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

Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q2 and H1 FY '25, '26 Earnings Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Chaitanya Yadav, National Head, Corporate Planning and Investor Relations. Thank you, and over to you, sir.

Thank you, Robin. Good evening, and welcome, everyone. We sincerely thank you for your patience, given delay in starting the call, which was due to a technical issue while uploading the document to the stock exchange. We appreciate your understanding. We are here to discuss the PNB Housing Finance quarter 2 and first half results of financial year '25, '26. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian stock exchanges and are also available on our website. With me, we have our management team led by Mr. Jatul Anand, Executive Director of the company. We will begin this call with the performance update by the management team, followed by an interactive Q&A session. Please note that 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 developments 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 44 of the investor presentation. With this, I will now hand over the call to Mr. Jatul Anand. Over to you, Jatul.

Good evening, everyone. I hope you all had a bright and cheerful Diwali. Before we move into the performance update, I would like to briefly reflect on the business momentum. Despite the challenges we faced in quarter 2, the business has continued to show steady progress, be it growth in loan book, disbursements and improvement in asset quality. Guided by a responsible leadership and strong sense of ownership, our teams have delivered with consistency and focus, reaffirming the strong foundation and solidarity of PNB Housing Finance. Talking on the company's performance based on audited financials for Q2 and H1 of FY '26, we have delivered yet another strong quarter with disbursements of almost INR 6,000 crores at a sequential growth of 20% versus quarter 1 FY '26. The retail loan book grew by 17% year-on-year, reaching INR 79,430 crores as on September 30, '25. It now contributes 99.6% of the total loan book, which stands at INR [ 79,771 ] crores. A key highlight is the affordable and emerging market segments, which together grew 34% year-on-year and account for 38% of the retail loan book. This reflects our commitment to financial inclusion and penetration into high potential geographies and demographies while maintaining strong asset quality and risk-adjusted returns. These segments not only diversify our portfolio, but also position us to capture growth in India's expanding housing demand. Overall collections remain strong, with significant recoveries leading to a credit cost reversal of 53 bps during the quarter. The gross NPA continued to decline. We were at 1.04% as of quarter 2 FY '26. With seasoning of affordable housing business, we have observed a sequential uptick in delinquencies, which was expected at this stage of the business cycle. Importantly, these levels remain well within the industry benchmarks for the affordable segment. Having said that, [ Vinay ] will cover the same in detail later, covering performance on affordable housing business. Our spread marginally improved to 2.26% in quarter 2 FY '26 from 2.23% in quarter 1 FY '26, while achieving a return on assets of 2.73% for quarter 2 FY '26 and 2.65% for H1 '26 on an annualized basis. I would now like to delve deeper into the performance highlights achieved during the quarter. On disbursement, the company continued its focus on high-yielding business as a strategy. Disbursement in affordable and emerging segments grew year-on-year by 31% and 23%, respectively, contributing around 50% of the total retail disbursements. Prime segment grew by 2% year-on-year, ensuring steady margins in a highly rate-sensitive market. The overall retail segment disbursement grew 12% year-on-year during the quarter to INR 5,995 crores. We will continue prioritizing growth in the affordable and emerging market segments. On loan books, the retail loan book grew by 3% quarter-on-quarter and 17% year-on-year as on 30th September 2025. The loan book for emerging markets and affordable segments grew by 34% year-on-year, reinforcing our commitment and focus on these segments. As stated earlier, the company continues to focus on growth in these two segments that is emerging and affordable, which contributed 38% of the retail book. The corporate book now stands at INR 332 crores as on September 30, 2025 due to foreclosure of one of the corporate loans during the quarter. The total loan book stood at INR 79,779 crores, and asset under management is that INR [ 83,829 ] crores. The total accounts serviced by the company crossed 3.5 lakhs during the quarter. The growth in the affordable and emerging segment continues to remain strong in all the geographies. Our network today spans out 356 branches across the country, out of which 198 are in affordable segment, 85 in the emerging markets and 73 in prime. This reach gives us a strong foothold in the Tier 2 and Tier 3 cities, where we continue to see growing demand. We plan to steadily expand our presence by adding around 40 to 50 branches each year in line with our growth strategy. On asset quality, as mentioned earlier, the gross NPA improved to 1.04% as on 30th September 2025 as compared to 1.06% on 30 June 2025 and 1.24% as of 30th December 2024. During the quarter, we recovered INR 59 crores from the overall written-off pool. In our retail portfolio, we have seen remarkable process or -- progress on asset recovery. During quarter 2, we successfully auctioned 178 repossessed properties, bringing the total disposals for the first half of FY '26 to 276. This strong execution reflects our robust recovery strategy and we -- our commitment to maintain asset quality. The company has a remaining written-off pool of around INR 1,000 crores, having INR 675 crores in corporate and balance in retail. On borrowing rates, our cost of borrowing declined by 7 bps sequentially to 7.69% in quarter 2 of FY '26, driven by ongoing negotiations with banks and the impact of repo rate cuts. On margins, the company was able to slightly improve the margin to 2.26% in quarter 2 FY '26 from 2.23% in quarter 1. NIM remained range bound at 3.67% for the quarter versus 3.74% in quarter 1 of FY '26. And on an overall basis for H1 FY '26, it remained at 3.7%. On profitability, all efforts across parameters aided in improving the profitability. Our return on assets improved to 2.73% in quarter 2 FY '26, and H1 stood at 2.65%. Return on equity was at 13.14% annualized for quarter 2 FY '25. Let me now share some highlights on our prime and emerging segments. Overall, prime and emerging business delivered growth of 10% year-on-year and 23% quarter-on-quarter. The emerging business recorded quarterly disbursement of INR 2,122 crores, up by 23% year-on-year. And prime business remained flat in line with our strategic approach to profitable growth. Emerging business now contributes 41% of overall prime and emerging segment, up from 37% in quarter 2 of last year. The affordable housing business will be covered up by Ms. Valli Sekar. And to sum it up, as we look ahead to FY '26, our strategic approach remains on explorative retail growth and expanding our affordable housing footprint. We aim to enhance customer experience, reinforce risk framework and sustain industry-leading asset quality while delivering consistent, long-term value for all stakeholders. Backed by a strong leadership team and a resilient culture, we are well positioned for sustainable growth. With this, I would like to hand over the call to Valli to take through the update on the affordable business.

Thank you, Jatul. Good evening, everyone. This is Valli Sekar. It is with great pleasure that I present the significant progress we have achieved in our Roshni business during this quarter. We closed the second quarter of this financial year with a robust loan book of INR 6,531 crores, marking an impressive 121% year-on-year growth from INR [ 2,949 ] crores in Q2 last year. This also represents a healthy 14% increase over the previous quarter, underscoring our continued momentum and strong execution. Our disbursement performance this quarter is equally noteworthy, reflecting strong growth and deepening market traction. In Q2 FY '26, we disbursed INR 828 crores, a strong 31% increase over INR 630 crores in Q2 last year, reflecting sustained momentum and growing market acceptance. We also saw an improvement in incremental leads, which rose to 12.1% this quarter from 12% a year ago. This uptick is driven by our strategic focus on higher-yielding segments and deeper penetration into Tier 3 and Tier 4 markets. Over the past year, we have expanded our footprint by adding 40 new branches, bringing our total to 198 branches across 130-plus high-potential districts in 15 states. I'm pleased to share you that these branches are fully operational and already contributing meaningfully. We will continue to strengthen our presence in 3 newly added markets, Punjab, Chandigarh and the Northeast as a part of our strategic expansion plan for the upcoming fiscal. Our Pan-India presence enabled us to scale efficiency across regions. Our Pan-India operations are well balanced across three zones: North zone at 33%, West zone at 35% and South zone at 32%. This geographical balance continues to be a key strength, ensuring both resilience and consistency in our growth. Tamil Nadu leads our AUM, followed by -- closely by Uttar Pradesh, [ Maharashtra ] and Madhya Pradesh. Our customer profile continues to evolve positively. Self-employed customers now represent 43% of our base, up from 39% a year ago. Informal segment grew to 30%, up from 27% last year, following a sizable portion of our portfolio. 72% of our portfolio is within the ticket size of 25 lakhs. 35% of our portfolio remains nonhousing loans. The yield is at 12.13%, marching towards 12.25% in the coming quarters. Importantly, our portfolio quality remains strong. The collection metrics are well within the predefined acceptance criteria. Bounce rates are well controlled at 11.4%, while 3.5% is due to technical reasons. Early reminders, omnichannel communications, customer segmentation and diverse collection techniques, wherein technical integration backed by human communications have helped us towards collecting efficiently. The recent spike in NPA is attributed to the maturation of the portfolio. However, it remains low at 0.51% as against the affordable housing industry level of 1.3%. 30-plus remains at 1.40% as against profitable housing industry standard of 3.7%. We have, however, proactively implemented loan amount based on tier levels, on city levels to enhance quality and keep the future delinquency low with a low easy-to-serve EMI. Further, we have identified specific markets for course corrections, which is a part of our standard operations model. We are deeply proud of the milestones we have achieved. With a solid foundation we have laid and the strong momentum we are building, we are entering the second half of the year with confidence and optimism. The road ahead is full of opportunity, and we are well positioned to close the financial year on a truly high note, stronger, bolder and more impactful than ever. Thank you very much for your continued support. And now I will hand over the call to Vinay Gupta, the CFO of the company, to talk over the financial numbers. Thank you.

Thank you, Valli, and a very good evening to everyone. I'm pleased to share that this quarter again, we have delivered robust financial results across all key performance indicators. Revenue growth has been strong, margins have remained healthy, and our cost optimization initiatives have further strengthened profitability. Our total loan book as of 30th September stood at INR 79,771 crores, growing 15% year-on-year. And retail loan book grew 17% year-on-year to reach around INR 79,440 crores. Now I'll cover some of the key major P&L highlights. With respect to yield, we were able to -- I mean, despite the 10 bps rate to pass through during the quarter, there is a marginal decline at 9.95 versus 9.99 in the previous quarter. Cost of borrowing declined by 7 bps sequentially to 7.69 in Q2, driven by all the ongoing negotiations and the impact of recent repo rate cuts. The incremental cost of borrowing remained stable at 7.42 in Q2 as compared to 7.44 in previous quarter. Our net interest income grew during the quarter to INR 765 crores at a growth rate of around 14% year-on-year. Spread marginally improved to 2.26 versus 2.23. NIM declined marginally from 3.74 to 3.67. And this is due to lower investment yield. The gross margin is stable at 4.05 in Q2 versus 4.06 in Q1. Similarly, OpEx to ATA is stable at around 1.02. We maintain the guidance of around 1% to 1.1% going ahead. Our pre-provision operating profit has grown 16% to INR 646 crores, driven by positive operating leverage. Our credit cost stood at minus 53 bps. This is due to recovery that we are able to do of around INR 60 crores from written-off pool during the quarter. And there is a release of ECL of INR 70 crores due to foreclosure of one corporate loan during the quarter. All this has led to profitable growth for us. So our PAT has grown to INR 582 crores at a growth rate of 24% year-on-year. ROA for Q2 stood at 2.73, and ROE stands at 13.14 for Q2. With respect to capital, CRAR remained strong at 29.8 and Tier 1 capital out of this is 29.2. And our book value has moved to around INR 690 per share. I now hand over the call back to Chaitanya to close the call.

Thank you, Vinay. Now we can open for the Q&A, please.

[Operator Instructions] Our first question comes from the line of [ Dhavan Shah], an individual investor.

Am I audible?

You are audible, sir. You may proceed.

The first question is what's the update on the new CEO who is coming on the ground? Is it from the internal or you are going to get it from the external? Because I think so, last [ date ] has been gone away.

See, the company is taking all necessary steps for filling up the vacancy. So as per the protocol, the disclosures will be first made to stock exchanges at an appropriate time. And then definitely, it will be released. So in the interim, we are -- I am leading the team and accordingly reporting to the Board. So that is how we are managing.

No, sir. Just want to know, so already 1.5 months back, your CEO told like he is going [ away ]. From the internal or from the outer -- external? That's the simple question I'm asking.

You will appreciate that given the sensitivity and the process involved, so it will be difficult to comment on that at the current time.

So what we did -- sir, then what are we doing it from last 1.5 month? We know that one person is going and leaving the company, and that's for sure. You have accepted the resignation. Then what the company did in 90 days? Sir, it affected the stock price and the market cap.

There is a detailed process, which has been followed. And as I have mentioned that we have traveled the distance and the disclosures will first go to the stock markets and then will definitely be released. And company is mindful of the other [ position ], and we're working very fast on closing the gap.

Yes. Another second question is like, sir, what's the projected growth? Like what we are expecting on the credit side? Like if it's going...

Sorry to interrupt, sir, you do have a disturbance on your line. If you could please check into the mode.

Can you hear? Now it's okay?

Please go ahead.

Yes. Can I know what is the growth trajectory for the upcoming quarters? Like is it on the loan side or the credit side? Is it on the retail portion as well on the -- like big portion of the loan? What is the growth trajectory?

See, we have guided for the year to grow at around 18% -- 17% to 18%. So that remains this quarter. And last quarter, we have grown between 17% to 18%. So that growth guidance remains intact.

Our next question comes from the line of Praful Kumar from Diamond Asia.

Congratulations, sir, on the very strong quarter. Just a couple of things. One, in terms of -- as the previous participant asked, the new CEO, so can you just give an update in terms of the process that you had? So you had the -- I think how many applicants come in, how many were from the private sector, broadly? So in terms of the process that was followed and when it was closed, and by when we should expect? So it should be next week, 10 days or month, a timeline to it? I'm not asking the sensitivity of the [ candidature ].

See, first of all, thank you for acknowledging the results. Thank you. And please appreciate that this is, again, given the sensitivity of the process. So I would not be in a position to share the details. This process was done by the Board of -- Board directly and the -- following a transparent search for the right candidate. And definitely, the results as and when decided, will be, as I mentioned earlier, will be disclosed to stock exchanges first and will definitely reach to all of us.

Fair enough. So what we understand is that the last date of the applications have gone, say, 2 to 3 weeks back. And whenever the process is concluded, the exchanges will get to know first. That's the way it is?

Yes.

Okay, sir. And many congratulations of standing up very tall. In spite of so-called leadership crisis, you guys have done a phenomenal job.

The next question comes from the line of Renish from ICICI.

Congrats on a good set of numbers. Just two things. One, on the spread and margin trajectory side, obviously, this quarter, the incremental cost of borrowing has gone down materially. Obviously, NIM contracted a bit because of the incremental yields being lower in prime and emerging. So how do you see NIM sort of spelling out over the next 2 quarters? I mean, do you see the NIMs have bottomed out in Q2 then Q3, Q4 should see some improvement?

So Renish, for this quarter, spread, actually, if you see, we were able to maintain. And NIM has come down due to some impact on the investment yield. And the -- while we will continue to see some benefits coming in on the cost of borrowing, but at the same time, due to the mix being in favor towards prime and emerging, so this will continue to have some impact going forward also. So we have given a guidance of 3.6% to 3.7% as a NIM guidance for this year. So we expect it to remain range bound between this particular range for the second half of this year as well.

Okay. Okay. Got it. And sir, second question is on the affordable fees. So obviously, I heard Valli on the, let's say -- though there is an increase in 30-plus, as well as gross NPA and it is far below the industry [ level ], but can you throw some light on what has led to this spike in this quarter? I mean is there any particular geography or sort of product segment in terms of whether it is LAP, HL? What is driving this higher delinquency in this quarter?

Yes, Renish, you will appreciate that the portfolio is getting matured. And our portfolio, more than 2 years itself is close to INR 2,500 crores plus. Now the portfolio is maturing. And we are in the affordable business of handling EWS, LIG and we are getting into Tier 3 and Tier 4 market. We are getting into informal segments, we are getting into high-yield products. So this spike is going to be there. I would appreciate if we do not see affordable on quarter-to-quarter basis because every quarter is going to be different. And the first quarter, in particular, was cyclical also. We had some rain problem, and there were problems in 1 or 2 states because of the government ordinance coming into place. So everything is getting improved. So from there, it will slightly hike up. And after a particular mark, it will get stabilized.

Got it. And maybe just related to that, as you said, given now this book will get seasoned over the next maybe 3, 4 quarters, so when you see delinquencies going up, are we also looking to, let's say, recover yields accordingly to sort of price that risk? I mean, how one should see the asset is moving in affordable segment?

Yes, we do. So the first 1.5 years of operation, we were more concentrating on salaried segment and formal segment. So in the note I had read that the self-employed is significantly growing up, and even the informal has gone up to 30% from 27%, so these are high-yield products. So when we are talking about increase in this delinquency, we are also mindful of increasing the yield as well.

And that should start showing in numbers from next quarter? Or it might take a few more quarters before it shows up in yield?

So periodically, quarter-by-quarter, you will see this happening.

Our next question comes from the line of Prithviraj Patil from Investec.

Your first question is a bookkeeping question. I just wanted to know what is a 1-plus DPD on our affordable portfolio?

Just one moment.

1-plus is around 2.5%.

Okay. And a follow-up, that has sort that 30-plus DPD and 90-plus DPD below industry. So 1-plus DPD also, I'm assuming, is below industry level, right?

Yes, Yes. That's correct.

Yes.

Okay. And the second question is what is the asset pool that is pending for recovery? Like I've seen that there is a write-back from corporate as well as the retail pool. I just wanted to know, how do we see credit costs going forward? What could be the write-off? What is the pool that's [ pending ]?

See the write-off pool which is available, as I mentioned in the opening remarks, is close to INR 1,000 crores, out of which INR 675 crores is from corporate and the balance is retail. So recoveries have been steady so far quarter-on-quarter from this pool. And we envisage this happening for some more quarters for now. So credit cost will definitely be range bound the way it is as of now.

And the third -- the last question is on the cost of borrowing. So that the incremental cost of borrowing has also come down to 7.4%. So largely, the whole of [ 66% ] of our book has been repriced.

Yes, that's right. And this is more or less stable on incremental cost. We were at 7.44 last quarter. This quarter, we are at 7.42%. This will keep adding up on the overall cost of borrowing as well from the benefit standpoint, and we might have to look at passing on also some of the benefits.

Our next question comes from the line of Harshit Toshniwal from Premji Invest.

Firstly, congratulations on managing the transition so well. I think the question was more regarding the disbursement growth, sir. So clearly I wanted to understand that if I look at the affordable segment, sir, even though our disbursement goes Y-o-Y looks north of 20%, but at the same time, we have also expanded the branch count from 160 to 200. So basically disbursement to branch, despite branch [ leasing ], hasn't happened a lot this quarter. So if you can just explain, is it because in the transition phase, you want to go slow and we should expect the disbursement growth in general to be a bit more moderate in the next few quarters until the management is fully transitioned? Or you think that it's a reason of the maturity itself and then it's natural to expect a low disbursement growth because of the market's condition?

Yes, your second point is right, it is more to attribute with the monsoons continuing, where in affordable, we depend more on self-construction and plot plus construction cases, where the retail cases, the construction stage did not come because of the monsoons. And you will appreciate that the first 2 quarters are slightly muted in terms of growth in affordable. Now that the festival season has come in, now from hereon, the numbers will start to come in.

Got it. So I think even on disbursement per branch on a Y-o-Y basis, the number didn't grow. So I was more asking that since our branches are seasoned, shouldn't the disbursement per branch should have shown a better results in affordable?

Correct. I'll explain it. Because the 40 new branches which have started -- just now started to perform, they have not even reached their normal level, optimum is very far off. So when we take all the overall 198 into consideration, then the total overall business seems to be flat. That is the reason. Once these 40 branches also start performing to a normal level, then you will find per branch productivity slightly higher.

Okay. Okay. Okay. That was one. And the second one was on the corporate segment, ma'am, that I think we had some aspiration to restart the corporate segment. But in -- so at present, how should we look at that business? So I think if I'm not wrong, we were wanting to do a INR 500 crores, INR 600 crores disbursal in '26. It's a good [ number ]. But at least as of now, how should we look at that segment? What are our plans for the entry? Have we halted that for now? And if at all, what could be the aspirational disbursement with which we want to restart the corporate?

Yes, Harshit, we have revamped the corporate credit policies. And there have been a couple of sanctions, which should translate to disbursement in Q3 and Q4. So corporate is on the cards, as already talked about. So you will see some business happening on the corporate side. But it is gradual and slow. It depends upon -- you will appreciate, each case has their own nuances. So the business is being done in a very thoughtful manner, the disbursement will pick up.

Okay. And if I remember correctly, we will be focusing more on the INR 50 crores, INR 60 crores ticket size, granular portfolio itself. So even if, for example, 2, 3 cases, when you say it would be more around INR 100 crores, INR 150 crores disbursal at max, nothing lumpy yet?

Not necessary that was that INR 50 crores to INR 60 crores will be the ticket size. So it depends upon, as I said, the each case is different. On corporate, in particular, the nuances are different. So it could be more also.

Sir, if you can help to that, you said that we have [ changed ] the corporate policy, which is the segment then are we now planning to target? Or when we say the change in corporate policy, which is -- what are the guardrails in this segment, which we want to adhere to when starting the segment?

See, when I say change in corporate policy, I meant the revamp in corporate policy because the earlier one was, in fact, pretty old when we used to do corporate business at a full-fledged manner. So the guardrails largely remain the same, focusing on right segment, right choice of the builders and the projects. So the guardrails broadly are the same. But the policy is revamped, given the current nuances.

And the ticket sizes would be, let's say, up to INR 150 crores to INR 200 crores.

Our next question comes from the line of Abhijit Tibrewal from Motilal Oswal.

Am I audible?

Yes, Abhijit, please.

Sir, just two questions really. I mean question first, I mean, you've taken a PLR cut of 10 basis points until now. While if I look at some of our larger peers, LIC Housing, Bajaj and even a smaller [indiscernible]; they have taken a higher PLR cut than what we have taken. While I appreciate the fact that we've been able to maintain very healthy yields and margins, are we not seeing higher BT outs particularly in the prime segment now? And I remember Vinay sir saying that maybe at some point in time, we will look to pass on through some PLR cuts maybe in the subsequent quarters. So how are we thinking about that, if you could just explain that? And are there more benefits expected in the cost of [ borrowings ]? Why I ask this is I remember, sir, making that comment that even in the second half, margins will remain between 3.6 to 3.7. So I mean, are there more benefits which will be expected? Because from what I understand, yields will remain under pressure if we were to pass on more PLR cuts in the coming quarters?

That's right, Abhijit. So if you see from Q4 till now Q2, our cost of borrowing has gone down from 7.84 to around 7.7. So we have seen, overall, if you see a benefit of somewhere around 14 to 15 basis points, out of which 10 bps we have passed on. So we are monitoring it very closely. And once we see a sizable benefit coming in, we intend to pass it on to the customers. We would be watching the next monetary policy as well and then accordingly time it and see if we can align it with that change.

Got it, sir. And then, sir, I mean, in the opening remarks, we spoke about this corporate account, which has led to some ECL release. So there's two subparts, more of a data keeping question. One is how much exactly was the ECL released on this account? And also if you can basically qualitatively speak a little bit about this corporate account, which corporate account -- without naming it, of course. I mean, some details about this corporate account, how much of the total exposure?

This was a standard account, and they wanted to close the loan, and so they did so. So the ECL release was close to around INR 70 crores from the account. It was a standard performing account.

Understood. Understood. So basically a Stage 1 account, and the ECL release was about INR 70 crores. What was the total outstanding in this account?

That was a Stage 1 account.

Yes, around INR 330 crores, sir.

Got it, sir. And lastly, for Valli ma'am. Ma'am, this thing has been asked by some -- by a previous participant. But I'm just trying to kind of understand, while we are cognizant of the fact that we are moving towards more self-employed, more informal segment, which you shared is 30% now; don't you think, I mean, the risk portion at least is going up, right? And maybe going forward, right, if the yields increase is not commensurate with the risk increase, then probably -- I mean we might have problems later? If you could just share some thoughts on this dynamic of risk, reward in the affordable segment, given the fact that we're leaning more towards informal, more self-employed.

Yes. See, now that PMAY 2 has come, there is a clear guideline of what overall the profile we have to look in. And they have even mentioned the type of customers that we have to service in. This time, the circular is very, very explicit. So when we are wanting to promote PMAY [ to ] the government initiative, then we have to get into EWS and LIG. When we get into EWS and LIG, we have to enter into this self-employed and informal segment. While we are talking about that, we internally have kept in mind that we will not cross self-employed at any point of time, more than 45% to 50%, which we have kept within -- which we have kept for ourselves. At same, informal, we have kept in mind that we will not cross more than 35% to 40% at any point of time. And you have to appreciate that still in our portfolio, close to 50% to 53% formal vanilla salary accounts. So we are even servicing those customers. So we are balancing it out because we will have to bring in yield as well. Now with the cost coming in, we will have to manage that as well. So to promote PMAY, this is one method we will have to take. But we are very mindful, and we are going ahead with that.

Our next question comes from the line of Sravan from Sincere Syndication.

Yes, sir. My question was rather focused on the next CEO. But as you've vividly given an answer, my follow-up question would be on credit growth. What is the credit growth this quarter, Q2?

Are you -- you meant loan growth?

Yes, loan growth.

Loan growth is 17%, 16.9% for the year -- year-on-year.

For the -- year-on-year. Okay, sir. And have you got any update -- possible update on the CEO? Because this has been going on for a while and the stock price really took a dive. We would appreciate an effort, an announcement maybe. Are you -- any timeline that you can give in? Any information without leaking any sensitive material? I understand that, and I can appreciate that. But any information on how long would it take or what is -- where are you in the process right now? Have you streamlined any -- a few candidates? Something like that would be helpful.

Sravan, I have already answered that. But however, given the questions from investors, let me say the leadership transitions are never easy, especially after a phase of success and momentum. But yet, what has stood out is shared resilience and responsibility of PNB Housing leadership team that the business remains steadfast, and we have delivered on all the parameters as expected. So we continue to remain the same and grow quarter-by-quarter. And the strategy remains the same. It's all about execution, as already talked about in various calls with the investors. And while we appreciate the sensitivity of the process, meanwhile, patiently waiting for the new MD and CEO to take charge; the company remains responsible and accountable to grow the business in line with the expectation of the stakeholders.

Okay. And could you just answer -- this would be my last question. Will the new CEO being appointed, will we follow the same strategy of you focusing higher -- on the higher-yield segment, upping -- doubling your affordable book -- loan book? Would he stick with the strategies? Or would there be any changes, any shocks?

We have already spoken about. You will appreciate that the mortgage business is largely monoline what we do. And till March '27, we have already laid out a strategy and working towards the same. So most likely, the strategy should remain the same, plus/minus little variation.

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

Yes. So firstly, maybe particularly with respect to the lower provisioning on -- when we look at it overall on the -- when I look at like cumulative provisions, so one is, obviously, I would tend to believe that the entire movement in gross Stage 1, the entire coverage is purely on account of the release of the provisioning. I think you mentioned like INR 70-odd crores kind of a number. Otherwise, broadly, the coverage has been broadly sustained in the Stage 1 assets.

Yes, that's the right, Kunal.

Okay. Okay. And secondly, on the consolidation part on the branches side, so we have seen maybe 2 branches being lower, say, in the affordable housing segment. Obviously, on the emerging side, it's still growing. But again, on the prime side, it's been lower by maybe 3-odd branches or so. So maybe do we expect to see this consolidation out there? What would be the branch expansion plans here on? And if you can give the number of employees breakup across these three businesses?

See, I would say that 2 branches here and there does not -- it is part of BAU, and it is more to do on increasing the operational efficiencies of the company. And so that is where it is, and it does not change the business plan per se. And on employee numbers, I don't have the numbers handy as of now. But however, having said that, out of 356 branches, the major number of branches are in affordable and emerging segments, which resonate with the company's strategy to grow these businesses faster. And prime continue to be a range-bound growth, given the economic -- it has to make some economic sense for the company to accelerate that business. So accordingly, we are overall maintaining the retail asset growth.

Okay. But there has been any exit with respect to the locations or not really? Maybe it's like just maybe the branches within a particular location, they have just got consolidated.

Yes, Kunal. See, what we have done is it is as a process -- standard operating process, wherever we found that the branch is not profitable, we consolidated it. But well, as per the guidance we have given already, we are in the process of opening more branches in this particular quarter. By the end of this year, we are talking about having [ 240 ] branches in affordable housing. So that remains. So this consolidation has happened as a part of our standard operation process, and it is BAU.

Yes. And this would be the net number. So at the gross level, how much would have been the addition in the closure?

No, no. This is the gross only. The addition comes, we are working on that.

Our next question is from the line of Sanket Chheda, an individual investor.

Am I audible?

Sir, you are audible.

Yes. Sir, just wanted to ask on the account that you mentioned was the Stage 1 account. But then why the provision cover on the same was 20% to reverse the INR 70 crore amount that you just upgraded?

That was basically because of the past trends that happened during COVID crisis. So the provisioning has been kept at a slightly higher level. However, it was a standard account, has been paying regularly. It's more to do with the client that they had funds and they want to foreclose, and they foreclosed.

The next question comes from the line of Siraj Khan from [ Ascendant ] Capital.

Am I audible?

You are audible, sir.

Good set of numbers. So sir, first to clarify, the exit NIM for FY '26 that was mentioned was 3.6 to 3.7. Was that correct? Did I catch that right?

Yes, that's right.

Okay. And also another clarification, our guidance that you had given for FY '27, that 15% of the portfolio, so approximately INR 15,000 crores will be the AUM for affordable, and 65% will be prime, and the balance will be emerging. Is that still holding true? Or will that change?

Yes, yes, that's holding true. We are working on that strategy.

Understood. Understood. A few questions, data keeping and qualitative. I'll get the data keeping ones out. What was the sanction amount during the quarter?

Sanction to disbursement ratio is around 70%...

The disbursement is close to...

Sanction to disbursement ratio was?

68% to 70%, so you can calculate.

Okay. And the amount if that could be shared?

Sorry?

The amount -- sanction amount, if that could be shared?

I don't have it handy, Siraj, but I think it will be upwards of INR 8,000 crores.

Okay. Okay. Okay. Next question was, what is the BT in and BT out rate specifically for the affordable segment, if you could share and overall also?

So for affordable, it is around -- BT is around 9% and BT out is around 4%.

Okay. And final one. So I think Valli ma'am had said that with the branches that we have opened over the last few quarters, 40 new branches, they are still a bit away from the optimal level. So what is the optimal level of business like with respect to amount? Like how much amount of disbursements or the number of files that we consider that the branch is now optimal and it should run on its own two feet and should start to be more productive? What is that level?

Yes. So you will appreciate that we have different types of branches. We don't have uniform type of branches. We have large branch, medium branch and small branch, which we call it as Ganga, Yamuna, Kaveri. So if a Ganga branch reaches close to 1.8, Yamuna reaches close to 1.3 and the Kaveri starts doing close to INR 70 lakhs, INR 80 lakhs, which is basically in the Tier 4 and Tier 5; then we feel it has reached its optimum level. And from there, the takeout happens.

So this is per month disbursement that you said, 1.8, 1.3 and INR 70 lakhs to INR 80 lakhs?

Yes. This is a different branches disbursement per month.

Understood. Understood. And finally, on the asset quality, yes, our asset quality is still much below than our peers and everyone in the industry. But where do you see it settling, say, over -- by the FY '27 target that you have placed, where do you see it in that range? Because some of our peers do -- are showing some signs of -- in Q1, they said there was a little bit of an asset quality issue. Although seasonal, but there is a little bit of a thing with respect to the ordinance in the MFI space and the lower ticket size, not having the best of the bounce rates, all that stuff. So could you give some color with respect to where do you see the asset quality 2 years on, 1.5 years on and a bit of a commentary on the asset quality?

Siraj, this will be range bound, and I think this should remain around 1% itself. And we have been working very hard on asset quality over the last couple of quarters, and we tend to maintain the guardrails. So it should be range bound around 1%.

The [ GNPA ]?

Yes.

Understood. Understood. And any commentary with respect to any product, category or customer, regions that you're seeing, say, early signs of warnings or anything of that sort?

Not really. Not really. It's like portfolio seasoning, which is happening across.

Understood. And finally, on the asset pool, the INR 1,000 crores of asset pool that is pending, so I believe another 4 to 6 quarters-odd would still continue to be on this negative credit cost trajectory? Is that understanding? Because then that is directly helping our ROA and the profitability for the business as a whole. So the negative credit cost episode will continue, say, maybe another 4 to 5, 6 quarters? Or can we see lumpy recoveries in the coming few quarters and this gets extinguished maybe before the FY '27 closure?

We have line of sight for next 2 to 3 quarters, that should happen. And then again, thereafter, it depends on certain timing of certain corporate accounts, et cetera.

Our next question comes from the line of Chinmay Nema from Prescient Capital.

Sir, my question is on the affordable side. I just wanted to understand, typically, what is the month on books after which you consider an account seasoned or do you see delinquency start flowing in?

It's between 12 to 24 months, somewhere around 14 to 15 months.

See, this is in line with industry mortgage loan cycle. So I think generally, an account hold some maturity around 18 months to 24 months. And that is when you see early signs of delinquencies.

Is it fair to say that the spike in 30-plus that we've seen in this quarter and the GNPA as well, this would primarily be from loans that were disbursed like between 12 to 18 months prior? So would that be a right assumption?

Yes, yes. The maturity of the portfolio is attributing to the spike of this. And as we told, please appreciate the fact, sir, in affordable housing, we cannot see quarter-on-quarter. Every quarter, there will be a slight increase. And the first quarter, there was some cyclical issues also, the monsoon, certain ordinance passed by state governments and all also came and hit us. But generally, it is a right statement to say that the portfolio maturity attributed to the spike.

Got it. So ma'am, just lastly, in a steady state, what would be the 30-plus and the 0-plus numbers that you expect from this portfolio? I know you called out the 90-plus number at 1%.

Yes, it will be as per the industry number. We don't have a number as such for that. We are only focusing on to keep the NPA less than 1% at the way. We would not actually have a number. You can take the industry guideline for that.

Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Mr. Chaitanya Yadav for closing comments. Over to you, sir.

Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website, that is www.pnbhousing.com. Thank you all for your participation.

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