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

Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q2 and H1 FY '21 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.

Thank you, Santhosh. Good morning, and welcome, everyone. We are here to discuss PNB Housing Finance Q2 and H1 Financial Year 2021 results. You must have seen our business and financial numbers in the presentation and press release shared with the Indian stock Exchanges and also available on our website. With me, we have our leadership team represented by Mr. Hardayal Prasad, 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; and Mr. Sanjay Jain, our Company Secretary and Head of Compliance. We will begin this call with the performance update by the Managing Director and CEO, 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 28 of the investor presentation. With this, I hand over the call to Mr. Hardayal Prasad. Over to you, sir.

Thank you, Deepika, and good morning, everyone. Welcome to our quarter 2 and half yearly financial results for the financial year 2021. As the Managing Director and CEO of PNB Housing Finance, this is my first interaction with you all. On behalf of the company, I extend a very warm welcome to all of you and thank you for joining us in the call today. For some of us, it's pretty early in the morning. I hope you all and your families are safe and healthy and taking due care and precautions from COVID-19. With the lockdown measures easing and the company entering into the unlock phase, economic activity is picking up across sectors, and green shoots are clearly visible in the housing sector. The company is witnessing steady growth across all parameters, the log-ins, the sanctions and the disbursements, which are very critical from the company's perspective. The company has achieved 86% of the pre-COVID levels in disbursements during the Q2 FY '21 and is already nearing 100% of pre-COVID levels in October or going forward. We are confident that the festival season will see a surge in the housing market with almost all financiers coming out with a large number of campaigns, which has been lingering for a long time. The low interest is expected to further boost the demand in the housing sector. We, at PNB Housing Finance, disbursed loans amounting to INR 3,138 crores during the half year, registering an increasing trend on a month-to-month basis. Retail segment contributed 95% of the total disbursement, with 65% disbursed towards lower risk-weighted individual housing loan, which has been a new focus of the company. As a retail-focused company, we offer a wide bouquet of products with risk-based pricing to all customers. Along with the mass housing, we are increasing our focus on segments where the financial discipline is better and the demand is rising. The company is closely watching the retail housing loan markets and is realigning its strategies to capture the emerging business opportunities. With the digital being the new normal, the company has taken steps to go digital even at the sourcing stage. The company in the month of October when we launched its customer onboarding digital platform, which is called Ace. It enables customers to upload documents for online verification process and video-based KYC to ensure safe and contactless service to customers. In fact, we are very proud to say that we are the first housing finance company to implement the video KYC. It facilitates easier verification and improves our turnover time. Over time, we expect significant percent of sourcing to come from digital channels. In addition to seamless onboarding experience, the company uses various apps in underwriting, customer service and post-disbursal activities to enhance efficiency at each level. Going forward, we will be connecting all our different apps to make a complete seamless experience right from the sourcing stage until the account is [ seeded ] in the CBS. As on September 30, 2020, the asset under management of the company is at INR 81,221 crores with retail AUM at 82% and corporate at 18%. The gross NPAs on AUM basis as on 30th September is 2.20%. On loan assets, the GNPA is 2.59% as on 30th September. Retail book GNPA stood at 1.23%, and corporate book GNPA stood at 7.6%. The GNPA in corporate book has reduced during the quarter, owing to proactive resolution in 4 accounts. And in line with the interim order from Honorable Supreme Court, the company has not recognized accounts classified NPAs as on 31st August 2020. Adjusted for these accounts, pro forma gross NPAs would have been 3.04%. As a prudent provision coverage measure, the company has made adequate provisions in these accounts in line with the Stage 3 provision coverage ratio. With the current provision, the total provisions to total asset is 2.99%, and overall provision coverage ratio of 115% as of September 30, 2020. The Stage 3 provision coverage ratio has increased substantially to 44% vis-à-vis 22% as on September 30, 2019. The live to-date write-off by the company is 11%, which is pretty good if you compare it with some of our competitors of the cumulative disbursement. In line with the changing environment and keeping in view the stress in the real estate sector, the company has further tightened its underwriting standards and has remained one of the cornerstone of our growth story in terms of the risk management the company is going to exercise. On the corporate book, during H1 FY '21, the company has down-sold a couple of corporate accounts and received accelerated prepayments. We remain steadfast in our strategy to bring the share of corporate book down by the end of the current fiscal year. We are closely watching our corporate book, which are in various stages of resolutions and are hopeful that some of those resolutions will fructify during the financial year. On the collection front, average monthly collection efficiency during the quarter remained at around 95% level. The company has enhanced its collection efforts by utilizing cross-functional teams and improving its collection -- field collection abilities. The field collection that remained restricted due to COVID-19 has shown signs of improvement. As the market starts unlocking, the venues for resolution will also advance, and the impact on Bucket 3 and NPA will reduce. We have also intensified our efforts to resolve the accounts through auction, OTS, et cetera. They have borne good results as we have been able to dispose of some assets. Let me now share a few financial highlights with you. The pre-provision operating profit for the quarter is at INR 575 crores in Q2 FY '21 as against INR 578 crores in the corresponding quarter last year. During the last interaction, we had advised you about the cost rationalized measures taken by the company. I am pleased to inform that our operating expenditures during the Q2 FY '21 have reduced by 19% compared to Q2 FY '20. Since the severity of COVID-19 is not fully known and the economic conditions are yet to improve, as a prudent approach to increasing provision and thereof, the profit after tax for Q2 FY '21 is at INR 330 crores as against INR 367 crores in Q2 FY '21, registering a decline of 15%. The return on asset for H1 FY '21 is 1.47%, and the return on equity for the same period is 13.38% on an annualized basis. Talking about the liabilities with the falling MCLR, the company has registered sequential decline in the cost of borrowings of 12 basis points quarter-on-quarter. The company is at various stages of discussions with lenders to reduce interest rates on our high-cost borrowings that will help in further bringing down our cost of funds. The company mobilized funds from multiple sources, and its second largest deposit-taking HFC in the country. The company has enough liquidity as on September 30, 2020, and undrawn sanction limits. The company is comfortably placed on its capital requirements as on September 30, '20, with CRAR at 18.66% and Tier 1 capital at 16.13% and Tier 2 at 2.53%, which is based on IGAAP numbers. The gearing of the company has improved and is now at 7.8% as on September 30, '20. On the capital raise, PNB, our promoter, has advised that they are seeking regulatory approvals to infuse capital through preferential or rights issue. The Board of the company has also approved capital raise through preferential and rights issue. The same has also been disclosed to the stock exchanges and the information is in public domain. Meanwhile, we have initiated the process of appointing the bankers and legal counsels to raise the capital at the earliest once the permissions are in place. On the regulatory front, Reserve Bank of India on 22nd October issued a revised regulatory framework for HFCs. We are reviewing the guidelines and its impact on us and advise you as we go forward in the next maybe 10, 15 days. We would like to assure you that we will continue our focus on improving our acquisition strategy, strengthen our underwriting standards, enhance our recovery capabilities, improve our system and processes and further rationalize cost. The company has built a strong balance sheet and will continue to rebalance its portfolio to build a strong retail franchise. With this, I would now like to open the floor for question and answers. And with the full management team sitting over there, we'd be more than happy to respond to the queries that come to us. Thank you very much.

[Operator Instructions] The first question is from the line of Sanket Chheda from B&K.

Sir, just I wanted to ask that what is our nonpaying pool as of end of September? So what percentage of the AUM has not paid any EMI? Or what percentage of borrowers have not paid any single EMI until August and also in September, so they remain unpaid?

Ajay? I think 19% of the book has not paid. 81% has paid at least minimum 1 or more EMIs.

Okay. And of this 19%, how much...

Of the morat book only, not of the whole book. We are only talking about the morat book. And from the morat book, 19% is one which have not paid. And obviously, they are being looked at and contacted through various sources right from SMSs, e-mails, field collection and through various measures to see to it that whether they are really in dire straits or they have the ability to repay the loans. And we are -- actually, we have been continuously improving these numbers.

So 19% is -- we have to take it on Phase 2 number, which was about 39%, or the Phase 1 number, which was 56%?

I didn't get the question.

Can you just repeat the question for the...

Sir, in Phase 1, our loans under moratorium were about 56% overall. In Phase 2, it went down to about 39%, 40%. So the 19% we have to take it on that Phase 2 number or the Phase I number?

No, no, Phase 2 number because the numbers which we have given is where the customers have availed moratorium until 31st August.

Okay. And sir, this 19%, can you give a flavor on how much it would be from corporate and how much of individuals?

I mean the -- it will be...

In terms of the numbers, if you would look at it, obviously, it will be retail. The corporate book, almost significant numbers have applied for a moratorium. So amount-wise and number-wise would vary. That is -- and these are the numbers that we can give it to you separately also.

Okay. Sure. And sir, on disbursements, while we said that we have reached 80% in Q2, actually, we are comparing that with Q4 disbursement numbers, is it right? Because anyways they're also impacted by COVID. So if you compare Q2 to Q2...

I would not say that they were really impacted by the COVID because the lockdown started only around 22. So more or less, the files would have come in and the disbursement would have taken place in Q4. The comparison is done because that is the narrative everybody is talking about. To compare it with the lockdown for almost about 3, 4 months -- significant lockdown in the first quarter, I mean, I really -- we can make a comparison and would have given the numbers, but you would not really make out that whether the businesses are coming back to normal or not. That's the whole purpose. Otherwise, it's not that the comparison is not being given. The comparison has been given at various places.

Okay. And sir, the last question is that what has led to such sharp fall sequentially in the AUM? If the disbursement -- even if we compare Q2 to Q2, that was about 60%, 70%, but then what has led to such sharp fall in the AUM, sequentially?

What is that led to the...

Fall in the AUM from Q2...

Fall in the AUM. It is about 2.53%, sequential.

It is primarily because after the lockdown, with gradual opening of the lockdown, activities opening up and with some of the sharp reduction in pricing that is being available from the banks side, there have been some stress which is coming in from run-off side. The book has run-off, which is resulting in this AUM coming down.

Almost all banks, if you look at it, have really reduced their interest rates significantly, and our ability to reduce the interest rates, obviously, would remain a little different because we do not have CASA deposits. And therefore, our reduction has been not up to the mark. So the differential of interest rates between us and any of the major financiers has increased, and there is a run-off in terms of the books that we are seeing. But the only thing that we are doing is that we are working pretty hard in terms of ensuring that despite the fact that there is a differential that has come in, how can we actually really hold onto the book by bringing in efficiency in terms of new acquisition as well as talking to the customers and explaining to them the reasons why they should stay with us and the advantages that they would get once they are with us. So unless it is pure interest reason, I mean, obviously, you would go, but there are many other charges and other things that go. And some of the financiers, once you have -- once you may be quoting an acquisition maybe at a lower rate, very quickly keep on changing the interest rates and most of the customers understand that part that there are interest rates that keep on changing. And that is why we have also been able to retain some customers.

The next question is from the line of Parag Jariwala from White Oak Capital.

Sir, my question is with respect to morat. When you say 19%, is this 19% of total book, right, which has not paid any EMI?

No, I think we made it very clear, the morat book.

Okay. So I have to basically apply a percentage to morat book and say that this is the 19% of the morat book, which is not paid?

That's right, sir.

Yes. So it should be 19% of 40%, which is not paid, right? I mean, sorry, but just to make it a little clearer.

So [indiscernible] 40%, 19%, 20%, about -- you can [ very well ] do the math.

Okay. And sir, is it possible to give us a breakup or you think it will take time between retail and corporate?

See, overall, if you look at -- I'm just addressing your first question. 81% is collection efficiency for morat cases. But overall, if we look at by collection efficiencies, 94%, 95%, which remained more or less same last 3, 4 quarters, so we should take confidence from that, that the portfolio so far is holding on.

Yes. Yes. That's right. Sir, is it possible to give us a breakup of retail and corporate within those who are not paying EMIs for the morat book, especially?

I'm sure it is possible, not right now, but we shall give. I mean, we can reach out -- you can reach out to Deepika, and we should definitely be in a position to answer that.

Yes, sir, we'll do that. And sir, the last thing. When you said you've tightened the underwriting and -- so how much time do you think you will take to reach to the normalized profitability level once this cleanup and the growth and everything comes back?

The most important thing is actually to ensure that the limited data that may be coming up, for example, the non-updation of CIBIL and other data because information is not being uploaded or is not really true because of morat and other reasons. Obviously, you have one of the vectors that goes into the underwriting has a limited view over there. But there are so many vectors that go into the underwriting. So what we have done it and we look at almost everything, what is your ability, what is your income stream, how good is your income stream? We look at the salary slip. Even the emphasis -- I mentioned it in my opening remarks, the emphasis is on the salaried and others, the strong book that we are building on to it. So you look at those things. You look at the surrogate data. And you see to it that -- whether -- how strong it is. So the underwriting standards have been improved, and I can assure you and I can tell you with a lot of confidence that the company will ensure and will maintain that there is no dilution in the underwriting standards. In fact, the underwriting standards can actually be strengthen and will continue to strengthen, keeping in view the individual portfolio within the home loan. If there is any portfolio where we see there is a stress coming in, obviously, the underwriting will immediately be done. In case we see that some portfolio is behaving very well, then we -- after some time, we will see whether the underwriting standards need to be relooked at and whether there is unlocking of the tightening that needs to be done, that would be done. I think there is -- on the risk management side, we remain steadfast in our approach to ensure that the portfolio remains strong and robust and there is no dilution. I think -- we can assure you that the risk management team works completely independently in terms of ensuring that the portfolio quality is always maintained. But you also have to factor in what is happening in the economy, the unlocking that is taking place, the green shoots that you are seeking. So despite that, we are also saying that we are -- on the disbursement and the acquisition side, we are growing. So there are mixed things that are happening. Too early to say what is going to happen, but we are sure that we are on the right course.

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

Sir, can you give us some indication of the collection efficiency for the month of September as well in terms of the exit rate after the moratorium?

We just mentioned it is 94%, 95% and remained range bound pre-September and in September.

Okay. So around the same ballpark, 93%, 94% holds for September as well?

That's right.

Okay. Okay. And sir, is it possible to share the Stage 2 assets in the 2Q?

We normally show the bifurcation of Stage 1, 2, 3 annually because this is a mortgage business and annuity kind of a business, and we will continue to show detailed retail, corporate annually.

Okay. Sir, this is -- because after moratorium, the key concern among -- the GNPA numbers will not reflect the total asset quality. So if any indication -- I don't know if you can share some more color on that Stage 2 because that's become a key focus area this point of time for investors.

Anuj, it's a little early right now because we just have received the Supreme Court order. Supreme Court has just done -- keeping that in view and the behavior of the consumers and the borrowers, it's a little premature at this stage to exactly say that how they are going to behave because all of them were -- despite the fact that the moratorium was over, people were expecting some kind of release to take place. And they were once -- even when we were going and we were strongly pitching for the collection and explaining to them, educating them through various channels, SMSs, e-mails and everything, the need to repay, many of them did say and were a little aggressive also in terms of saying that they would like to wait and they would like to see that how it is going to pan out. So I think even if many of them who could have repaid were holding back. I think now the time has come. I think it is very clear how it is going to fare. Based on that, I think another month or so, this next quarter, we should be in a position to tell you how the book is faring. At this stage, it's a little premature to give those kind of numbers to you.

Okay. Fair enough, sir. Sir, lastly, in terms of yields, we have seen a Q2 improvement of 100 basis points despite the pricing pressure from banks which you maintained. So is it primarily on account of the securitized pool income of INR 105 crores in 2Q? Or there are some other factors you have taken hikes -- interest rate hikes in specific segments?

So if you remember, in Q1, we did mention the fact that we have increased our rates in the corporate book, the result of which is fully there in the quarter 2, which is added up. And so that's -- is 1 part, but primarily the yield in the portfolio has actually moved up in Q2 and has stood at what it was as of March as well. So we have held back on our yields on a normal state basis as well, not factoring the securitization impact. Securitization impact has given an added blip to the quarter yield.

In some of the portfolios, we have introduced risk-based pricing. We are also going to actually take it forward in terms of LTVs and others. The risk-based pricing on some of the portfolios have already been introduced as part of the strengthening of the underwriting book.

Okay. Just to clarify, this 11.3% number will include the impact of the INR 105 crores as well, right, of the securitized...

Yes. Yes. It does. It does. But even if you shave that off, the yield in the normal book is in line to what it was in March because of some rationalization that we did in the retail portfolio and some increase that we did in the corporate portfolio at the beginning of the quarter.

We'll continue to look at the book very, very closely on every aspect in terms of how we can do -- we can -- the balance sheet -- how do we strengthen our balance sheet, in terms of the provisions that we are going to bring in and in terms of the cost rationalization, the revenue optimization, which has also, naturally, if you look at it, led to reduced gearing also. I think we will continue to monitor it very, very closely.

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

Congrats on the quarter. I had a follow-up to Anuj's question. Sir, this INR 105 crores is part of the INR 1,960 crore interest income, is it?

Yes. Yes, Piran.

Okay. Okay. Fair enough. And secondly, out of your SMA account of INR 5,100 crores, which have been granted moratorium, how much was retail and how much was corporate?

Ajay, do you have those numbers?

Piran, we'll update you separately on this. We don't have it readily available.

Fair enough. And just lastly, on the same yield question for now, I see that the lowest yields that you all offer are like 100 bps higher than competitors. For an 800-plus CIBIL score customer, it is 7.9%, whereas HDFC, LIC start at 6.9%. So really, how can we be competitive in such an environment? Historically, we've maintained a yield of 20 bps above on HDFC. But with 100 bps above, how do we see the future of business growth?

I fully agree with you that at that level, we were always 5% higher. It's not that we were never higher. We were always around 5% interest rate higher. What has happened today is that we are almost at about...

[ 50 basis points ].

50?

50 basis points.

5% of the interest rates. Whatever was being quoted, we -- if 7% was quoted, I was above 35 basis -- 50 basis points above -- 35 basis points above. What is the differential that has come is 10%, not the basis point, 10% over the interest rate quoted by our competitors. What is important is that, obviously, interest rate we will quote, based on the risk-based pricing, is going to remain the cornerstone of our policy. We have some challenges in terms of our ratings and everything and, therefore, it is important for us that we remain very, very profitable in terms of the way we are going to grow our books. Importantly, I did mention to you that we have been able to pay down our interest -- the borrowing cost, and we'll continue to look at that. What you just mentioned about that 800 and everything, as a part of the campaign, we have already reduced the interest rates for one particular category and brought it down to 7.5% for the next few months. And we are looking at it in terms of how we can really look at the balance sheet and we find out that -- where there is a room for looking at the interest rates. But I would like to tell you very, very clearly that profitability, cost benefit analysis will continuously remain -- the delinquency and everything will continue to remain one of the most important things that we will look at it in terms of the growth that we are going to look at. One thing I would like to mention, Mr. Engineer, is that if you really look at the housing market, the housing market in India, obviously, is quite underpenetrated. So mortgage to GDP ratio is only 10%, which is much lower than in a lot of countries and around -- across the globe. Even if you look at the estimates that ICRA has given, it just moved to 13%. I think there is a huge demand for that. And with nuclearization of the families and there are a lot of other things that are happening, people started looking at buying new houses, bigger houses, having some offices across because both spouses are working, there is a demand that is going to come up. With this kind of mortgage -- underpenetrated mortgage industry, despite the fact that -- I mean I take your point on interest rates. I think there still is going to remain some demand for housing and we look at it. Housing for All, the government's very important initiative, will help us significantly in terms of the way we are going to build our Unnati portfolio and affordable housing portfolio. We will continue to actually focus on those areas, which are going to be the new sunrise kind of areas that are going to come up.

The next question is from the line of Swanand Samant from Chanakya Capital Services.

Hello. Yes. Sir, just I wanted the number of the under-construction portfolio on the retail side? That's my first question. Second, we have decreased branches in this quarter. So will it continue in the next 2 quarters also or we are finished with that? Third, sir, we have started borrowing on CP from last quarter. So is there any upper limit on the percentage of CP of the total borrowing?

Yes. So our under construction portfolio as on -- as it stands today is 19% as an under-construction portfolio, and we are currently not concentrating too much on under-construction projects. Rather we are concentrating on completed projects and on resale properties. So that's where we are moving on as far as this under-construction portfolio is concerned. And on number of branches we are talking about, currently, we have 96 branches we are present in. And I think we are well-capitalized for a growth from these 96 branches because we are working on the productivity model rather than just going on expansion and spreading thin in the market. So each and every branch has to be productive and profitable, then the next branch can be looked at. So that is the model that we are targeting now.

That was actually the first round of rationalization of branches and operations that was done. Now that the business will start picking up, we need to relook at the rationalization, cost-cutting and cost optimization initiatives. It's a continuous exercise every quarter the organization is going to look at very, very closely in terms of how the costs can be optimized. So the second round will also take place in terms of looking at it whether these branches are profitable, productive. I think Rajan mentioned it very clearly. And as a sales head, he remains very, very glued to the fact that it has to be a very profitable brand, and it has to have profitable operation. On the CP, I think if you can handle. Obviously, the CPs...

Yes. So our CP share currently is around 2, 2.5. I can't look CP in isolation. I have to look into CP in line with what is the other backstop facilities I have, my liquidity position, my pipeline of borrowing that's available to me and more particularly now the MCLR guidelines have also come in, which would also need to make sure that I've got adequate liquidity buffered in for the short-term windows. So with those elements securely in place will define -- will decide on how much of CP share we're going to build into the portfolio. But very clearly, we're not going to go too heavy on CPs. And even if I go for a CP, we'll go for a longer tenure rather than looking into a 3-month refinance window.

Okay. And sir, on the corporate side of the portfolio, so we sold down almost INR 350 crores in quarter 1. So is there any target for the whole year?

[ Saurabh ]?

Yes, we'll target to bring down the book by -- through down-sell about INR 1,500 crores throughout the year. Roughly, INR 500 crores a quarter is the plan going forward.

Okay. Is it possible to spell out the yields product-wise, home loan, corporate, LAP, et cetera, for this quarter?

We, usually -- we do not actually give those yields. But I think off-line, if you can connect with Deepika, we can -- we'll think about -- we might give it.

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

So what could be the time line for capital raise? And when you are interacting with credit-rating agencies, what they are saying? Because our leverage has come up quite significantly over the last 12 months. So does that still remain a concern in the minds of credit-rating agencies? And what is the hindrance of our credit rating being upgraded? What is the feedback that we are getting from credit-rating agencies? These 2 questions, sir.

The announcement of PNB as the promoter of the company to infuse, subject to regulatory, has been a very positive sentiment. Subsequently, the Board also came out with a resolution for raising the capital. I think these are very positive sentiments and the interactions that we have had with the rating agencies, obviously, have centered around the capital raise on the delinquency as well as on the liquidity part. I think we are -- the way we have managed our liquidity, the way we have managed our delinquency, I think, are pretty good. Just waiting for a regulatory approval. I definitely cannot read the mind of the regulators in terms of when the approval comes. We are expecting the approval to come. We have to hear from the PNB. The moment we hear it out, we are ready. We have done our due diligence in terms of how quickly we can reach the market. So obviously, after we received the approval, we should be in a position to go ahead and mop up those capital as quickly as possible. I would not be able to give you the date or any other period on which that will be done.

Sure, sir. And looking at the current data and the provisioning that we have created, what is your view on the incremental credit cost for the company over this year and next year?

[indiscernible]

We are at a healthy provision of 115% overall and -- so we feel that as of now the provisions are adequate and don't expect this to rise exponentially in the coming quarters.

No, provisions are adequate if you really look at, but I think with what has happened now, the Supreme Court and other directors that have come in, I think it now is the time to really find out whether the provisions are going to be very good or not. What is important is that whether the company has geared and has ensured that the provision coverage ratio and other things improve. I think that's very, very important and significant. We look at the book and see how it pans out, and we will continue to improve, if required, the provisions that are there. I think what we have done this year is also quite significant in the way we have built our provisions. And we have seen to it that -- and I gave you the numbers of pro forma NPAs, and we have actually treated them. The provision has been treated as if it was a -- it would have become an NPA, which was not there at all. And I don't think the whole portfolio will become NPA, but went -- as a prudent exercise, we went ahead, and we provided for that portfolio also. And we made a disclosure also, which is important, that this is the provision, and this is the risk -- if anybody would like to look at it that this is the magnitude of the risk that is sitting on the book.

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

First was on the collection numbers. So I think in June, total collections were around INR 550-odd crores, excluding the amount received from sell-downs. What is it in September?

INR 1,200 crores.

Without factoring in any sell-down, et cetera?

Yes.

Okay. And when you say 95% is the overall collection efficiency, is there any breakup between retail and corporate there?

That's on the retail side, I think, no?

This is on retail side.

95% is on the retail side.

95%. Okay. And on the wholesale side?

Wholesale side, I don't know. Saurabh, can we have -- then you can pull back or give the number offline.

So we -- actually, on wholesale, it is about billing and receiving. Separately, we can connect and give this information.

Sure. Sure. Sure. No worries. My last question is on the restructuring part. So what is your thought process? Have any developers or even corporates come and approach you for restructuring? What percentage of book could be restructured?

See, it is a little, again, premature. We got our Board-approved policies for restructuring. There are definitely inquiries from the developers, and we are evaluating it. Now to crystallize and say that how much percentage book will actually ask for modification, restructuring, et cetera, at this stage is a little premature. I think give us 1 month, 45 days' time to basically fathom as to what is -- how many cases will qualify, and we are ready to do restructuring or modification.

The next question is from the line of Mansi Shah (sic) [ Naishi Shah ] from Acko General Insurance.

I think you got my name wrong. It's Naishi. So one of the questions that I had was regarding the liquidity coverage ratio. So would you be able to quantify it?

So the new regulations are applicable from December of '21, and that too on a gradual basis starting from 50%, moving to 100%. So we have not absolutely measured the liquidity coverage ratio from the guidelines perspective. But given the kind of liquidity that we have been maintaining over the last 2 quarters and even now as of 30th of September, we are well in place to be close to 100% of the liquidity ratio that has been prescribed on a pure-play basis, not doing HQLA kind of a definition. But on a pure liquidity perspective, we are well in place because this liquidity is something that should last us for the next 90 days. So we have adequate liquidity. We're actually using this liquidity as a tool to pay off some of [ high-cost ] borrowings that we have, which we already did last quarter and even this quarter as well, and using it as well to do all kind of negotiations for all our high-cost borrowings. So that's the comfort zone we are in as of now.

Repayment of high-cost borrowings. The repayment borrowings would mean that, what you're saying is, we are trying to look at it and repay high-cost borrowings because we have some liquidity. In fact, wherever we have repaid, we have gotten a very good feedback. Initially, obviously, nobody would like to reduce the rates. But once we have taken a call, most of the financiers are coming back to us and saying that, okay, we are going to reduce and bring it down, linked to the present MCLR.

Correct, sir. And so basically, you all are drawing down on the liquidity at least since the month of September, am I correct?

Sorry?

So basically, you all are drawing down your liquidity buffer since the month of September, if I'm not wrong.

Yes. So we measure our -- the comfort on our liquidity on 2 bases: one is the hard liquidity that I hold on the balance sheet and also the kind of pipeline that we have built in for fresh borrowing. In aggregate, if the 2 gives us comfort, we can play around in reducing the liquidity so that the load on the balance sheet comes down, but I have buffer with me. So since we have built a reasonably good pipeline on lines of credit, which we have not yet drawn, we are in a position to bring the security levels down.

Actually, in the initial 4 or 5 months, the banks and the lenders were a little slow in terms of looking at the limits that we had with them, and they were taking longer time to give limits. Now what we are doing is that we are anticipating 3 months in advance and, if required, we are going to the banks and the lenders to improve -- to increase the limits if required. I think, overall, the liquidity -- by the hard cash -- the cash liquidity that we maintain and the undrawn limits that we have, we will see to it that there's a pretty good balance. And we are in a position to negotiate, we are in a position to maintain, and we are in a position to have enough amount to lend also.

Correct, sir. Sir, another question. Sir, you all have -- the net deposits of the company have gone down to 0 year-on-year. Is there a reason why that would have happened considering you all have relatively higher rates as compared to other banks and companies?

Actually, there has been a little slowdown in terms of our deposit mobilization also. I agree with you. There's a little bit issues on the corporate deposits that were coming in. Normally, the corporate is also a strong book that we built. However, this time, the corporate book did not grow as it was. However, the new measures that we have put -- twice we have reduced the interest rates also, but the measures that we are putting in, I'm sure that as the second largest deposit-taking HFC, we will ensure that there is sufficient growth that will come in. If you really look at it on the -- from the deposit growth that one would see in the market, a lot of it is coming on the CASA side. And on that fixed deposits, most of the deposits that are coming in are coming only for less than 1 year. So I think there is an issue over there -- sitting over there, and we need to look at it. And we need to see that if the growth is coming in those 1- to 5-year deposits, how are we pairing and how are our interest rates in terms of the market and competition. We are continuously looking at it. I think as we go forward, you will see growth on the deposit franchise.

[Operator Instructions] The next question is from the line of [ Anuj Sharma ], an Investor.

First of all, congrats on the results. Sir, my question is, can you give us a picture on, like, what will be your closing morat as on August 31, 2020? And what will be your current liquidity? When we talk about liquidity, your -- the investments that you have done and undrawn lines that you might have?

Anuj, as I mentioned just in the previous call, our liquidity currently is sufficient to take us for the next 90 days, and I'm not factoring in the undrawn lines that we hold. This is factoring in also the disbursement that we are planning, the anticipated collections that's going to come in from other sources as well and my normal business operations. So with that all being factored in, this liquidity looks to be sufficient to take us until the end of this quarter because Q3 has already started, not factoring the pipeline that we hold.

Sure, sir. Sir, what was your call closing morat as on August 31?

Yes. For retail, it was about INR 18,000 crores book, which was in moratorium as on August 31, 2020.

INR 18,000 crores?

Approximately, yes.

Sure, sir. Sir, what will be your -- sir, in the PPT, you mentioned that on top of the regulatory risk provision requirement, you have made a provision of around INR 1,332 crores. So will we take it as a COVID provision, like, additionally -- because of the COVID that you have done this additional provision?

See, one correction, we have a provision of INR 2,004 crores. The INR 1,332 crores is over and above the earlier IGAAP provision norms. So it is not that INR 1,332 crores is a provision. Provision, which we are standing, is at INR 2,004 crores. To your second question, we are already into 6 months of COVID. So the risk is certified in the sense that the pandemic is there. So it is not possible after 6 months to segregate what would be my pre-COVID or post-COVID. So all these numbers are -- as things stand today and looking forward, how things will pan up 6 months, 12 months or 24 months from now on, for which we apply macroeconomic factors and -- so the model is created.

Sure, sir. Sir, there will be no segregation of what will be the exactly COVID provisions that the company might have done for...

Sorry, what is the question?

I'm saying, sir, there would not be possible segregation between the total provisions and the COVID provisions.

Yes, it is actually a futile exercise to make hypothesis that had there been no COVID, what would it be. It is very difficult to just give one example. For LGD, how do I assume that if there was no COVID, what would be the security cover and what would be the debt because we have to see today what is the impact of security and what is my loss given default under the COVID scenario? So I think it becomes a very hypothetical and academic exercise to presume that there was no COVID, there was no stress on LTVs or securities and then make up resumption on LGDs.

Sure. And just last clarification that you said on morat. You said the book is around INR 18,000 crores in the morat as on August 31st, the retail book. So that means almost 20% of the book was under morat in retail. Any number on corporate side?

We mentioned earlier that 94% of corporate book -- 85% of corporate book was on -- it was in moratorium as on August 31, 2020.

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

Yes. So firstly, on the corporate side, if you can give color in terms of what are the collections in the escrow which is happening? For the developer zone on we have lent, what is the kind of sales and the collections that they have seen over last 3 to 4-odd months just to get some sense as to how the behavior has been? And what is the kind of improvement that we are looking at? So maybe some more color apart from maybe what we are saying that by end of August, it was, like, 85% was under morat, but how to expect in terms of -- over a couple of quarters, how they would move.

See, my request to you would be -- this is too early to make any value judgment. This is -- we all know that real estate sector and project, especially, the things were -- because of lockdown, things were not good in the sense that all the construction work, supply chain, et cetera, were all stopped. So we should appreciate that this is a situation until about 1 month back, and things are opening up now. So to make any judgment in terms of 30 days' time how things are panning up, I can only give you one indication that, yes, things are shaping up good for a completed units or near-completed units. There is a surge in demand for affordable or that kind of property line. In Pune market, in Bombay market, there is a good demand which is being generated. This is the feeling which we are getting. And if you look at ANAROCK report, in Q3, I think the numbers of -- the sales number has tripled from the previous quarter and that is why the retail business, we see -- there is an offtake in retail also. We are close to 85% of what we were pre-COVID numbers.

We have interacted with almost all top builders and, fortunately, whichever way you look at it, we have all the top builders of the country where we are single financiers in some of the projects. And our interactions are continuous with videoconferencing and sometimes personal meetings and all that. Everybody is saying that the conversion at their office is increasing, which would mean that if there were 100 people walking in and there were only 25 who were converting it, today, only 50 people walk in, but maybe 25% to 30% -- 50% conversion takes place because with all the virtual imageries and other things being shown, people who come to the builder's office, they very clearly are ready to buy a property. I think that's one thing which is very, very good. But obviously, it is going to take time. Once you have finalized a deal, only then the escrow and other mechanism will start flowing in. In terms of the salary, in terms of other things, people are making payments, they are coming in, but there are some portfolios or some segments in the society which definitely have a problem. So I think as the unlock starts, more or less, it has started, I will have to see unless it -- what has happened in Europe once again, the second or the third round or something like that happens, then it could be an issue. Otherwise, if you look at it, the builders are saying that they are receiving good queries, I think, which is a very good sign. And whether -- the top 10 markets -- as Ajay mentioned, the top 10 markets are coming out with a solid rebound is what is our numbers very clearly suggest in terms of the acquisition that we are doing.

Sure. Because some of the peers have been sharing, particularly on the corporate side, that 80% is the collection efficiency and somewhere around 86 to 90-odd percent kind of escrow collections. So I thought that maybe on a comparable basis, it would really help if we also have some numbers to it. And secondly, maybe in terms of between the restructuring and DCCO extension, how do we look at it? Maybe wherever the payment is not coming through, maybe are the projects such that they could get into the DCCO extension without restructuring or it would be a combination of both?

See, housing finance companies are not covered under DCCO extension. So that is not applicable for housing finance companies. It is applicable for banks and for NBFCs.

You can talk about NHBs. Who wants it? Do you want to talk, Saurabh?

Yes. But we do have guidelines with respect to NHB, which allows for reschedulement once in the lifetime of a project because of reasons which are beyond the control of a developer. So you are correct that these guidelines are available, and we look at the impact of COVID or other circumstances on the project, and we are taking away a conservative call as to what is required to be done? Is it a general stress or there is an actual impact on the project and only then we look at the possibility of reschedulement in this case. You're right that this is a more efficient way of doing it. But still, the way we are, we are very conservative in our ECL provisioning. We make sure that if any kind of reschedulement is done, we are adequately providing in terms of ECL provisions here as well.

Sure. And lastly, in terms of this LTV and risk weights, so any indication, is it applicable to HFCs? And do we get the benefit?

No. The risk weights that have been announced by the Reserve Bank of India presently are only for the banks. They have not mentioned HFCs over there.

Yes. So it's not applicable to HFCs, no, at this point of time?

As of now, we are -- we have taken it up, obviously. We would like that it is extended, but NHB is maybe looking at it, and they'll come out with some structure. Because when Reserve Bank of India -- and this is for -- I mean for the consumption of each one of you. When circulars come out from the Reserve Bank of India, they are very clearly mentioning whether it is for the banks, it is for NBFCs and it is for HFCs. So when it doesn't mention, it is not applicable for the banks -- for the HFCs.

The next question is from the line of S. Parameswaran from Jefferies.

This is Prakhar. Just wanted a clarification on the collection information that you've shared. So you clarified that on the moratorium loans, about 19% have not paid a single installment. And so that will be approximately 8% of the loan book. And you've also mentioned that on an overall basis, you are collecting 94%, 95% in September. So just wanted to understand that are these mutually exclusive numbers or basically the 94%, 95% applies to non-moratorium book only? Or have the moratorium guys started to pay very well from September itself?

When we give collection efficiency of 94%, 95%, this is on an overall basis, so what I have billed, what I have collected, right?

Yes.

So customers who were in moratorium on 31st August and came out of moratorium, we have billed them. And we have...

Whatever EMIs were supposed to be received by us, out of that, how much was received? And if it is out of the moratorium, well, we are going to bill him. So out of the whole EMIs that the company is going to bill, 95% is coming back, which is, I think, in my opinion, keeping in view of what is happening around, our field collection team or otherwise digital or the phone collection, telecalling and other things have been very, very useful in terms of getting back those kind of efficiencies. I'm not saying that others are not doing it. I'm just saying that we have been equally good.

No, no, I can understand. But just to reconfirm this part, basically, when you add this 19% of the moratorium clients not even paying a single installment, maybe 94%, 95% of those guys also paid the September deals. Is that a fair way to understand?

Obviously, there will be. When we were talking about 80%, 81% and 19%, that was only for the morat, 5 months, 6 months of morat period.

And this 94%, 95% would not be inclusive of prepayments, loan transfers, et cetera?

No, it doesn't include that. That's why it's a great number.

The next question is from the line of Atishay Jain from ICICI.

Thanks for having the call.

Excuse me, this is the operator. Mr. Jain, your voice is not coming in clear.

Is it better now?

It is better, but low.

It's quite feeble.

Better now?

Yes, very good.

My question is around growth. So what are we thinking about growth in the coming quarters? And how has that AUM behaved in terms of growth or degrowth this quarter versus the last quarter -- versus the same quarter last year?

I think the numbers you can give, Kapish, but in terms of the growth that we are looking, it's going to be a very, very calibrated growth. We're looking at gradual growth. We are looking at lower risk-weight assets to be built. I think those are some of the important things that we are going to -- we are going to look at the book, which are the profitable segments within the home loan. Those are the areas that we are going to concentrate. We are going to look at the demand. We are going to look at the category of customers. It's coming from salaried. Within the salaried, it's coming from government. It comes from the MNCs. It comes from the Category B of the type of companies, where the salaries are being paid, or if there is a decline in the salary, what is the decline, everything is being factored in. And so it's very, very calibrated in terms of the way we are going to increase -- the growth will take place. Despite all these checks and balances and the underwriting tightening that is taking place, we still feel that there are a lot of eligible customers, as almost about 70% of the acquisitions or the pipeline that comes out of funnel is getting approved, which very clearly means that there is a large number of people, who fit into this whole scheme of things, are actually getting cleared for giving a loan. So as we go forward, gradually, we will see that how the book will actually pan out and we'll see. But let me ensure you once again that it is going to be lower risk-weight assets that we are going to acquire, assets where NPAs are lower or the segments where NPA is lower. The retail book will grow accordingly. In terms of the numbers, AUMs and other things, if you can give.

Like what I mentioned earlier, the AUM has actually gone down from last quarter marginally by around 3%. There are 2 elements of that thing. One is that we've also grown in a very muted, controlled manner. So [indiscernible] has been quite muted at around INR 2,400 crores for [indiscernible] quarter, which is 60% lower to what we had same time last year.

I'm sorry, I'm sorry, 3% is degrowth this quarter?

The AUM has degrown from last quarter of [ June '20 ], by around 3%. If you compare to September '19, it's gone down by around 8%, right? The one good reason why the year has come down this quarter is because we have grown in a very muted manner and some bit of the book has also run off with the opening of the market and with the price differential, which MD highlighted earlier.

So you are saying quarter 1 has grown by -- degrown by 3% and quarter 2 has degrown by 8%?

Quarter 2 over quarter 1 has degrown by 3%; quarter 2 this year over quarter 2 last year, the AUM has degrown by 8%.

Okay. All right. And what are the future projections like for the AUM growth? How are we planning to grow the AUM next year or probably in the coming quarters? Any sense on that?

[indiscernible]

Yes. So as we highlighted in quarter 1 as well as our outlook, we would have a flattish kind of AUM this particular year. And depending on how the COVID pans out and things shape in and post raising of equity, we should be able to then focus more on building the book and the business on the growth side. But whichever way, the focus would be on the retail side and lower risk-weight assets.

Our whole effort is on strengthening the balance sheet, on cost optimization, revenue optimization and see to it that we have a very calibrated growth. I mean middle single-digit level growth, if it comes, it is going to be great. I think the expectation is around 5% to 6% that everybody is looking at. I would not know that how we are going to grow at this stage, but our effort is going to be there, the market scanning is going to continue to take place, and we'll see how we would like to go forward.

And can you also give a sense on the delinquencies, how they have moved this quarter versus last year and split in terms of corporate and retail?

Ajay, if you can give, I think, the high level numbers, we can...

We don't give segregation of corporate and retail because of reasons explained earlier. September '19, the Stage 3, basically, 0.8 was the number, and now it is -- the number is given for September '20.

GNPA is 0.8%?

No, no, no, retail gross NPA, GNPA is at...

Okay. Okay. Retail GNPA is...

1.23% and corporate GNPA is at 7.6%.

Okay. Retail GNPA is 1.23%.

Yes. And we have also actually mentioned regarding our pro forma and gross NPA, effectually those accounts, which were after -- out of the -- after the moratorium. That would go up to 3.04% then from net NPAs, I think, of 2.59%. From 2.59%, they'll go up -- GNPA will go up to 3.04%, a marginal increase, but we have disclosed those numbers for the benefit of you.

And adequately provided...

And adequately provided, I did mention to you, that's very important. It will be treated as if they would have become NPA and we have made the provision based on the modeling that we -- this is our provision that we would have made if the account was an NPA and, accordingly, the provisions have been built in. Have we disconnected?

Hello?

Mr. Jain, do you have any further questions?

We can move now.

We take the next question from the line of Vishnu Soni from Bharti AXA.

So we -- I mean we have been seeing like liquidity is comfortable. So can you tell me the number, what is liquidity available as on 30 September? And also the bucket-wise breakup for the ALM.

As I mentioned, our liquidity -- we should also look -- we should always measure how much is liquidity there to suffice and support the balance sheet. As I mentioned, the liquidity is there to support for the next 90 days from the reporting date, and we have a healthy pipeline attached to it, which we have lined up with the banks and borrowing that is there in the plan. On the number side, it's around INR 7,500 crores. And with regard to buckets, the buckets are also fairly comfortable. And this liquidity, as I said, is giving us a good impetus for us and, therefore, the buckets across up till 1 year is also looking very comfortable. There's a marginal...

Obviously, that is part of the ALM management, and we would ensure that the regulatory ALM management is always ensured. All the buckets right up from 15 days to 3 months, to 6 months, to 9 months, they'll all be maintained. So when actually Kapish talks about, the CFO talks about the liquidity, he's talking that he has very well managed the quarter end liquidity and the bucket-wise liquidity. All these things have been taken into account as part of an ALM exercise. So I think that way you can be assured that we have -- that is what is reported. If we report -- if there are mismatches, the next day, I will get a -- not next day, probably at 9:00, 10:00, somebody from Reserve Bank of India is going to call me to talk to me on that report. That way we are pretty well managed.

So you said it is comfortable up to 1 year. So is there any mismatch in the -- on the period -- beyond 1 year?

No, no, I only answered that question that from a liquidity management and liquidity is more relevant for the shorter window in particular, we are fairly comfortable right up to 1-year window.

Okay. And sir, how much is the undrawn credit line facility available as of now, I mean, on 30 September?

It's reasonably sufficient. It is -- sorry, it's reasonably sufficient. It's far higher than what we had as of June as well. And that's precisely what is giving us the comfort that we are on the right course from a liquidity perspective, and we are, therefore, using that as a tool to negotiate on reducing our pricing for the current high costs that we have, also of the borrowing that we have, which is [indiscernible] and what we would like them to be.

A little premature to say, but we are also discussing with all the large lenders for reviewing our limits and if there are other borrowings that we can have. So this is a work-in-progress, and we will continuously look at it so that next 3 months, if they take about a month or so, 3 months for giving us revised limits or a [indiscernible] limits, we will continue to actually look at those options, and we'll continue to build on the limits that are required by the company.

It was around INR 5,400 crores in last quarter. So I just wanted to compare the number as of now we have -- but now you're saying it's under discussion. Is it...

[indiscernible] another question.

See, gentleman, I've just mentioned to you that we are better placed on liquidity than what it was even in last quarter. So that should give you the comfort.

Ladies and gentlemen, we will be taking the last question now. We take the question from the line of Nischint Chawathe from Kotak.

Just wanted to understand on the projects that you have financed. In how many cases is your last-mile financier or a new financier or somebody, SWAMIH [indiscernible] over there?

Corporate book, I think. Saurabh?

See, SWAMIH has identified around 7 to 8 projects of ours for last-mile funding, but that's not a preferred route for us, to be very frank, because that requires ceding first priority charge in favor of SWAMIH. So we do understand that projects need funding at last mile if they are working capital -- if a working capital shortage is there. And we're looking at various avenues, not just SWAMIH, to get that done. So I mean though this is available, but -- SWAMIH is available, but it's not a huge success in the market because of the construct of the scheme right now.

But you would have got a last-mile financier in any of the projects by ceding superior charge or, as a policy, you would not see the superior charge.

See, as a policy, we're not very comfortable ceding first charge, whereas we are looking at various other options in terms of doing bulk sales, liquidating certain inventories in the project, so that, that liquidity is available. So I mean, other options, structured options rather than actually ceding first charge and losing control of the project.

A lot of options are being looked at on the corporate book to see to it that the large projects, what can be done in terms of bringing strategic people and everything, strategic investors, strategic builders or whosoever it is. So everything is being looked at. SWAMIH is one of them, not that we are out of it, but they're constructed in such a way I cannot have anything which is unfavorable for the company. The company has to have its security coverages, both on the security as -- overall security, also on the receivables and to ensure that what is the amount that is required to be brought in to complete the project and see then what is the kind of ceding that we have to do. So I think we look at everything, and we are going to be very, very careful in terms of protecting your company.

Perfect. Just one last thing. I don't know if this was mentioned earlier because I joined a little late, but can you give a medium-term guidance on the ROA and ROE for the company?

I usually don't give forward-looking, but I think the CFO would have...

In quarter 1, we did make that -- give that outlook because we thought that there were some disparity in what market is looking at and what we are envisaging for ourselves. So for now we stick to those numbers so you can go back to and refer to what we had given in quarter 1.

Thank you. Ladies and gentlemen, that was the last question. I now 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, everyone.

Thank you very much. Ladies and gentlemen, on behalf of PNB Housing Finance Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.