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

Ladies and gentlemen, good day, and welcome to the Q4 and FY 2023-'24 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, Head, Investor Relations and Treasury. Thank you, and over to you.

Thank you, Yasaswi. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q4 and FY '23-'24 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 our entire management team across verticals, led by Mr. Girish Kousgi, our MD and CEO. We'll begin the call with the performance update by the Managing Director and CEO, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances. A detailed disclaimer is on Slide 33 of the investor presentation. With that, I'll now hand over the call to Mr. Girish Kousgi. Over to you, sir.

Good evening to all the investors. I'm happy to state that quarter 4 FY '24 performance has been very good. We had an exciting financial year, whereby we made significant stride across parameters, that is growth, asset quality, liability mix, liquidity, credit rating and profitability. At the start of the year, we raised capital. We did rights issue, which was subscribed by 1.21x. In terms of growth, we had mentioned that we will get into double-digit growth on the retail front. We were able to show growth on a Y-o-Y of 14% on retail loan book, and this happens to be the highest growth in last 5 years. And also we moved largely towards retail. Now, retail contributes to 97% of our portfolio. Within Retail segment, we started affordable business -- we started in last financial year, and now it's 15 months. So in about 10 months' time, we built a book of INR 1,000 crores. And as of March, the book is close to INR 1,800 crores. So March '24, the book was INR 1,790 crores. So we had a very good story on Affordable. We started off with 100 branches. We opened 60 branches in Affordable between December to March. So now we have 160 branches, which will cater to Affordable segment. And predominantly, Affordable branches would be in Tier 2 and Tier 3 space. This business, Affordable business, contributed to about 12% of disbursements in quarter 4. It started with 3%. This was last year, quarter 4, that's when we started the business. So in about 5 quarters, from 3% incremental contribution, we have moved to 12% contribution. This is on disbursements. We also started a new vertical called emerging market, and this was keeping in mind that we had taken this call of transitioning this company within retail from Prime-based business to Affordable and emerging markets. So we have started a new vertical starting this financial year, that is April 2024. We have -- we will have 50 branches in Emerging segment, catering to a segment which can give us a higher yield. So our plan is to try and build the book from both Affordable and Emerging, which would contribute to almost about 40% to 42% of incremental business. So whatever business we're going to do this year, incrementally, Affordable and Emerging would contribute to 42% of the overall disbursement. And the rest, 58% would come from Prime. So as you speak, we have totally 300 branches. Out of 300, 160 would be Affordable, 50 branches would be in Emerging segment, and the balance 90 will cater to Prime. In order to bring undivided focus on retail segment, we ensured that we set up different verticals. For example, Affordable, Emerging and Prime, these 3 are different verticals within retail, which means there is a dedicated team starting from sales, credit, operations and collections. This is to ensure that we smoothly transition from Prime to high-yielding business, and that's the reason why we started both affordable and emerging. If you look at the total number of branches, we have 300. Almost 2/3 of the branches would be focusing on building book at a higher yield. In terms of overall loan book growth on a Y-o-Y, we grew by 10.3%. Retail, we grew by 14.1%. On Affordable, last year, the book was about INR 138 crores, and this year, as of March, the book is INR 1,790 crores, we have grown by 11x over last year. Corporate, the book last year was INR 3,800 crores, and this year, it is INR 2,052 crores. The book has de-grown by 46% as per plan. And runoff last year, that is FY '23, it was 18.7%. We have a good story here. Runoff has come down to 16.7%. On the loan book, as I mentioned, on a Y-o-Y, we have grown by 10.3% and quarter-on-quarter by 4.8%. Retail loan book, we have grown by 14.1% on a Y-o-Y and sequentially, the book has grown by 5.3%. Affordable book on a quarter-on-quarter basis, we have grown by 56% on a Y-o-Y, it's over 11x. We are looking at a book growth of 17% in retail segment, FY '25 onwards, with higher focus on affordable and emerging segment. Talking about disbursements. On disbursements, retail disbursements grew by 35% in quarter 4 and 19% in FY '24. We disbursed loans worth INR 5,541 crores, which is again all-time high in last, over, 5 years. And if you have to look at the whole year, the disbursement was INR 17,483 crores. Out of this, INR 1,653 crores was from affordable segment, which is 10% of total retail disbursements. We started off the quarter with 3% contribution from Affordable in the overall retail and quarter 4 of last year, the contribution was 12%. For the whole year, the contribution is 10%. This percent is likely to go up to 18% in FY '25. Out of the total disbursement, total retail disbursements, 86% is up to a loan of INR 1 crore. So the concentration is largely up to INR 1 crore, and up to INR 1 crore, the retail loans is about 86%. So it's only 14%, which is more than INR 1 crore on the retail side. On the retail disbursements, Y-o-Y, the growth was 18.5%. And if you have to talk about total disbursements, it is 17.5%. That is including Corporate and Affordable. In terms of geographical breakup, North contributes to about 35.3%, West is about 27% and South is 37.5%. On the asset quality, we had a great and remarkable improvement in asset quality. Our GNPA reduced by 57%. FY'23, the GNPA was 3.83%, and FY '24, that is as of March, it is 1.5%. Net NPA declined to less than 1%. So it is at 0.95% as on 31st March '24. We will continue to work towards achieving best-in-class asset quality in the years to come. Corporate GNPA, March '23 was 22.5%, March '24 is 3.31%. Retail GNPA as of March '23 was 2.57% and March '24 is 1.45%. Overall GNPA at the enterprise level, March '23 was 3.83%, and now it is 1.5%. And net NPA, March '23 was 2.76% and March '24 is 0.95%. On collections, we were pretty keen and focused on cash collections, on using various legal tools. We aggressively used SARFAESI and auction. We sold 268 properties in FY '24 through auction as compared to 95 properties in FY '23. And in FY '24, on those 268 properties, which went through auction, there was no principal loss at enterprise level. As I had mentioned earlier as well, the company had a written off pool of around INR 1,700 crores in Corporate and INR 500 crores in Retail. In FY '24, we have recovered about INR 100 crores from write-off pool. We continue to work on this recovery in write-off pool. On the corporate loan book, book reduced by 46% in FY '24, and now the book is INR 2,052 crores. The reduction is on account of resolutions, balance transfer, accelerated prepayment, sale to ARC and runoff. In quarter 4, one account of pause of INR 126 crores slipped to stage 2. We are very confident that this account will be in stage 2 or might recover to stage 1, and we are very closely monitoring the corporate book. In terms of borrowing mix, we had a very good story. In FY '24, we received INR 3,000 crores from NHB, which started in FY '24 and it was not there in prior 2 to 3 years' time because of high GNPA and high net NPA. We started off in FY '24, and we have availed INR 3,000 crores from NHB, which will come at approximately about 50 bps lower than the other average source of borrowing. We restarted raising funds from wholesale debt market. We raised about INR 1,500 crores through NCD and INR 10,000 crores via CPs in FY '24. The incremental cost of borrowing for the quarter was 7.93%. Deposits grew by 3% during the year with 88% as public deposits. We are well capitalized with CRAR of 29.3%. And out of that, Tier 1 is 27.9%. The mix for quarter 4, that is as of March '24, term loans is about 40%, deposits 32%, NCDs are about 10% and NHB refinance, which was 5.7% as of March '23, increased to 9.2%. CPs, which was nil in March '23, rose to 6% in March '24. ECB, which was 10.2% in March '23, came down to 2.6%. So 3 critical changes. One is on ECB. ECB came down, CPs went up and NHB went up. As you are aware, we got a rating upgrade from AA to AA+ from 3 rating agencies, that is India Ratings, ICRA and CARE. We were also certified as a great place to work in October '23 by GPTW Institute. In terms of profitability in FY '24, PAT stood at INR 1,508 crores, registering a growth of 44% Y-o-Y. Ex one-off, PAT registered a growth of 79% Y-o-Y. Our efforts across parameters helped in improving the profitability. Our return on assets improved to 2.2% in FY '24 from 1.61% in FY '23. Return on equity was at 10.9%. In terms of guidance, margin would be around 3.5%. ROA will be more than 2.1%. Credit cost for FY '25 is expected to be around 30 bps. I will now hand over to Vinay, CFO, to brief on the financial parameters.

Good evening to all the participants present on the call today. I am pleased to present an overview of our financial performance for Q4 FY '24 and full year FY '23-'24. Happy to share that we have reported a PAT of INR 439 crores in Q4 FY '24, which is up 57% year-on-year and 30% quarter-on-quarter. For FY '24, PAT grew by 44% to INR 1,508 crores. Ex one-offs in FY '23, PAT grew by 79% year-on-year. In Q4 FY '24, yield was 10.08% versus 10.19% in Q3 FY '24. The marginal drop was due to repricing and runoff of high-yielding book during Q4. Yield for full year '24 was at 10.35% versus 10.28% in FY '23. However, ex one-off yield in FY '23 was 9.78%. So there is a sequential improvement year-on-year. Cost of borrowings stood at 7.98% for Q4 versus 8.07% in Q3. Ex one-off, even Q3 was at 7.98%. So we are flat on cost of borrowing. Full year cost of borrowing is also similar at around 8% versus 7.5% for FY '23-'24. Net interest income grew by 6% year-on-year for Q4 FY '24. For full year FY '24, net interest income grew by 7% to INR 2,500 crores. However, ex one-off, net interest income grew by 22% year-on-year. NIM during Q4 was at 3.65%, which is in line with the last quarter ex one-off NIM. The reported NIM last quarter was 3.49%. Against that, in Q4, it is 3.65%. Next year, we expect this to be somewhere around 3.5%. In Q4, OpEx grew by 23% year-on-year. However, this is largely on account of investments that we have made in Roshni vertical, IT transformation and the new spend that has come on account of royalty. We have further invested in 90 additional branches for Roshni and emerging verticals in Q4 FY '24. This will help us in scaling up Roshni and emerging verticals faster. Credit cost stood at 4 bps for Q4 and 25 bps for FY '24. Happy to report that we have recovered around INR 49 crores from the return of pool during Q4, which had been controlling credit cost for the quarter. Recovery for the full year was INR 99 crores. We will continue to optimize credit cost through recoveries from the written-off pool. ROA last year was 1.6%, and it has improved to 2.2% for the full year FY '24. ROE stands at 10.9%. Capital adequacy is at 29.26% as of 31st March, with Tier 1 at 27.9%. You may also refer to Page 23, where we have put in ex one-off financials for FY '23-'24 as well as the reported numbers. There are no one-offs in Q4 FY '24. Thank you. I hand it over to Deepika.

So we can start with the Q&A, please.

[Operator Instructions] We'll take a first question from the line of Renish from ICICI.

Just 2 questions from my side. One, on this new vertical, which is emerging market, what is the outstanding AUM stands at as on March '24?

So this is a new vertical. We have just started this year. What we did was we just culled out some of the existing prime brands depending on the geography and customer segments, which can give us an opportunity of building book at a higher yield. And we also opened a few new branches between December to March.

Okay. So as of now, there is...

So as of -- from the existing set of branches, the book is around INR 12,000 crores.

Book, we have INR 12,000 crores?

Yes.

Yes.

Okay. Okay. And secondly, on the Affordable piece. When you look at the customer profile, with the select customer at 62%. And then we look at the sourcing mix, it is almost 30% being sourced by DSA route. So is there any CIBIL threshold limit we follow? Or maybe if you can just throw some light on the customer profile under the Affordable housing finance space?

In terms of threshold, in terms of what, I didn't understand it?

CIBIL. [indiscernible].

Yes, yes. Fair enough, fair enough. So we are now present in 3 segments out of 4 segments. The 3 segments are Prime, Emerging and Affordable. The only segment where we are not there is Super Prime, and that is more by design. In terms of Affordable, we would be operating in geography in segments where most of the affordable companies would operate. In terms of bureau, I think about 1/3 of the customers would be either new to bank or new to credit. And we would have close to about 45% to 50%, where the bureau score will be about 700 plus.

Okay. Okay. This is in the Affordable segment, right?

This is in the Affordable, yes.

Got it. And just the last question from my side on the yield. So adjusted for one-off, there has been a sharp decline in the yields from 10.29% to 10.08% in Q4. So what is happening there on the yield side?

So basically, which is why I mentioned, I think if you see last few quarters, we had taken this transformational journey to move away from Super Prime to Prime and we started Affordable about 15 months back. And this year, we've taken the call to no further move some portion of business from Prime to Emerging. The reason why we are doing is that on the Super Prime and on Prime, so definitely given the competition and given that we are not a bank, we are an HFC, and definitely, even a cost structure, there will be pressure on margins. And that is the reason we started moving towards high-margin segments, and that is why this whole transition story. So there will be some pressure on the Prime book in terms of book depletion, maybe because of foreclosure or maybe BT out. And that is why we had moved towards high-yielding segments, Affordable last year and Emerging this year. So in terms of guidance, I think margin would be about 3.5%.

Got it. Got it. No, sir, just circling back to the yield side. I mean, when we look at the sequential drop in the yields, it essentially means that the disbursement lender, Prime or Super Prime category, is actually falling quarter-by-quarter because of the competition. Is that the right conclusion?

To a certain extent, yes, the answer is right. But to a large extent also, we are moving segments. And if you look at any organization, the portfolio yield would be higher than the incremental yield. So because of these 2 reasons, our yield would be lower if you look at quarter-on-quarter comparison.

Got it. Got it. But considering, let's say, the AUM mix changing competition on the Super Prime category plus maybe some lower cost of fund going ahead. We are fairly confident about sustaining NIM at 3.5%?

Yes.

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

Congratulations on good quarter. Sir, I mean, just kind of taking that discussion forward on yields before I ask the other 2 questions that I have. I mean very clearly, you are saying that Prime book will be paid, which is the lower yielding book, which will deplete. At the same time, our Emerging vertical and Affordable book will increase, which is higher yielding book. So going forward, do you still see a pressure on yields as we move into FY '25?

So if you look at last year, our corporate book has come down by almost half. So the book has come down to 47%. So obviously, we are not doing corporate business now. We plan to start this year. So even that has contributed to drop in yields. And now the book has come down. Book is now down to almost about INR 2,050 crores, right? So if you see in comparison compared to last year and this year, the contribution of yield contraction is largely because of our corporate book. So I was talking about retail. So even corporate book is one reason. So now the book has come down and we change in our segment strategy and also the plan to start corporate this year. So we'll be back on the requisite yield to maintain a margin of 3.5%.

Okay. Sir, essentially speaking, what you're saying is going forward, I mean corporate book will also start growing with retail yields growing for us and that can result in an improvement in yields?

Yes. So corporate, we have planned to start this year. Maybe, we may start in second half. So that would also assist in better yields.

Got it. Sir, one question that I had was on the credit cost front. Obviously, I mean, this quarter, credit costs are very benign. But you have in your opening remarks, guided for credit cost of 30 basis points. Just wanted to understand this write-off pool that you're carrying in both corporate and retail. When can it kind of start giving us recoveries like INR 50 crores, I think, what Vinay sir also shared in this quarter. So when can we expect a higher quantum of recoveries? And over what time period can these recoveries come?

So I think there are 2 parts to this. One is this 30 bps is without considering write-back, number one. Number two, write-backs have started. So in quarter 4, as we mentioned that we did a good amount of recovery, that has already started. It will continue this year as well quarter-on-quarter.

Got it. And sir, just one last question. Again, shifting back to OpEx. Very clearly, we have invested in 90 additional branches for Affordable and Emerging. We also shared that we have now a dedicated team of sales, credit, operations and collections, I'm assuming across each of these 3 verticals. Then, from here on, do you expect the operating expenses more particularly whichever way we want to look at it, OpEx to AUM or OpEx to assets to increase over the next 2 years or so?

So OpEx, yes, as you rightly mentioned, because we invested the new branches, both on Affordable and Emerging. Affordable 60 and Emerging -- and a bit of Prime, we opened about 100 branches from December to March. So in that context, definitely, yes, the OpEx is going to slightly grow. It will be in the range of 95 to 100 bps, that is OpEx to ADA. And if you look at the business, what we have done in FY '24, that is from 200 branches. So starting this financial year, we will have 100 branches, which is ready and operational, which will start contributing business. So there will be some lag effect, but I think we should be able to catch up and OpEx would be 95 to 100 bps.

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

Firstly, fee income, we have seen pretty strong growth in Q4. So what is driving that and how sustainable it is? Secondly, the write-back income that you have reported of INR 100 crores, in which line item, you have reported that income in P&L?

So on the fee income, this is in line with our volume growth. So if you see quarter 4, I think that happens to be the highest in last many years. If you look at the overall book growth, FY '24 has been the highest in the last 5 years. So fee income is largely attributed to increase in disbursements. And write back what we have got, that is in the same...

In the credit cost.

In the credit cost.

It is netted off in the credit cost line.

Okay, sure. Secondly, what is the BT out rate for FY '24 and Q4?

So it's in the range of 6% to 7%. Our overall closures have been 16.7% in the year. BT out used to be higher. If you compare FY '23, it used to be higher. In FY '24, it has come down. So now it will be in the range of about 7-odd percent.

Okay, sure. And lastly...

On a Y-o-Y basis, BT out has come down to 10%.

So from -- in absolute terms or in percentage terms?

In absolute terms.

In absolute terms, okay. And lastly, if you look at the cost of funds, since our incremental cost of fund and book cost of funds are broadly similar. So cost of funds should not inch from here onwards. Despite that, you are guiding for around 15 basis point compression in margins from Q4. So which means that we expect further moderation in yields in FY '25 versus Q4?

See, when we give guidance on NIM, we are looking at slightly long term. So what I'm saying is margin will be in the range of 3.5%. Now, given the fact that a lot of performance metrics have improved over the last few quarters, especially in last year and also the rating upgrade by 3 agencies from AA to AA+, we are expecting the cost of borrowing to come down. And moving to high-yield segments and restart of corporate. So all of these things will ensure any drop in the yield because of book attrition, especially on the prime.

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

Just wanted to reconfirm, so the benefit of rating upgrade is not something that you're building in your margin guidance, right?

To a certain extent, we are building in because the rating update, we got the upgrade recently. So we are building in the benefits of rating upgrade. So all I'm saying is that because of corporate, because of book depletion, especially on the Prime book, that would be compensated by new segments, which will give us a higher yield and also the benefit of what we can see in cost of borrowing because of rating upgrade.

Got it. But in last 1 year -- for the last 1 month in your conversations, what is the benefit that you are seeing right now?

It is too short a time. This will take about a quarter or so. So we are negotiating with all the bankers, and we are trying to figure out how we can try to bring down the cost to various instruments. So I think this effort is on. So we expect cost of borrowing to come down because of the rating upgrade and the implementing performance metrics.

Just on the emerging markets business, these are basically into exterior India. So these markets will already have some other lenders or would you be the first lender in these markets?

These markets would have lenders already.

But then do these lenders like, maybe the larger banks out there, do they really differentiate in terms of the rate of interest between the larger and Tier 1 and Tier 2 cities or whatever?

Yes, there will be differential. Even today, even today, the kind of business what we do, for us, the lowest book in terms of yield is about 60 to 70 bps higher than the yield of most of the banks. So even today, the differential is there in Prime book only, in Primary markets only. So in Emerging, this is going to be slightly higher. Within our segment composition, this would be about 50 to 75 bps higher than the Prime yield.

Got it. Just on the ECL coverage, we have been consistently increasing it. So are you comfortable at these levels? And specifically in stage 2 where we had a slippage in the corporate segment?

No, we are pretty comfortable. .

Sure. And just one last question, which is a little topical at this point of time. In terms of anything if you could share in terms of the audits that happened with the regulator? And if that has happened for the year and if there is anything notable that you can share on that?

So there was an audit by the regulator, and we have discussed the initial observations. So there's nothing serious in nature, and we are still awaiting the final confirmation from the regulator.

Got it. And this will be NHB or RBI?

This is NHB.

NHB. RBI doesn't audit you at all from a regulatory point of view?

So given the structure, for policy framework, it is RBI. For supervision, it is NHB.

We'll take our next question from the line of Dixit Doshi from Whitestone Financial Advisors.

So basically, my question is, if we compare ourselves with, let's say, Can Fin Homes, our book is kind of double of what they are doing. So -- but if I see our employee cost, it's like more than 3x -- it's around 3x. So what is the reason for that? Is it because our earlier focus was predominantly a Prime business? Or is there a lower utilization of our branches? Or -- so basically, I wanted to understand -- because their NIM is also kind of similar, 3.5% to 3.7% and with a similar credit cost. So if you can broadly help me understand what is the difference between us?

I wouldn't be able to compare it to be in one other company. But just to give you a context, the name which you mentioned for us, that is going to the emerging vertical business.

Okay. So basically, just wanted to understand how we'll be able to improve the ROE?

See ROE today, it is slightly muted because of the drag of rights issue. With improvement in performance metrics, you must have seen the journey in the last few quarters, last 5 to 6 quarters. So as of now, there will be a drag because of capital raise. I think in about 3 years or so, I think we should be able to look at reasonable ROEs.

Okay. And can you just mention how much your typical employees per branch in, let's say, Prime, Affordable and Emerging?

So in Affordable, we would have -- typically a brand should have a branch manager, we would have a credit manager and we would have an ops resource, and we would have some executives to source. The same model would also be on the emerging. On the Prime side, depending on the location and the potential, the branch staff could vary between 4, some of the bigger branches will have more, but those are few in numbers.

How many you said, 4?

Some of the smaller branches will have 4 to 5. Some of the bigger branches may have even 10. That depends on the location and the potential and the business what we do.

Okay. And if you can just repeat the recovery number you mentioned in the Q4?

Q4 recovery was INR 49 crores. From the written-off pool, it is INR 49 crores for the Q4.

INR 49 crores. Okay. That's it from my side.

We'll take the next question from the line of Viral Shah from IIFL Securities.

So actually, a few questions. One, first of all, did I get it right? Your growth guidance for FY '25 is 17%?

Correct.

If I may, what is stopping us given that we are pretty, I would say, levered at a lower end of the spectrum. Is the market opportunity not out there to grow faster, especially given that you are getting into some of the subsegments and the geographies where you would now have a pricing power?

There are 2, 3 contexts. One is we want to grow profitable book. That is one. And that is the reason why we moved towards Affordable and Emerging. So if you see incrementally this FY '25, 40% to 42% of the origination would happen from affordable and emerging markets. So the idea of 17% is that keeping this in mind, number one. And number two, with respect to asset quality, we want to be one of the best in the industry in the next few quarters. So the idea of 17% was to ensure that we grow in all the 3 segments and try and leverage opportunity on high-yield segments.

Right. And if you are able to scale up the corporate piece, as you mentioned in the second half, does this growth that is kind of take that also into account or there could be some additional lever?

So this growth is on retail, what I mentioned. So corporate would be separate.

Right. And basically on the recovery pool, correct me if I'm wrong, like the broad numbers are around INR 1,200 crores is what you had written off on the corporate side and some another INR 500 crores is there on the retail side. If you can give us like visibility of -- I understand, like, of course, you won't have visibility in terms of time line precisely to guide. But just your assessment of what's the potential pool of recovery. It can happen either over a, say, 1-year period or 3-year period, but just a sense of it?

So as I mentioned, recovery has already started. It started from quarter 4, and this will continue from this quarter onwards. I think at least this will play out in the next 4 to 6 quarters' time on both corporate and retail.

And what would be the kind of recoveries. Should we assume say $0.50 to $1 or how could it look like?

I think every quarter, we will have support of recovery from the write-off pool, both on retail and corporate. In terms of corporate, it's difficult to quantify every quarter. In terms of retail, we will have -- you can see numbers almost similar to what we have done in quarter four.

Right. But actually, what I was looking at is on the corporate piece, I'm sure you would have done an account-by-account analysis. Again, I'm not asking for like what's the time line and extent of it. But just a broad picture of like what could repo rates look like, say, over 3 years, just on a cent to dollar basis?

So this is what I was trying to say. FY '25, the credit cost is going to decrease and this does not take into account the write-back. And in terms of write-back, we can look at the number of what you've done in quarter 4. This might play out for the next 4 to 6 quarters' time. On corporate, it is difficult to tell quarter-on-quarter, but I think in a year, we will see a good amount being recovered.

Fair enough. Maybe I will connect separately after this. Thank you so much and all the best.

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

So firstly, on the overall disbursements yield, if we have to look at it across the 3 segments, would it be fair to assume that maybe the Prime would be somewhere closer to 10%, 11% -- or maybe 9%, 10-odd percent; maybe Emerging market somewhere around 10% to 11% 'and Affordable in 11.5% to 12-odd-percent range?

Yes.

Yes, you're right.

Okay. So when we look at the overall disbursement yields, okay, then obviously, maybe there would be a component of the nonhousing. But currently, when we look at the disbursement yields, particularly in the individual housing, then that should very closely resemble to where our Prime would be? That would be closer to 10-odd percent?

Yes. And also, one more thing on Affordable. On Affordable, last year, the yield was about 11.6%. In FY '25, there will be 100 bps lift in terms of yield in Affordable. So we are looking at 12.5% to 12.6%.

Okay. 12.5% to 12.6%. Because, last time, maybe slide shows it somewhere around closer to 11.5%, 11.6% all through.

Yes.

Yes. Okay. And when we look at it in terms of the branches, okay? So outside of Affordable, we still have, say, added almost like 30-odd branches during the quarter. Maybe carving out what we have highlighted over a period, 90-odd branches would be Prime and 50-odd branches would be the Emerging market. So this incremental branches, are they more towards the Prime segment or the Emerging market because currently, there is no breakup which is there?

So I think broadly, we opened 100 branches between December to March. Out of 100, 60 is in Affordable.

Yes, Affordable. And balance 40, yes.

60 in Affordable. And out of the balance 40, about 22 in Emerging and the balance 18 in Prime.

Okay. Okay. And lastly, in terms of the incremental borrowing cost, so I presume given that last time we have withdrawn -- drawn down around about INR 800 crores. So balance in the NHB would have come in this quarter?

Yes. We have drawn...

So almost like -- yes, so INR 2,200 crores would have been drawn down this particular quarter. But still, when we look at the incremental borrowing cost that's moving up compared to that of Q3 and NHB would have been at a much lower cost. So is it like more kind of a CPE repricing impact? Or how should we look at it? There is still a 10 bps kind of an increase in the incremental cost of borrowing despite a larger part of the increase in borrowing through NHB?

Yes. It is, Kunal, because of the tighter liquidity conditions in Q4. Generally, the market remains tight in liquidity during Q4. This will start improving from Q1 onwards.

Okay. But still we are saying that margins would still come off despite, maybe, this can, maybe -- I think because incremental also, it should come off a bit in terms of the overall borrowing cost. And we are, maybe, increasing the proportion of Emerging as well as Affordable, then to maybe we are guiding for 15 bps kind of a decline in NIMs?

Yes. See, NHB will not there in Q1, right? So that is -- we have to work on the existing instruments. Plus, as sir mentioned, there would be some BT and repricing pressure on the existing Prime book. So initially, we might face some pressure. And hence, it might stabilize at 3.5%, and then with a higher improvement and higher mix of Roshni and Emerging and corporate coming in. In the later half, it will start.

And also to a significant extent, we draw down from NHB in quarter 4. So if you see the impact, it will be hardly anything in that particular quarter.

We'll take the next question from the line of [ Nilesh Shah ] from Julius Baer.

Yes. So just starting once again, from a glide path point of view, say, about 3 to 4 years from now, where do you expect your segment mix to land up between the...

I am sorry, you are sounding muffled.

Sorry, I'll try once again as I get back into queue.

I got your question. I got your question. In about 4 to 5 years from now...

Where do you expect the mix will be, between Affordable, Prime and...

Yes, I got your question. In about 4 to 5 years from now, on the corporate side, we want to keep it in single digit. So it's going to be less than 10%. So in about 4 years' time, between Affordable and Emerging, we would like to reach at a book level of about 40% to 42%, and rest could be from Prime.

I see. Okay. I have a follow-up. Sir, now you have a mix of branches. What you have done over the last 2 years is you have created stand-alone offer [Technical Difficulty]. Are you able to hear me now?

Sir, you are not audible. Not able to hear you properly.

Okay. I will go back in the queue. And hopefully, my -- actually, on the road. Hence, the issue. I will go back in the queue.

The next question is from the line of Vignesh Iyer from Sequent Investments.

My question is what is regarding what is the AUM growth, I mean, the AUM growth that you are targeting for FY '25?

17% retail.

Okay. 17% on the retail side. And sir, also on the corporate side of rate, so -- if I understand it right, we're planning to restart this corporate lending activity from H2. So are we going to, I mean, bring the book down to 0 before that? Or would it be stable around this levels only?

So I think we would start this year sometime in the beginning of H2. So by that time, this book wouldn't have become 0. So I think it may be a couple of hundreds lower from the current level, that's all.

We'll take the next question from the line of Ravi Naredi from Naredi Investments.

Girishji, you have cleared and cleaned the balance sheet since you have did very hard work. Now, we want -- you have good capital adequacy below 1% NPA. Now, what is the strategy to grow in financial year '25-'26 in percentage term if you can tell something about figures?

Okay. In terms of growth guidance, we are looking at 17%. The reason why it is 17%, why it's not more is simply because we are now moving towards high-yield segment. So we were only -- we were largely in Prime and Super Prime earlier. So last year, we started Affordable. And overall contribution was about 10-odd percent incrementally. And this year, we have started Emerging. So -- which is why we want to ensure that we grow profitable book and not adjust the book. That is why we are focusing on 17%. In future, if we see an opportunity, and this number could change.

We have a follow-up question from the line of [ Nilesh Shah ] from Julius Baer.

Sir, just wanted to ask, sir, what you are trying to build here, where you're inside one company, a set of branches and people catering to Prime and a set of branches and people work ethics, right. Sir, what our experience in India has shown us that actually both the go-to-market, right? In terms of the kind of brands you need to have, where you need to have, how you accept customers and the business processes are very different, right? And I understand that you have had a business process that is oriented thus far for Prime. Now that you want Affordable to become 40% to 50% of your book over the next 5 years, how would some of these things have to change? Or would you create a new set of processes, rules, right? For the other segment? And is it possible to have 2 sets of employees like that inside the company? And are there -- in your experience in doing this over the last 1 year, how has your experience been basically?

Thank you for the question. Yes, yes. So actually, it is not Affordable. Affordable and Emerging, both put together in the next 4 to 5 years at a portfolio level, we would ideally want to be around 40%. So that's the first point. Second, in terms of Affordable and Prime, these are 2 totally different businesses, whether it is customer segmentation, whether it is the geography, whether it is a given pocket in the town or the city, whether it is a type of collateral, I think it's very different. And even the process and the risk controls what we need to have are very different from these 2. Now between Prime and Emerging, not much of difference. There is a difference, but the difference is very less. And therefore, both Prime and Emerging could be -- even though these are 2 different verticals, we have set up different teams, and therefore, the nitty-gritties are very different compared to Prime and Affordable. Therefore, number one, on the Affordable side, we have very carefully chosen the geography and the pocket within the given town or city to ensure that our branch would cater to customer segments and the kind of properties we cater to. That's number one. Number two, the entire team on the Affordable side, they have experience in doing affordable business. And to -- because we have a slightly different process for Affordable and Prime, we have a different dedicated team on the Affordable side. We have a dedicated sales team, dedicated credit team, dedicated ops team. So it's very different. And therefore, it is very important that we need to have a different team to manage different businesses. Because the need and the opportunity, what is available in this country is very different depending on the customer segmentation. Therefore, we have different verticals to manage different set of businesses. And our experience on the Affordable side has been very good and very encouraging. However, initially, in the first year, we were not operating in all the segments because we -- even though the team is from Affordable segment, even though we had done a thorough research before selection of branch in the city or town, we thought let's understand the market better and get the team also get used to PNB Housing culture and the processes. Therefore, we went a little slow in terms of opening up all the segments. However, after quarter 3 onwards, we started looking at all the segments, and that is why now, we are ready with increased set of branches from 100 to 160 to operate in all the segments within Affordable. So these 2 are very, very different business, you rightly pointed out. Everything is different. Customer segment is different. Branches are different, geography is different, the products are different, type of collateral is different, the orientation is different, the kind of risk controls what you need to have is very different. And therefore, we have dedicated specialized team to manage different businesses.

I see. Sir, just one follow-up. Sir, from an ROE point of view, you are -- what we hear from you is confidence on the NIM part improving because of this Emerging and also Affordable mix going up, right? But we haven't -- but don't you think OpEx of this would be significant. And even from an OpEx point of view, for -- at a branch level, Affordable branch also has a journey, right? In terms of breaking even because the loan ticket sizes are smaller, right? Don't you think that the OpEx cost would significantly increase? And therefore, at least in my mind, I'm not -- perhaps you could comment on what impact of this transition would have over the next 2 years as you increase the share on the ROE, primarily because of OpEx and the credit cost line, which will sort of worsen because of this mix?

On the OpEx side for Prime and Emerging, not much of difference. On Prime and Affordable, there is going to be some difference. But for PNB Housing, most of the verticals other than sales, credit, operations and collections are shared, number one. Number two, we have seen the experience on the affordable side by opening 100 branches and all the 100 branches are now with a decent vintage. And we have seen the OpEx on that. So we already have an experience of 100 branches. So OpEx on the affordable is going to be slightly higher. But if you look at the breakeven of the branch on the Affordable side, it should happen in about -- on an average of about 8 months or so. So now we have crossed the bridge to the extent of about 65% to 70%, and we have an experience on what kind of business we can generate, at what yield and what is going to be the OpEx. And that is the reason -- we were very confident, that is the reason we opened 60 more branches on the Affordable side. So to answer your question, OpEx for Affordable is going to be higher compared to Prime, but the difference in our case is not going to be substantial. It's not going to be significant because we have most of the shared resource, which should cater to all the 3. For example, we have the entire IT infrastructure, the call center, all of these things are shared. So we have to only dedicate certain teams to do this business, that is sales, credit, operations and collections. And therefore, for Affordable -- for a stand-alone Affordable company, if you look at the OpEx, for a stand-alone Prime company, if you look at the OpEx, there will be huge difference. For us, it is just one segment within the overall enterprise, and therefore, the OpEx is not going to be significantly higher in Affordable compared to Prime or Emerging.

Okay. I mean, overall, what is your company level ROA guidance over the next or 2 years? Where do you expect it to go versus the FY '24 numbers?

Sir, we don't give guidance, but it should be about 2.1% plus.

Thank you. We'll take a last question from the line of Anusha Raheja from Dalal and Broacha.

Sir, on the corporate loan book side, you said that you will be starting the loan growth in that segment in this year. I'm saying that you will be growing your corporate loan book from this current fiscal. So what is the share that we are looking at it?

Look, it will be in single digit at its peak. So we are looking at overall share from corporate is going to be less than 10% in the year to come out of the overall portfolio. So this year, we might start, we might do some business. But even in future, corporate business is going to be always in single digit, less than 10%.

Okay. And you said that retail loan book growth we are looking at close to around 17-odd percent. So I assume that given the lower base of the corporate loan book, even if you -- in quantum wise, even if the growth is lower, I think you can give a good delta to the overall total loan book growth, right? Because if the corporate kicks in.

Yes, the 17%, what we mentioned was for retail. So whatever corporate, that will be additional.

Okay. And can you just share the number -- what is the total write-off pool currently that you're sitting at it on retail and corporate side?

So on the corporate, we have close to about INR 1,700 crores. On the retail, we have about INR 500 crores.

Okay. And how much recoveries that we can expect in retail. The current run rate of INR 50-odd crores that you said that might continue, right? Per quarter?

Yes, I think it will be on a similar trend.

And some rough guidance on the corporate side, although difficult to predict quarterly wise, but overall, in the full year FY '25, how do we see the recoveries from the corporate loan...

It will be difficult to give guidance on the corporate recovery. But definitely, yes, we would be collecting a good amount of [Technical Difficulty] FY '25.

I'm sorry, sir, you are not clearly audible. Can you repeat the last part, please.

I will saying, it is difficult to put a number, but definitely, we will be able to collect good amount from the recoveries.

And, sir, this credit cost of 30 basis points this excludes the recovery, right? So if you built in the recoveries, then this number can be lower again, right?

Yes, it can be lower, yes. The 30 bps is excluding write-back. So this number could be lower if we include recoveries.

Okay. And just last thing on this BT out rate. That Number was in percentage from 16% at the start of the fiscal FY '24. So how is it right now?

No, no, that 16% is the overall book depletion. Out of that, we have natural runoff. We have foreclosures, which again has 2 parts. One is BT out and the second is customer-initiated loan closure. So BT out will be in the -- it will be around 7%.

Okay. No. So I meant the total runoff of the book is 16.5% to 17%, right? So that continues?

Yes, yes. I think that will be around 16%, 16.5%.

In FY '25 as well?

Yes.

Okay. So when we can see a complete rundown of this book because I think that is high yielding and see, given the fact that even Affordable is at a higher yield and the share of that will increase. And...

Which book run down you're talking about, ma'am?

The previous Prime book, which is running off from your balance sheet, which is at a high yielding -- which is a high-yielding book.

No. This is the natural book depletion. So we don't intend to run off that book fast. We would want to maintain that book and try to retain the customers. Because at a portfolio level on retail, we are still at about 10-plus percent. So we don't want to run down this book. This is natural attrition and some attrition because of BT out and closures from the customer. So this is in line with the industry, and we are at about 16%, 16.5%, and this will continue.

Okay. Just one last thing. On corporate loan book, what could be the average yield that you might expect there?

We'll be able to share with you once we are ready with the business plan and once we're about to start to start.

As there are no further questions, I would now like to hand the conference over to management for closing comments. Over to you.

Thank you, everyone, for joining the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript and the -- the audio of this call will be uploaded today, and the transcript will be available in a few days. Thank you.

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