of 8% should go down further, and that is the reason that we are trying to raise the capital. Notwithstanding that reason, we had already declared to the market last year that we'll go to the market because my capital adequacy was 13.98%. But subsequently, when we found that it is -- we are yet to take a call to raise the capital, in which way we will raise the capital, and we decided that will go into balance sheet management and we try to do some securitization of our office. And in that process and on account of profit earned during FY '20, our capital adequacy went up from 13.98% to 17.98%. And as of today, it is sitting at 18.05%. While capital is sufficient, but you can't sit on the front and do business. If I have to see my plan for next 2 years, I need capital at this juncture because, otherwise, again, my capital adequacy will be going down, and that would impact my rating. I don't want to do that. I have to improve my rating too and reduce our gearing further. So both of this factors, that is sufficient capital available for doing business and to take care of my rating in the market because credit rating agencies have been looking at gearing of -- branded gearing of 5% to 6% if I have corporate book. Pure retail book, we are okay with the gearing of 8%, but because I have a corporate book portfolio available to my book, they have a different way of looking at my gearing. So to satisfy the market, I need capital to bring my gearing down. That would help me reduce cost of fund too.

Because the question arises is that at such a lower valuation, you will be diluting much of the equity because the market capitalization has already fallen drastically?

Yes. Yes, we have to take a call on that. We will -- whatever rates today are there, based on that, we go to the market, there would be dilution, but we made a calculation on that, and we are okay with that. Improving rating is prime importance, and with the rating and all that, your -- our cost of funds goes down. So we have done that calculation, and we are okay with that to raise the capital.

Okay just one final thing is that -- you talked about business plan for upcoming financial year, the current financial year. So can you just tell that again? I just missed that, in terms of ROE and AUM growth.

Okay. AUM growth will remain same because we are trying to do business of INR 13,000 crores, but simultaneously, as I mentioned that we also have the differential in rate of interest, so there is a runoff which is happening in the market. Some of the banks are very, very aggressive on that. They are trying to take over the account because these accounts are having a vintage of 2 to 3 years. Track record is available in the market, so people are trying to take over. But we are looking at a business of INR 13,000 crores in retail. But going by the trend, it's very easy for us, I think, throughout this business. But as of today, the plan which has approved by the Board is INR 13,000 crores for retail business. These are which we are going to achieve. As far as the corporate thing is concerned, we have already taken a call. We'll not do any corporate financing. Last year, we did not do anything. Going forward also, we'll not do it. Whatever disbursement you are seeing in the balance sheet is basically our final commitments given to the sanction, we accorded before March 31, 2019. These are commitments to the builders and those who are on track in terms of their commitment in terms of time lines, in terms of milestones that for while sanctioning the loan, we are still disbursing to them. So this is the plan for the financial year '21. Retail disbursement, we're expecting that we will be disbursing something around INR 13,000 crores. Return on assets, we are expecting to be in the range of 140 to 160 basis points.

So basically, you're seeing -- yes, please go ahead.

This is in line with what we showed for Q1 as well.

Correct. So basically, what you mean is that, there would be almost all the sanction and disbursal would go to the retail side?

Yes, correct. And we are aiming that our retail will grow beyond 85%. Even the incremental disbursal, we are trying that we achieve a ratio of 75:25 in retail only, housing loan and nonhousing loan, as we call it.

The next question is from the line of Pankaj Agarwal from AMBIT Capital.

Am I audible, sir?

Yes, sure. Go ahead, please.

Sir, is there any difference between moratorium numbers between under construction projects and completed projects?

No, there is no difference.

Okay. And any difference between ticket sizes?

Whether in corporate or retail?

No, within retail.

Corporate, as I -- Corporate, I said everybody has taken almost everyone -- around 85% people have taken the moratorium.

Okay. So there is no different trends between different ticket sizes?

No, no.

Okay, okay. Any difference between last moratorium and individual home loan moratorium?

Yes, it is almost in the same ratio as we have the loan book.

The next question is from the line of Pratik from IIFL Securities.

Sir, I just want to understand a bit on the collection system a little bit more. So you said your collection, you do collect around INR 6,000 crores on a quarterly basis and approximately -- on approximate basis. And around 40% is under morat. So your collection could have been close to around INR 3,800 crores. And what you said is that you collected around INR 500 crores average on a monthly basis. So that adds up around INR 1,500 crores. And just adding the corporate book to that, it could be slightly higher. So I'm not able to completely reconcile how the collection efficiency percentage is [ comparable ]? So if you could just help us with the numbers that would be great.

No. I think I mentioned about the collection efficiency and average collection, but let me tell you in the month of June itself, we've got a roughly around INR 700 crores additional EMI paid by the customer, which I was mentioning even last time also that some of the customers who are salaried class, particularly from the government and public sector undertaking and good private sector undertaking, the discretionary spending was not there. So they've left with the customer fund. So almost around INR 700 crores during June. June, we got INR 700 crores extra from such kind of customers. That is not included in the amount that I mentioned to you.

This is over and above the INR 1,500 crores...

Yes, this is over and above that.

Okay. Okay. And my second question is on OpEx. I look at your OpEx number result, other overheads have dropped drastically from around INR 94 crores to around INR 27 crores. And so I want to understand what will be a sustainable for the year in the next coming 9 months? Also on the employee cost base, I mean, employee cost had dropped to around INR 35 crores in the last quarter and again back up to INR 69 crores. There was a bit of volatility in this number. So just tell us what is your sustainable OpEx over the next 3 quarters?

Okay. I'll request our CFO Kapish to respond to this, OpEx and employee cost.

No. So like I think what you should look into is the overall OpEx that we are talking about, our overall OpEx that we have given is around 0.50. And the endeavor is to see how we can bring it down and keep it around these levels. And the outlook that we have given as well is that our endeavor is to bring the OpEx down by around 5% to 10%, yes. So that's the kind of number we should track rather than looking into a quarter-on-quarter detailing of these numbers between employee costs and others.

So you're saying on overall yearly basis, OpEx would be around -- down by around 10% over the FY '20?

Yes, that's the kind of endeavor and target that we are carrying.

5% to 10%.

Okay. Okay. And just lastly, on the margins, I mean, what I understand is, incrementally, you'll lending be more towards retail. And yields in the retail segment would be slightly lower than that generating for corporate. So is there a possibility that the margins could see a bit of pressure because of higher retail disbursements?

No. We have done the calculation. And as I mentioned that we are expecting ROA of around 130 to 140 basis points -- 140 to 160 basis points. And return on equity is double digit, which is plus 13%. So I think we have done the calculation on that because the major benefit is in our, when we are going into retail, credit cost is not coming as high as it used to be in corporate loans.

Okay. Okay. But then how the benefit that you get on retail is, you would be able to have a higher churn because the risk rates are lower.

These are all capital-light assets. So at 35% to 50% capital-light and churn [ like capital ], better to book the assets.

[Operator Instructions] The next question is from the line of [ Satvik Shah ] from -- who is an individual investor.

So I just wanted to get a flavor from you in the matter of the new CEO search. I know it might be a little confidential. But if you can just give us some background about it?

The NRC is looking into it. They are interacting with the prospective candidates, and final call will be taken by them shortly. And thereafter, we'll inform all the concerns. Right now, it is work in progress, but will get completed very fast, let me tell you this once more.

Okay. By when can we expect, sir?

I can't give any time line to it, but I would simply mention that the Chair -- you can look at the statement made by the Chairman of the company, not as a Chairman, but he even took the earning calls of PNB in PNB's meeting -- MD of PNB.

Okay. Understood, sir. And my rest of the questions have been answered, so that's it from my side. Thank you.

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

Sir, is there a plan B if PNB doesn't be able to subscribe to our [indiscernible] then what -- how will we address this leverage and the capital raise issue?

Yes, Kapish, please.

Nidhesh, this is Kapish here. So like what you would have seen, we have been very disciplined around this. Our capital adequacy was 17.98% as of March of '19, and our gearing was around 9.6%. From there, we have taken the journey, and we've got it to around 8.2% now. And the capital adequacy is 18%. Somebody you heard in the call itself mentioning that it seems that we don't need capital anymore. So that's precisely the point. That's the plan B in the sense that operating -- without getting impacted with the capital piece, our endeavor has been to make the book lighter and use our capital more judiciously by working towards more lower risk-weighted assets. And that's the plan. So that's the plan and that's precisely what you have seen quarter-on-quarter. Not just an average in 1 quarter, but every single quarter, you have seen the journey of lower gearing and improvement in capital adequacy. And that's how we're going to see how we progress.

And what level of AUM you will be fine with the nonretail book? Is there interim cap that you want to have on the nonretail book as percentage of...

You are talking about the corporate book?

Yes, yes. On corporate book, the percentage of AUM, what -- is there...

Yes. We are trying to reduce the corporate book. As I mentioned, 85 plus, we will have a retail book as well as the corporate book will be been less than 15%.

So -- and after that, you will then start disbursing the corporate loan book?

No. Corporate, we have not taken a call. It's no as of today. Last financial year, we did not do it. This financial year also, we will not do it. Going forward, when the results are available for '21, after that, the Board will take a call on that. But as of today, no, no to corporate book.

The next question is from the line of Rohit Harlalka from Bharti AXA Life Insurance.

So could you be able to help me with your repayment obligations over the next 2 or 3 quarters? So basically, on your borrowings, which would be bonds, term loans and fixed deposits?

In order to answer this question, Rohit, I would like to answer it in a manner that we are working towards keeping a liquidity, which should be in the range of around 60 to 90 days of my liability commitments without considering any moratorium being available to us from any of our borrowers or any of our lenders, and we do our business, which is in line to what we are planning and striving to do. So with that, we would be working with this discipline that we'll keep our liquidity intact for around 60 to 90 days, taking care also that we don't have a huge liquidity, which itself is a big negative carry. The way we measure it is that what is my pipeline on my borrowing in addition to what I already have in my book. And that's something which is looking better to what it was maybe in March quarter because post the result, like what MD mentioned, the traction with banks having them also released their results and with more limits opening up and we also being available with our March results, we see that traction building up where we are building a reasonably good pipeline. And that's where our comfort draws it.

But let me clarify that whatever liquidity I mentioned that we have roughly 3 months liquidity available does not take into account any prospective limit, which is not in place.

Yes. And it doesn't even because...

Yes, clearly, the cash available with me and the sanction lines available with unutilized limits.

Okay. That's great. So even if I want to arrive at an estimate, can I take the liability numbers from your ALM part and adjust it to your payment obligations?

That's precisely the number you should look into because those are scheduled liabilities as for my contractual commitments.

Okay. That's good. And that would also include operating expenses, if I'm correct, right?

Yes, they would -- no, they are balance sheet to balance sheet. They are balance sheet to balance sheet, my asset to my liability.

Okay. That's great. So -- and most of my questions have been answered. So just another question on your corporate book. So let's suppose after this special moratorium is lifted, let's say, a quarter down the line, how much of your corporate book be under principal moratorium? Would you be able to give an estimate of that?

After moratorium is lifted?

Yes, this special -- this is a special moratorium right? But in the regular, both your business and book would be under principal moratorium, right?

Correct, correct, correct. Yes. As I mentioned, about 58% under construction book, which is under moratorium. I mentioned it to you. We have given in the month of March about 60%. As of today, it is around 58%. And as I mentioned, majority -- more than 85% of this book is 0 DPD.

The next question is from the line of Subramanian Iyer from Morgan Stanley.

Just for the question, the capital ratios and the gearing numbers that have been given, they have been given on the basis of IGAAP numbers. How much of a difference does it make if seen in terms of IndAS?

[Foreign Language]

Today, the regulator has prescribed us to work on our capital adequacy basis IGAAP. And therefore, we have worked on a capital adequacy basis IGAAP. It wouldn't be proper for us to do any kind of a market statement of how would this number look like, which is IndAS, unless -- this is more firmly worked out in discussion with our auditors and in discussion with our Board.

Okay. Would the primary difference come from the provisioning that you are sharing, I mean, under IndAS and under IGAAP?

No. Look, let's not do any estimation there because that's not just one differential which is there. There are differentials on fair value, which comes on the asset side as well. So some gives a positive impact. Some gives the negative impact. And therefore, it will be difficult to say that one would give a higher benefit than the other. We will need to work it out. And once the regulations allow and ask us to make it on those lines, we would have build it up, take it to our Board and then come to the market on what we would look like.

Got it. And just a follow-up question on collections because I'm actually not still clear on that. So the retail collections in the month of June were about INR 500 crores, right? So what was the actual receivable during the month? I'm just trying to put it in context of the 29% moratorium.

No, you are talking about the collection amount of INR 500 crores, which is 97% collection efficiency, based on 97% collection efficiency. So 3% of that collected, which will get raised. The bill would be raised next month, whatever overdues are there, that billing is done next month. We should take 97% in June, 3% was not there [indiscernible] 15th were not collected.

Yes. Got it. But I mean, just simplistically assuming that, say, INR 500 crores broadly, say, corresponded to about 71% of your retail book in value terms. I mean would it be right to say that -- so I mean, that your collection -- that the actual amount due on the overall book -- overall retail book, say, would be -- so INR 500 crores corresponded to the INR 70 crores, so would the overall book be somewhere -- overall repayment due on retail would be around, say, somewhere around INR 700 crores?

See it's difficult to work out because these are all EMIs, where the major portion goes towards interest in the initial period of loan. And later on, as the interest goes down, the principal -- the interest comes down and the principal goes up. So I think if you apply it and calculate on all that, it will be difficult to work out on that.

And this INR 500 crores is only the scheduled payment, which is billed to the customer. In addition to that, there are prepayments and balance transfers, which also are incrementally funds that do come in from the customers from time to time.

This I mentioned, around INR 600 crores, we've got extra in the month of June.

The next question is from Anuj Singla from Bank of America.

Sir, one question regarding the clarity on the corporate moratorium. Just wanted to confirm the number. Is 85% you said they have opted for morat 2 under -- in the corporate side?

Both morat 1 and morat 2. They're still in morat 1 and still in morat 2 as well.

Okay, understood. Second question with regards to the FY '21 plan, so where we are targeting 140 to 160 basis points of ROA. Have we built in some kind of recoveries from the accounts, which we are planning to resolve over the next couple of months? So is there some amount of recovery amount also built in those numbers, sir?

Yes, definitely. Recovery has been built in to that. All kind of scenario has been considered while making the business plan vis-à-vis the recovery that we are going to anticipate based on the current situation. And what is it going forward, the requirement to other issues, if you have some retail books where my NPAs are 1%, 1-point-something percent. So all those factors have been taken into account.

Sir, would it be -- will you be able to share out some major accounts, which you have highlighted in the presentation as well, including Radius and the other accounts? How much of that has been built in this number? If you can give some color on that, maybe not absolute numbers, but some color, maybe 3 out of those 5 accounts, or any color on that will be helpful.

No. Anuj, I think this is still difficult to share because we are in discussion with the promoter and the prospective buyers. So I don't think that this is -- it's okay for me to disclose this information or discuss this information. As I told you about the idea of whatever has happened, I told you. Till it happens, I think it's difficult to discuss it.

The next question is from the line of Nishant Rungta from Premji Invest.

Sorry to persist on ALM question. Again, I had a question on the ALM table drawn on one of the slides in the presentation. If you can clarify if the maturity for assets is behavioral or contractual in nature that the numbers disclosed here? And do they factor in the assets under moratorium at this juncture, while drawing these numbers?

Which page you are on?

The ALM table in the presentation -- the chart.

Yes. Kapish?

Yes. So the ALM, of course, is behavioral. The ALM is always drawn basis the behavioral experience on our asset book. And basis -- on those lines, they are drawn. The moratorium is only for a very minimal period. Since we're already in the month of June, it's going to -- it's there for next 2 months. So the impact of factoring moratorium impact and not factoring moratorium will be very minimal. It is drawn basis our experience over the last -- immediately prior period of last 1 or 2 years and then populated on a behavioral basis. And on that basis, we have been drawing the ALM every time. And the ALM does definitely factors in the experience of our collections from the recent past across assets class.

Understood, Kapish. And just a follow-up on that. Does this also factor in the INR 7,000 crore of cash liquidity that you have on books while providing the positive or the negative mismatches?

Yes. So let me give you some more understanding. This ALM is on principal to principal. So all that I have on my asset side and on my liability side has been populated. So the cash that I had of INR 7,000 crores has been populated into the -- on the asset side. For -- and since it's principal to principal, it doesn't incorporate the INR 2,300 crores of annual net interest income that are mobilized for the business. So that's the additional cushion that is there on this ALM, which more than adequately covers even the 12 months gap that you see of INR 1,469 crores.

The next question is from the line of Jigar Mistry from Buoyant.

Just 1 question from me. When you report the collection efficiency, in the numerator, is it the total amount of EMI include for retail? So let's say, the actual collection is INR 500 crores, you will receive an incremental INR 600 crores. So you do INR 500 crores plus INR 600 crores divided by the demand rate? Or is it just the INR 500 crores divided by the demand rate?

Incremental that we receive -- incremental you're talking about the surplus EMI paid?

Correct.

That is not included. Collection efficiency is [ mapped ] on billing made. Anything paid beyond that, that is not included.

Correct, even in the numerator?

Yes. This is not billed -- it's not billed. It's not billed. So anything beyond that is not included in collection efficiency. We include only overdues. If not paid earlier month, it's included in the billing this month. And against that we map the collection efficiency. Anything which is a prepayment or an additional EMI paid over and above the billing is not included.

The confusion, sir, is because, let's say, if you say, INR 1,500 crores is the regular, like an ongoing receivable that we get and if 30% of book in morat, then we should ideally be looking to collect something like INR 1,000 crores. And you have collected INR 500 crores, how does that make it a 97% collection?

Okay. [Foreign Language] See INR 1,500 crores would include even the runoffs. INR 1,500 crores includes the runoffs as well. It is not that INR 1,500 crores is total amount of the billing that I'm doing. You have to take care -- take into account that INR 1,500 crores includes the runoffs as well. So we have to provide you working, but right now, working is not available with me. But I think maybe we can share with you.

Yes. So just to add -- sorry for this confusion. Just to add what MD is articulating is collection efficiencies is a measure of numerator, denominator for all that I am scheduled to collect, including my overdue, which is scheduled. In addition to what -- in addition to this number, whatever I collect, which comes to us as a balance transfer or a prepayment is the incremental amount, which you mentioned, which adds up to around INR 1,500 crores.

The next question is from the line of from [ Jigar ] from Financial Research.

Sir, I just want to know what is the amount we plan to raise in terms of capital? Do you have any figure in mind?

See, we have something around -- we had approval to raise INR 2,000 crores earlier. Subsequently, we went to the Board. So we are trying to raise same amount plus/minus INR 100 crores to INR 200 crores. So anything between INR 1,500 crores to INR 1,800 crores.

And this would be entire, I mean, by PNB, I mean, we put in?

Sorry?

Entirely subscriptions of...

No, no, no. If we go for the right issue, it depends who are subscribing to it, who are the equity shareholder. As I mentioned, the major shareholders are willing for it, but a call has to be taken by PNB that depends on decision of the PNB. So if it is a right, proportionate will come from the equity holders. If there's any other combination, PNB takes a decision and depending on that, we will mobilize it.

So this -- how soon we expect to go ahead? I mean, very soon to finalize this?

Yes, it is expected, as I mentioned that the PNB is expected to meet in the month of July or maybe in the month of August, early August. Let's wait for their Board meetings, where ultimately, as I mentioned, PNB is a listed company. And we need approval from RBI and Government of India. It will depend on the decision of PNB and thereafter, we will inform the market accordingly.

Most likely to be a rights issue that is, is it?

That appears to be an option available, which is more suitable. But as I mentioned, all the 3 options are open to us, but depends on the call taken by PNB.

We will be able to take one last question. It is the last question from the line of Abhishek Murarka from IIFL.

Sir, my questions are, in fact, what is your approved borrowing limit from PNB?

See, borrowing limit -- approved borrowing limit, PNB is fixed, I am not fixed because they have the exposure norms.

So you would have already taken some borrowing limit?

Yes, yes. We got exposure norms from them. [indiscernible] limit is there with us. I think the lender will decide how much to lend to whom.

Yes, yes, sure. So you might have some PC facility or some approved limit, which you may not have utilized fully. That is what I was asking about.

[Foreign Language]

So we have a blend of multiple borrowings from them. We have external commercial borrowing. We have OD lines. We have term loans. And these are replenished from time to time. And depending on my own balance sheet, my own requirement, it comes in, which is submitted to them. We do the credit analysis on absolutely arm's length basis, just like they do for any other lender and then derive what kind of rate they can give it to us.

It's absolutely on an arm's length basis. It's not because they are the promoter in the company, they will give you whatever I demand. It depends on -- yes, yes.

Yes. And sir, in the previous question on ALM, your cash is in which bucket? Is it in the greater than 5-year bucket or which bucket does it feature in?

No, no, no. My cash should be in 3 months, right? Within 3 months -- cash would be in 3 months bucket.

Okay. Okay. And finally, sir, what is the yield on a blended basis on your retail portfolio and your nonretail portfolio?

Kapish? Just 1 minute. I will tell you.

Yes. So on the retail portfolio, on the home loan side, it was 9.52%. It was [ 10.6% ] for the LAP portfolio. And on the corporate side, it's around 12.5% to 13%.

We'll take that as the last question. I would now like to hand the conference over to Ms. Deepika Gupta Padhi for closing comments.

Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website. Thank you.

Thank you very much. On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.