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

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '22 Earnings Conference Call of PNB Housing Finance Limited. [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, Margaret. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q2 and H1 financial year '21, '22 results. You must have seen our business and financial numbers in the presentation and the press release shared with Indian Stock Exchanges, and also available on our website, that is, www.pnbhousing.com. With me, we have our entire management team across vertical sitting over here, led by Mr. Hardayal Prasad, Managing Director and CEO. 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 risk and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances. A detailed disclaimer is on Slide 36 of the Investor Presentation. With that, I will now hand over the call to Mr. Hardayal Prasad. Over to you, sir.

Thank you, Deepika, and good evening, everyone, and welcome to our Q2 and H1 FY '22 results. On behalf of the company, I extend a very warm welcome to all of you and wish you all a very happy, safe and healthy festive season. Before I share business and financial updates, let me give you an update on the transformational project, project in IGNITE that the company embarked upon in the last financial year. The Phase 1, which was the diagnostic phase of the project was successfully completed with various projects identified across the value chain of the organization. The Phase 2 of the project, which was design and implementation was kicked off well and is within timelines. The key structural initiatives identified by the diagnostic phase and the design and implementation are, scale-up the high-yield affordable housing Unnati's business by focusing on Tier 2 and Tier 3 geographies. We are on track to open 13 Unnati locations in this quarter itself. Enhance our core capability of serving self-employed nonprofessionals across segments. Create different -- differentiators to remain competitive in Salaried segment. This can be generated through enhanced customer experience, with improved debt and revamped digital customer journey. Improve collections and recovery by leveraging digitization and building advanced analytics. We have initiated multiple projects, and these projects are on track to be delivered within this fiscal year. Optimize productivity and rightsize infrastructure to drive higher profitability, a core team comprising of senior leaders is in place in the company to implement the identified initiatives. Let me now share business and financial update. With opening up of restrictions post second wave of COVID, the company registered a healthy 68% growth in disbursements in Q2 FY '22, as compared to the previous quarter. The company disbursed INR 2,961 crore during the quarter with 96% of the disbursement in Retail segment, in line with our agenda. With retail-focused approach, we were able to control the degrowth in retail loan portfolio assets during the quarter. Our Affordable segment, which is the Unnati is currently at INR 3,043 crores of AUM. With focus on the Affordable segment, the company has identified 13 locations in Tier 2 and Tier 3. Geographies to be operationalized. 6 of these 13 locations are optionalized last month itself. With the opening of field moment and legal machinery, we witnessed improvement in resolutions. The collection efficiency for Q2 FY '22 stood at 98.3% as compared to 95.4% in Q1 FY '22. As a result, the retail group -- gross NPA reduced by healthy 14% on absolute basis in September '21 compared to June '21. The gross NPA of the company stood at 5.92% as on September 30, '21 on loan asset basis. The net NPA, as on September 30 '21 stood at 3.32%. The company has a prudent measure, has made adequate provisions and our total provisions to total assets is at healthy 4.8%. In terms of the percentage, the retail GNPA stood at 3.3% as on September 30, '21 compared to 3.8% as of June 30, '21. The corporate book GNPA stood at 19.1% as of September 30, '21 as compared to 15.9% as of June 30, '21 on a depleting book, which further reduced by 9% since June '21. The increase in corporate GNPA is from the already identified SICR accounts. The Remedial Management Group continues to work towards accelerated resolution of corporate accounts. The company has seen some positive traction in 2 accounts was INR 359 crores during the quarter. In one account, the resolution plan is finalized by the committee of creditors, and is awaiting NCLT approval. The account is resolved, however, it will continue to be in our book -- NPA book for some time. For both these accounts on lines of prudence, we have retained the existing provisions. On an overall basis, the company carries 18.3% provision on the loan assets in the corporate book with coverage ratio of 58% in stage 3 accounts. During the half year, the company has sold and received accelerated payments of INR 1,214 crores. The corporate book has degrown by 44% in absolute terms in September '21 from March '19. Talking about the liabilities. The incremental cost of borrowings stood at 5.74% for the quarter. The average cost of borrowing declined by 68-basis-point to 7.41% as on September 30, '21 compared to the same time last year. The company has maintained liquidity of INR 5,772 crores as on September 30, '21. On the capital raise, as informed time to time, the Board of the company on October 14, '21 decided not to proceed with the preferential allotment of INR 4,000 crores. The decision was taken considering various factors, which are not to divert the attention and resources of the company and to protect it legal proceedings, no visibility or certainty as to the timeline for judicial determination of the legal issues and to move ahead to achieve the primary objective of the company to raise capital. The company has filed an application to withdraw its appeal with SAT. Further, the Supreme Court on 20 October, '21 discussed the appeal filed by SEBI, stating that the appeal has become infructuous due to subsequent developments. The company is working with SEBI to close the issue. The company is presently comfortably capitalized with CRAR at 20.66% and Tier 1 at 17.82%. The leverage has come down to less than 6 at 5.8x as of September 30, '21 with reduced share of corporate book at 17% of loan assets in September '21 from 22% of loan assets in March '20. The promoters and key shareholders of the company have always been supportive of the company. Having said so, the company will work with the Board to enable capital to augment growth through other modes. With this, I would like to open the floor for questions and answers. We have the whole management team sitting over here. And thank you very much.

[Operator Instructions] The first question is from the line of Aditya Doshi from Chanakya Capital. Aditya Doshi, your line has been unmuted. Due to no response we'll move to the next question. The next question is from the line of Gautami Desai from Chanakya Capital.

Sir, we've been hearing of late that some middle management about -- who have been leading from PNB Housing Finance, more so, in the last 6 months, so any particular reason for that?

Ma'am, churning of an organization is always good. However, as far as the management is concerned, we definitely are seeing some more attrition in the company. However, the top management continues to remain. There will always be a few people who will move out of the organization, looking for better opportunities or for other considerations, family consideration, personal reasons. However, we do not see that it is such a big -- it is a very big issue in terms of the attrition. We are continuously monitoring the situation, wherever required. We are also going ahead and doing the recruitments. With the business coming to -- coming down to some extent, we still feel that on the productivity side and on other consideration, the company is well human capitalized, and we'll continue to attract very good talent.

Okay. And sir, the way, wholesale has been running down, we believe that they have not been, as many mishaps as the market had expected earlier. So at some point of time, would PNB Housing Finance think of restarting the wholesale funding?

At this moment, we remain extremely committed to 2 of 3, one is the very clear agenda that we had set for ourselves in January. The second is that the retail focus is very, very strong with almost 96% of the disbursements under the retail. The third is that, we believe that we need to deplete the corporate book at this stage. At some point of time, we will think about it. But right now, it will be -- it's a little early to say that whether the company will go ahead and look for that opportunity. Right now, we believe that it is time that we need to conserve capital and the capital that is freed by the rundown in the corporate allows us to grow in the Retail segment. I think that is very critical for the company at this stage.

Sir, actually, what we fear is that your affordable, as a percentage of the whole company is so small. Even if you have a stellar growth on that side, the overall growth of the company might be extremely limited. And now that the differential between your borrowing cost and these larger banks, their borrowing costs growing and plus the other banks going so aggressive on home loans, banks and NBFCS, would our business model kind of allow us to have that kind of growth for the entire company?

Actually, if you look at the numbers, the numbers will be out and the presentation also will be there. There are some -- there is a silver lining over there, in terms of what we have done in the Retail segment. With this quarter, if you look at it, it's almost a flat growth that has come in. So after about 8 or 9 quarters of negative growth, the company has only degrown by INR 152 crores or INR 157 crores. I think that's a strong statement because our disbursement grew significantly. We'll continue to focus on the Retail segment, we'll continue to improve. And more importantly, if you look at the cost of the company, the company has a very, very strong distribution network. The company has specialized itself in retail, especially, self-employed, salaried as well as it is building strength on the Unnati platform. And I don't see any reason with the kind of interest rates that we have -- we are now quoting, with the last reduction being done during October itself that there will be challenge. Yes, there will always be challenges with the bank. But I think we are reaching a sweet spot where we should be able to have a complete flat growth. And then going forward, we will continue to grow on our asset side. I think with the retail -- with the mortgage industry, showing very, very good sign, there is room for everyone to grow. We have the right talent, we have the right people working over there. We have the right distribution and the strength to grow. It's just a matter of time that we will be back in the business, and where it will -- strongly we will come and grow. But please remember that the company is very, very mindful of the fact that we would like to have a very calibrated growth so that the profitability is protected. So there are 2 things that we will take care of it. One of them is on the top line. We are continuously monitoring the top line, and we'll continuously do it. And the second is the bottom line. These 2 will remain the cornerstone of our growth and the story that PNBHFL will write now.

Sir, is a 15%, 20% kind of a growth there in the near term visibility?

Ma'am, we are not coming out with any kind of guidance because you have seen in the last about 8 or 9 quarters, we have had a negative growth. The first milestone is to ensure that we have a flat numbers, and then the growth story will start. Maybe next time when we meet in the next quarter or maybe in the March quarter, it is at that time that we should be in a position to give you a much better guidance on where exactly we are going to move forward.

[Operator Instructions] The next question is from the line of Krishnendu Saha from Quantum Mutual.

Sir, they are very simple questions. I just wanted to ask is, could talk about a little bit of spreads and your NIM, part of it looks like these are compression in the spreads from 2.8% to 3.2% for the quarter. So how do you look at that going ahead because we're just having a retail heavy portfolio? So -- and if I remember, Unnati supposed to be a high-yielding product. So just some thoughts on the NIM. How we look at it in the next 1 or 2 years, 1 year, maybe?

So Unnati, is something that we're building up. So it's not that we're going to -- Unnati is becoming a big share of the entire portfolio. As you would have -- heard earlier as well under Project IGNITE. We are looking into all aspects of this particular business on a 360-degree basis to build the right infrastructure and the support to go ahead and build this entire business. So today, the business is largely what it is from a retail side and the corporate business. So our -- as we have shared as well, our spread not considering securitization, is around 2.8%. And 2.8% is something that we have consistently maintained in quarter 1, quarter 2 and also for the half year as well. And if you look into quarter 4 of last year as well, the spread has been on similar lines for the company. So for us, as we build the retail franchise, the yield might come down, but we also get the benefit of lower borrowing costs, as we have a larger share of retail because it opens new avenues to raise funds, whether it's from the regulator, whether it's from the banks instead of PSL borrowings or through the route of ECBs. So we know that, for us, it's the overall spread and margin, which is something it is very critical for us to maintain. And we've demonstrated that we have been able to maintain the healthy spread, which is in the upwards of around 2.5% and plus, even with a lower and downward movement of the corporate book.

Sure. So we still -- will the asset have any purchase securitization in the future also?

No, we don't look to -- we don't intend to progress any securitization in the near future. As what MD mentioned, the objective of this company is to build the asset and build the asset on our own balance sheet. In his speech, you would have heard that we are adequately well placed with that -- with regard to our capitalization, we are at a 21% of capital adequacy with 5.9% gearing, with a lower share of corporate book. So in spite of capital loss coming in as a primary way, we are anywhere releasing capital with lower share of corporate books. So in a different manner, the capital is anywhere getting accumulated and buffered into organization to enable and progress the retail growth, which is what we are eyeing for. We are not looking for any securitization or any sell down. If we get good opportunity to buy assets, we would like to go and look to buy assets as well.

[Operator Instructions] The next question is from the line of Pratik Chheda from IIFL Securities.

My question is more towards competition right now. These banks are going to be aggressive on the home loan front. Just wanted some data around what is the level of balance transfers you are witnessing right now? And how would that trend be over the last, say of 12 to 18 months?

So absolutely right. I mean, the rates of interest in the market is very, very competitive as on date. And if you talk about the balance transfer, BT out, which is happening is currently 18% of the BT out is happening from our portfolio, which is pure, pure BT. And -- but we are in the process of retaining the customers in a very strong way. And with the current -- as you know, as just mentioned by Kapish, also, we have reduced the rates in last quarter only -- last month only. And we will be able to hold on to our customers and reduce this BT out portfolio going forward.

Sure. So how much of the -- how of a decline in your -- would attribute to the BT out right now?

No. So as I say told, it is 18%. I mean in terms of value, I don't have a figure right now, but I can give you the figures in terms of value instead of figures. You're asking about figures, right?

Yes. Yes.

So I don't have a exact figure of BT out in terms of amount. So I'll share with you after call.

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

Just some data keeping question. So if you can help us with the breakdown of Stage 2, as well as restructured loans into retail and corporate? And also what the portion of the restructured has been classified as stage 1? And I have one more question.

In the retail book, the restructuring -- total restructuring book is INR 2,071 crore. And in the corporate, the retail book is INR 336 crore. And majority of the book as of stage 1, it is around INR 758 crore is in the stage 2 of the retail portfolio.

And if you can also break up the stage 2 into retail and corporate?

See, these numbers, actually, we are giving in annual reviews only. So -- but our stage 2 has reduced in this quarter for corporate book as well for retail book.

Got it...

You meant in the stage 2 for a corporate book as well as retail book for this quarter?

Understood. And just wanted to understand this impact of securitizations, the compression, which has impacted the NII. How should we think about this going forward? I think in terms of the impact on NII? If you can please articulate that.

You Like -- it's been our constant endeavor to keep working on reducing our cost of borrowings. As you would have heard in MD's address as well, they have been a 68-basis-point decline between H1 of last year to H1 of this year. Incremental cost of borrowing is touching around 5.74%. So which means that we are working on continuously supporting the 2 aspects of our business. One is, the new acquisition rates, which you can potentially get a lower rate and also the element on repricing of my old book. We, as we said as last month only have reduced our rates for -- to enable repricing at lower rates and detain good customers. So these efforts will help us in getting further traction in retaining good customers in the portfolio and then enable us to help and retain our good quality assets so that our securitization assets behave the way they have been envisaged, and I don't have negative impact coming into our P&L for that book. The securitization book has now come down to around INR 10,500 crore. So we which did -- in history, we have done in aggregate of around INR 20,000 crore, INR 22,000 crore securitization. That book is in less than half today. So as the book shrinks further, the impact of that on the P&L would only go lesser, and therefore, we'll be able to get our spread and NIM growth on the BAU business that we are building for ourselves.

Got it. But should we expect -- I mean, is there a possibility of such further one-off impacts as well?

So the one-off impact can only be to the extent that if I have a adverse experience on my runoffs for that portfolio, then, of course, there will be a reversal on the income that's been driven potentially factored earlier. But with these efforts, we do see some traction, which should help us in arresting these runoffs in that particular book in particular. And more particularly, as you see, the markets are moving towards a little hardening side. These hardenings would also help us getting ourselves got competitive compared to others. And the gap also narrows down for us to be more attractive when I'm offering in the market.

Understood. And just to summarize then, that basically, this one-off impact is largely because of, say, runoff with the portfolio as well to a certain extent?

Yes. The one-off impact is largely because of the adverse behavior of the securitized portfolio, which is causing this reduction on the income there.

One additional piece of information on the restructuring. In the retail of INR 2,071 crore, which I talked about around INR 700-plus is a SICR -- is in the stage 2. Of that, INR 500-plus odd crore is because of the SICR.

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

Sir, is it possible to talk about -- I mean, some of those corporate accounts that have slipped for you during the quarter, I'm not sure, if you have already covered it in the opening remarks. Which accounts were those, and which state? If you can just give some qualitative color on the accounts which you were speaking about earlier?

What we can just tell you is that, it's just a single account, which is moved. It's INR 159 crore account, which was moved into NPA only and that was already part of the SICR, which we had declared in March earlier. So nothing new, which has come out. It is just one account which is forward flowed.

Sure. All right. Sir, the other question, the second question that I had was on the disbursement. I'm not sure, and please correct me if I'm wrong, but I recall that in the past, you've guided for about 15% growth in disbursements in FY '22. I understand we are in consolidation mode and our AUM has been declining. But given that, we did about INR 10,500 crores in FY '21, we have done about, I think, INR 4,700 crores in the first half of the year. Do you think we can kind of reasonably do anything between INR 11,000 crores to INR 12,000 crores in this financial year?

Yes. So absolutely right, we have been talking about that we'll be crossing the growth of 40% to 50%, and we will still stand by it. I mean there is no doubt on that because the market has improved. If you see, overall sentiments in the market has improved, and people are going out and buying properties and all those things. So those transactions are happening in the market. That's the overall economy factor that is playing 1. Internally, also, we have done a lot of trainings in terms of sourcing business. So I mean, if I can talk about all those things, maybe we have reduced the rates, as I said earlier also. And that gives us sort of impetus in the market to go out and source good quality business. Second, yes, we have opened a little bit of market for our Builder segment, which is on retail side. And on third, we are coming out in lot of some kind of changes in towards sourcing pattern for our customers. So that's all these things are happening. And obviously, we are going to vast, vast distribution, which is always our strength. It's just about time we start taking advantage of that, and we are -- go all out in the market. And yes, we -- as you know, we have always been very aggressive on giving us those tax and all this thing in the market, and we'll maintain that. And these numbers will not be a problem going forward.

Sir, and I might sound a little bit critical, but just trying to understand this better, that, I mean, most of the other housing finance companies, I mean, the 2 largest, I mean, housing financials in our country. And if I kind of even look at some of the smaller affordable housing financials, everyone talked about very, very strong demand momentum in housing finance during Q2 and something which continued in October as well. I think we have had a fairly stable leadership team at least for the last, let's say, 2 to 3 quarters, then what is it that is any kind of holding that back? I'm seeing, we see improvement on the cost of borrowings. We are targeting a slightly different Customer segment than what we did in the past. Then what is it that is kind of holding that back at least in disbursement? I understand the book could continue to run off, there could be higher BT outs because there is a lot of aggression from banks and larger extra fees. But what is it that is holding us back on disbursements? And maybe another question for Mr. Prasad. Sir, I understand this might be a little bit of a sensitive issue. But the fact that we have kind of decided that we will not go ahead with the announced capital rates, and that we will be kind of looking at other alternatives for this capital rates. Did today in the Board meeting, we kind of sit with the Board and present what are the other alternative options which are available? And if you can just show to some color from your perspective in terms of what are the options which are available, and which could be presented to the Board.

Yes. So I'll take the first one and second one obviously, MD, sir will take. So on the disbursement side, I think, if you have seen the presentation, we have, again, come out with a resounding number for disbursement. We are 50% over last H1 -- last H1 year of FY '21. And in terms of logins and sanctions and all those things, we are way, way ahead of our numbers, as far for our business plan is concerned. So overall, if you see on the disbursement growth, we are far ahead in terms of logins, we have far ahead. And in terms of sanctions also, we are way ahead of our even business plan numbers. So in terms of -- as I said, I've earlier also explained, it's just about time now. We are ramping up things now. And as I said, there was a little bit of difference in the rate of interest or between us in the competition earlier. Now even that is also covered to a larger extent. Though I would say, yes, we are not there, but yes, we are covered in a larger extent, and we will be -- we're in the fighting spirit and we'll do better than what is expected as mentioned earlier, and the 40% to 50% growth, we will be maintaining, and that's how we will move forward.

Abhijit, very important to understand that the company has -- was undergoing a transition. And it has almost reached a level where this quarter, I mentioned to you, there was a flat growth. We have had a very good disbursement if you take into account Y-o-Y or sequentially also. So we will continue to work towards that to grow and to ensure that we have a calibrated growth. Very important for us in our state where we had a corporate capital constraint. We can have only calibrated growth. And that is what the company is very steadfastly doing. So having said that, on the disbursement and on the retail side, the company presently is comfortably capitalized with CRAR at 20.66%. And Tier 1 is at 17.82%. The leverage, actually because of all that has happened, and all that the company do -- has done has come down to less than 6% at 5.89x as on September 30 the we reduced share of corporate book. I Think this is very critical, which frees away significant amount of capital to be lent towards the retail. And that is one thing that the company was always looking at. It was stuck with the corporate book, utilizing very high capital and now with the freeing of the capital, we have great opportunity to grow on the retail. Having said so, the Board actually recognizes the need for capital in the medium- to long-term basis. And secondly, the promoter as well Carlyle and other stakeholders has been extremely supportive. I mean the very fact that we came out with that such a large issue is a demonstration of the fact that people are then their stakeholders have strong faith in the company. So the need of the capital remains over there. We will look at it, and we will take it to the Board as and when it is actually required. Presently, I can only say to you that we are pretty well capitalized. The promoters and other stakeholders remain committed towards the company's growth cycle. And at the appropriate time, the company will take it forward for or any kind of modes for -- to raising the capital.

Sir, so fair to say that in the near term, we will not pursuing the equity capital risk, and it will be business as usual, at least in the near term?

No. I'm not saying that. I'm just saying that at the right time, we will go back, and we will talk to the Board to see that what best options we can have. But presently, keeping in view, a depleting corporate book, the availability of capital to grow the retail segment, the CRAR 20.66%, Tier 1 at 17.82%. I mean, the company can look forward for growth at these numbers also, which is what we will continue to look at it. But I'm also telling you that the moment, we feel the need to raise capital, we will approach the stakeholders who have been supportive towards the company in terms of the capital raised.

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

Sir, one question regarding the restructuring book. I couldn't get the number. The retail book on the restructure side is INR 2,071 crores, out of which INR 758 crores is in stage 2. Is my understanding correct?

Yes, INR 750 crore plus [ part is on ] stage 2, which includes SICR proportion of INR 550-odd crores also.

Okay. Rest of the book is all in stage 1.

Yes. Yes. The majority is in stage 1.

Okay. And what kind of provisioning have we provided there for the restructured book?

At overhead level, for a restructuring portfolio in the retail book, we have around provisions in the range of 12% to 13%.

And corporate side?

The corporate side is INR 336 crore. The provision would be around 15%, 16%, sub-20% kind of a number, on an average.

Okay. Understood. Understood. And lastly, on the one-off from the securitization book, can you quantify that? #1. And the second one, when you talked about adverse behavior, is this that because of the runoff of the book? Or you had some -- maybe on the performance side, the stage 3 and the write-offs were higher than what you were earlier expecting?

Is your question, how is the securitized portfolio performing?

Yes. So when you said there is a one-off, adverse one-off related to the performance of the portfolio, what does -- what is the parameter where, because of which you have to take the one-off adverse impact? And can you quantify that?

No. So the securitized portfolio gets an adverse impact because of 2 elements. One is that when I'm securitizing the portfolio, at that point in time, we have a history of its performance with regard to its life. And if there is -- because of BT pressures, if they are running off sooner, then there are potential future earnings, which I will not get in my book, and therefore, I have to undo the entire working here because of which, the P&L gets impacted. So that is the adverse impact, which I was talking about. This portfolio is a very, very high-quality and, I would say gold standard kind of a portfolio, and therefore, the asset quality here is very good. There's absolutely no doubt about the asset quality part of this book, and that's precisely why this is on target as well with regards to acquisition by others. And that's the only element that I was talking about with regard to the adverse impact. So whatever we envisage with regard to runoff experience, it's actually more than what we had factored in our working when we did this sell down of our portfolio.

Understood. And possible to quantify that for this quarter? How much was the impact?

So the impact for this particular quarter with regard to the income reversal or unwinding is our INR 61 crore.

Okay. Understood. That's very useful.

And last quarter this amount was INR 18 crore. And just to tell you, in the last fiscal, in FY '21, our same quarter with the widening -- with the deduction in MCLRs of the bank, we could earn more from these assets because our yield was not going down, and that resulted in a positive experience of around INR 105 crore. So the anomaly between quarter 2 of this year to quarter 2 of last year is a differential of around INR 150 crores -- INR 166 crore because it was INR105 crore positive compared to a INR 61 crore negative.

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

Firstly, in terms of Unnati book. So when we look at the scale up, in fact, that seems to be like tapering down. Maybe it went up from INR 1,700 crores to INR 2,600. INR 2,600 crores to INR3,000 crores. So we saw almost like INR 400 crores of accretion last year during COVID. And in the first half, no doubt, our first quarter would have got impacted, but still, that's hardly INR 60 crore, INR 80-odd crores. So I'm not able to get it. So, what is actually hampering the growth in that segment when it is such now a focus area? And when do we see the scale-up happening on the Unnati book.

So on Unnati book, if you talk about, in same time last year, we were at AUM of INR 2,787 crores. And currently, we are at INR 3,043 crores of AUM, which is a 9% of increase on AUM side. And yes, we are opening up, as mentioned earlier also, we are opening up location branches, which will be Unnati's specific location and branches. And from there, we will be definitely getting. So we are in a process. So that's how this transformation team, IGNITE team is working on, where we will be getting on to this piece, and we're taking up very strongly in future. Currently, the infrastructure and everything remains the same. We are working on our sales structure. Going forward, we are building on to it, and we'll make a real big portfolio out of this Unnati business.

Kunal, just one thing I want to tell you. Kunal just one thing. In January, we decided that we will actually start -- we will bring focus on the retail book, with special emphasis on the Unnati portfolio, which is affordable piece. Now having said that, we have started working on it. You would appreciate that it is a completely different business that we -- as against the kind of business that the company was doing. Company was between mid and premium segment, which it was doing on the salaries and on the self-employed. And it has decided that it is now going to focus on the Unnati, affordable piece. So first thing that was done was to create a vertical. Within that, Chief Sales Officer, the vertical was created to actually start monitoring those. So we, first of all, started concentrating and building the portfolio and sourcing the business from our existing branches. Now this time when we -- along with the results we have told that we are going to open 13 branches, out of which 6 branches were opened last month. Now it is not just opening of the infrastructure. It is actually that you have to create a separate kind of a sales force, the underwriting team and the collection team also. So it is definitely going to take little bit time, but we might be able to reach the inflection point in the next 3 months. And it is at that time that you will see the buildup of step taking place.

Sure. And the second question is with respect to the corporate. So compared to 31 March, wherein we used to disclose the breakup between retail and corporate. Stage 3 used to be 12%, 12.5%. Now it is almost 20%. And when we look at the breakup, now what we thought maybe the disclosure, wherein, we say that 65% is safe, 0-plus. So should we broadly assume that maybe there would have been forward close from stage 2? And even from stage 1 to stage 2 and stage 2 would have been broadly been flat? Or overall stage 2 plus, stage 3 there would have had been an improvement compared to March. How should we look at it? Because I think that number is still -- I think it's going up in terms of maybe non-zero DPD. So I think stage 2 is also getting stickier, plus the flows are out there into stage 3.

No. So there is definite improvement there. You look at, given of 2 numbers, one is, 75% of the book as on 30 September is stage 1. And out of that 19% separately, Stage 3. So Stage 2 has actually improved and moved into Stage 1. There has been an improvement there.

Okay. So then, maybe overall 75%, so broadly 25% between stage 2 and stage 3, of which 20% is in Stage 3. and Stage 2 ideally should have been down compared to what we have disclosed in March?

Let me just rearrange the number little bit for you. Look, the portfolio attrition is a deliberate activity, which we have been doing. It's a conscious corporate call for the capital needs, Kapish also talked about. In the percentage terms, the Stage 3 has increased. And in the absolute term, whatever has gone into a Stage 3 is identified SICR account. So first of all, there is no unexpected risk, which has risen in the book yet. It's the first thing. Secondly, on the Stage 2, on the Stage 2, whatever SICR we have declared, okay, those have gone into high risk. There is one account, which is in the Stage 2 about INR 100 crore which still buckets 0. We are going well with that, that's a part of our Stage 2. We don't see any unexpected risk in the near future also. So company will relook into this in the March, and probably we will may revert it back. If I compare those numbers with the last quarter, when the COVID impact was -- had shuttered our quarter 1. Since then, there is a backward movement also in the corporate book. Going forward, as MD also talked about, there are 2 cases have got dissolution. In one case, we have already ticked many boxes, and we will see some backward moment for Stage 3 also. I hope I'm clear?

Yes. Sir, the only thing was maybe Stage 2 is still down. So I was just getting to that number that maybe its compared to 13-odd percent, even though we don't disclose, but that is like almost 5-odd percent.

We disclosed those numbers as a policy. It has been coming in annual event only. But we are assuring that the company is working on the resolution. The traction is good, positive. And results will be out on a positive manner very soon.

The next question is from the line of Krishnendu Saha from Quantum Mutual Fund.

Sir, sneaking in a question again. Sir, with -- in terms of understanding on the capital risk rate. As you said that, we'll be growing a book in a calculated manner, and the books will be not going far. It is actually stopping it's -- level, and the profitability increases. So do we capital, hello?

Really sorry to interrupt you Mr. Shah. Your voice is not very clear, sir. I would request you to speak on the hand-set mode, please?

[Technical Difficulty]

Your voice is breaking up. It's unclear.

Can you hear me?

This is better, sir.

Yes. Just on the capital raise funds. As you spoke about that, you were not on both book fast and the profitability increasing ROE -- the ROE is increasing. Do we see and some of the money is coming back from the assets which we are set to resolve? So do we see capital being raised even after a year or later. So this possibly will be there and the books will not be showing. So are we enough capitalized for the next 2 years at least or 1.5 years, FY '23 end?

Can you hear us -- can you hear me, Mr. Shah?

Yes. Yes. I can hear you now.

Again, I've already mentioned to you on the capital raise, that right now, we are in a position where the CRAR, as well as Tier 1 is in good shape. We have -- our gearing has come down because of the depleting corporate book. We have significant amount of capital available for our retail book to grow. However, because of the various factors that go into many, many company's capital plan, we will take a call. We will approach the Board at a life time. I'm not saying that it is short, long. It could be any time, but we are definitely reviewing everything possible in terms of our strategy. And all options are being evaluated for the capital raise. The first thing was to undo whatever had been done on -- from 31 May onwards, which it is in the public domain. We have taken a conscious call. We have done everything possible. So we are just out of that particular transaction. Now it is a time to rethink. And presently, as the results are coming up, I have given you a very clear idea of where we stand in terms of our capital adequacy, in terms of a Tier 1, in terms of our leverages, our depleting books. And that is one of the reasons why now is the time that we will -- the management team will sit together to evaluate the options that it has. And then take it forward to the Board, but what can -- what best is required for the company. I can only tell you that not only the Board, but all stakeholders are extremely supportive of the way the company is trying to navigate the capital requirements as well as whatever is possible in terms of the businesses.

Thank you. As we have no further questions from the participants, I now hand the conference over to Ms. Deepika Gupta Padhi for closing comments.

Thank you, everyone for...

Mr. Shah, was there any other question? I thought that you had also asked one more question.

Sorry. He disconnected sir, from the call.

You can respond.

You can respond on that. Reversal of provision...

Reversal of some provision, that for others, we can do that.

We have not done any reversal of provision so far. In the future, as soon as it's a model-driven this thing, and we will evaluate how the things are moving. Accordingly, we will take a call on that.

Thank you. Ms. Padhi, would you like to give any closing comments.

Yes. Thank you, everyone, for joining us on the call. If you have any questions and answer, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website. Thank you and wish you all a very Happy Diwali.

Thank you. On behalf of the PNB Housing Finance Limited, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.