The South Indian Bank Limited (SOUTHBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the South Indian Bank 4Q FY '20 Results Conference Call, hosted by Spark Capital Advisors India Private Limited. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note this conference is being recorded. I now hand the conference over to Mr. Abhinesh Vijayaraj of Spark Capital. Thank you, and over to you, sir.

Thank you, Vikram. Good morning, everyone. On behalf of Spark Capital, I welcome you to the Q4 FY '20 Earnings Call of South Indian Bank. We have with us today the management team of South Indian Bank, represented by the MD and CEO, Mr. V. G. Mathew; EVP Operations; Mr. Thomas Joseph; EVP Credit, Mr. Sivakumar; EVP Treasury; Mr. Reghunathan; and CFO, Ms. Chithra. I now request Mr. Mathew to take us through the highlights of the quarter gone by, after which we will open the floor for questions. Over to you, sir.

Thank you very much. A very good morning to all of you, and thank you for joining for the South Indian Bank Q4 FY '20 Earnings Conference Call. We hope that you and your family are safe and healthy. We would like to extend our gratitude to all the health care workers, sanitation workers, police and other essential service providers and everyone who has continued to work to keep our society functioning and meet our daily needs for their immense contribution. I would like to appreciate the efforts of our employees who have shown strong resilience and the ability to adapt to changing circumstances. The health and well-being of our employees and customers and business continuity is of utmost importance to us. In order to ensure that no interruptions occur in any of the business activities, we have set up acute response team as part of business continuity plan. The employees were given work from home facility as a safety measure with adequate IT infrastructure and enhanced cybersecurity measures. 98% of the branches and ATMs across the country remained operational during the lockdown period following all precautionary measures as per the guidelines. When it comes to the moratorium, the bank followed an opt-out policy for availing loan moratorium. The loans under moratorium were approximately 36% of total loans. Bank's provision coverage ratio has improved markedly from 42.46% to 54.22% during the year. While announcing the results for the Q4 of FY 2019, we have given a guidance of improving the PCR to 60% in a phased manner within a span of 12 to 18 months. We have reached 54% of PCR in 12 months period. We've continued to focus on containing future slippages and improving recovery and upgrades to achieve our stated goal of reaching PCR of 60% in next 6 months. Now let me take you through the key highlights of the operational and financial performance for this quarter. I'm delighted to state that the bank's operating performance continues to be robust in Q4. We have achieved strong successes across our stated strategies of strengthening margins, improving -- moving towards a favorable loan mix and recognizing the last of the strength in our corporate loan book. The bank reported profit after tax of INR 104 crores for FY '20. Excluding the one-off extraordinary provisions on SRs and for COVID-19, the profit after tax would have been INR 351 crores for the year, and the Q4 would have registered a net profit of INR 104 crores. We continued to expand our noncorporate portfolio, particularly in the segments of retail, gold and agri loans, which now form 71% of the overall loan book. As of March 31, 2020, the total business for the bank stands at INR 147,473 crores. Advances grew by 3% to INR 65,524 crores, driven by continued robust growth in agri loans, retail and MSME segments, while the corporate loan portfolio declined. Retail loans grew by 15%, primarily driven by increase in our desired segments such as mortgages, gold loans and auto loans. The share of corporate loans declined from 34% as of March 2019 to 29% as of March 2020. Deposits, excluding CDs, rose by 10% to INR 80,700 crores. CASA deposits increased by 7% to INR 20,760 crores. CASA ratio is 25% of the total deposits. Gross NPA ratio remained stable at 4.98% as of March 2020. Net NPA ratio improved by 11 basis points to 3.34%. Net interest income for the quarter stood at INR 596 crores, registering a growth of 19%. Net interest margin rose to 2.67% in the quarter as against 2.46% in Q4 FY '19. On a cumulative basis, NIM increased from 2.58% to 2.68% during the year. Other income for the quarter increased by 79% to INR 394 crores. Our core transaction fee contributed INR 65 crores, while treasury income increased to INR 226 crores. As mentioned in the earlier calls, we have completed multiple distribution tie-ups with leading insurance companies and are seeing strong traction in third-party sales. As we continue to expand the retail and MSME verticals, we expect better momentum in the transaction fee and third-party income in the coming quarters. Operating profit for the quarter was INR 533 crores as against INR 328 crores in Q4 FY '19, an increase of 63% driven by better margins and treasury income. In Q4 FY '20, the cost-to-income ratio improved to 51.1% against 55.4% in Q4 FY '19. The business per employee rose by -- employees rose by 9%, while business per branch rose by 11%. We expect positive impact on OpEx ratio as we gain more from operating leverage from our centralized operations, higher fee income and increasing productivity from existing branches. The bank has made COVID-19-related portions of INR 76.5 crores against standard assets to strengthen the balance sheet. Based on RBI guidelines, the bank is required to make a provision of 10% in respect of all loans overdue as of March 1, where moratorium has been granted over 2 quarters. Loans that were overdue for more than 90 days as of March 31, but have not been classified as nonperforming, were INR 207 crores. Of these loans, the banks have made full 10% provision that is INR 20.7 crore in Q4. Additionally, as a prudent measure, the bank has provided INR 55.7 crores to meet any future impact of the pandemic. The above total provision of INR 76.5 crore is not considered in NPA calculations. Overall provisions increased by 301% to INR 723 crores in Q4 FY '20. These provisions included loan loss provisions of INR 360 crores, provision towards MTM on security receipts of INR 255 crores and INR 76 crore of provision towards COVID-19 impact. In Q4 FY '20, gross slippages amounted to INR 332 crores, which were primarily contributed by the NBFC, food processing and engineering sectors. Our overall capital adequacy stands at 13.4%, while the core CRAR is at 10.79%. We had raised additional Tier 1 bonds amounting to INR 500 crores during the year. The bank has a wide geographical presence with 875 branches, 54 extension counters and over 1,400 ATMs. To summarize, the bank continues to focus on strong business growth in the retail, agri and MSME sectors; favorable loan mix; and improved asset quality. The bank will closely monitor the impact of COVID on our business and defers the outlook closer to December 2020. With this, we open the floor for questions.

[Operator Instructions] We have a first question from the line of [ Amit Rane ] from B&K Securities.

I just wanted to understand our calculation methodology for our moratorium book. So have we included those customers who have paid even a single EMI in our moratorium calculation?

Yes. We have included everyone. What we have done is we have offered moratorium to all the customers. Now out of the moratorium customers, which is coming to 36% of the total loan book, actually, 34% of the customers have liability accounts where 1, 2 and more than 3 installments of the dues available as balances. We have not excluded that. When we say 36%, it is 36% of the people who have asked for the moratorium, and we have not eliminated anyone.

Okay. This moratorium is on -- as on which date?

This is March 31, 2019 -- sorry, March 31, 2020 number, and the current number is also the same. It keeps on coming down. That's a different matter. Every day, something keeps on coming down. I think the number we have shown, I think, is INR 932 crores. The moratorium extended is INR 23,862 crores, which is 36.41%. Out of them, the SMA 1, 2, et cetera, is coming to INR 932 crores, of which we have taken a standstill benefit of INR 207 crores, and we have made a provision of 10% upfront. The INR 932 crores number, including this INR 207 crores, keeps on coming down every day.

Right. So what is the current number at?

INR 912 crore or so.

Okay. Okay. And sir, can you give the reason for why we have seen a drop in the current deposits on a Q-o-Q basis?

Basically, there were withdrawals in that period. Obviously, there is significant pressure on people -- liquidity pressure on some of them. So they have done that. Plus when it comes to -- Thomas, would you like to add?

There were some high-balance government business accounts also during December, which maybe for COVID-related reasons they have withdrawn. That is one of the reasons. And in the business accounts also, because of [ low level of ] cash flows, et cetera, there has been some withdrawals.

Okay. Sir, finally, we have raised some INR 5 billion of Tier 1 capital. At what cost we have raised it?

13.75%.

Okay. And what is our CET1 number?

10.80%.

10.80% is CET1?

9.84%.

9.84%. CET1 is -- that is core CRAR is 10.79%, and office CET1 is 9.84%.

We have next question from the line of Rohan Mandora from Equirus Securities.

I wanted to understand, in terms of the assessment of the potential stress that can come in after COVID, especially with respect to sectors like tourism, where Kerala has a good exposure. So what would be your exposure to the COVID-impacted sectors? And how -- and what is the feedback that we are getting from the customers? Because in case the provision doesn't pick up for, say, next 9 to 12 months, what is the outlook on the asset qualities on this basis?

Yes. I will -- this is an elaborate question. Anyway, I will mention it in 2, 3 steps. One is we must appreciate that we have practically very little unsecured loans in our [indiscernible] portfolio. We follow a policy of having secured business and, in addition to that, each business is carrying collateral security -- significant amount of collateral security. That is one point we have to keep in mind, and then we have to remember that, like, we don't have anything like -- practically anything like completely unsecured business, we don't have anything like the credit card receivables, funding and all those things in our system. Now the impacted sectors, according to us, the small NBFCs with exposures below INR 25 crores, and that number for the bank is INR 115 crores. And nobody has asked for SMA -- what you call the standstill benefit in that account. There is no SMA 0, 1, 2 in that segment. Travel and tourism and resorts is INR 1,052 crores, and moratorium in that one is INR 631 crores. Again, when it comes to SMA, it is just INR 5 crores, and standstill benefit has been taken only on INR 4 crores. Professional services, which is INR 4,545 crores, that is where you have the hospitals, the medical colleges, education institutions because they are all in various stages of reopening at the moment. And therefore, the moratorium there is INR 2,187 crores. But again, SMA 0, 1 is only INR 7 crores and standstill is just INR 3 crores. Construction industry, INR 3,106 crores INR, and moratorium is INR 1,157 crores and SMA balance of INR 51 crores, and the benefit has been taken only for INR 4 crores. Transport operators is very limited at INR 119 crores, and moratorium is only INR 24 crores, and SMA status as well as standstill are for just INR 2 crores each. Gents jewelry, INR 585 crores is the total exposure, INR 87 crores is the moratorium, and there is no SMA 0, 1, 2 or standstill. Commercial real estate is INR 1,086 crores. There, the portfolio that has availed the moratorium is INR 345 crores, and there is no SMA 0, 1, 2 or standstill avail in these accounts. Textiles, INR 3,095 crores is the total exposure, INR 725 crores is the moratorium and SMA 0, 1, 2 status is INR 7 crores, and standstill is INR 4 crores. So that is the complete description of our accounts.

Sure, sir. This was pretty helpful. And sir, just on the legacy book right now, as you are sitting, any accounts which we are posing will immediately slip in, say, next 2 to 3 quarters irrespective of the COVID situation panning out?

We have taken a good look at some of the accounts, and they are -- I mean, otherwise, this quarter, the NPAs would have been practically -- accretion would have be practically nil. But we have taken a hard look at all our portfolios to try to figure out if anyone is going to face additional pressure because of COVID. So those accounts we have already made NPA in this quarter. Now -- that is how the INR 332 crores coming in. Now to again answer your question very specifically, I'm not able to say clearly about the 1 account. I think we have been talking about this account because it is low-rated sometime back also. The exposure is large and, therefore, I would very much like to talk about it. It is INR 422 crores exposure, belonging to a very reputed and highly resourceful group operating out of Kolkata, running a business of cement and tire, substantially cement and maybe 1/3 of the business is tire. They are, at the moment, BB rated and [indiscernible] BB. And we have taken that account. And because they have taken the standstill benefit, we would like to look -- flag that account as a potential -- potentially weak account, irrespective of their resource and capability. And they are planning to infuse significant amount of funds through certain fees, et cetera, but I -- we have not seen the final resolution of that at the moment and, therefore, we have already made a 10% provision -- marked the 10% provision for that account also. That is where we stand.

[Operator Instructions] We have next question from the line of Deepak Poddar from Sapphire Capital.

Sir, given the current situation, how do you see -- like we have been talking about INR 200 crores per quarter kind of a provision for next 4 quarters. Now given the change in scenario, how would you want to revise it?

See, the number -- if you're asking me about the COVID scenario, one more -- most important thing that we need to remember is our -- the staggering corporate slippages that we used to pay repeatedly quarter-after-quarter, that business is getting over -- is virtually over barring the account which I'm talking about today and which I have been flagging for some time now as weak accounts. I don't know they have made a resolution. They claim that it will never become NPA, et cetera. That's a different matter, but as far as I am concerned, this number that you would like to talk about, then if you take the INR 932 crores, this account alone is INR 422 crores. So the remaining accounts are coming to maybe around INR 500-odd crores, and even that will keep on coming down is our expectation. And that is the visibility of the account, which is stressed asset today. Every account which has asked for moratorium and within that -- which has been -- which was on a DPD basis, has been flagged in this group. And if they pay even 1 or 2 -- 1 installment, automatically, it will become upgraded, but then we would like to take a conservative view. So this is the kind of slippage that can happen. So therefore, our general perception that our slippages were more like 1.5% of the total loan book of INR 65,500 crores. So that is the kind of number -- 1.5% to 2% is the kind of number, that is around INR 1,000 crore to INR 1,300 crores maximum is the number that we are looking at for the whole year.

So 1.5% to 2% of slippages we are looking at. So maybe in the closer to maybe 1,500 -- INR 1,300 crores to INR 1,500 crores, right, earlier which we are targeting about INR 800 crores to INR 1,000 crores?

Yes. I mean last year, we were very clear that we would be around INR 1,000 crores max. And perhaps we would have been very close to it, but then because of the COVID anyway, we have taken some of the accounts. Because they are all eligible for standstill. But then we decided that looking at the COVID scenario, their ability to come back will get restricted and, therefore, we wanted to treat them as NPA. That is what we have done in this quarter. INR 332 crores we have taken out. So it is a good treatment that we have done. So from the present weak accounts, this is the actual position that we have described now. So I would continue to think that about 2% is a very good number for us and, on that basis, we should work and that would be maximum around -- so INR 1,000 crores to INR 1,300 crores kind of number is the max. That's what I'm talking about.

So sir, in terms of provision outlook or a credit cost outlook like INR 200 crores per quarter, so how do you see that basically? Because the increase in your slippage is kind of marginal, right?

It will -- from the INR 200 crores that we were looking at, it may become INR 250 crores.

Okay, okay, okay. Understood. And how do you see your growth outlook panning out? Like we at all are seeing growth panning out or it's difficult to kind of comment right now?

We are finding growth opportunities. For example, gold definitely is growing across the regions. That is one area where people will leave money. Thankfully, we have our presence. We have a portfolio. We are growing there. Gold is already 12% of the total loan book. We are stably growing there. In the agri, the rural sector, we don't have too much of a problem. Our agri portfolio seems to be folding up very well. So obviously, that is one area where, again, the crop season begin and, obviously, they will need money, and the markets are opening up. So definitely, we will find reasonable traction there. MSME is one area where -- okay, in March -- in Q4, definitely, we took a step back because even the sanctions, which we had already run in the system, we decided that we would require a recalibration in the COVID scenario. So therefore, there has been a definite slowdown in MSME. But I am sure as it opens up, there will be some opportunities there also. Then the pure retail, obviously, including gold, there will be opportunities, and people will continue to buy homes, continue to buy vehicles. Only thing is we are not looking at 25, 30 kind of percentage kind of growth that we had registered sometime back in those areas. Again, it will come down to maybe more like 10% to 15%. That is the kind of growth that we have seen in these sectors earlier also. So maybe more like 10% to 15% is the growth in these sectors. What normally pulls down the overall growth is the prepayment -- sorry, the [indiscernible] the corporate business. So I think the corporate business has come down well below the targets that we had set for ourselves as 30%. We are at around 28% kind of thing. And if you look at the large corporate portfolio, that is more than INR 100 crores, 2014 it was INR 11,000 crores plus. Today, we are talking about INR 6,500 crores. So we have done that recalibration. Going forward, we may not require to do that. Therefore, when somebody repays and he wants further facilities, we can definitely reinstate the limits. That is something we have deliberately avoided last 1 year because the desire was to bring down the INR 100 crores and above portfolio significantly. So that we have done also. So now that, that recalibration has happened, it will not -- that sector will not pull down the growth, overall growth. That is what I believe. So we then look at something like growth rate between 10% and 15% for the overall portfolio.

[Operator Instructions] We have next question from the line of [ Krishnan P ] from [ India Advisory ].

When I look at the metrics in the investor presentation, I think they're all very good, CASA growth, growth in PCR, cost to income, degrowth in loan book. But there's been a significant shareholder wealth erosion over the last years. So my first query is, what is the bank's growth aspirations and vision over a 3-year period in our own growth and further enhancement and performance metrics that can restore the erosion in bank's value?

In terms of the -- nice that you raised that point. The point -- our aspirations are very clear. We always wanted to grow 20% plus in the loan book without any problem. And we were on that kind of a path, very close to that path. Only issue that came up was our desire to control the corporate loan book. A corporate -- large corporate based or syndicated loans base kind of growth, we do not want again. We are very clear about it. So that's the portfolio, which will be very closely watched, supervised and controlled. Therefore, the growth has to happen from the MSME, from the agri, from the retail. And pure retail today is 32.32% of the loan book, and it is growing. And similarly, the entire centralization is over in the bank, every single data point is available today, [ Deloitte ] is working beautifully, and the structural changes that we wanted everywhere in the credit vertical, everything has taken place. There is a very good marketing outfit, which is working very well. And with all these things, we should be able to grow normally continuously. And that is what we are looking forward to because the correction that we were looking for in the corporate sector has already happened. That is one side. Secondly, the kind of NPA pressures that we have faced over a period of time, that is completely getting behind us today. So with that, we are talking about a scenario in which we have a very, very robust platform for growth and expansion. And of course, COVID has created an uncertainty today. That is fine, but it will go away. I'm very sure our growth targets of 20% plus will definitely work out without any problem.

Okay. The second query which I have is, I also do find that I think treasury income is a very key driver for us, but I think without treasury income, the bank will incur an operating loss. So is there a strategy to reduce dependence on the treasury income to drive profits? And please correct me if I'm wrong.

Treasury income is -- I mean if we are running a INR 21,000 crores kind of a book, if you wanted to book something, we booked. The idea was very clear, book the profit and use it for bringing up the provision coverage ratio. This is one number which we were committed to improving to 60% within a period of 18 months when we announced the Q4 of last year. It was a pretty low number at 42%. We said, this we will correct. So we have gone down that path very, very strict. That is what we have done. So that is the only reason why we have used an opportunity to take out something for the treasury, that's all. Otherwise, the treasury continues to give us between INR 150 crore to INR 250 crore. In a good year, it will give us INR 250 crore. In a bad year, it may go down to as little as INR 150 crore. That also depends on, again, how the equity markets behave because there also the depreciation can come significantly. So now that there is a certain opportunity for booking a little bit of profit in the treasury in the declining interest rate scenario, definitely, we have taken advantage of that and nothing more than that is there in that. It's not -- we are not definitely overly dependent on treasury at all.

Okay. One final question from my end. If it's possible, do you think you can share with us the cumulative data of last 5-year provisions created? And what was recovered and what was the absolute cumulative write-offs based on the provisions?

We can give you that data. Maybe we will do it offline because I don't have it readily with me exactly how much is the write-off. The provisions, of course, I mean, the data is available. We will note down, and our -- Mr. Vijith will get back to you.

We have next question from the line of Sapna Laha from Bajaj Holdings.

Sir, what is your equity raising plan going ahead?

Yes. Our CRAR is 13.4% as of now. I agree that you would think that it is not a particularly good number. But the fact is, last 5 years, we have managed with shoestring capital. And this may be the largest -- the best CRAR in the last 5 years -- 5 or 6 years. 2014 may have been -- even in 2014, I think it was well below 13%. So that is the position. And there is enough capital right now, if the growth is only going to be 10% to 15%. And I wouldn't like to give a particularly bullish growth number at this point of time, although our desire is always to grow at least 20% plus. But then in the current environment, I'm not able to give a clear idea that this growth is going to be well above 15% at the moment and, therefore, there may not be any immediate need for capital. And obviously, there are opportunities available, depending on the market perception. Obviously, at this current pricing, it is a little inconvenient to raise additional money immediately. But definitely, we are looking at all opportunities. And we believe that the perceptions also will definitely change.

So with this 10% to 15% growth, this 13% capital ratio, it will be sufficient for how many months?

It will take a growth of 10% to 15% without any problem for a year, without any problem.

For a year?

Yes, for a year, definitely. But I'm not saying that we are ruling out every capital raising opportunity. No. That is not the plan. Definitely -- and this is not the best way of working also. That we know. We have been doing it like this, but we will definitely look at opportunities. And as the market improves, definitely we will look at the opportunities. Multiple opportunities are -- we will definitely look at that.

And is there any plan to raise Tier 2 capital?

Not at the moment. Not at the moment. We will look at all options. And preferably, it would have been much better if we're going for a proper QIP. That is the right thing to do. So that is the right thing to do. Anyway -- but we will see. But we will look at all opportunities as it emerges.

Sir. And any views -- what's the succession plan right now?

It is completely on track. Recommendations have gone to Reserve Bank of India for doing it according to the rules, and we are absolutely confident that the approvals will come well in time because we are completely on track on that in terms of getting the recommendation. So all that is completely on track. Absolutely no difficulty on that.

We have next question from the line of Jai Mundhra from B&K Securities.

I have a couple of questions. So first on moratorium data. So you said this data is as of March 31, is it correct?

This data is as of today.

So INR 23,862 crore number is as of June, let's say, 25. Is this correct?

Yes.

Okay. So now, sir, just to understand how it has been trending, so if you can qualitatively tell us what was the peak and then how it has trended? Or it has remained more or less similar in April, May or June?

So that is the whole point. We offered it to everyone because that is the rule of the RBI, and it is an opt-out scheme that we have offered. So obviously, the number to begin with, immediately, everybody will -- large number of people would opt for it because that is the safest thing to do. So it was something like 50 -- close to -- around 50% kind of number. That today stands at 36.41%, and that is what it is.

Understood. Understood. And sir, how do I read this number, current balance of SME 0, 1, 2? So this is INR 932 crores, of which, let us say, those who have taken standstill benefit is INR 200 crores. So rest are basically SMS 0 plus 1. Is that the understanding?

Exactly. They are SMA 0, 1, et cetera, and only INR 207 crores required standstill benefit to keep it as standard on March 31, 2020.

Okay. And now, again, on this slide, wherein corporate SME 0, 1, 2 balance is INR 469 crores, but there is no standstill. And in question to one of the earlier questions, you had mentioned that Kolkata-based conglomerate, they are under standstill. So how do I reconcile this?

They are not under standstill. They don't require standstill on 31st March.

But still you have made provision of 10%?

I'm just making it very transparent because this question, I'm sure, many of you would have asked last quarter also or maybe even before that because company's ratings had come down. And so obviously, we are very clear that we wanted to flag that and also provide 10%. That's what we have done. It doesn't require standstill on 31st March.

Correct. And if I look at the corporate rating, right, so corporate external rating above INR 100 crores below -- BB and below is around INR 650 crores, roughly, 10% of INR 6,500 crores.

Right.

This INR 432 crores is, of course, there, right, in INR 650 crores?

Yes. I will give you absolute data if you want more about it. But yes, everything is included. Yes. So we are talking about this cement-tire conglomerate INR 422 crores. Then there is a portal project belonging to one of the leading gold NBFCs of Kerala, that is INR 109 crores, absolutely no question of slippage. Then there is a [indiscernible] dealing with the bank for maybe last 25 years. That is around INR 78 crores balance as of now. So that number is adding -- all these numbers are adding up to around INR 609 crores. That is the one that is less than BBB rating.

Sure. And there is no irrigation account here now?

That is a very small amount. I think -- how much is the exposure, maybe around INR 38 crores or something?

INR 38 crores.

Around INR 38 crores. So it's not coming into this.

Okay. Okay. And secondly, sir, if you can give -- because you mentioned the gold loan is where -- is one focus area, and I believe this is the right strategy also, but what is the total gold loan of the bank? Because you have given separately retail, agri and SME, but what is the total gold loan of the bank?

Total is around 12%. That is around -- I'll just give you the amount. Gold loan total is INR 7,816 crores.

And how it has...

It has grown Y-o-Y 26% and [indiscernible].

Sure, sir. And the last question, sir. So if you can elaborate your decision to step down, that would be much helpful.

Yes. Because I -- my contract is getting over on 30th September. That is the most important thing.

You can renew, right?

Yes. But I had told -- I think I have told this forum also earlier that I won't be there beyond 2 terms. And I believe a bank with 33 years of average age should not be led by somebody who is more than 66. So I think let us -- that is the only thing. So it is perfect. And so that is a right timing, and we are getting a particularly good hand for handling this job and, therefore, it's a very good opportunity for the bank to move ahead on the succession plan.

Yes. And sir, if possible -- because if someone outsider comes to this bank, there is a lot of opportunity for cleanup. Frankly speaking, your PCR, the way analysts would articulate, is -- specific PCR is the lowest, which is in 30s. So if -- I mean is there a possibility that even an outsider can come and become MD, CEO?

Yes, it's a possibility, definitely a possibility. Yes.

[Operator Instructions] We have next question from the line of [ Sreesankar Radhakrishnan from JBSN ].

My question is on corporate loan book [indiscernible] what has been the recovery in the corporate loan [indiscernible]?

Sreesankar, we are not able to hear you.

Sir, please speak a little close to the mic. This is the operator.

Sir, my question is, our basic problem or increased problem has been the high level of slippages in the corporate loan book, and most of the corporate loan book has been getting unsecured to [indiscernible]. So are we seeing any recovery on that [indiscernible] in terms of the large corporate loans that we have. What is the loan loss [ recovery ] in the corporate that we have? And if you can share the same thing for retail, that would be great.

Yes. So it's very obvious. We are not carrying a slide on that at the moment, but it is very, very obvious that if you look at it, our corporate journey started in the year 2010, and it continued up to calendar year 2014 fully. So we are talking about some 5 years of significant corporate growth. And it is very, very obvious that a lot of it have become NPA, and we have transferred a whole lot of it into ARC. We have written off a whole lot of it. So if you look at the whole NPA scenario, around 75% of the NPAs are coming only from the corporate book, and large corporate book, in fact, not even from the corporate book, only from the large corporate book. So that is the position. And in terms of recovery, if you are asking me about that, unfortunately, the recovery in areas like EPC contractors, et cetera, are very, very negligible. It is a reality. And on the other hand, if you look at accounts like a steel account, which is now under resolution, I think, which requires only an approval from one of the high courts or Supreme Court, there, actually, it is sold out to an ARC. There, the recovery of this account -- settlement of this account alone will bring down the provisions by something like INR 50 crores, INR 60 crores. So such opportunities are there. And similarly, from some of the accounts, which are otherwise -- I mean in the case of EPC contractors and projects like that, we may not get in a recovery, but on the book, at the moment, we have got a couple of road projects, for example, which are NPA more than INR 100 crores each. I'm very sure that they were annuity projects. Once we are able to force a settlement with the promoter as well as the NHAI, there can be significant recoveries coming out of that.

Sir, if I extrapolate slightly more on this, in your large corporate book as well as on SRs, there is a large amount of what you call construction companies plus everything which has gone in, which, at every point of time, every six months when the revaluation gets done probably is valued downwards because the value is depreciated. So we have seen a significant write-off coming from it -- provisioning coming from it also. I'm trying to understand, to what extent we will have continue to keep providing for it on the asset? If I'm not mistaken, you had done a bouquet of assets sold to ARC. That included, in some cases, assets which have strong backing, asset-backed securities. So I would expect probably, unlike in the large corporate book, not to see huge loan loss defaults on the assets. So can we have some color on it? Because when you are doing a provision, even your slide, that INR 255-odd crores or whatever it is, provision written down on SRs, it doesn't give you -- tell you account-by-account. I'm trying to understand how much is left in SRs to get written off.

Yes. There is only one SR book which is significant. All others are very, very unimportant because those numbers are very small. Some of them have been sold at 50%. So there is no issue at all. There is no deflation in value that is possible. The one that stands out is the one that is sold out in March 2017, INR 1,776 crores, that portfolio today carries 63% provision coverage. So I would say that is a very, very important number. Anything above 60% is the one that we are looking at as a comfortable provision coverage. So on the loan book, we know we have to reach 60%. Yes, we are at 54% at the moment -- 54.4% at the moment. So some more provisions we have to do, that we will do in the next 6 months, and it may go to 65% by the end of the year. But on the SR book, which is the most -- I mean the most volatile component that has created problems in September 2017, it has created problems now, that is now carrying 63% provision coverage ratio plus. So that is what -- that's a very important number because a few resolutions under the IBC. It contains very large numbers in the IBC resolution. A few resolutions can definitely give us value. Similarly, we have made 100% provision in a Bombay-based infrastructure development conglomerate. For their subsidiary, INR 200 crores, we have made 100% provision. By any reckoning, even by -- going by the statements made by the government-approved board of that company, they are talking about a recovery of around 50%. So that write-back will definitely happen over a period of time. But we have made the position now because it is important to build up the provision coverage ratio, and we will definitely get the benefits in the future. That is what it is.

Okay. Sir, again, I'm sorry to be on this subject again. But when you say 63% PCR, this is -- obviously, these assets have been sold at a discount -- after a haircut. And the haircut is also taken in this PCR?

Yes. Everything is taken because we -- obviously, that provision is taken upfront, 33% was there, I think, to begin with. So now it is 63%.

And this includes those annuity projects, et cetera?

No, this doesn't include. The annuity projects are on our book. There is -- if you go by a consultant's view, we may get 90% to 100% recovery in one of them. We are not building any of those things into our presentations because that is optimistic kind of an environment, and we don't want to present that. There may be -- I mean, obviously, that is where the benefit is going to come to the bank because we have an NPA book, both on the book as well as on the SR side, and we have been making significant provisions in all these areas, and the results will come in the future. That is precisely the case.

We have the next question from the line of [ Saket Kapoor ] from Kapoor & Company.

Sir, firstly, if you could give what is the -- our size of the book that is being referred to the IBC -- cases pertaining to IBC, sir?

Yes, yes. Sure. I will just give the data. Just a moment.

And sir, here, we have also mentioned that our PCR is currently 53% to 54%. And we are envisaging 63% to 65% for the next year.

Yes. We have committed to that actually. We said very clearly, at 42.42% was there, we said it will become 60% within 18 months. So that is why we have done 54% right now because if you are to achieve 50%, then you need to do another 5%, 6% in the next 2 quarters. And so that is what we have done right now. We have provided significantly and completely on track. Now coming to answer your IBC-initiated account question, we have 1 major account on our book, that is INR 226 crores exposure. We are having a provision of 50% on that. That is under IBC process, long delayed, no resolution seen. This is referred by the consortium of the banks.

Which sector it is, sir, pertaining to?

This is EPC contract -- Delhi-based, very famous EPC contracting group. Yes. And -- yes, with a lot of assets, of course. That is an advantage in this. Now again, on the book -- accounts referred by other lenders, operational creditors, et cetera, under IBC, there is not a single account which is not NPA. All of them are, of course, NPA and carrying provision. So we have an infrastructure and development company out of Bombay, which is under government administration; we have a housing finance company, again, out of Bombay; we have an EPC contractor out of Kolkata, which are the 3 large advances. Others are very unimportant, INR 3 crores, INR 10 crores, etc. So this is where we stand in terms of IBC, references made by external people. And that number is coming to INR 494 crores. So the INR 226 crores, which is there referred by the consortium originally and by us and then the INR 494 crores, which subsequently came from other areas. And incidentally, this infrastructure development company, we are having 50% provision, and in other cases also, we are having reasonably good provisions. Yes.

So INR 226 crores and INR 494 crores, that sum total to INR 720 crore being the part of IBC.

Correct. I'm not saying that all of them have been admitted, et cetera. Yes. I'm only giving you the complete list. Yes.

Sir, what have been the payments to the KMB, the MD and the -- if you could give for this financial year?

We will -- I don't have it readily with me, but it would be there in the balance sheet. Absolutely no problem. It will be given. And maybe we just can give you that data separately. We will be giving you that data.

Sir, what is your message to your investors? When things have only deteriorated from every quarter, if we take from Q1 to Q4, so what is the way forward for a small-sized bank like ours? And what is the future that we hold for South Indian Bank going forward?

Now when you said parameters have deteriorated, we also need to see the context. The context is very simple. The problems of the large corporate loans, which we had decided to embark on as a part of strategy for building up the book in the 2010 to 2014 period, we have corrected that course. But these NPAs -- and you also very well are aware that the entire operating environment has changed in the last 3, 4 years. And in this environment, the recoveries in these cases plus the resolutions, et cetera, are very, very tardy. That's precisely what is happening. But the provisions are very, very fast. So we are doing that. We have done that. We have done that cleanup substantially. And we are only talking about the cleanup on one side, but the real side what we are missing out is the growth that has been happening on the retail, agriculture and MSME portfolios consistently. We have been generating enough money to make or meet all the provisions every quarter till now. And in this quarter alone, we had a problem of multiple incidences of provision and impacting our profitability. And every year, we have been putting back close to INR 200 crores -- around INR 200 crores back in the business every year. And our -- we are not dependent on external capital for our growth that we have been showing so far. So now that these problems are all getting over, basically, I mean, we are in a reasonably well placed position to move forward. And our move-forward at all times is in the areas of retail, agriculture and MSME. We have demonstrated that we can grow beyond 20%. So we have absolutely no doubt about that part. And we have been careful with our CapEx at all times, and so we know how to manage that very well. So that is the position. And we believe that we have a very sound and stable future, and we also are pretty much confident that 1 or 2 weak points, which repeatedly came up in the investors' mind like having a lower provision coverage ratio, that is getting addressed fully today.

Sir, a very small point...

Sir, I'm sorry to interrupt, we have to wind up owing paucity of the time, right?

I should have been allowed, sir. Hello?

Yes. Yes.

Sir, a very small point about this NPA part of INR 360 crore, how many accounts constituted to this INR 360 crore addition?

Not INR 360 crore. If I remember correct, INR 332 crore. INR 332 crore maybe is the addition. Yes, INR 332 crore is the accounts. Yes. So there are -- from the corporate side, the slippages are -- corporate means, for us, anything above INR 25 crores is corporate. That is about INR 110 crores. Retail, that is below INR 25 crores, that is INR 221 crores. Anything more you would like to know, I can tell you. And NBFC account is around INR 55 crore; food processing is INR 28 crore; engineering is INR 27 crore. And that is how the corporate slippage of INR 110 crores adds up. As far as agriculture is concerned, it is about INR 10 crores. MSME, it is coming from trading firms INR 47 crores; basic metals, INR 18 crores; food processing, INR 10 crores; professional services, INR 7 crores; road and road projects, INR 6 crores; tourism, hotels, et cetera, INR 4 crores; textiles, INR 9 crores; other services, INR 18 crores; other industries INR 5 crores. Personal segment INR 87 crores; housing is INR 14 crores; ODAP is around INR 64 crores; education is INR 2 crores; vehicle loan is INR 3 crores; other personal loans are INR 4 crores. Thank you.

Owing to paucity of time, that was the last question. On behalf of Spark Capital Advisors, that concludes today's conference call. Thank you for joining with us, and you may now disconnect your lines. Thank you, gentlemen.