Sammaan Capital Limited (SAMMAANCAP) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Indiabulls Housing Finance Limited Q4 FY '22 Results Update Call hosted by Barclays. [Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Bhanu Chauhan from Barclays. Thank you, and over to you, sir.

Thank you, operator. Good afternoon, and good evening, everyone. Thanks for taking all the time and attending this call. As has been done by the management of Indiabulls Housing consistently over the last couple of years, the company recently announced their most recent financial results for quarter 4 FY '22, as well as for the full year financial year '22. We have the senior management from the company led by Mr. Gagan Banga, Vice Chairman and Managing Director for the company. From our perspective, the company management will provide the most recent update in terms of both the financial performance as well as the business update. And post that, we'll have a Q&A session as highlighted by the operator. Over to you, Mr. Gagan Banga. Thank you.

Thank you, Bhanu. A very good day to all of you, and welcome to the quarter 4 and full year fiscal '21/'22 earnings call. As you may have read in our release, we also did a call -- a similar call yesterday, premarket hours, India. But given the fact that we realized that, that time may have been convenient for several of our stakeholders, especially in the western geographies of Europe and the U.S., the management thought it will be appropriate for us to make ourselves available for our stakeholders in these geographies, and here we are with the second call. I also hope all of you and your families are doing well and are safe. The year fiscal '22 was to serve as a litmus test for Indiabulls Housing new asset-light business model. And I'm happy to inform you all that we have made tremendous progress on this front beyond what we had anticipated. We've laid it out on the Slides 4 to 8 of the earnings update. We began fiscal '22 with the aim of establishing strategic co-lending partnerships with a set of banks and other financial institutions, implementing the technological integration, which is a lengthy and onerous process and began disbursals under the model from quarter 2 fiscal '22. We were hopeful of scaling up the disbursals to achieving a quarterly disbursal run rate of INR 8,000 crores by quarter 3 fiscal '22 under the asset-light business model. Against this, in the second half of fiscal '22, retail loans of INR 2,962 crores through just the co-lending and the sell-down model, which was almost 1.5x of our targeted dispersal rune rate and at an ROA of well above 3%. This ROA has to be kept in perspective of the company's current ROA, which is running at 1.3%. So this is clearly a business model which is significantly superior to the asset mix that we have. Our historical ROA has been in the range of 4% to 4.5%. But this 3% against the past, we are generating purely on retail and granular assets. Therefore, the new book has a significantly high quality. And as it becomes equal to the size of the legacy book, you will see profits, ROE and ROA significantly going up. The litmus test was around the scalability of this model, which has also now been established. And in the wider market, we also see banks lining up to establish co-lending relationships with multiple NBFCs. And the banks are also interested in implementing the technology platforms for co-lending, which we are leading. We have committed demand for disbursing INR 15,000 crores of retail loans through co-lending with our partner banks in fiscal '23. We've also scaled up our capacity and have added around 1,200 employees in fiscal '22 to scale up retail disbursals. We are currently capacitized to do over INR 1,000 crores of gross retail loans per month. As employees get trained and productivity improves with the current employee base, we are on track to disburse around INR 1,500 crores of monthly disbursals by September '22, and adding a few more people, which we will in the first half, we will be capacitized to get to INR 2,000 crores of monthly disbursals by March 23. We've also successfully fully integrated the co-lending technology platform with 2 of our partner banks and are on track to complete tech integration with all of our co-lending partners in the first half of fiscal '23. Overall, we aim to disburse around INR 15,000 crores of retail loans in fiscal '23, which would increase to INR 20,000 crores of retail loans in fiscal '24 through co-lending and sell down. Of this, only about 30% would stay back on our balance sheet as it was to get sold down or if the 20% stake that we have supposed to retain. The incremental retail loans we will have can actually turn out to be on an AUM basis 3 to 4x of what we carry on our books. We've also progressed meaningfully on our track of establishing partnerships with global funds for setting up PIFs platforms to recommence the wholesale loan business, which historically has been a very, very profitable business. But given the cyclicality of the underlying real estate piece, the real estate industry, it is a realization that this business is better housed in an AIF platform versus the NBFC platform. And it has been our endeavor to be able to start doing this business again in the AIF model. We were first prioritizing the retail business to go -- get past the litmus test, which we successfully did in fiscal '22. And in fiscal '23 as the retail business scales up, management will devote some bandwidth to also taking the wholesale business in the AIR structure through a litmus test. As part of this, we've already gotten an approval for one AIF structure by the capital markets regulator of INR 2,000 crores. We have applied for another 1 with another global fund for INR 5,000 crores, of which we expect over the course of the next 2 weeks, the approval to come through. And within the current quarter, we expect to file for 1 more fund of INR 5,000 crores. Altogether, we are now -- we have created a capacity to disburse at least INR 10,000 crores in fiscal '23, which can increase to INR 15,000 crores in fiscal '24. This platform will generate an ROA of 5%. That said, fiscal '23 will be a litmus test for this wholesale model, much like fiscal '22 was the litmus test for the retail model, but one is fairly confident given our rich track record of lending to the wholesale real estate segment that we should be able to do a very successful scale-up of this business. Overall, in fiscal '23, the company will be focused on resuming AUM compounding. So we are getting back to growth on the back of retail co-lending and sell-down and wholesale lending through the AI platform, which will help compound the AUM by at least 10% for fiscal '23 and 15% for fiscal '24. We will be breaking this consolidation process which we began 3.5 years ago. And from the first quarter of fiscal '23 itself, you will see that there will be no de-growth which would be happening in the AUM. And for the full year, as I said earlier, we are looking at a growth in AUM of around 10%. While we pursue both the tracks, we shall continue with the exercise of de-risking the balance sheet through reduction of the legacy book. We are on tranche the legacy book by 20% by the end of the calendar year '22 from March '22 levels. The AUM growth of 10%, which I have mentioned, is despite the reduction of 20% in the legacy book. The third track is that we have been working on -- that we have been working on for the past 2 years is the institutionalization of the company. Towards this end, Mr. Gehlaut, as the founder of the company, has relinquished the chairmanship of the Board in August '20 and later in December 21, had reduced his stake from roughly 21.5% to around 9.5% levels. As a further step towards this direction, in March 22, he also resigned from his nonexecutive Director Post on the Board of the company, thus making it a fully board-governed professionally managed company with 60% of the Board being independent directors. The Board and the shareholders subsequently have approved the de-promoterization of Mr. Sameer Gehlaut and his group companies subject to the requisite approvals. We will conclude the process of de-promoterization in calendar '22, subject to requisite approvals by various regulators, lenders, etc. And it's only after that, that it would -- there would be a technical change in control. As another step towards institutionalization of the company, in April '22, we have inducted Mr. Patnaik, who is the Managing Director of Life Insurance Corporation of India on to our Board as a Nominee Director of the LIC, which is the largest institutional shareholder, are holding around 9% of the company and also the largest bondholder with an investment of around $1.5 billion of rupee equivalent domestic bonds. With the induction of Mr. Patnaik, 60% of Indiabulls Housing Board now comprises of independent directors. We are continuing our talks with other significant institutional investors who are on board, who came on board during the time that Mr. Gehlaut sold is 21% to bring down the stake to around 9.5%, and to have institutional representation to have some of these funds who came in to have their nominee directors also on to their board such that the direct institutional oversight into the operations of the company continues to increase. Together, the 3 tracks will govern the way we operate going forward. We look to regain our position as one of the largest originator of retail loans within fiscal '23. And again, to re-establish ourselves as one of the largest originator of wholesale loans in the next 12 to 18 months. while at a cultural level, we transform ourselves to become an even stronger and deeply ingrained, board-driven, professionally managed company. I will now cover some of the headline numbers for the quarter. As of the end of March '22, our assets under management stood at INR 72,211 crores, and our loan book stood at INR 59,333 crores. Our AUM has been on a decline as we have looked to consolidate our wholesale and high-ticket assets in order to derisk the balance sheet. The AUM consolidation or reduction has now ended. And as I said from quarter 1 itself, you will witness no further reduction. And for the full year, you will witness an increase of 10% in the AUM. Since September '18 on a gross basis, and this is one of the most significant achievements of the management team at Indiabulls Housing, we have successfully repaid roughly INR 94,000 crores to the system. As we did this, we have successfully delevered from a net gearing of 7x in fiscal '18 to 2.5x now. But more importantly, we have demonstrated the ability of the management team to do the appropriate credit selection and how the portfolio has performed in a very, very stellar manner in what have been otherwise very challenging macroeconomic conditions. Our capital adequacy at the consolidated level stands comfortably at 32.6%, of which Tier 1 capital is 27.2%. PAT for the quarter came in at INR 307 crores, up 11% Y-o-Y. More importantly, over the course of the last 2 years, we formed a solid base of around INR 1,200 crores of quarters, from which as the increase starts, we can now start looking at achieving a double-digit ROE very, very shortly. It is pertinent to note that the company's profitability has been showing a quarter-on-quarter growth continuously for the last 5 quarters now, but diluting to the strong base, which I mentioned. Our strong capital adequacy, low gearing, high liquidity and robust provisioning provide a strong base, which will give us direction for various important measurement criteria such as ROA and ROE for fiscal '23 and fiscal '24. I'd like you to kindly refer to Slide 9, please, for an update on asset quality. As of the end of March 22, our gross NPA stood at INR 2318 crores, down from INR 2,350 crores due to the reduction in the denominator, which is the loan book, on percentage terms, it has marginally gone up. Our Stage 3 provision cover has stayed more or less steady at about -- increasing from 40% to 41%. And our net NPA stands at 1.89%. The company has been witnessing strong recoveries over the last 3 quarters and has been using its provision buffers as well as these recoveries to proactively tackle any asset which it considers as stressed, classifying it as NPA, working either with the developer or with the legal system [Audio Gap] that our money has come back. And that's a proactive approach which we will continue to take through fiscal '23. We have not resorted to restructuring or government guarantee provision, which we believe was just kicking the can down the road. So our total restructuring under restructuring trends of 1.4 and 2.0 is all of 0.26%. And under the government guarantee schemes, we only disbursed INR 214 crores or 0.36% of ARPU. Given the fact that there is minimal restructuring and government guarantee resort and also the fact that we have been reasonably proactive in tackling the stressed loans, we expect gross NPAs to remain in the range of 3% to 3.5%. We will continue to use the buoyant real estate market to tackle whatever little stress is there on the balance sheet. And therefore we expect fiscal '23 to have a credit cost of 100 to 150 bps, so that we can continue to proactively provide for certain loans and solve them while the markets are solid. Fiscal '24 onwards, we expect most of the residual stress to have also gone and the credit costs to then become -- come down to more normal levels, which is 60 to 70 basis points on an annualized basis. Now moving on to one of the most important pillars of our operations and a great strength, which is liquidity and ALM management. On Slide 11, we've given the details of the monies we've raised in fiscal '22. We've raised a total of INR 24,497 crores, of which INR 5,600 crores is in our 3-year term loans, INR 10,000 crores is between 1 and 3 years. A very important step taken by the company was a couple of public issues through which we've raised around INR 1,345 crores, which should enable greater granularization and utilization of our liability franchise. In fiscal '23, we intend to do 9 more such issues to cumulatively raise around INR 2,000 crores through this funding channel. Securitization, which is the foundation, securitization loan sell-down, which is the foundation of our asset-light business model, we raised INR 5,214 crores, resulting in loan sell-down/securitization/co-lending contributing now to 29% of our funding mix, which is the highest ever number and this number will soon inch to about 50% over the course of the next 2 years. As we scale to the asset-light business model, funding through this route will contribute to higher and higher percentages. And as I said, we should get to about 50% over the course of the next 2 years. We've raised INR 1,570 crores of equity capital through an FCCB issuance and sale of our remaining stake in OakNorth Bank. Over the past 1 year, on the back of all of these initiatives, CRISIL, ICRA and Brickworks domestic rating agencies have revised the company's rating outlook to stable. Very recently, even Moody's revised the outlook to stable, citing strong capital levels, higher liquidity levels and stabilization and access to funding as a rationale behind the outlook revision. Our cost of funds on book is now 8.1%. Book yields are at 10.5%, earning us a spread of 2.4%. Now if this 2.4% is to be put in perspective, as I mentioned earlier, the ROA that we are generating on the new business that we are doing is north of 3%. So we are actually on a daily basis adding to our spread, and we are very, very confident that the ROA because of the severe steps of consolidation that we had taken, which had declined to 1.3% will start inching back. And over the course of the next 2 years on a quarter-by-quarter basis, we should get to greater than 2% sort of ROA, the traction of which will be visible every quarter hereon. We've also increased our reference rates by 40 basis points, which will be effective from the 1st of June. This will also help us maintain our margins going ahead. During the last earnings call, we had spoken about ESG. In association with ESG rating from Sustainalytics, the company has developed a sustainable financing framework for issuing sustainable bonds. Our goal is to raise around INR 3,000 crores of bonds through this year, which would include around INR 2,000 crores through public issues. A large part of this INR 3,000 crores would be done under the sustainable financing framework that the company has made for itself. We continue to enjoy a robust liquidity buffer of over INR 9,000 crores. And this is a principle that we've held through for the last 15 years, and this is one of the most fundamental principles, which we will continue to follow. Coming to the topic of ALM management, I wanted to begin here by thanking our bond investors. I know that the USD bondholders, in particular, have been on a roller coaster ride with the price fluctuations on the bond over the last few years. From our end, we have always provided reassurance to all our debt investors that the company has a conservative approach to ALM management, and we plan well ahead of due repayments. We do not plan or assume refinance. Now as the term of the USD bonds was to close, I am happy that we were in a situation of being able to prefund the dollar bond obligations after having voluntarily created a reserve fund for repayment. And even though we had committed that we will put into the reserve fund 75% of the maturity proceeds, we proactively put in 100% of the maturity proceeds and via the prefunding which was intimated to all of our stakeholders, we have told the repayment trustee or in an irrevocable manner that on due date on prior to due date to fund the trustees through this irrevocable instruction and provision of liquidity, the company has, in some ways, fully dispatched its repayment obligation towards the dollar bond and the money will hit your account as and when the trustee is to fund it, which should happen on or before the due date. The company has also made an offer to its domestic bondholders to buy back bonds at par maturing up to June 30, 2022, of up to INR 800 crores, which is the approximate maturity in this period. We are for the resolve to continue to take similar proactive steps to manage our ALM and continue to tackle any large prepayment obligation in a proactive manner. I would like to restate here that the company's ALM management and liquidity planning never assumes refinance of any of our domestic or international bonds or term loans. We will continue to maintain a strong capital and liquidity position to provide comfort and confidence to its bondholders and other stakeholders. The proof of that footing has been that we've been able to repay on a gross basis, if some, as large as INR 94,000 crores, which is unprecedented in corporate India. We had master directions for HFCs introduced in February '21. We are supposed to maintain an LCR of 50% in what they define as high-quality liquid assets. We maintain a liquidity of against the 50% of 241%. This is just liquidity that we maintain in high-quality liquidity -- liquid assets as defined by RBI. The actual liquidity where we invest in money market funds, etc., is actually significantly higher and will be to the tune of around INR 9,000 crores. Our ALM at the end of March is also published on Slide 10, which has a positive net cash of INR 8,587 crores at the end of the first year. Moving on to Slide 13, we've laid down the objective targets for the company over the next 10 years to improve upon its operations such that we adhere to ESG best practices. We have engaged center of environmental research and education to assess our current environmental footprint. We've also partnered with ESG rating firms Sustainalytics to develop a sustainable financing program and a large part of our INR 3,000 crore bond borrowing program would be guided by the same book, which is monitored by a Board subcommittee awards ESG subcommittee, comprising of 5 Board of Directors with former Supreme Court Justice, Justice Gyan Sudha Misra as the Chairman. This Board subcommittee will go on the process related to the use of proceeds and would evaluate and monitor everything as far as the sustainable bond framework of the company's concerns. The past 3 years have been testing one for the company and the management. We have been at the receiving end of various blackmailing attempt by extortionists. The company appreciates that it operates in a vibrant democracy. And if we need to deal with and emerge successfully out of such conflicts, our detractors will try and repeatedly pull us down. But we have to make sure that as they knock the door of a different regulator or a legal authority to pull us out, we have to come clean. We have stuck to our resolve and refused to give in to any blackmailing tactic whatsoever. We've opened up our books to all agencies wanting to inspect us and have come out very, very successfully through each of these several audits and inspections, aside of some minor operational aspects which have good points of feedback, nothing incriminating with respect to any of the allegations which have been made on the company, which had been a rehash of the same things which have been floating around for the last 3, 3.5 years. None of those allegations have so far been found to be true. We have a litigation famously known in our case as a public interest litigation or a PIL, pending in the honorable Delhi High Court, where the prayer of the petitioners was that regulators should look into our books. Happy to inform that all regulators starting from the government of India's Ministry of Corporate Affairs, to various financial regulators, the National Housing Bank, The Reserve Bank of India, SEBI, etc., have conducted these inspections. Some operational lapses have certainly been found, but there has been 0 -- there has been nothing found as far as the allegation made by these blackmailers. The case is now scheduled for 23rd of August. And I hope given the fact that the prayer of the petitioners stand satisfied given the fact that all these regulators have looked in and the Supreme Court has already said that since the payer is satisfied, the matter is not infructuous. The Delhi High Court would also take that on record and close this matter once and for all. We have decided that we will have to have a holistic legal strategy and get these matters shut in various courts. There was another FIR filed against the company in April 21. The Bombay High Court after having stayed the investigation in April '21 itself, on 4th May of '22 quashed the FIR, stating we are of the opinion that the lodgment of the complaint against the petitioners and continuity of the proceedings is views of the process of law. This order thus marks the end of the road for the patently false and malicious complaints that the blackmailers have been circulating for the last 3 years. We hope that other enforcement agencies also take note of the court actions on this. And as has been described by the Supreme Court, close all such matters. Otherwise, anyway the court suo moto close all such matters. Otherwise, we are anyway petitioning in the Delhi High Court. And we hope given the recent Supreme Court judgment, the various enforcement agencies will have to anyways close this matter since the court will quash it, very, very shortly. It has been the company and management's unequivocal stand that we will not give into the malicious attempts of our detractors and we will fight it out with all of our legal might. As I mentioned earlier, in a democracy, such attacks are inevitable, but we have faith in the country's legal system and we believe that is the one and only way of being able to holistically close these matters once and for all, though it may take a little bit of time. At this stage, I would want to specifically take the opportunity to acknowledge and appreciate our shareholders who have shown the confidence in the company and have stayed with us through thick and thin. We are cognizant of the beating our stock price has taken and that we are now trading at only 0.4x of book value. When you invested in the company, you invested in one of the fastest-growing economies with one of the largest mortgage penetration and in one of the largest mortgage originators on the largest mortgage balance sheets. Unfortunately, we have had a significant depreciation in our stock value. On top of that, we've also not proposed any dividend in the backdrop of the RBI circular which came in earlier this year, allowing dividend distribution if a company dips into reserves, which we had done so for creating the provisions which are coming in very handy. We had also disclosed the same in -- along with our quarter 1 earnings. Despite the pain that our shareholders have gone through, I would like to assure all shareholders that I am very, very mindful of the pain that they have suffered. Along with my team, we are taking all the necessary operational steps to put the business back on track of a very steady growth trajectory, which we delivered for 10 years. In my view, it takes 5 years for large financial companies to transform business models. If we learn from the experience of some of the large private banks, they took about 5 years to transform the business model. A large part of these 5 years are over. Indiabulls also had to go through one period of transformation in the year 2009 to 2014. And through that period, we traded at a similar 0.4 to 0.6x book. But by 2014, once the transformation was over and the company could present a steady growth path, we started trading at even up to 4x book. I'm sure a large part of this transformation is over, as is evident in the fact that we've come through the litmus test for fiscal '22 around our retail asset-light business model. We have created capacity for our wholesale AI-based business model to come through and scale up in fiscal '23. One is quite hopeful that the new book will become larger than the legacy book very, very shortly and would be generating an ROA of close to 3% as it is right now, thus generating for the business an ROA, a blended business of the legacy and the old book of greater than 2%. At this stage I think it is appropriate to give out guidance for fiscal '23 and fiscal '24. In fiscal '23, we are projecting an AUM growth of 10%, and in fiscal '24 of 15%. This will be evident from the first quarter itself, where the reduction in AUM will stop. The ROA will go back, as I mentioned, as the new book becomes equal to the legacy book over the next 2 years or grows larger than that. It will go back to greater than 2%. ROE should climb back to 11% to 12%, and we will resume our dividend distribution where our dividend distribution policy subject to obviously regulatory approvals will -- and board approvals, would remain at about 40% of that. We are confident that these steps and if we achieve these numbers, which we are fairly confident of achieving, along with the strong capital adequacy, high provisions and higher liquidity will have a corresponding positive effect on the share price in the coming few months. To conclude, I would like to quote Winston Churchill. Success is not final, failure is not fatal. It is courage to continue that count. My management team and I continue to work towards uplifting the company and would request your patience and belief to support the company during this rebuilding. With this, the team is now open for questions. Thank you.

[Operator Instructions] The first question from the line of Hari Hariharan from NWI Management.

For what the company has gone through the last 3 years, it's pretty remarkable that you held course and the story you have to paint is very interesting. But I want to start off on a not so interesting element, and that is what you were talking about, the Price-to-Book. The Price-to-Book, at least according to Bloomberg right now is 0.33. So I guess it's a map. The market cap of the company now is USD 700 million, roughly. So if I gross up to a price-to-book of 1, it says that the book value is roughly about $2.1 billion. And what I find fascinating is that the market is treating your current wholesale loan book as worth minus $400 million, effectively, assuming a lot of the discount in the Price-to-Book is because of concerns about the wholesale book. Now, if I remember correctly from previous presentations you have made, the wholesale loan book itself is only -- the residual wholesale loan book itself is only about $1 billion. So clearly, there is a lack of appreciation in the market that essentially you're developing 3 important -- there are 3 important developments in terms of your AUM. One is the growth from your co-lending retail. The other is the growth potentially from your wholesale loan AIF, offset potentially by a decline in the legacy wholesale loan book. But like I said, the market is treating like your legacy -- the whole loan book is around a negative $400 million. What part of this story is management not able to convince the investor base to say that this stock is absolutely absurdly undervalued?

You've always been highly, highly supportive and also been an adviser amongst our best and sound advisers. So I would like to place that appreciation from the entire team on record. To be honest, sometimes this valuation also baffles me. But as management, I'm focused on basically 3 things. One, I went through a similarly frustrating period during 2009 to 2014, where despite the fact that we had significantly de-grown between 2008 and '09 and then started regrowing, the market took its own time to appreciate that. Having gone through that experience, what I do know is that till the time that we are shrinking, it will be very difficult for the market to appreciate or to model anything because they do not know -- the market does not appreciate till what stage would we continue to shrink? Is the shrinking strategic or is the shrinkage due to lack of capital availability? As Moody's has very rightly pointed out, the financing has finally stabilized. In our minds, it has stabilized a long time back. Now it has visibly stabilized. In our mind, we were looking to unwind the risk, minimize the risk and use the real estate opportunity, the real estate tailwinds, which had come to India after almost a gap of 7 years, use those tailwinds to unwind the legacy book. Understanding fully well that the legacy book was -- it's not a bad book. It was in good years, generating a return on asset of over 4.5%. Even if we adjust for the provisions and the write-offs that we have done over the last 3 years, my sense is that it would still be a book generating on an average over a period of 5 years an ROA of around 3%. And a 3% ROA through the cycle is a fairly competitive ROA. Our historical gearing has been at least 5x. So we are talking of high teen kind of mid- to high teen kind of ROEs which the business has generated. The issue of the wholesale book, which we do not want to repeat is that it's a highly pro-cyclical book. There are various other elements, bond borrowings, credit ratings, etcetera, on which we are inherently dependent. And we don't want both the asset and the liability side of the balance sheet to be completely pro-cyclical ever again. So we decided to take deep corrective action. The good news is that the deep corrective action at a headline level is now over. Starting quarter one, I should be able to go back to equity and debt analysts with a growth model. And once I start doing that, I'm fairly confident that the way that our AUM is playing out and when I look at it versus some of the smaller originators in the country, our monthly origination is perhaps larger than -- or our quarterly origination is perhaps larger than their total loan book or total AUM. In a couple of quarters, at the rate that we are adding assets under management right now, we would not only by flow, but on stock basis, have a new book, which can be very independently viewed and analyzed and therefore, modeled. And that's the time I am fairly confident that this observed pricing, which is more an outcome of a few sellers and no buyers being in the market and no analysts really tracking the stock. As that situation changes to even a few buyers and some analysts, you will suddenly find this Price-to-Book very, very abruptly changing one for that between 2014 and 2015. I'm fairly sure that 2022 to '23 is that year of transformation for us, not on the basis of some future pipe dream or something that we will achieve in due course. But on the basis of what we have been doing on the retail side over the last 9 months and what we can certainly potentially do over the course of the next 9 to 10 months on the wholesale side. So I believe we are at that stage where we will -- as we pivot towards growth Hari, I'm very, very sure that this absurd discount would go away, and we should be appropriately valued. As management team decides the operational aspects, there has to be first realization that shareholders are important. Shareholders can take some pain, but they're ultimately the foundation on which the company gets all of its strength. We are extremely mindful of that. And we will continue with this very regular engagement, and we will hopefully now have a growth story to come back to for shareholders. Fortunately, the macro of the country is very, very favorable. The macro has become even more favorable with tectonic shifts as far as the NBFC industry is concerned with several of the NBFCs, which were competing with us not being there, a large player on the wholesale side merging itself or potentially merging itself with the bank. And for all stakeholders, especially shareholders, the risk or existential risk, which NBFCs posed in the past practically disappearing with bank regulations and NBFC regulations being bought at par with RBI and not only regulations, even supervision being practically bought at par. So I think the right base has been created. I would just request from you as well as all the other shareholders give us a quarter or 2 to just stand true to our word that we are back on growth. And you will -- I'm very, very sure see the very sharp difference that may emerge in the stock price. Fingers crossed, that should happen, and we will relentlessly continue to try to achieve that.

The next question is from the line of Gautam Prasad from DB.

Just on a follow-up to, I guess, what you covered in the last question. Has there been any plans to maybe like securitize or separate the existing wholesale book? From what we understand, I guess, the AIF platform, the platforms that we are in discussion, that will be for new origination. But apart from the 20% reduction in the existing wholesale book, is there any other plans, I guess, to securitize or separate that and the legacy wholesale book from the balance sheet of the existing business?

So my goal is that by fiscal '24, the new book should be bigger than the legacy book. We will continue to work on it on a quarterly basis. If the rundown in normal course, which is happening is naturally achieving that we will follow the path of a natural rundown, which is from a return perspective and cost perspective, the best thing for the company to have. But in case we are not then the company will take a poison pin and will resort to a slightly more expensive structure but will ensure that the new book is bigger than the legacy book over the course of the next 2 years. That's essentially something I will be able to provide to you on a quarterly basis on an update as to how we are trending on that potential achievement. But one's goal is that INR 50,000 crores of legacy assets should drop to around INR 25,000 crores and we should add at least INR 25,000 crores of new assets on a net basis over the next 2 years in normal course. If that is to happen, very well, otherwise, we have built a unique strength amongst our peers. We actually went ahead and implemented almost $2 billion of structured transactions. The good news is of that $2 billion to our -- to the Special Situations funds, which provide us that liquidity, a $1 billion has already come back. So they are appreciative of our assets and are standing with us to do more and more transactions. So there is headroom available if one wants to resort to that. Mathematically, I don't think we need to. But if it is so required, we -- that option always exists. The more important resolve is to make sure that we achieve a 1:1. And we also, in the process, achieve a size and scale of a new book, which is fairly compulsive is of a net size of $3 billion to $4 billion over the course of the next 2 years, which then should be able to demand its own valuation of both the franchise as well as the earning potential.

Understood. And just a follow-up on one of the things that you again captured on the last call. In terms of, I guess, getting more analysts to cover the stock from an Indian equity investor perspective. Just would like to hear, I guess what steps the company is proactively taking on that front?

So there could be a few analysts from this call. There was a few on the last call. So while I'm 47, I have been CEO for 16 years. And through the course of the 16 years, I have gone through periods where there was practically nil analyst coverage to a time there were about 15 analysts and practically all global brokerages covering us. That dwindles, that again increased to an all-time high, where practically all brokerages in the country were. And today, again, there are less than a handful, which are covering. So it's a matter -- it's a cycle. Through this cycle what analysts would confirm to you is that as a management team, we have remained available not only to stakeholders, but also to each of these analysts and have proactively kept them updated on a quarterly or 6 monthly basis as to where we are going. That engagement is going to become even more regular now since as management, we have greater predictability on what our assets under management can trend to or what our earnings can trend to given the fact that the consolidation is getting over. Once I am in a position of being able to confidently communicate that this is a trend line for AUM, NII, spreads, profits, loan mix, etcetera and given the institutionalized character of the company, I'm sure analysts will come in quickly. There is always with the independence that the analysts have today, there is always an additional, so to say, pressure on them than the market so to kind of demand coverage from them. So my suggestion and request to all our bondholders and institutional stakeholders is demand coverage. From our side, I can assure you that management is more than available. Management is today ready with all the numbers and is willing to get evaluated on a quarterly basis on the commitments that it has made. I would also use this opportunity to remind the broader market that this company went through a cycle on credit ratings. From a AA minus in 2009 to a AAA in 2017. And we could do that because every year, every 6 months, every quarter, we would share projections with our rating agencies. And I remember through that 8-year period, there was not one quarter on which we failed on any of those projections. So we take our time as a management team to come across and come through projections. But when we do, we stand by them. After a gap of 3.5 years, for the first time, I'm saying I'm sticking my neck out and I'm saying, I'm ready with those projections, and I can project that on a quarterly basis. And me and my team will make sure that we deliver on that. So this is the right time we will be engaging even more deeply with these analysts. Hopefully, over the course of the next quarter or 2, maybe 3 quarters, you will see greater analyst coverage, especially as we move forward on all 3 aspects. The asset-light retail model scales up, the asset-light wholesale model starts delivering and the institutionalization process crosses the last hurdle of the de-promoterization process getting completed. As we achieve all of these 3 things, I'm sure there would be a greater analyst coverage in due course.

The next question is from the line of Craig Elliot from NWI Management.

First of all, congratulations on the excellent results and the progress not just in the last year, but over a few years. And we, as bond investors, we invest in bonds and in the equities, but my bond investor hat on, I really wanted to go on the record expressing our appreciation for the diligence and focus and care you took with respect to the [ rate bond ] defusement and those -- that was really exceptional efforts, so thank you. And then I have one follow-up question. Congratulations, of course, on the Moody's outlook upgrade. You mentioned a little bit about equities and stock analysts. Could you share a little bit about your ongoing discussions, which make you and us confident that we'll continue the earnings -- not the earnings, the credit rating upgrade momentum, please?

Yes. So where we are, Craig, on credit ratings, we are back to where we were perhaps in the period 2014, where I remember one of the leading domestic rating agencies, which was rating us at AA exactly where we are rated today. They were asked as to why we are not at AAA in one of the forums? And they said that this AA balance sheet is actually superior to some of the AAAs. It's just the size of their balance sheet, their track record, etcetera, which needs to increase their track record needs to be over a slightly longer period of time. And then we will certainly upgrade them first to AA plus and then to AAA, which we witnessed in the years to follow. But I also strongly believe, Craig, that some of the dumbest decisions that management took was that it made rating agencies -- ratings and [ issuing ] upgrades and end game rather than the outcome of several right steps being taken. I don't want to make that mistake again. A certain credit rating is an end game. I will -- I'm committed to making sure that we build our business in which we float around a 3x sort of a gearing, 2.5x to 3x sort of a gearing. Build at first and AUM where the securitized or co-lend assets, which are currently at 29%, increased to 50%. And then they become a multiple of the book on balance sheet. As we do that, I'm quite sure that given this inherent strong capital adequacy, the very, very strong ROA and ROE as well as the highly granular nature of this business. The new business is adding practically 3 customers per every crore of the disbursals that we do. So every INR 10 million of disbursals gets us 3 new customers, which is as granular as it gets. The new customers that we are acquiring are people with -- are families with an annualized income of about $10,000 to $15,000, which is fairly comfortable is 4x our per capita would qualify to be the top 10% of India. With that kind of a granular base the credit rating agencies are bound to appreciate that and the track record there, our ability of being able to handle stressful situations. And the silver lining of the last 3.5 years is that while we've been subjected to all of these allegations and blackmail attempts, the various regulators and agencies, enforcement agencies continue to look into our books, have so far found nothing wrong. And if 6 to 7 have not found anything wrong, even if one more wants to come and look, they are more than welcome. We will support anyone who comes -- wants to come and take a look. We've gone through a concurrent audit for the last 9 quarters by our lenders and the lenders, which is the bank lenders continue to support us. Several of them have now even started increasing their exposures and are not only refinancing, but are adding fresh lines to us. If we gross that up for the co-lending exposures that they're taking, then practically each one of them is adding their exposure to the company, which obviously they would not have done if they would have found even the risk of some sort of malice in our lending practices, which should have certainly come through since the concurrent lenders have not only gone through every rupee that we've lent over the last 9 quarters, but have gone through over 81% of the wholesale book, and have found nothing wrong so far. So with all of these strengths, I think ratings are just an outcome. We are deeply engaged with our rating agencies. The rating agencies in India have also matured given the events of the last 4 to 5 years. That engagement is positive. They're actually one of our strongest, I would say, supporters and the right kind of advisers to have by our side. That's how I would like to approach it. I would not want to approach rating as an end game and actually driving business because I want to become AAA so I must become a certain size. I'm hopeful that the rating as an outcome will be because of all the progress that we are making on our AUM, our ROA and ROE.

The next question is from the line of [ Mahendra Kanakiya ] from MK Capital.

But you have not declared dividend due to mistake by the management and the Board because most of the top 5 HFC declared the dividend in this current last fiscal. Company could have been eligible to pay 50% of earnings, which is around INR 13 per dividend per share. Now so long people got paid, employee got their salary and perks, management including all person on the call got paid salary and perks. Board of Directors got paid [indiscernible] and perks, bondholder and the bank got paid interest, auditor and consultant got paid. So all the stakeholders got paid, but the onus who gave the money remain as a bank holder due to mistake. Why no mistake for the other people, other stakeholders. Company came into the existence because shareholders gave the money first. Without sale order, company would not have been in existence. If company won't be in existence all the employees and Directors, et cetera, would have no job. Mr. Banga, you have mentioned in con call and interview proudly saying that the company has paid one of the highest dividends, so request you to pay the dividend to the shareholder. My request is to put the company on the sale to unlock the value.

Mr. Kanakiya, firstly, thank you for being a shareholder, and I do appreciate that you are pained by the fact that after having distributed dividend for the last 16 years, 17 years of -- ever since practically ever since our listing. This is the first year that we've not given -- distributed dividend. For both the Board as well as the management, it was not the happiest decision to take. And you're absolutely right that our lenders, both bondholders and other term lenders have received their principal and interest in full. They will continue to receive their principal and interest in full. That is one of my biggest responsibilities. The employees, which form the core strength of the company had through the period of COVID and in years that we had paid dividends taken deep salary cuts. The management had taken as deep a salary card, including me personally, of 80% or so. In order to retain talent and in order to build the franchise and unlock shareholder value, we will have to retain the management talent as well as the employee talent. And therefore, we will have to pay them appropriately. Now moving on to dividends, there the company has to make sure that the company is in a position to tackle short-term issues, which have emerged out of both the transformation in the business model, which is an outcome of macro developments as well as an outcome of the pandemic. So in order to be able to present a very, very stable sort of financial picture, we had to, which is most, most necessary for a financial operation. We had to first create a provision pool, which was large and then which gave us flexibility of being able to not kick our problems down the road and hope that they will get sorted out, but to actually proactively solve them and make sure that they remain solved permanently. If I reflect back on the global credit crisis then it will be ability which the government actually provided to U.S.-based financial institutions by running the top program and so on, that the financial institutions were able to do that deep correction and then emerge much, much stronger, which eventually resulted in the shareholder being the largest beneficiary. This has a little bit of a lag, but a multifold beneficiary to, let's say, a bondholder or an employee. Shareholders have gone through a lot of pain. I am also a shareholder Mr. Kanakiya, and a large shareholder of the company. And I've also gone through a lot of pain. I also used to enjoy the dividend, which I have not received this year. Yet I continue to work tirelessly to make sure that this absence of one year of dividend, which we have essentially been -- not been able to distribute because of recent regulatory changes. We will try and avoid that in the future. And as I said, it is one of the goals that I have said that we should be back to distributing our dividends from next year onwards. I said that on the call yesterday, and I am repeating that. At this point in time, it is important for the company to conserve capital, to use that capital to create provisions such that it can move on, maximize the franchise value and make sure that the -- there is exponential unlocking of value for shareholders. As far as selling the company or not selling the company, sir, there is -- this is a public shareholder-led company. It is a decision of the Board and the shareholders as to the direction in which the company should be progressing. As the CEO of the company, all I can assure you is that my engagement with strategic investors continues. A few strategic investors have come on board recently. They are some of the most marquee names amongst one of the most respected sovereign funds as well as one of the largest private equity funds in the world have become our shareholders and our engagement with several such marquee investors continue. Our business model continues to go from strength to strength. And I see no reason why shareholders should not gain exponentially from here. The management will at least tirelessly continue to do that. But what I can't do is change regulation, and I'm constrained by that. So I again, sincerely apologize. But at this point in time, I believe this is the best I can do to.

I have one follow-up that the -- if you look at it, that the top HFC was able to declare the dividend, even though they have a less CRAR, very high leverage like 7x, 8x. So frankly, it looks like that Board and the management made a mistake, given the company is in a very good position compared to other HFC which has declared the dividend.

Mr. Kanakiya, I'm sorry if I'm interrupting. It's not a question of CRAR or other such fundamental ratios. I had specifically even replied to you on e-mail, there is a specific RBI regulation. One has to be mindful of that RBI regulation, which talks about several factors. And the large HFC or some other HFC may be in a position today. But I am very, very sure that the quantum of dividend, which is roughly $1.5 billion or INR 11,000-odd-crores that we have distributed over the course of the last 15 to 16 years is unparalleled to any HFC, NBFC bank or even most corporates, both as a percentage of profits as well as on an overall basis, the value of the dividend that we have paid. I'm quite sure till about 2 years ago, for the last 10 years, we were amongst the top 3 or 4 or 5 corporates in the country on the quantum of private companies, on the quantum of dividends we have paid out. Companies go through transition, sir. And my request is, bear with us for a year or 2 as we transition, and we shall be back with our dividend track. That's the way that we like to reward our shareholders. Our shareholders are extremely, extremely important to us. Your and my interests are perfectly aligned. I am also a shareholder. So it's not as if we are at cross purposes to each other. All I can say with folded hands, and most humbly is, please bear with us and understand that the company is going through a period of transition, sir. Thank you, everyone, and thank you for accommodating us for 2 different calls. Next time onwards, we will be slightly more mindful. This time given the summer and the fact that travel had opened up after many years several of our independent directors were traveling to different geographies thus, the Board meeting had to be convened late in the evening hours. And therefore, we thought it was appropriate that we at least made ourselves available before market hours on Monday. So on that note, and again, on a more optimistic note that we record the support of both bondholders and shareholders. We've made sure that bondholders are very, very comfortable. The management team is striving tirelessly to make sure that we -- this becomes a rewarding investment for our shareholders also. I seek a little bit more of support and patience and can assure you that we will certainly go back to our valuations that we used to achieve in the period 2016, '17, '18, etcetera. On that note, thank you so much, and look forward to speaking with you again next quarter. Thank you.

Thank you. Ladies and gentlemen, on behalf of Indiabulls Housing Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.