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

Ladies and gentlemen, good day, and welcome to Q3 and 9 months FY '22 Earnings Conference Call of PNB Housing Finance Limited. [Operator Instructions] Please note that this conference is being recorded. And now I'll hand the conference over to Ms. Deepika Gupta Padhi. Thank you, and over to you, ma'am.

Thank you, Nirav. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q3 and 9 months FY '21-'22 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian stock exchanges and also available on our website. With me, we have an entire management team across verticals 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 judgement and future expectations concerning the development of our business. These forward-looking statements involve risk 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 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. Good evening, everyone, and welcome to our Q3 and 9 months FY '22 results. On behalf of the company, I extend a very warm welcome to all of you. Before I share business and financial update, let me give you an update on the transformation project, that is Project IGNITE that the company embarked upon in last financial year. Phase 2 of the project, that is design and implementation, started and is within time lines. The key structural initiative identified are: focus on high-yielding, affordable housing Unnati business in Tier 2 and Tier 3 geographies. We have already opened 13 Unnati locations during the quarter, and 25 new locations will be operationalized by March '22. Enhance our core capabilities of serving self-employed segments by creating new models backed by advanced analytics; create differentiators to remain competitive in salaried segment through automated decisioning; improve collections and recovery by leveraging digitization and building advanced analytics. We have undertaken multiple interventions to reduce forward flows in the collection. Enhanced productivity and right-size infrastructure through various initiatives have also been undertaken. Let me now share business and financial update. The company disbursed INR 7,548 crores in 9 months FY '22 as compared to INR 6,342 crores in 9 months FY '21, registering a growth of 19% Y-o-Y. The loan disbursed during the quarter are INR 2,828 crores with 97% towards retail segment. The loan asset is at INR 56,798 crores as on 31st December, '21 as compared to INR 64,584 crore as on 31st December 2020, and INR 59,283 crore as on 30th September '21. The retail loans are at INR 49,036 crore, which is similar to loans as on 30th September 2021. The corporate loans are at INR 7,761 crore, registering a decline of 22% quarter on quarter. As per our stated intention, this includes the sell down/accelerated payments of INR 1,080 crores in corporate book in Q3 FY '22. Since March '19, the corporate book has degrown by 57% in absolute terms, and is currently at 12% of AUM of the company. This is exactly as per the announcement that we have been continuously making since 2019 when it was decided that we are not going to do new corporate loans. Our affordable segment which is Unnati, is at INR 3,089 crores of AUM as on 31st December, '21. We have opened 13 Unnati locations to increase our presence, enhance business in this segment. The gross NPA of the company stood at INR 4,340 crores, which includes gross NPA of INR 829 crore, which is less than 90% DPD, but included on account of asset classification norms as per RBI notification dated 20th -- 12th November 2021. Gross NPA, excluding asset classification norms as per RBI notification, is INR 3,511 crore as on 31st December, which is at similar levels compared to 30th September 2021. Actually, it is the same number. The net NPA as on 31st December 2021 stood at 4.87 percentage. The adjusted net NPA without considering INR 829 crore, which is less than 90 DPD, would have been 3.6 percentage. The total provision to total assets is at 4.4%. The retail GNPA stood at INR 2,431 crore including INR 829 crore added on account of asset classification norms as per RBI notification. The corporate book GNPA has stood at INR 1,908 crore as on 31st December, '21 on a depleting book, which further reduced by 22% quarter-on-quarter in December 2021. The retail collection efficiency for quarter 3 FY '22 still stood at 98.5% as compared to 98.3% in Q2 FY '22. On the liabilities, the incremental cost of borrowing stood at 5.75% for the quarter. The average of -- average cost of borrowing declined by 62 basis points to 7.36 as on 31st December 2021, as compared to 7.98 same time last year. The company has maintained liquidity of over INR 5,000 crores as on 31st December, '21. The company is comfortably capitalized with CRAR at 21.6%, and Tier 1 at 18.9%. The leverage has come down to 5.5% -- 5.57x as on 31st December, '21 with reduced share of corporate books. With this, I would like to open the floor for questions and answers. We have the entire management team, the CFO, the CRO, the Head of the business, the Head of Underwriting, the HR team, the IT team, and the transformational team. All heads are sitting over there. And we welcome any questions that you would -- that you have, and we'll be more than happy to answer them. Thank you very much.

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

I have 4 questions. First one was on the disbursements. So while we have been flagging that the corporate book could be running down over a period of time, but even in this quarter, the retail disbursements also fell 4% Q-o-Q. So while we are seeing strong growth by some of the peers, what explains the sequential contraction in the retail disbursements? That's question number one. Second one was on asset quality. The INR 829 crore impact from the RBI circular, was it largely only due to the upgradation norms or was there also some impact from the daily stamping of the loans? And if, yes, then what would be the breakup between the 2? Third one is on the margins. You do highlight that there was net income reversal of INR 79 crores. As explained in the last quarter, it was partly due to the BT outs. So just wanted to get a sense of what was balance transfer out this quarter, and how is our interest rate differential on vis-a-vis the competitor's? Do you see the BT outs kind of slowing down going forward? And lastly, there was just some notification that Kapish would have resigned. So just wanted a clarification on that as well. That's all from me.

I want to talk about the disbursement. Yes. This is...

Introduce yourself…

Yes. So on the disbursement front, the fresh retail disbursal for Q3 was INR 7,217 crore, which has registered a growth of 18% on year-on-year. Having said that, we are also operating in a very largely rate sensitive markets. And due to the lower rates offered by the PSUs and some of the larger players, we did have an impact in our business, but still we have managed to have a growth of 18% so far. And considering the -- whatever the steps that we have taken, we expect the growth in the Q4 in financial year '22 and the disbursement to be in the line with Q4 of financial year '21, and that's how we will register the growth for the financial year -- this year as well.

In terms of the disbursements, home loan has remained absolutely flat -- I mean, we will start growing now, because of the interest rate differential and other issues that were there. However, on the non-home loan, the interest rates have come down significantly by most of the players. And as an HFC, obviously, with whatever issues we have, these are some things that we are working on. On the NHL it's something that we have also -- we had also -- along with the corporate book, we had also exited the high value NHL, which was very significant and which was one of the businesses that the company used to do continuously. Now that was -- all those things have impacted to some extent the overall disbursement. The company is really looking at how we'd like to reposition. One is on the affordable. The affordable will not give you a major amount of -- the kind of growth that you have seen in this company. However, we are open to look at all options so that we continue to have the focus on the Unnati business that is there, which is stated proposition of our company, and also see that the existing book that we have, how do we actually continue to grow within. In terms of the asset quality and upgradation, I think the CRO will take you through.

See, on INR 829 crore, this is impact our November 12 circular, and it is the upgradation. Most of the accounts were in Stage 2 only, which has been in a transit to Stage 3. It's a retail portfolio, I mean.

And any impact from the daily tagging on this?

So see, daily tagging is -- see, it's impact of a both. November 12 circular talks about daily tagging and the upgradation which was...

For 12th December the daily tagging has started. The daily stamping will take place of the account based on that these numbers have come. We have just given you the breakup of the numbers, where this say INR 29 crore stands, I think that's more important.

So of this INR 829 crore, INR 40 crore is Stage 1, and the rest of the -- in Stage 2. But we have marked them as NPAs. Stage -- on DPD basis.

There was another question on the margin and the balance transfer. Let me actually respond about Kapish. I think Kapish has been with the company for almost 4 years, and he has made an immense contribution in terms of the way the company has shaped, and the value addition -- massive value addition that he has done in terms of bringing down the cost of operations, and bringing in new -- completely new way in which the finance department would look at, work upon it. And whether it is cost, whether it is revenues, whether it is deputization, there is a huge amount of effort that has been put in. But as anybody would like to -- as looks at the career, he has decided to move on and look for good opportunities, and the company also was offering him very good opportunity. But based on his personal preferences and choices, he has decided to move on. The company has decided, and it has gone ahead with the -- for the replacement to be hired as quickly as possible. And Kapish is sitting here also, working on the balance sheet…

So on the -- another part of the question was about the BT out. Yes, we had about 18% of the BT out that we have witnessed so far, and that is largely due to the -- which has impacted the margins as well.

And just as a clarification on the asset classification. I do see that the provision coverage has also come down because of this technical change. In terms of going -- in terms of the outlook going ahead, is this the kind of provision coverage that you would feel comfortable running with, or you would look to kind of shore it up again over a period of time? And secondly, the net NPA is also around 4.8%, if I recall correctly, while the RBI requirement is 6%. But is there any soft requirement to bring it down below 4%?

You can actually respond on the revenue provision coverage.

Okay. See, in terms of the provisional coverage, if we look at a number of Stage 3 coverage, it has -- it looks to be a 43% in September, and now it is around 36% in December. So it is because of the technical write-off. The company today -- overall coverage ratio, if I look at it segment-wise and other component wise, there is no significant change, and the company will always continue to maintain adequate provision policy. There is no relaxation in that as a rule, as the policy also. And in terms of net NPAs, see, net NPA basically, it's INR 829 crore impact which is coming there, and we are maintaining the -- all the provisions as per the behavioral model of the IndAS. Okay. So the provisions are very much sufficient. In terms of 4% existing…

Kapish here. 4.8% is a number that we are seeing. It was 3.2% in September. It is 4.8% because we are considering that in the NPA bucket. They are not 90 plus. So that's -- such numbers have always been there. So you should not compare 3.2% moving to 4.8%. If I just corrected, what MD mentioned regarding statement as well, that this 3.2% has moved to 3.6%, which means that there has been no change in the net NPA number. It is more because the book has depleted, the net NPA percentage has gone up on a lower denominator. So therefore, the net NPA actually is 3.6%. Yes, it is 4.8% because of the new norm that is coming. We will be working to see how we can get our processes aligned to the new normal which is there on the daily marking fees, and get this INR 829 crores at a lower threshold so that that number overall looks lesser. But honestly speaking, you should consider it as 3.6% on a comparative basis.

Let me actually say that when we are comparing these numbers, it's not apples-and-apples that we are comparing it. I can go back and actually say that in September -- March '21 what was the number based on the Reserve Bank of India definition. So we are not comparing. That was a totally different definition that was there.

So my question really was not to make the sequential comparison, but how does RBI look at net NPA and whether there is any soft requirement to bring the net NPA below 4%, because that has been the case with some other [ IndAS ]. So not -- no comparison here really.

So sir, the PCI regulations talks about 6%. Right? And the PCI regulations are currently not applicable to HFCs. They are more for NBFCs. It is clearly mentioned in the regulations it's not HFCs. So there is no soft regulation which is talking about having lower number than 6%, and we would like to honestly keep it at around 4% and lesser than that.

So all our efforts will be made to actually pull back as much as possible. I just cannot give you the number straight away. But efforts are made in the last about 20 days, because it's a completely new norm that is we are looking at it, the new way and the stamping that is taking place. The NBFCs and HFCs were not prepared for it. So I can tell you that within -- if I look at yesterday's number, which is a dynamic number now because of the daily stamping that is taking place, the number is improving, and we will make a lot of efforts to see to it that we pull back as much as possible on month-to-month basis. But by the quarter end you'll see some little bit amount of improvement over there. I cannot actually give you the number right away. But yes, there is -- internally we have a number that is there, and we'd like to work on that number.

The next question is from the line of [ Aditya Doshi from Chanakya Capital ].

Can you hear me?

[ Aditya ], we can hear you.

I had few questions. First, if you can please provide some qualitative color on the corporate NPA and the resolution. Second, Unnati is currently being around average odd -- 5-odd percent of our total book, and it's also our focus area and a high-yield product. So what composition do we aspire to grow over the next long term or 10 years? And the time frame, if you can give a guidance. Third question is, since in this quarter, we just got the news of Kapish leaving the organization. In the past -- like, for 1 year, we have been seeing some large churning in middle and top level. So is there something in particular reason for this?

In terms of the corporate resolution, let's -- Saurabh, can you just firstly?

Yes. On the corporate resolution, see, we have a pool of INR 1,900 crores of NPA. Though, we've -- sequentially on a quarter-on-quarter basis it's remained the same. It's just that it looks bloated because of the lower down basically run off of the book. But we are working on the -- solving the issues. And if you look at -- we've resolved a few accounts. I mean, in fact, there was a resolution which was there in the last quarter, which was solved in the NCLT. Similarly, we are working on a few higher value resolutions also, which we'll start looking up from next quarter or about one quarter more. So we have resolutions lined up for each of the assets. Only thing is that they will -- some of these aspects, even though they'll get resolved, they continue to stay in the NPA bucket, because the resolution and the money takes time to come in. But we definitely have resolutions for each of them.

One very significant thing I'd like to talk. There was some accounts in March, we had said that they are SICR. We have been able to -- other than one account, we have been able to pull them back. I think that's very significant. They were large account -- large exposures that were there. We have been able to pull back. Yes, there will be some stresses, because that portfolio had been completely segregated, and we were working on it. So one is that, 3 accounts have been pulled back. Second is, one account has actually definitely slipped into NPA. We're working with them in terms of the resolution, how we can bring in another party to do it, or sell the assets in whichever way that is possible. On the Unnati front, I think, Pankaj will cover that in terms of growth and everything.

So Unnati has remained the focus for us, and it will continue to grow. As of now, we are able to do 9% of what -- of the total IHL business. Having said that, we have also taken some initiatives by introducing 13 new outreaches, which we have already started in last 1.5 months or 2 months, and from business have already started from these 13 new locations. At the same time, we have also identified 50 branches across the geographies that where we are present, where we have introduced Unnati team's specific sourcing channel, from where the sourcing will increase. This has also been done recently, and it will help us to increase our reach and sourcing our Unnati business in quarter 4 of financial year '22. We expect that the monthly disbursement numbers to cross INR 100 crore from immediate basis, and maybe our overall percentage of Unnati share will grow from 9% to maybe 12% to 13%-14%. That's what we are looking at.

In terms of the top level changes, you know that from 2019 there were some decisions that were taken by the company in terms of the way the business will be done, whether it was corporate growth, whether it was actually high ticket loans and all those things. So based on that and some of the changes that have happened because of the COVID -- and COVID is actually the last straw. If you look at it right from demonetization, the GST, the RERA, and IL&FS crisis, there is one after another the NBFCs, HFCs have been going through it. So as part of that, yes, people did decide to move on. The Risk Manager -- MD was -- his tenure was completed. The ED risk also decided to move on, because he wanted to start something on his own. The HR Head had actually applied much before all this happened, because he wanted to go back to the government. He came from the government, and then he -- from the army -- and then he decided to move back to the government. So that was one of the reasons. It was not that he was -- it was a personal choice. And then, actually now Kapish has decided. I think he has put in 4 years. Organic and inorganic growths are essential. The company actually relies on the internal talent also, and the company pushes for the internal talent to take over. So I would say that yes, it is -- one would look at it that there are some changes that are happening. But I would personally feel that it will be very good for the company. Overall, the company is going to grow. The company is going to -- company has the strength, the company has delivered, and it's just a matter of time when there are a couple of fixes that we -- that the company will do it. There will be growth that is coming up. We have also seen that there is a lot of interest that the investor community has in us. When we had announced the INR 4,000 crore deal, there was very clear direction that came from the investment committee -- I mean, investor community. And I feel that in case there are certain things that are very essential for the company, if that takes place, there are 2 or 3 things which will very quickly take place. One is the growth trajectory that we are looking at it. The second is actually under provisions and other aspects that one can look at it. The third is the creation of verticals that we are looking at it. All these things put together will actually help the company in coming back and delivering on the numbers. Yes, there are challenging times for the company. There is no second thought about it. But I'm sure that with the steps that we are taking, even if you would feel it's just a baby step, but these tests are going to create lot of vibrancy into the organization. Another question that you had, I think you wanted corporate resolution on…

Middle and top level changes. Sir, just if I can add one more thing. On the capital raise if you can update anything, like, that would be very helpful.

We're still actually working on it. We have not announced anything. We have not come out with anything. We're still working on the capital raise. I think all of you are aware, everybody is aware that the capital is required by the company. The company is working on it. And hopefully, once we have taken some call, we will come back to you and we'll make the necessary announcement and also inform each one of you.

[Operator Instructions] The next question is from the line of Kunal Shah from ICICI Securities.

Yes. So again on growth, earlier, we had guided for quite an aggressive disbursement target for the full year compared to that of what we had reported in FY '21. But looking at the run rate which is there for the first 9 months, obviously, seems quite away. Sir, now, in terms of the strategy would it be in terms, as we are seeing rate sensitive competition intensity, would the call be to lower the rates and grow, and that could ideally lead to the margin compression? Should we expect it?

One is that, Kunal, on the rate side is if we look at about last about 1, 1.5 year, you will find that there were 6 or 7 times we have actually recalibrated the rates. This is -- these are times where -- for NBFCs and HFCs they are very difficult times, because the cost of borrowing for them is slightly on the higher side. And the banks, because they do not have any options to lend to industry or a corporate, they are actually -- they have brought down the interest rates to one of the lowest that India has ever seen. So that is definitely a big, big cause of concern. To respond to it, one is that we have also lowered down. We are further looking at it. We are calibrating every day. Now as I told you earlier in my presentation that on the home line side, we have at least arrested the decline that was massive decline that we were seeing it. So we have arrested it. Now we'll have to -- maybe one other quarter we'll start showing the growth on the home line. Now the question comes on the NHL side. Now NHL also, these interest rates used to be about 10%, 11% if you look at some few years back, they came back to 9%. Now some of the banks are quoting almost at similar rate as a home loan rate. Now that again is a cause of concern for us. We are looking at it how we can bring in, because they also involve 100% risk weightages. And the moment I have 100% risk weightages, I also would have to consume capital, and my ability to do the retail loan goes down. The retail means the home loan goes down because there it is about 33% to about 50% and that, actually, without a capital, I may have some issue. In terms of the growth that you are looking at it, we had targeted some growth. We expect to do more than what we had done last year. The reason for -- some of the reason could be -- I will not ascribe all the reasons, but one of the reasons could be that we were factoring in the capital that would come in. I would not say fully, but there was little expectation that it will come and hit us by December. And if it would come over there, then there was a possibility of the growth trajectory. But having said that, whatever has happened, we are really looking at all our options in terms of the growth that we would like to. Any organization, and specially our size -- we continue to be a large organization -- would like to look at the growth opportunities every time. So we are looking at it. We will work on it and we will see that the rate sensitive environment is also taken care of in terms of the growth opportunities that exist on the realty and the mortgage industry.

And secondly, in terms of this nature of INR 829 crores, so this is largely the retail? Should I assume that this is largely coming in from retail, or there are corporate also which are getting classified in the RBI notification?

It is -- Kunal, one is, it is only retail. Only retail. There is no impact on the corporate. Zero impact actually. This is all retail. And out of that, it was given that INR 790 crores out of INR 829 crores is actually in Stage 2 and INR 40 crores is in Stage 1.

No, I mean that's a -- no, only -- yes.

Yes. Go ahead.

No. So the only question was, when we look at it -- if it is primarily retail, okay, when we look at the composition that you give in terms of 66% of the book in Stage 1, okay, earlier, we used to have almost 75-odd percent. So there seems to be some slippage out there. No doubt we would have sold down. So it seems like the sell down which is happening that is happening in a better rated book. And what we are sitting with now, okay, that seems to be the stressed book either in Stage 2 and Stage 3, because it's not there in RBI notification also. And still I don't see the coverage going up. Like Stage 2, in fact, we have reduced the coverage, okay. Particularly Stage 3, it's highlighted that it's because of write-off. But even on Stage 1, we had not seen any kind of an increase. So not able to get through maybe why there is no increase in the provisioning.

Yes. See, in the corporate book, in the Stage 1, there is a exit -- a large exits which we have seen of more than INR 1,500, INR 1,600-odd crores. And there is a 2 write off which we have done in the Stage 3 of around INR 422-odd crore. Now my Stage 3 coverage for corporate book is more than 50%. For Stage 3 coverage is more than 50%, and there is a -- some backward movement from Stage 2 to Stage 1, which we have resolved, with a zero overdues -- fully recovered money, right. And on the Stage 3 there is one slippage from Stage 2 to Stage 3 which is a large ticket, and on that we are carrying a provision of more than 45%. So for Stage 3 or a Stage 2, we are having adequately covered for our corporate portfolio. With the depletion in book, these numbers, percentages looking little blotted. Now on the -- just answering the overall question on the provisioning piece. My Stage 3 coverage for retail portfolio after considering INR 829 crores as NPA Stage 2, it is around 25%. It used to be around 26%, 27%, but since this portfolio NPA moved from Stage 2 to Stage 3, the coverage is 25%. If I include the technical written-off 2 accounts of INR 422-odd crore in the portfolio bag, I would be having a provisional coverage ratio of 4.90%. So we have not reduced any provisional coverage. It is growing by consistently with our models, and we have adequately provided for it.

No, sir, Stage 3 I understand. I was just talking about Stage 1 and Stage 2. Would it have been better if we increase the coverage out there on Stage 1 and Stage 2 as well? Because, obviously, Stage 2, there is a chunk of some delays as per RBI. And there is some slippage, or maybe there are -- maybe the accretion in the corporate of almost, like, INR 200 to INR 300 crores happening in Stage 2 as well.

No. See, it all works by the model. I mean, if we have already moved of INR 829 crore of retail portfolio which had an incident of NPA, and the model was behaviorally marking it on a higher side, then, I mean -- when there is more slippages coming, or the behavior of the residual Stage 2 accounts getting deteriorated, then automatically the numbers will go up. But as of now, we don't see any further stress or any kind of further severity on those portfolios.

And there is no impairment reserves created over and above the Stage -- IndAS for IRAC?

As per IndAS there was no impairment reserves. It's all to be the part of the -- your ECL provisioning only.

No. Something which was required under IRAC, additional provisioning, that was not routed through impairment reserves.

No, no, no. Our provision under IndAS is 2, 2.5 times more than probably which we are under the...

Thank you, Kunal.

The next question is from line of Sharaj Singh from Laburnum Capital.

My question is on the Unnati side. Can you give us some light on the sourcing and underwriting processes being followed here, for these Unnati loans?

No underwriting rules…

For Unnati loans, as we have categorized the loans under INR 35 lakhs segment for both salaried and self-employed, so the underwriting remains -- for salaried, again, it has a few rigor points in terms of the salary credits in bank accounts et cetera, and largely the same as in the other than the segment. The self-employed, of course, is a segment wherein, the -- they are less organized in terms of filing regular ITRs and having the regular bank credits, et cetera. So there is a mechanism to ascertain the cash flows and cash flow-based assessment is done for the self-employed profiles. And plus the field visits are done. The full-time employee visits the customer's business, customer's property to be purchased, and the assessment is done accordingly.

Is it the same team -- the sourcing team which is doing this or it's a different team?

Underwriting.

Yes, the team is separate. The team is separate, who has the skillsets of appraising Unnati customers. The scheme -- the team on the -- both the sourcing side and the underwriting segment remain separate to appraise this kind of loan profiles.

And sir -- I mean -- so our main focus area is supposed to be the Unnati loan. But it is too small for the entire book to grow, right? So I mean, what other areas are we focusing upon to grow the entire book?

See, this is one of the focus areas -- however we call it -- a main focus area is because, as we increase the percentage -- 9% disbursement to 12% to 13%, 14% kind of a percentage. But the other focus area, the prime home loans, which we do for salaried and non-housing loans, remain in the focus. And as what has already been addressed in the MD's initial address, that non-housing is a segment which clearly received some focus to be -- further to be focused upon. And we will augment more business in that space as well. So it's not only Unnati for -- per se, for the organization.

Okay, so Unnati just remains one of the areas that we'll focus. But having said that, as we have mentioned earlier also that we are looking forward to growing Unnati piece only from 9% to maybe 13% to 15% of the overall IHL. So our primary business or prime HL and non-HL, will continue to have rigors on that, and will continue to augment and will see the opportunities of growing the prime business with the prime HL and non-HL in focus to have a right product mix, and that's where our strategies will be put in in going forward.

There are 2 or 3 things that we have initiated. One is that we had also withdrawn from the builder financing. Builder means on the retail side, the builder agreements that used to have the AP about you -- advanced processing facilities that we had with the builders. That we have reactivated it. So that is -- that has started giving us results. The second is that, once we exited in 2019 from the NHL side -- I mean, from the large ticket, especially the more than INR 2 crore. So our connect with the DMAs and DSAs has actually come down. That's one thing that we have restarted. We've started building that connect once again, because we are trying to -- we have found our sweet spots or where we can actually deliver, even on the NHL side. So those are some of the things that once we have cleaned up lot of stuff that was there, we have decided that we will go ahead and actually build. So there has been a traction in this month, in December, and going forward, there will be. However, the numbers that don't reflect this. The reason is -- because of 2 things. One of them is actually the interest rates that are there. And the second is also the runoff that keeps on there. Even if I get a customer, suddenly he's actually going ahead and shopping for another lower interest rate continuously. And with private banks and the public sector banks offering very, very -- almost the home loan rate, the portfolio also runs away in about 3 months, 6 months' time. So I think, there are challenges, but we have find out our own -- we have already found our sweet spots. It is not that we have not -- we still have significant business, and we will continue to look at these opportunities so that the growth comes up very quickly. I think what we have done in December especially has been very, very good in terms of the sourcing. It's a very, very good sourcing number that the -- it's almost about 50% increase that we have seen over November -- October-November. This is something that if we -- what we are trying to replicate. There are sourcing increases, the business mix changes, the connect actually improves, the productivity is improved. We are working on the productivity improvement. Now these are some of the steps that will help us in augmenting the business growth that are there. Let me again reiterate. Unnati will remain a focus, affordable is our focus. Housing for all is a government mandate. We are part of it and we will ensure that our systems and procedures and the overall push that we have on the Unnati will be there always.

So essentially -- yes.

I'll request to come back in the question queue for the follow-up questions.

Sure. All right.

[Operator Instructions] The next question is from the line of Shubhranshu Mishra from Systematix Group.

I wanted to understand, on Slide 13 where we give out the AUM mix and we've give out salaried, self-employed. So how -- what percentage of our salaried customers come from the CAT A companies? If we can split the salaried into PLC employees, government employee -- government, non-PLC employees, private sector employees. And within private sector, how many come from CAT A, CAT B, CAT C? What's the average income and average FOIR for these salaried customers? And similarly, if we can split it for a self-employed as well, what's the average FOIR and what's the average income for them? That's the first one, sir. Second is, what kind of budget have we estimated for the litigation or the resolutions of pending corporate loans? That's the second question, sir.

Litigation in the corporate loans.

Litigation in the corporate.

Yes. On the retail as you asked, the salaried -- largely 60% is our CAT A profiles, okay, which comprises of government employees plus other well-established companies. The Category B and C constitutes the balance, around 40%, and that too, again, Category B has a larger share in that. The FOIR what you asked for, salaried is on a -- this thing -- around 50% FOIR is on a salaried segment, and close to 66%, 67% is the FOIR on self-employed.

Saurabh, can you reply for corporate litigation?

So what is the question? What is exactly you're looking for? How much we are budgeting for the corporate litigations?

Yes. So what kind of budgeting -- in our budgeting exercises, what kind of expense have we budgeted for the litigations or pending litigations for all the corporate loans?

See, we can give those numbers offline. But -- see, whatever we are budgeting in terms of litigation, as of now, what we are doing is, we book those in the specific accounts, and we've been recovering each and every penny from those specific accounts when they're exiting. When we do any kind of litigations, whether it's SARFAESI or Section 138, or whatever we have to do in terms of our litigation costs. As of now, very few costs we are bearing ourselves, and we are recovering each of them from the customer itself. So...

Sir, I have full faith that you're recovering it. That's not the question, sir. My question is fairly simple. In your budgeting exercises, what are you budgeting for the litigation costs? It's fairly simple, sir. I have full faith in you that we'll get the money, but what is the budget -- budgeted estimate?

I don't understand your question. Budgetary -- budgeting estimate on the legal. Can you actually exemplify the question also? I'm not able to...

Sir, for all the litigations that are pending, sir, what kind of -- what is the litigation estimate that we may have, sir? What can go out?

What can go out means you are talking about estimate…

About the litigation costs, sir. Yes sir, litigation costs, basically.

Litigation cost?

Yes, sir. Any kind of legal cost or…

I think that's a very specific number. We can offline here.

Sure. Sure, sir.

It's not actually -- if you're looking at the cost to the account, I don't think it is significant in terms of the litigation cost that goes in. Because what do you do? You can actually issue the SARFAESI notices, you issue loan recall notices. If it is an NCLT, you will go and actually invoke -- either you will go and sit with the committee of creditors. You are actually going to invoke the personal guarantees. So all this actually, it doesn't -- actually it's not just a significant cost that goes in the litigation part. If that is -- I don't know whether I've been able to answer your question. But if you are looking at the cost to the account, I don't think that there is any budgeting also that is done for that. Or it is that what is the cost. But I can actually offline, I can handle it with you and we can work on it, and tell you that what exactly could be the litigation cost.

We'll give you that number. It's not a very significant number, let me tell you. And with respect to NCLT cost, wherever we have NCLT, those are part of CIRP costs, which is, as per law, first met out by the resolution applicant, comes back very, very quickly first when the resolution happens. So as of now, we just had one NCLT case for us so -- where we recovered that money. But we'll give you that number offline. It's not a very significant one.

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

Sir, I understand -- I mean, last 2 years have been really difficult, and I have complete empathy for you and your team. But sir, I mean -- and maybe I'm kind of repeating the question again what some of the earlier participants have asked. But sir, I'm finding it difficult to understand what is, I mean, our core positioning right now? Because at some point in time, maybe we thought that we kind of want to change our target customer segment, we really want to be growing in the Unnati segment, and we shared something that out of the total IHL -- division housing book. I mean, we are kind of looking to grow Unnati to about 13% to 15%. So I mean, sir, what I'm trying to understand is, understandably, I mean, the banks have been very aggressive. But when we look at this entire, I mean, housing finance companies landscape, there are customers who are ready to take loans at the entire spectrum. You have customers seeking loans of 6.5%, right up till -- up 14%, 15%, 16%. You have housing finance companies doing that. And sir, then to get defensive and say that, I mean, PSUs have been aggressive -- sir, I think -- I mean, I understand the aggression is much, much higher, in the last, let's say, 18 months. But I mean, that aggression, I think, has always been there. So I mean, if we were to just defend ourselves by saying that, I mean, we are kind of waiting for this aggression to come down, then I don't know, sir, I mean, what is kind of lacking here, because our cost of borrowings are maybe not going to come down materially from here. So I mean, what is it that we are doing? And when you, sir, guide that after, let's say -- I mean, that we'll start growing now, by when do you kind of expect your disbursements to kind of start outpace -- outpacing the runoff that you see in the book? So that's my question one. Sir, 2 more are data keeping questions. The one is on this 890 -- INR 829 crores that you've classified under Stage 3, but what you're suggesting is because of RBI guidelines, and it's under Stage 1 and Stage 2 respectively. Just wanted to understand, sir, I mean, what is the time origin that we have taken? Is it -- this exercise that you've done of classifying these accounts under Stage 3, is it a prospective exercise or a retrospective exercise? Have you classified accounts since 1st April onwards, that have touched NPA or these are accounts which could have touched NPA at even 2-3 years back, but are less than 90 DPD now, so you are now classifying it under Stage 3, which is GNPA. And sir, lastly, a lot of the housing financials now have started talking about that the book whatever we had restructured, are now -- are coming up for repayments. In other words, the repayments are starting now. So what has your collection efficiency experience been in that 4%, 4.5% of the book that you have restructured?

Okay. So to answer your second question, whether this has been implemented retrospectively or prospectively. So after the 12th November circular, we have implemented it prospectively. So from the 12th November, any account which was in NPA, not getting -- covering the overdues fully, that continues to be NPA. And any account which was on 12th November for standard, becoming NPA, but still not getting fully recovered, that is also being created as an NPA. So we have not implemented before 12th November kind of thing. On the restructuring piece...

Sir, if I understood you right, you said you have done it on the prospectively, from 12th November onwards?

Absolutely, absolutely. Because the circular was very clear, it is from immediate impact on the 12th November, whatever the position is as of that date. Now on the restructuring book -- I will give you some numbers also. So the -- in this we have implemented -- executed restructuring on INR 85 crore incremental asset. So it is INR 2,146 crore retail restructuring which we have done. Around 40%-odd of customers have started repaying us, and we see a good traction, but there are some risks also coming up. So around 10% to 11% of that book is moving towards Stage 3 in delinquencies actually.

So what is actually -- I don't know why this doubt is coming to your mind. In terms of the Reserve Bank of India, the instructions are very, very clear how it came, and we have actually implemented it exactly as what it is written over there. So one is that there should not be any doubt that whether it has been done this way, 31st, 12th -- 31st December. It has been done as per the instruction. They said that 12th December, please start doing it. We have started doing it, and we have to categorized it. There was a question -- there was this question that NBFCs will show it maybe as NPA. Reserve Bank of India has said you have to show it as NPA. But you could have shown it in Stage 2, Stage 1, depending on what it is, we decided that we are going to keep it because Reserve Bank of India says this is an NPA. In terms of the business positioning and other things, there were some decisions that were taken in 2019 that we will not do certain type of business. So obviously, once you have stopped doing the business, there are linkages and relationships which are there with the builders and others. So it does take some time before the companies will actually come back and start doing it. We are very clear on 2 things. We will remain in the prime business that we do. We will not do some large tickets that we were doing earlier. We will build our portfolio on the -- you look at any of the -- these affordable housing, it doesn't come up in 1 day, it takes some time to build it. So we are building it. Our focus remains. So there is no doubt -- ambiguity in terms of what we will do. We will do prime business. We will do affordable business. This is what the company will do it.

Sure, sir. I mean, and please don't get me wrong, sir. I mean, I kind of strongly believe that PNB Housing is a great franchise and just a matter of time before you get your mojo back, sir. So wish you the very best, sir, to you and your team.

The next question is from the line of Sameer Bhise from JM Financial Services.

Have you shared the yield on the Unnati book as of now?

How much is the Unnati book?

The incremental ROI for Unnati for the third -- Q3 FY '22 is 11.26%.

And secondly, just one question on this whole INR 829 crore. Is it fair to assume that large part of it was due to the daily stamping? Or was it otherwise? I mean, the upgrade related issue, I mean, overdues were not fully covered.

It's both.

Okay. So fairly -- sorry.

It's for both.

The next question is from line of Gautami Desai from Chanakya Capital.

I think a similar question, but I'll put it in a different way. So when you say that certain decisions were taken in 2019 by the company, so I guess company also has -- I mean, company is shareholder, right? So I mean, I can talk about myself and several others that I know of, the secondary market investors. We did not -- even that point of time, we did not have as big a problem on the corporate book -- problem on the company investing in the corporate book as much as probably the private equity investor had. Right? So that is point number one. In 2019, there were some -- there was some overreaction on the corporate book that this is going to happen and that is going to happen, and which actually did not happen. The portfolio turned out to be much better than what was expected at that point of time. In fact, I feel, the quality of the portfolio was not much different than, say, one of the most reputed housing companies. But only difference was that housing company kept growing, whereas we did not. So the NPA percentage ballooned. Had we continued to grow, this would have been a part of the business. So are there any kind of learnings over the -- and then you keep saying that we have competition, we have interest rates, problems and all that, so that is a part of -- that is your business model. So the business model doesn't support that kind of approach and that kind of interest rates, then I'm sure there are some learnings and visiting and revisiting of what we thought 2 years back. And somebody like Pankaj Jain, who has been so proficient on the Western side, on the corporate loan book side, now, he being at the helm aren't -- I mean, I'm surprised that the company is not thinking of revisiting what they had decided in 2019.

It's presumptuous to say that the company is not thinking. The company continuously recalibrates and the company thinks about what it is. I think in last about half an hour, we have said that we have been recalibrating, and we are thinking. When I said on the DMA, DSA, very clearly said that we are revisiting that, and we are really looking at that business model. In terms of what we were doing on the NHL side, we are relooking at what we are going to do. We are building back the whole stuff that is required there. In terms of the corporate, I mean it's a multiple of -- multiple things. You know what RERA had done it. So whether the projects were there, projects were not there, we -- the company actually segregated the 2 portfolios very clearly, and said that this is under the remedial management group. The remedial management accounts were account which was stressed. With more financial disciplines being exerted, it becomes essential that actually we also see whether the accounts are maintained properly on time. There is a financial discipline in terms of the repayment, in terms of project completion, in terms of whatever it is. I think those are some of the things that -- at that stage or even subsequently, when the reviews have been taking place, that is -- that this portfolio has been kept separated. In terms -- if you ask me that what are the security coverages, what are other things. Well, I have about 1.96 coverage that is there for the remedial management groups also. I have 2.5 coverage for the other portfolio. So as far as the coverage is concerned, I have -- I don't agree. If the coverage doesn't help you in actually taking forward things, there are a lot of other imponderables that continue to remain on the book. Some of them will remain, some of them you are working on it, and some of them you will actually come out of it. I think, Saurabh, if you can actually talk a little bit about the corporate book that she's asking.

Sure. So see, what happened was in 2019, there were a number of factors which affected the micro market. And because largest PNB Housing then decided to recede out of this business for the time being, if I would say, a lot of other NBFCs and HFCs also receded. Because even though there were micro market changes which were happening, there were issues at ground in terms of prolonged slump in the real estate market. And that is why it was very essential at that point in time to concentrate on the existing portfolio, on the existing projects which we had underwritten to make sure that they see light of the day, and we make recoveries out of that. We are good at building that part of the book, but we will build it at the right time. That is most important. We have to get back to this business only when we should -- we see the green shoots of recovery in the business, when we know what is our new target segment. After the whatever issues have happened in the market, a lot of developers which were -- even good developers in certain micro market -- faced issues. Now that the developers have started to deleverage themselves, say they are improving, we are relooking at it. But it's -- at that point in time until now, it was a very, very conscious decision to make sure that we are completing our existing assets, we are not taking unnecessary risks. Because, obviously, a lot of peers of ours get -- that are affected because of this. And we made sure that we are -- our capital is not getting blocked, neither our projects are majorly getting stuck. We are monitoring...

Just to add -- so Gautami, just to -- so as you mentioned about the corporate book, I mean, there were some -- at that point of time there was some decision taken, but now we are at 12% of AUM on the corporate book. We are looking at few things which MD also talked about. And I think we will be -- we'll keep on updating on that front as well. But then as of now, we are looking at all these various avenues where we were performing and how we can go about it in the coming time.

The very fact that Pankaj who did so well on the West is the reason that we elevated him, and he said that, okay, he is going to head the business front. And I'm sure that there is a lot of energy that he is going to bring into the system. The experience that he has both on the retail and the corporate side, that is going to help the organization move forward fast. And at some stage he will take that call in terms of whether corporate is to be done or not to be done. It's something that we are hopefully…

I really hope so, sir, that the organization takes advantage of Pankaj and his expertise. And the way the environment has changed in favor of real estate, I think that it's a very good opportunity for the company to restore its glory.

Thank you, ma'am. Thank you for [ reposing ] confidence in the sales head.

The next question is from Aditya Jain from Citigroup.

Just a quick question on the BT outs. I think you mentioned 18% in the beginning of the call. So could you tell what was the level of this, just to put context around it, what was this in the last quarter, and what was their normal pre-COVID sort of level?

Actually, the BT out percentages have remained similar, more or less, a percentage here or there. But having said that, we are also taking lot of efforts on the retention part, and we have built in a core task force also behind that. So going forward, we will ensure that the BT out will see the reduction, and our attrition will also. We have demonstrated on attrition front as well. Our overall attrition on the IHL have really reduced and we have arrested that. So what remains is the non-HL part where we are working very, very hard, and we have a task force which have already been set up across all branches, all regions and every other locations wherever we are, and we are focusing on that.

Sir, pre-COVID…

It has always remained between 15% to 18%.

The next question is from Vivek Shah from HDFC Bank Limited. [Operator Instructions] Due to no response, we move on to the next participant. The next question is from the line of [ Ajay Chaudhary ], individual investor.

I'm retail investor. And actually, I would like to know what is going to be your biggest focus in the next 12 months. And the next question is, given that the bank is profitable, do you have any plans to start paying dividend in near future?

Sir, growth is the biggest focus. That we are looking forward to our growth in the AUM. So we have seen last 8, 9 quarters the degrowth. We have already worked on that. So the arrest has already happened on the retail side to a larger extent. And on corporate side also, whatever our plan that was there, we had met that plan. And going forward from last month onwards, we have seen the growth happening, growth coming in. And the quarter 4 will see the arrest completely happening and growth will start coming in from this particular quarter. So that's the largest focus on that. And secondly, we -- also on the improving on the asset quality. These are the 2 important focus area which will continue to be there for the organization.

My second question was, do you have any plans to start paying dividends?

Dividend is a -- is not a very efficient way to reward shareholders because dividend inculcates dividend distribution tax. And then at the end of the day, the shareholder also has to pay tax because it's not like a tax efficient way for you as well. If a shareholder is being paid dividend, he still has to pay tax, those norms have also changed. So rather than having a dividend leakage and a tax levy at both ends, for a firm like ours where we would need to grow and we will need capital to be preserved to support our growth, we would like to use the capital in a more efficient manner, at least for the next foreseeable time. And as we grow further and have more capital buffer being built through internal tools, we might look into paying for dividend in future years. But today, it doesn't really make too much a sense, both for the company and for the shareholder to look for dividend.

Well, I kind of don't agree with you. Even though we have to pay taxes, it's better to have income. So that's -- let's keep that aside. So what I hear from you is that, you need a lot of cash to grow. Right?

Yes, we need capital to grow. The firm has been looking to raise capital. We are now corrected our gearing further and got it down to around 5.6. So therefore, now we see that there's an opportunity for us to push up for growth, and for that we need capital. As we grow and as we get more business coming in, you'll still see -- I think you should see the value coming in into the share price, which will more than compensate for any dividend that one would except for and that should -- that's our endeavor.

Ladies and gentlemen, that was the last question for today. And now I'll 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 and the audio of this call will be uploaded on our website, which is pnbhousing.com. Thank you.

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