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

Ladies and gentlemen, good day, and welcome to the Q1 FY 2024-'25 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 of Investor Relations and Treasury. Thank you, and over to you, ma'am.

Thank you, Steve. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q1 FY '25 performance, which you must have seen in the presentation and press release shared with the Indian stock exchanges and is also available on our website. With me, we have the entire management team across verticals, led by Mr. Girish Kousgi, our MD and CEO. We'll begin this call with the performance update by the team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on Slide 38 of the investor presentation. With that, I'll now hand over to Mr. Girish Kousgi. Over to you, sir.

Good evening to all the investors. We had a very good quarter 1 at FY '25. Just to talk about some of the key performance metrics. On disbursement, retail disbursement grew by 19% Y-o-Y in quarter 1. We disbursed retail loans of INR 4,363 crores. 33% of retail disbursements are made in emerging and affordable segment. Our guidance in emerging and affordable this year on disbursements are 40% to 42%. So we have covered 33% in quarter 1. So this will increase, and we'll be able to reach our guidance of about 40% to 42% of incremental disbursement, which would come in from emerging and affordable. Our total disbursements grew by 19.3%, retail disbursement by 19%. And within retail, in line with our strategy, we wanted to grow our affordable and emerging much faster than prime. This is more by design. On a Y-o-Y, affordable business grew by 157% on disbursement. Emerging grew by 18% and prime by 8%. Talking about the book, we achieved double-digit growth of 14.4% Y-o-Y in retail loan asset. And now the book is INR 65,157 crores, which is the retail book as of 30th June. So if you look at last year, last June, our book growth was 11.5%. We are at 14.4%. Our guidance on book growth is 17%, so we will be able to reach 17% by this year end. The total loan assets stood at INR 66,986 crores. We have made significant progress in retail book with 97.3% of our book being retail now as compared to 87% in March 2022. Within the retail segment, in order to balance between growth and profitability, we are moving down the affordability pyramid with increased focus on emerging markets and affordable segment. We started new verticals, mainly affordable and emerging markets. Affordable was started last to last year, and emerging market, we started this year. We have set affordable segment in Jan 2023. And in 18 months' time, we're able to achieve book of INR 2,000 crores, and the book stands at INR 2,361 crores as of June 2025. This vertical has contributed 13% of retail disbursement in quarter 1. We started emerging market segment with dedicated branches. We have 50 branches in emerging. So this was started this year in this quarter. This segment focuses on high-yielding customer base with average ticket size of INR 45 lakhs. Yield on incremental disbursement in quarter 1 FY '25 generated by this emerging market segment was 25 bps higher than the prime segment. We are pan-India present with strong network of 303 branches across 20 states as on 30th June 2024. With this large presence, we are ready to capitalize the opportunity available, both in affordable and emerging segments, predominantly focusing on Tier 2 and Tier 3 cities. We plan to add 40 to 50 branches annually, Looking to grow at 17% of retail loan asset in FY '25 and onwards with higher growth in affordable and emerging segments. On asset quality, we witnessed remarkable improvement in the asset quality. Our gross NPA reduced by 241 bps Y-o-Y to 1.35% as on 30th June '24. We continue to work towards achieving 1% NPA by this year end. Our overall collections remained strong, and in quarter 1, we've had considerable recoveries from written-off accounts, contributing to reversal in grade cost to minus 7 bps. During the quarter, in corporate book, we resolved one NPA account and one written-off account. The written-off account was sold to ARC. During the quarter, we recovered around INR 80 crores from total written-off pool, both corporate and retail. We expect to continue recovery from written-off pool every quarter. The company has written-off pool of around INR 1,250 crores in corporate and INR 500 crores in retail. On the borrowing mix, our cost of borrowing has reduced 6 bps sequentially to 7.92% in quarter 1. Our ability to borrow from debt market at competitive rates, coupled with improved pricing from bank, aided in cost reduction. The incremental cost of borrowing for the quarter is at 7.75% compared to 7.93% in quarter 4 FY '24. Deposits grew by 7% Y-o-Y with 88% as public deposits. CRISIL upgraded the rating to AA+ from AA, outlook stable. With this, company is rated AA+ from all the 4 rating agencies. In quarter 1, PAT stood at INR 433 crores, registering a growth of 25% Y-o-Y, maintained net interest margin of 3.65% during the quarter. We had guided threshold of 3.5% NIM. So we'll be able to maintain that. Our efforts across parameters, either in improving the profitability or return on assets, improved to 2.38% in quarter 1 from 2.47% in quarter 1 of FY '24. Return on equity was at 11.4%. Couple of days back, government presented with Union Budget. The expansion of PMAY scheme to 3 crore houses in urban and rural areas is a significant step towards Housing-for-All mission. With our expanding network of 303 branches, including 160 for affordable and 50 for emerging market segments, we are well positioned to cater to this segment. Under the CLSS scheme, up to date, the company has sanctioned over 65,000 customers with a sanctioned amount of INR 13,000 crores (sic) [ INR 13,030 crores ]. So even though in the budget, a high-level disclosure was made, we are expecting scheme details in next 3 to 4 weeks' time. And based on the interactions, what we've had with the Ministry of Finance and NHB, we expect the scheme is going to be really beneficial to companies focusing on emerging markets and affordable. So it will be a huge plus for companies focusing on these 2 segments, and we are geared up. So all of our branches, all 303 branches will be geared up to do PMAY Scheme, which is to be announced by Ministry of Housing Affairs in the next few weeks time. So it's a huge opportunity. So typically, what happens is that on -- we do not know the color of the scheme, but I think broadly, it's going to benefit the end customer, either by way of a lump sum amount in terms of subsidy amount or it could be some kind of interest, which we do not know. It is our assumption it is going to be big and beneficial. And like last couple of term the scheme was announced, there's going to be a lending cap with a certain margin. We expect the margin to increase this time so which would create companies to know where the margin was, lower than this, for example. Today, we are talking about NIM of 3.65%. The expected PMAY Scheme, the margin could be better than this. In the sense, it's going to help PNB Housing. All the 303 branches are going to focus on PMAY Scheme, and it is going to help the margin going forward.

I would like to now request Vinay to talk about our financial performance.

Hi, good evening, everyone. Thank you for joining us today. I am pleased to present the financial highlights for Q1 FY '24-'25. As MD sir mentioned, our PAT has grown 25% year-on-year and remained flattish quarter-on-quarter to INR 433 crores in Q1 FY '25. Net interest income has grown 3% quarter-on-quarter to INR 651 crores in Q1. Yield is -- yield for the quarter was 10.03% versus 10.08% in the previous quarter. The marginal drop was due to few repricing and run-off of high-yielding. At the same time, cost of borrowing has improved from 7.98% in previous quarter to 7.92%. Further post rating upgrade, our incremental cost of borrowing at the end of Q1 has come down to 7.75% versus 7.93% in Q4 FY '24. NIM during Q1 have now stable at 3.65%. We might face NIM pressure in the short term but -- however, with the higher mix of business emerging and affordable, we should see NIM improvement after few quarters. Gross margin, including fees and other income, has grown by 11% year-on-year to 4.03% versus 3.91% in Q1 FY '24. Operating expenses in Q1 have grown 27% year-on-year to INR 190 crores. This is largely due to branch expansion done in Roshni and emerging verticals during Q4, where we have added 100 branches. This will help in profitable growth going forward. Our OpEx also includes our impact of annual performance appraisals done for FY '24. Credit costs remains benign at 7 bps of relief in Q1. We have fully resolved one corporate NPA account through settlement during the quarter. Further, we have recovered INR 80 crores from written-off pool during Q1. This has helped in controlling credit costs for the quarter, and we expect the recoveries to continue in the subsequent quarters as well. ROA, which was 2.07% for Q1 is now at 2.38% for Q1 FY '25. ROE is 11.4%. Our capital adequacy at the end of Q1 is 29.5% with Tier 1 at 28.4%. Thank you.

So with this now, I would like to invite and request Dilip to talk about the performance of our retail prime and emerging business.

Thank you, Deepika. Good evening, everybody. The business that I'm going to be speak about is our retail prime business, which now stands bifurcated into prime and emerging markets. On this side of the business, our loan book registered a growth of 11% and our disbursements registered a growth of 10% Y-o-Y. In line with our organizational imperatives, the margin-accretive business, which is emerging markets, grew at a faster pace. The loan book in the emerging markets grew at 18%. The disbursements in the emerging markets also grew at 18%. On the prime markets, the loan book grew by 10%, but disbursements grew by 8%. We now have 50 branches, which stand to categorize the emerging markets. They contributed to 22% of the disbursements in the first quarter of FY '25. This will actually go up to 30-plus percent by the end of the year. In the emerging markets, just to give you a deeper color of this business, this portfolio now stands at almost INR 12,000 crores to about INR 11,970 crores as of June end. It forms 18-plus percent of our retail loan assets. By the end of the year, we are hopeful that this will be anywhere between 22% to 25%. In this side of the business, our ticket size is actually lesser than what we see on the prime markets. It's in the range of INR 24 lakhs to INR 25 lakhs. The origination LTVs are at 66% in case of home loans. It is -- the sourcing here is largely done through in-house channel. See, almost 2/3 of the sourcing in these markets is done by our in-house channel. The balance is done through third-party or DSA. On incremental yields in the quarter, overall, our yields increased by about 8 basis points on a quarter-on-quarter basis. Again, the lift in yields were higher in the emerging markets where it was to the range of 12 bps. In case of prime markets, it was in the range of 7 bps. We opened about 33 new branches in Q4 of last financial year. We are happy to share that almost all of them have now started contributing to disbursements. In fact, in the first quarter, they contributed to 6% of the overall disbursements. And since they just started, we expect this percentage to be much higher in the quarters to come. So to summarize, the 2 imperatives for this business, which is growth and margin-accretive growth, we are happy with the progress being made on both of them. We -- on account of the investments in our footprint expansion and technology, growth will go up in the quarters to come. On account of the margin-accretive business is growing at a faster pace, the margins also will go up in this business.

We'll request Anujai to talk about our Roshni affordable business, please.

Good evening, everyone. Continuing our promising growth story on the affordable housing business side, I'm happy to announce that we have become profitable on a stand-alone basis in our affordable housing business. And continuing to the growth story, we crossed INR 2,000 crores of loan book in May '24. The loan book stands at upwards of INR 2,300 crores at the end of Q1, which is 5x growth from same time last year and 32% up from quarter 4 of last financial year. Disbursements grew by 157% on a year-on-year basis, and we disbursed close to INR 600 crores of loans in the last quarter. Overall, on the yield side, again, there is a positive trend that we are witnessing. Continuing our focus on the informal income side, we have developed our expertise on the underwriting side of managing the informal income customer profile, and it is resulting into higher yields for our business. Our self-employed sourcing has also been consistently increasing. Until last quarter, it was about 37% of our sourcing. Now it is upwards of 41% of our sourcing. One of the important initiatives that we undertook in the last quarter was implementation of a new loan originations platform, which is a Salesforce-based platform which has been introduced in our affordable housing business. Like most of the other things, we have done a good job in execution of this project, and 135 out of 160 branches are now live on the affordable housing side on the new loan origination platform. And in the coming months, coming couple of months, we'll be stabilizing the new system, and we are likely to start getting the productivity benefit through the win-to-win digitization of the customer application life cycle process. Going forward, one important point, earlier, that I would want to share is out of 160 branches that we have in our Roshni business, 60 branches were opened in the last quarter of last financial year and happy to share that we have operationalized these branches in the last quarter. And now these branches that we have opened in Tier 3 and Tier 4 locations have started contributing more towards our business volume, and this will also start translating into higher yields that we expect from this business in the coming months.

Would request Jatul to talk about credit and collection, please.

Yes. Good evening, everyone. On credit front, during the quarter 1 of '25, the total retained logins were 36,151 and sanctions were 24,589 applications, thereby registered a growth of 33% on logins and 26% on sanction count vis-à-vis quarter 1 of the previous year. Decentralized underwriting approach has been adopted by the company with underwriters being positioned at branches for better business support and control perspective. More than 80% of the loan applications during the quarter had a CIBIL score of 700 and above. On collections front, FY '25 kicked off with continued growth focus and momentum of 3 key aspects: legal actions or measures to resolve delinquency and redemption in NPAs, greater success in property positions and subsequent auction and recoveries from technically written-off pool. This, thereby, allowed us to have an upbeat performance in quarter 1, decreasing the cyclical industry trends and some amount of operational delays caused due to general elections, vocation of courts in June. To provide detail on this, our ongoing rigor on retail collections saw successfully positioned over 165 properties in the first quarter. In terms of disposal of repossessed properties, we successfully sold off 98 properties in the quarter through auction channel, recovering complete principal outstanding in these accounts without incurring any loss. The sale count is more than 1/3 of the total successful auctions done in the previous financial year. Another positive development was the quarterly recovery from technically written-off pool. Close to INR 28 crores in retail was collected from the technically written-off pool, which is more than 40% of our total recoveries in the last financial year. So the company is poised to recover from the technically written-off pool quarter-on-quarter. The organization will continue its multipronged strategy of bringing further reduction in NPAs in coming quarters, adopting all-rounded approach and reduction in delinquency. Thank you.

Would request Anubhav to talk about our debt transformation, please.

Thank you, Deepika. Good evening, everyone. PNB Housing Finance initiated a massive technology transformation program over a year back. At this time today, I'm happy to share that most of the initiatives as part of the transformation have been initiated and completed. I would like to cover some of these in brief. Firstly, we have launched a new cloud-based CRM platform, Salesforce platform, which has been leveraged for acquisition as well as improving the customer service capabilities. A lot of automation has been built into this platform, and almost 18% of service requests are being addressed through a self-service mechanism. Using this platform, our inbound [ within ] productivity has also seen an uplift of almost 5% to 10% on a regular basis despite growing volumes. This platform is tightly coupled to the predictive dialer, which helps to improve the customer outbound capabilities and reduce leakages to a large extent. Secondly, we have revamped our website and converted an [indiscernible] engagement channel for customers with massive personalization capabilities, and it also provides better access and experience on mobile, which accounts for almost 75% of our user traffic. The new website provides seamless access to our products and services, which has yielded to an increase of lead generation by almost 50% in an organic manner. Thirdly, we have launched a digital collection platform, which provides on-the-go availability of customer data, loan details, payment capabilities and interaction details to our entire sales collection team, and that is leading to improvement of collection efficiency on a large scale. We have also implemented a new cloud-based LOS system on Salesforce-as-a-platform with the launch of this platform, which is currently underway and shall be completed by the end of Q4, beginning of Q3 in the current financial year. But whatever branches have been launched with the new platform, we have seen improvement in loan TAT processing times as well as enabling better performance and tracking capability for our customers. Through the digitization of LOS processes, we have seen a reduction in the physical documents that are handled and significant reduction of the manual data entry that is required to be done. Lastly, we also introduced chatbots, which are intelligent enough to act as a kind of customer service. We are calling it ARYA. These are introduced on our new website as well as on WhatsApp, and we have seen a significant usage of these channels by the customers for customer r service capabilities in a self-service manner.

Yes. Thank you. So with these updates, Steve, I would request to open up for the Q&A please.

[Operator Instructions] The first question is from the line of Renish from ICICI Bank.

Congrats on a good set of numbers. Sir, just 2 questions from my side, one on the spread or maybe NIM as well, right. So incremental cost of borrowing is lower than the blended cost of borrowing. We are growing, let's say, incrementally faster in the high-lending segments. So despite that, why we see NIM -- let's say, NIM will be under pressure in near term?

So the reason is -- we have couple of reasons. One is the corporate book is degrowing. So we will very shortly start corporate business. So hopefully, next 3 to 4 months' time, we'll start corporate business. So I think now the team is ready. We are ready with the blueprint. Very shortly, we will start. So why? There is contraction in the field because of the corporate book rundown. I think that'll get solved in next 3 to 4 months' time because we start doing fresh corporate business, number one. Number two, we have a large prime book. So certain amount of BT, even though we have set up the retention team, the BT as a percentage has come down drastically over last 1, 1.5 years' time. So there is some BT out where that would impact us on the book and eventually on the income. Third, there is also repricing. So on one side, there is yield contraction because of corporate book going down, BT out and foreclosure and repricing. On the other hand, we are moving towards high-yielding segments. In quarter 1, typically, we saw most of the disbursements were a spill off from quarter 4 sanctions, which were at a lower rate. And which is why in quarter 1, we don't see spike in yield. But if you see the current trend, I think there is improving trend, both in affordable and emerging, on the yield side. Incremental yield is going up. So you will see quarter 2, the yields are going to be slightly higher. As a policy, we had guided margin of 3.5%, and we stick to that. I think we will have maybe 3 to 5 -- maybe 3.5% to 3.65% for next 2 to 3 quarters' time and then the NIM will start inching up.

No, sir. But again, if we look at the corporate book, as on June '24, that book, hardly anything. So I don't think so there should be any drag because of the corporate book on the yield side. Maybe you're right that incrementally because of the BT out pressure on the prime segment, the repricing to retain the customers would be lower. Is that the fair understanding?

It is combination of all the 3, which I mentioned. One is corporate book degrowth. Second is BT out. Third is repricing and foreclosure. All as a combination, I think, there is a contraction of yield to a certain extent. And on the other side, we are moving segments and trying to increase the yield, but that is on incremental basis. So in about 2 quarters' time, I think we'll reach to a point where there won't be any contraction of yield and it will start moving up. And that's when we will see the margins inching up.

All right. And my next question is to Girish Kousgiji. So sir, given we are present in almost all the customer segments, whether it is prime, affordable, and if the PMAY scheme has to move things faster in the ground, as and when the fine print comes, do you foresee upside risk to our growth guidance of 17% in retail book?

Actually, PMAY is going to help us on bettering our growth rate.

Okay. So would you like to revise our guidance of 17% now or maybe you would want to do it in Q...

We would not want to revise for the simple reason, if you have to grow at the same yield, we could have definitely done far better than 17%. Since we have a dual task, one is to grow -- because last year with so many challenges, we grew at 14.1% on retail. And this year, we said we're going to grow at 17% on book. So with PMAY, we are ready to see how the scheme will get rolled out. And we believe that it'll open huge potential, not only on the affordable side, even on emerging and prime, because if you have to go by the last couple of times the scheme parameter, I think a lot of customers would qualify even on the prime and emerging side. So we feel opportunity of all our branches catering to this particular segment, whereas affordable focus purely on affordable and -- which should also consider part of PMAY. But otherwise, on the emerging and prime side, largely income-based, we will have an opportunity. So we would not want to revise the guidance at this point in time, but we are very sure and confident of reaching 17% book growth, what we have guided for.

All right. And sir, just lastly, you did mention about this, the margin improvement on the NHB borrowing side. So could you please elaborate a bit on that?

So if you look at the scheme which was there till about March 2022, so the funding which comes from NHB, especially for affordable segment, which is under the CLSS subsidy, so there, that funding will come at a lower cost. So one, the borrowing -- it'll help us in the borrowing cost. And number two, there is a lending cap. So this discussion was to increase that lending cap. So that would definitely help us to improve our margins.

It was 5.5%, right, sir, last time?

No, I think that rate kept on changing over a period of time, but however, the margin was fixed at about 3.5%. I think this time, there are some talks. I think this is purely our assumption and expectation. So we feel that the 3.5% could go up maybe to 4% or 4.5%, which is going to help us on all the 3 segments, be it Roshni, emerging and prime, because our margin on the emerging and prime is less than 4% or 4.5%. So any incremental business we do from this PMAY scheme is going to be -- will lead to incremental margins.

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

First of all, I mean, congratulations on a good quarter. Sir, first thing I wanted to understand is, I mean, this Fair Practices Code for Lenders charging of interest in the circular that came out from RBI on 29th April. I mean how have we handled the circular? Basically, the circular talked about recognizing interest income only after a DD or check was handed over to the customer. So I mean the disbursements and the loan advances that we are showing today and the recognition of interest income, is there any component of interest income reversal in our interest income that you reported?

So we are fully compliant. No, I think there were a couple of other reasons. One was there was -- I think there were elections during quarter 1 and also heat wave. I think despite the regulation, what you mentioned, despite election quarter and heat wave, we were able to show growth of 19% on disbursement and book growth of 14.4%. I think [ no ] else, we would have probably been 2%, 3% higher.

Sir, I think my question was around, I mean, recognition of interest income after the 29th April circular, which talked about recognizing interest income only after a check or a DD was handed over to a customer.

We had a very strong process even in the past. So the alignment required was very less for us. The gap was really less for us to cover. So in terms of interest, it was hardly about INR 4 crores, INR 4.5 crores.

Got it. Got it. Okay. Great. Sir, the second thing was on OpEx. When Vinay, sir, was giving his opening remarks, he spoke about OpEx also including the impact of annual performance appraisals, which were done for FY '24. So I mean was this just in the nature of, I mean, increments that happened or also the variable payouts? Just trying to understand how the quarterly run rate is going to be now for the next couple of quarters.

Yes. Abhijit, this was largely the annual increments. Variable payouts, in any case, is provisioned. So there is no such impact on that.

Got it. Got it. So basically now -- I mean is this the new kind of a steady state that we can keep building on for OpEx?

That's right. This is our new steady-state number.

okay. And sir -- Vinay, sir, just one related question I mean while you cover liabilities in a greater detail, I'm just trying to understand, after this credit rating upgrade, I mean, how are conversations progressing? I mean, incremental cost of borrowing is already down to 7.75%. How are you looking at cost of borrowing trending going ahead?

So same, Abhijit. So in this quarter itself, we have seen improvement. It has gone down by around 6 basis points, and the incremental cost of borrowing has come down to 7.75%. While it is still volatile, it will still move slightly. But the -- some more benefit is expected to come in the 2 quarters. And once the PMAY is announced, as sir mentioned, there could be few -- further benefits, which can come on account of PMAY.

Got it. But this PMAY is going to help us more on the growth side as well as on the spread or margin side because we're expecting the spread cap, which was earlier 3.5% to be increased when the details of the scheme come out.

It is going to help us on 3 counts: one is on the cost of borrowing; second, on the growth; third, on the margin.

Got it. Perfect. Girish, sir, last question for you. I mean obviously, this quarter, there was benefit from recoveries on the corporate side. During the opening remarks, I also heard that out of the total pool of -- total recoveries of INR 50 crores from the written-off pool, almost around INR 23 crores were recovered from retail, if I heard you right. So just trying to understand, going forward, why you spoke about a pool of both corporate and retail written-off pool. How are you looking at basically credit cost lending? They are expected to remain benign for the next couple of quarters, at least.

I think -- yes, credit costs will be muted. Just to give you some numbers, for quarter 1, retail recovery was INR 28 crores and corporate was INR 53 crores, total INR 81 crores. And quarter 1 being cyclical, I think the write-back amount was quite low. I think this number will only improve in the quarters to come, both on retail and corporate.

Got it, sir. And sir, later, during the call, if you could just explain this corporate account that we have resolved during -- using customer settlement. What was the nature of that? And what was the outstanding? And how much have we recovered?

So we had sold to ARC, so it was cash and SR. So we have -- we received, we recovered the cash portion in quarter 1 and the rest would be -- the SRs will be redeemed in this year. So this is on this particular account. And on the retail, I think it is quite regular in nature. So we'll keep recovering. And we had one NPA in corporate. I think that is now resolved. Now on corporate, NPA is 0.

The next question is from the line of Shubhranshu Mishra from PhillipCapital.

So Girish, 2 questions. The first one is around the PMAY scheme. My fair understanding is that the scheme has to be implemented at scale. As far as self-construction, then it can be implemented. However, if the builders have to recover their inventory, it'll take a longer period of time because the supply itself has come out. I just wondered your thoughts on that, how long will the builder -- developer take to recover -- pivot their inventory for affordable housing. And when do we get that benefit in terms of certification of disbursements at scale? While I understand for self-construction houses, this could have immediate benefit. The second is around the ARC sale. How much of provisions are we carrying on the SRs right now on the ARC sale?

So on the ARC sale, the one that we have done during the quarter, it's 100% provided. And for the other one, we are carrying around 70%.

On the PMAY, I think we are yet to know -- get the detail. It is still not announced. But we feel that it's going to be big one. And if you look at the composition of products under PMAY, in terms of whether it is self-construction, whether it self-construction with a plot purchase and construction, depending on the nature of product, I think the opportunity is going to be huge. I think once we get the scheme details, we'll be able to rework on that. And if need be, then we will be ready to take that opportunity forward.

So will we change our disbursement AUM growth guidance once we get the fine print?

No, we will not be able to comment on it. As of now, we stick to 17% book growth guidance. And if there is any need during the year, we may look at revising it. But at this point in time, 17% is where we stand.

17% is the book growth guidance. What is the disbursement...

Book growth, yes. Retail book growth at 17%.

And what is the disbursement growth guidance for retail?

That will be about 25-plus percent.

The next question is from the line of Viral Shah from IIFL Capital.

Congrats on good set of numbers. I have a few questions, Girish, if you can help me understand. So first of all, in the affordable book, right, what is the share of disbursements that are done for either a purchase or construction to the borrower versus what is the business transfer?

Sorry, could you please repeat the question?

So in affordable segment, the disbursement that you do, what would be the share of the business, the BT-ins that you would've got?

Yes. I think on the BT-in would be close to 25% and BT-out is negligible.

Okay. So 25% of the disbursements for 1Q that you have done, right?

Yes, 20% of disbursement is the deal.

Got it. Next is on the affordable side. I remember in the analyst meet also, you had mentioned that. Incrementally, we are looking at a different customer mix and product mix, which is going to ensure that the yields are going to go up by 100 basis points immediately from next year. So from when should we see that? Because I see that the disbursement yields are flat Q-o-Q.

No. So I mentioned that. So it has already started. The only thing is in quarter 1, most of the disbursements there from the sanctions which happened in quarter 4. So you will see a very marginal spike in the quarter 1. It has already started. So you will see yields improving increment -- on incremental disbursements quarter-on-quarter.

Okay. So we should see that at least on reported first decimal numbers from next quarter only.

No, this is on incremental, so from -- let's say, from now onwards till this year end. So this year, whatever to originate, that would carry a yield of 12.6% on affordable.

Okay. Got it. And if I have to basically look a bit deeper in your cost of funds reduction of 6 basis points in this quarter, what further room do we have in terms of reduction given that -- again, what was the share of the mix change in this quarter? Because there was some increase in the CPs as well. So is this entire reduction just because of the credit rating upgrade or there is some more benefit yet to come through because of that?

See, it is combination of various things. So one is the -- you mentioned CP. Definitely, yes, CP is one instrument, and second is the cost of deposit. For us, it is coming down. While we are growing our deposit book, cost of deposits is coming down. Number three, we're renegotiating with all the bankers on the existing lines/and all the new lines, we are able to get slightly at a better rate. I think it's a combination of all these things that is resulting in slight reduction in the cost of borrowings, both incrementally and on book.

Okay. And lastly, in terms of the recovery pipeline, last time around, you had mentioned that, on an average, around INR 50 crores every quarter for 6 to 8 quarters. So that gave us a pool of, say, around INR 300 crores to INR 400-odd crores. Now that we have had INR 80 crores of recovery in this quarter, do you see the overall pool increasing? Or the remainder of the recovery pool, how will it look like for next few quarters?

On the retail written-off book, we had told approximately about INR 170 crores to INR 180 crores we'll be able to recover this year. So if you look at quarter 1, the amount was INR 28 crores. I think in next 3 quarters, we'll be able to cover up another maybe INR 150 crores to INR 160 crores. On the corporate, whatever book we have, that is INR 1,250 crores. That will span out in next 3 years.

Sorry, next?

3 years.

Okay, next 3 years. And lastly, if we just go back to the NIM space in the near term, Vinay mentioned there may be some moderation. What is the extent of it that we are talking about? Is it just 5, 6 basis points? Or is it going to be more like 10-odd basis points?

I think it'll be in line. So we have guided 3.5%. So 3.5% is the threshold. And with this mix change and with reduction in cost of funds and all, obviously, we'll be able to maintain this for next 2 to 3 quarters. There could be few ups and downs, a few bps. After that, it'll start inching up.

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

Congrats on a good quarter. Just wanted to understand on the affordable bit. So we've hit 160 branches right now. What is the plan there? Or do you think that we have expanded like meaningfully in last 1 year, so you would want to take it slow at this point in time?

So we have 160 branches on affordable side. This year, we'll open 40 more branches. So by this year-end, we will have 200 branches in affordable segment. And this will be the plan for next few years. So we'll keep opening about 40 to 50 branches every year, at least for next 3 years.

Sure. And any specific states or it remains equally split between North, West, South?

I think we are a national player. So we would be focusing on predominantly 3 zones: South, West and North. We are scarcely present in East, more on the prime side. So our expansion would be in South, North and West. Largely, our branch expansion is going to be on affordable and emerging side.

Sure. And sir, just quickly on the Stage 3 ECL change sequential, what could be the reason?

So on Stage 3 ECLs, one is -- since we have resolved corporate, so that has completely gone, nil. And on the retail side, there is a marginal drop. It was around 35%. It is now 32.5%. This is on account of certain one-offs that we had taken on the retail side, and these were vintage accounts. So -- which got resolved or we have taken over now where we had a higher provision. So that got released. And the new which was -- got added, the requirement is on a lower side. So hence, it is more of a mix change, which is happening there.

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

My question was with respect to the branch itself. Now you said that we will be adding 40 more branches in the current year and approximately 40 to 50 over the next 3 to 4 years. So can you please help me understand what will be the metrics with respect to the bank? How much time will the branch take to just take and become a profitable branch? And what are the number of employees per branch and et cetera, with respect to understanding how the branch will grow as it seasons?

So the plan is to open 50 branches. So this year, we've opened 50. And every year, we'll open 50 for next 3 years. That is the plan. So this year 50, next year 50 and next to next year 50. That is a plan on branch expansion. In terms of breakeven on the affordable and emerging, both sides, it'll take about -- average, about 9 months, 9 to 10 months' time to breakeven.

Okay, 9 to 10 months. And with respect to the technology transformation that you've mentioned in the opening comments and also on the PPT, there is a mention of the reduction in TAT. So what was the TAT earlier and what is it now? Can that be quantified?

Yes. So on loan processing TAT, if you are talking specifically to LOS, our loan processing TAT has reduced about 16% to 17%. And on the CRM side, the customer service requests is seeing reduction in TAT because they've introduced self-service capabilities. Almost 18% of requests by the customers are getting self-serviced without being assigned to any agent. That is improving the TAT on an overall business.

Okay. Can we quantify the TAT in number of days? So like how much days does it take from logging to sanction or disbursement with respect to days of file that has been reduced.

Win-to-win right from reference, login to sanction and including salaried and self-employed, this is decision around 3 working days. So the other day, we have seen this coming down to close to 4 working days to gradually, we are reducing it to 3. And wherein salary days, decision till then the second day itself.

Understood. Understood. And with respect to the cost to income and the OpEx to AUM, as you are saying, that we are going to be so aggressive on the branch expansion. Affordable housing space as of what I have seen, they are very -- the OpEx ratios are very high. So how do we manage to overcome that and that would not make a drag on the profitability? Could you please share some light on that?

Well, actually, on the OpEx side, most of the investment related to 160-odd branches now and 300 overall that we have for the business, investments are already done, right? So it's both upfronted. So whatever you see now would be a run rate. Rest would be in the BAU core that we will be adding, and it will be only the direct cost that we would be investing, which is mostly in terms of sales and underwriting people. Rest, everything, would be the shared infrastructure. And plus, the economies of scale will kick in from other businesses, which would help in absorbing. So we are pretty much confident that 1% kind of OpEx to [indiscernible], we should be able to maintain.

Understood. And finally, with respect to the credit underwriting. Since our overall portfolio mix is more tilted towards the salaried people and affordable in the Tier 3, Tier 4 and beyond will be more self-employed, so how are we changing our underwriting practices? And what will be the way that we make sure that the asset quality remains stable? Can you please share that?

So I think the underwriting model for prime and emerging is similar. It is very little different between prime and emerging. I think broadly, it is similar. When it comes to affordability, it is totally different. So we have a different vertical for these 3 businesses. They have a different vertical for prime, different vertical for emerging, different vertical for affordable. Now on the affordable side, largely, we're going to focus on both income and assessment-based products. It will be 50-50 almost, 50% is going to be assessment, both on salaried and self-employed. And therefore, there, the underwriting model, what is required is very different. So we have a different structure, different team, different head to drive this piece vis-à-vis compared to prime and emerging. On the prime and emerging, it is rule-based, and largely, the focus is on income side. On the affordable, it is 50-50, and therefore, it is more of assessment model. So on the salaried side, when we say informal, it is cash salary. On the sel-employed side, when we say informal, it is basically LIP and certain programs where the income is not. This would be -- we have developed models. We have developed various templates. For example, we have close to 35 templates depending on the sector, depending on the nature of business. All these are templatized. All these are automated. And this would support us in terms of standardization of the asset spend. Having said that, on the affordable side, it's more of touch and feel. So every branch, we have a credit manager. The credit managers meet the customer, does the personal discussion, assesses the income, and then we use those templates to standardize our decisioning process. So it's very different. On the prime and emerging, it is different. It is more driven by rule-based algo. On the affordable side, it is a mix of both personal touch, personal discussion and use of templates.

Understand. Just one last bit, I wanted to understand what would be the ROA guidance for the next 2 to 3 years.

ROA guidance, we are not giving on a annual basis. What we are -- what we have laid out on our Investor Day, that we are working towards a range of 2.4% to 2.6% in next 3 years. So we are committed to deliver that.

2.2% to 2.3%? Did I get it right?

2.4% to 2.6%.

The next question is from the line of Viral Shah from IIFL Capital.

One last question is, so in this quarter, you have had INR 80 crores of recovery and then there was around INR 4.5 crores of reversal of provisions on the corporate loans, right, and with an overall net write-back of INR 12 crores. It means that the adjusted or ex of the recovery, the credit cost would have been INR 72 crores. Would that be a right understanding?

Yes, that's the right, Viral. But that also includes some one-offs that we have taken on the retail side. So it is not a core credit cost. That also had certain one-offs that we have taken.

Okay. And then you mentioned one-off, as in a charge to P&L, right?

Yes, right, charge to...

Yes, that makes sense, because otherwise, the impaired credit costs were a bit higher.

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

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