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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
We have with us the management team of IIFL Finance represented by Mr. Nirmal Jain, who's the Chairman; Mr. Rajesh Rajak, who's the CFO; Mr. Monu Ratra, who is the CEO of IIFL Home Finance; and Mr. Venkatesh, who is the CEO of IIFL Samasta Microfinance. With this, now I can hand over to Mr. Nirmal Jain for opening remarks. Over to you, sir.
Thank you, and welcome everybody on our earnings call. So maybe I'll just start with the macro environment as we see it and how we have been progressing on our strategy, and then I'll hand it over to our CFO, Rajesh, for more detailed commentary on the results and then we can have Q&A.So I mean all of us are well aware, although there is a -- in terms of surprise element, there was certainly wave 3, very swift but less damaging and hopefully, it is tapering off and will be behind us very soon. We -- I mean without covering a stock market, I mean they can guide it in their own manner, but macro environment is looking much better as we have seen the earnings of most of the companies have shown significant improvement. Our government spending has gone up and the budget also people are expecting the momentum to continue. We see that government is spending a lot in health infrastructure as well. And last year, because of the southern COVID wave 2 and 3, the revenue expenditure was up by at least 0.8% of GDP as compared to the budget estimate. And hopefully, if government doesn't have to spend that money again this year, then obviously that will lead the budget to spend more and make sure that the economic growth momentum continues. Besides a lot of groundwork has been done on this investment and maybe [indiscernible] will go through, but a significant part of this investment target will not be achieved in this year. But that may be a good news for next year because government will have also money in a year when actually they need to get the economy's momentum right. In terms of financial sector, I think bank rated growth Y-o-Y, 9% is healthy, which was -- is moving up from what we used to see around 5% to 6%. The liquidity has eased significantly. And what we are seeing is that the demand for credit seems very optimistic and sanguine and it looks like that as the economic activity is picking up, things are improving and the credit demand will also look up. Coming to our partial finance, momentum is good. Our core products are showing strong growth. And as we step into this quarter, which is seasonally a peak quarter for financial services, the credit growth momentum is there. In terms of collection efficiency and asset quality also, we are seeing an improvement. In last few quarters, every quarter, there's some surprise or another, and obviously, that impacts the reported results. So this time, we had -- there are 2 factors that have impacted our provision in a significant manner and also the GNP as we reported. One has been RBI circular impact, which was a bit of a surprise for the industry. It doesn't really impact the quality of assets that we have on our balance sheet, but it does impact the reported numbers. And hopefully, as the industry gets adjusted in terms of how to deal with this in the next few quarters, the numbers will come back to the normal time line. But for the time being, that has impacted our GNP as well. And besides microfinance facing difficult times, the continued impact of COVID wave 3, hopefully, even those things will get better. Liquidity in the system has improved significantly. And if we see our own balance sheet then at INR 9,000 crores, this all-time high liquidity that we are carrying, which has a small impact on our margins also because of the negative carry that we have. But I think what we have done is a prudent policy keeping in mind the growth trajectory that is ahead of us. And also the certain volatility that can be caused by forward our global sectors as well. In terms of interest rate and liquidity, although they look benign at this point in time, but obviously, everybody is talking about and is worried about what U.S. Fed will do. Given the inflation situation there, people -- most of the investors are getting prepared for rate hikes there, but only question is how much and when. And whenever it happens, it can have some impact on emerging markets as it's always had historically. In India, also, most experts expect upward bias on the interest rate. Our belief is that even if there's a rate hike, it would be marginal as compared to the base interest rate in India, which is already high. So India was never at a 0 or near 0% interest rate. But from these levels, 25 basis points or 50 basis points can be taken in stride. As far as we are concerned, we have -- most of our assets are short tenure. We also, in fact, increased our liquidity buffer. And now in the last 2, 3 years after the crisis, we are trying to make sure that our liabilities are for a longer period even if there's a higher cost. So with this we seem to be reasonably comfortable in terms of liquidity as well as tapping the growth opportunity. We've been investing a lot in digital transformation and a couple of initiatives that we have highlighted in analyst presentation at this time. One is our DIY loans, which has publicly papered at [indiscernible] , and we can do it in 2 ways. One is we can download an app called MyMoney and that journey is automated right from starting your application to transfer documents to transfer of [indiscernible] back period bank account. And the same journey can be done on WhatsApp also, which is industry first. While many players do generally reach on WhatsApp, but what we do WhatsApp at is end-to-end completion of entire journey is seeing good traction in terms of disbursement last quarter, although the volumes are still small, but on the base of quarter before, they have quadrupled, and we see strong growth continuing there. Another initiative on which we have worked that technology backbone to be very strong, and that is Gold Loan at home. We're starting in a few cities, we'll roll it out. This product basically targets customers and where the gold can be collected at home. And so the money gets digitally transferred to customers' account. Customer has selectivity to repay at any point in time, reduce interest burden, can top up or renew the loan. And also, we can deliver the gold back at customers place as to whenever the loan is fully repaid. In this initiative also, I think we'll have an advantage. Our brand is known. The customers have seen our branches and brand, and therefore, the trust in it is higher. So with this, I hand it over to Rajesh, who will take you through the details and then we will have the floor open for Q&A.
Thank you, Mr. Jain. Let me take you all through a brief commentary of our recent results. IIFL Finance profit after tax was highest ever at INR 310 crores in Q3 FY '22, up 15% year-on-year and 6% quarter-on-quarter driven by strong volume growth. We recorded pre-provision operating profit of INR 650 crores during the quarter, which was up 6% year-on-year and 12% quarter-on-quarter. Loan AUM grew by 11% year-on-year and 6% quarter-on-quarter to INR 46,780 crores. Loan AUM for core products, in fact, was faster year-on-year at 16% year-on-year and 6% quarter-on-quarter to INR 43,293 crores driven mainly by small ticket home loans, gold loan and microfinance loans. 94% of our loans are retail in nature and 67% of our retail loans are PSL compliant. Excluding gold loans, which are not classified as PSL loans. The largest share of retail and PSL-compliant loans are of significant value in the current environment, where we can sell down these loans to raise long-term resources. In line with the capital optimizing strategy, 35% of our AUM is assigned to securitized as of December 2021. During the quarter, IIFL Finance tied up with DBS Bank and Union Bank of India for co-lending of gold loan and home loan, respectively. This is over and above our existing tie-ups. We added over 550 branches and more than 6,000 employees during the current financial year. Cost-to-income ratio increased to 39% as compared to FY '21 due to expansion in our physical and digital footprint. Annualized ROE for quarter 3 stood at 20.7% driven by annualized ROA of 2.9% despite large investment in growth causing sight in operating costs. Capital adequacy ratio was 25.4% on an overall basis and Tier 1 capital adequacy stood at 18%. These are much higher than the statutory requirement of 10% for Tier 1 and total capital requirement of 15%. Our total capital of home finance and microfinance subsidiaries also remained healthy at 31.7% and 20.4%, respectively. Our average cost of borrowings declined by 27 basis points year-on-year to 8.7%. Our gross NPA stood at 2.8% and net NPAs at 1.5% as of 31st December 2021. This includes the impact of RBI notification dated 12 November 2021. With implementation of ECL model under NDA, the provision coverage stands at 33%. Collection efficiency has improved across segments. Microfinance collections was a marginal dip since quarter 2 because of high arrear collection in earlier quarters in quarter 2. During the quarter, we raised INR 4,300 crores to term loans, bonds and refinance, out of which we raised INR 1,100 crores via refinancing, which included INR 850 crores from National Housing Bank. In addition, loans of INR 3,600 crores were assigned during the year. Cash and cash equivalents and committed credit lines from banks and institutions of INR 9,145 crores were available as on 31st December 2021, adequate to meet not only near-term liabilities but also to fund the growth momentum. We have a positive ALM, whereby inflows cover or expect -- or exceed expected outflows across all buckets. Additionally, IIFL Home Finance raised INR 404 crores through a public issue of secured bonds in January 2022. Brief digital updates. We continue to focus on digitization and analytics to improve customer experience and enable a convenient one-stop shop for customers' credit and investment needs. During the previous quarter, we had mentioned about our digital DIY, do-it-yourself, initiatives for disbursement through WhatsApp and MyMoney app. Disbursements under MSME DIY loans grew more than fourfold to INR 114 crores during the quarter. More than 18,000 customers have been onboarded till date under DIY initiatives. Our Gold Loan delivered at home initiative is also getting significant traction. Disbursement under this initiative grew 31% quarter-on-quarter to INR 137 crores during the quarter. Jhatpat Home Loans, a pan-India product for instant home loan onboarding, continues to do well as 100% of the loans disbursed during quarter 3 was sourced through Jhatpat loans. The corresponding percentage for previous year same quarter was 88%. IIFL Loans app is being increasingly used for various transactions by customers and has been especially beneficial during COVID lockdown times, giving customers ease and convenience of access. We have around 2 lakh average active users on the app for the month of December. That brings an end to the update. We are now happy to take questions. Thank you.
[Operator Instructions] Our first question is from Sushant Parik from HSBC Securities.
I just had one -- a couple of questions on the NPA part. If you could just tell us what exactly has been the impact of the RBI circular on overall NPAs and if you have taken any additional provisions against the same. And also secondly, I just wanted to understand what the restructured outstanding is as of December.
The impact of GNP is around 30 basis points of the RBI circular. The restructured book movement we have given in Slide #18, which are 937 as of December end against 1,027 last quarter. The DCCO amount has fallen significantly from...
1,800.
1,800 to 600 as most of the projects have come out of DCCO.
Got it. Got it. Just one more question. Are there any plans on normalizing the liquidity buffer eventually -- or do we have any glide path towards that?
So liquidity buffer, I think -- okay. Normally, we trying to have liquidity for a year in terms of all the contractual liabilities. So the current liquidity that we see plus/minus 10%. And obviously, over a period of time, as our volumes grow, our book grows, this will also grow. It may be slightly higher in December end. But you can say that around 7,000 to 8,000 will be a reasonable number in these -- for this book size.
The next question is from Akshay Ashok from Dalal & Broacha Stock Broking.
Congratulations on a good set of numbers. Sir, I have 3 questions. So first, why the disbursement and home loan system did not see a pickup on a Q-o-Q basis. Any particular reason? And the second question will be this call ending, if you could just elaborate on the whether the disbursements have started with the banks that you have tied up with? And what is the progress on that? Yes, first if you could just answer these questions.
So Monu, you want to take this thing?
Yes. Yes. Yes. Akshay. Yes. Good afternoon, everyone. So if you look at the disbursement in home loans, so they look flattish because there was a bit of a pent-up in Q2, which we had from Q1 -- but otherwise, we ended December pretty aggressively rather December numbers of disbursements are all-time high for the last 1.5 years. So we expect that the Q4 should be a much significant number to look at. But yes, because of the pent-up thing which we had in Q1, which came into Q2, we did it very well.
Over in Q2 and got booked in Q2. The disbursement is early part of Q2 because Q1, I think, was impacted by COVID.
Yes. So then coming to the -- as far as December itself is concerned, as I told you, we did an all-time high numbers in home loans for the last 1.5 years. Then coming on the co-lending part, as far as home loan part is concerned, we were able to do a co-lending of nearly INR 850 crores with multiple banks. And so that's been a great experience and experiment, which we think is going to only solidify from here. So we did INR 850 crores of disbursements in -- under the co-lending for home loans. And similarly, some numbers have also been done from other products like Gold Loan as well.
Okay. So you got into agreement with 2 banks, Development Bank of Singapore, is it? And?
So there are product [indiscernible] So there ar product [indiscernible]
You told us that you got into agreement with 2 banks.
So we have started with DBS, and last quarter, we've done a lot of technology integration and testing. We are starting with them. So Gold Loan is something that we are doing with DBS at this point in time. So we have multiple banks on multiple products. Yes. So the Development Bank of Singapore, we have started the Gold Loan product.
Yes. And then last question, sir, the construction and real estate portfolio, the idea was to run it down, right? Why is this quarter on a Q-o-Q basis, there was a 2.2% growth in your AUM and construction and real estate? You give incremental loans. You don't give loans because [indiscernible] for construction [indiscernible] ?
Yes.
2.2% AUM growth in this quarter in for construction and real estate and not really the book has been running down for the past several quarters. So what was the reason for this growth?
Okay. So if you see Slide 32, we have given a very detailed explanation on what our strategy and goal on the construction adjusted book is, and how should we look at in terms of going forward. So one is that our construction and real estate finance, what we are doing earlier through NBFC, which was against land and against the SRA project, which is a higher risk. So suddenly piece of land, which is INR 200 crores and construction costs may be INR 30 crores, INR 40 crores. So normally, what happens, the bank lend only against the construction part of it. And that is what we will continue to do through our HFC. Now that is where your yield will be lower because the quality is much superior and the risk is lower because we start construction after we received all the approvals. But historically, many NBFCs suppose INR 100 crores land is there, people would lend INR 50 crores against the land also, which may be a takeout or maybe for some other purpose or maybe for our consideration for land itself. So that is something that we have discontinued. But what we will continue to do are 2 things. One is through our HFC will try and fund only the transaction part of it. And that also with 2 more conditions that we can make sure that they are fulfilled. One is that we fund affordable housing projects and not anything else. Secondly, we are looking primarily or predominantly a green and environmentally responsible or environmentally sustainable projects. And also, what has been done as that we have signed up with AUB and we are in advanced stage of negotiation with AUB and profit for funding these. So they are quite keen to support construction of green projects and affordable also. And they'll probably give a line of credit, which can be used primarily for this. Other than this, what earlier funded projects what we have done through NBFC, although we are not taking up any new projects of the similar type, but that's where if there's a last mile funding or a construction or something required we'll continue within the sanction of Board-approved limit. So those projects will continue to be funded.
Okay. The transfer to AIF, what portion has been transferred to the AIF? Or is the cost of going on...
Yes. We are -- when we transfer, we transfer at that point in time, whatever book we had about 1/3 of it. But when we realize that in terms of AIF are not great, and you end up paying 18%, 19% interest when you can borrow at 8%. And also, most of the projects now are seeing a recovery of demand for the next 2 to 3 years' time. You should see that most of them get the cash flow difficulty in that. So if you look at our CRE book over years, then in FY '19, it was INR 555 crores has gone -- it's gone practically half now almost at this point in time. But in the HFC component, we'll continue to fund some of this year, and this is what most of the HFC will do. So if you see very highly established HFCs from HFC to everybody, they will have some component of their book, which is for developer funding. That basically dovetails into home loans also because most of the projects that you fund, you may have a priority access to the customers who are buying housing units there. Probably will give you a very detailed explanation of what our strategy is.
[Operator Instructions] The next question is from Abrahim [indiscernible] of Deutsche Bank, Deutsche CIB Center.
Congratulations on a good set of numbers. My first question is actually pertaining to the microfinance segment. We've clearly seen a lot of growth from a quarter-on-quarter perspective or even from a Y-o-Y perspective compared to the total AUM. Correspondingly, we've also seen sort of like a big jump in GNPAs, some levels you do not see even in quarters or towards the end of last year as well. Is this primarily just the increase due to the RBI new norms? Or is there any other factor here? And what's the company's overall strategy here in microfinance? Are we like sort of focused on growing the book here? Because the growth rate has been much, much more than sort of the other segments.
So microfinance industry in November December, actually a disbursement route. So most of the microfinance companies have not yet reported numbers, but I would think that the growth has been there for most of the microfinance companies in last quarter. Secondly, in terms of GNPA growth, almost about 1 percentage is the impact of RBI circular. And other than that also, the restructured book has come down. A lot of -- some part of -- I mean I think restructured book has come down by 20%, 25%. So some part of loan has come out of that also. But then coming to the next part of your question, outlook. If microfinance industry has been impacted by one or another reason for -- in the last few years several times. But if you look at the business and the customer, then they basically borrow loan for income-generating activity in other group. So typically, under normal circumstances, performance is very good. So hopefully, we'll have normal circumstances going forward. Then we see a strong pullback in the GNPA as well as improvement in asset quality and collection efficiency.
Got it, sir. Got it. And just sort of a follow-up question to this. What's the strategy in terms of targeted AUM growth over, say, the next 12 months?
So I think targeted AUM growth should be around 25% or so.
Over 12 months of a project.
One thing but what we must keep in mind is that -- so we are talking about core products. And 25%, 30% depending on how our core lending picks up momentum because core lending is rather where if the banks basically have willingness to take more aggressive approach, we will be obviously supporting them.
Got it. Got it. And lastly, I've seen that the results have obviously been very robust for the bank and the liquidity [indiscernible] is the plan still to just start the domestic market here? And is that a sort of process to return to the U.S. market as well?
Domestic market for debt U.S.A.
Yes, for debt.
So for debt at this point in time, domestic market liquidity is good and interest rates are also going down. So if you look at fully hedge costs, then it doesn't make any sense to -- okay. It doesn't make any commercial sense to tap the overseas market on a -- through a broader issue. But on a bilateral conditions of ECB and actually, we are negotiating with DB and some other multilateral organizations. If we get a good plate, then obviously, the ECB market is there. But it will be a transaction specific. So at this point in time, at least, we don't envisage kind of a public issue or a larger issue of bonds.
Our next question is from Thomas Dresner of [ abrdn ].
Very similar to the previous one. I was just going to ask on your dollar bond outstanding. So is your plan to retire that bond? Or will you decide at the time in about a year's time whether you refinance it in the dollar market and what the conditions are like at the time?
So our dollar bond was $400 million at the time of issuance, we have bought back some whatever is allowed as per RBI guidelines. In fact, we're allowed to buy back more and reduce our cost of funding on an aggregate basis. But if you really look at it, maybe $350 million kind of things would be outstanding and we've got a more than $1 billion or $1.2 billion of liquidity on our books. So the way things stand today, I think probably we will repay the bonds on maturity. And under these conditions, it's unlikely to refinance them. But if the interest rates improve for ratings for some odd reason, we can look at it. But for the time -- I mean you can see on financial numbers also, we have more than adequate liquidity. In fact, we have more than 3x the liquidity to buy back the bond even at this point in time.
Okay. Very clear. And just one quick follow-up. If you were to tap the dollar market again, would you reengage with one of the rating agencies? Or do you see -- the rating agencies, if you were to do a dollar bond?
Yes, I think we'll engage them. And if you are to tap the dollar bond market again, then we'll have a dialogue with rating agencies, and they don't let them reevaluate the whole thing and make an assessment. See, I think rating agencies also have to catch up because if you look at our capital decay now it's 25%, 30% for a subsidiary company, they improved significantly. Our liquidity has improved, our asset profile has improved. So we will engage the rating agencies regardless of thing we do bond issue or not , but I think immediately after these rates now because quite clear in the last 1 month, we'll engage with them and we'll make representations to them on the rating because I think there's a strong case for us to make them look at the numbers, which are significantly better than what they were when they did their assessment.
The next question is from Deepak Poddar of Sapphire Capital.
Sir, I just have one query. In terms of your credit cost, so how many quarters away we are from a normalized credit cost of 1% that you have been talking earlier?
Deepak, actually yes becoming a little bit difficult around operating discussion because -- some of this or other has been happening in every quarter. And like RBI circular or these kind of microfinance situation, we did not expect earlier. So I don't -- maybe -- hopefully, it should happen very soon, but I'll keep fingers crossed and let's see every quarter on how do we get there. Because every time we say something, but something completely unexpected happens. So -- let's keep our fingers crossed. But hopefully, in this year, it should happen.
This year means FY...
2022.
Yes, 2022. Right?
Yes, yes.
And RBI report impact, like we have taken some provision this quarter. So it's likely to continue into fourth quarter and first quarter as well a higher provision.
No, which probably side provisions...
Yes.
RBI impact -- So what has happened is that it came in the middle of the quarter. But now I think most of the NBFCs will try and make sure that the collection system as well as contextual arrangement with the customers happen in a manner that you don't get into that trap of having higher entry, higher provisioning. And then it goes into vicious cycle, but it also impacts the customer's credit rating. But -- so I think this impact will taper off in next couple of quarters, March and June. It won't happen overnight, but I think these 2 quarters should get fully adjusted.
The next question is from Prashanth Sridhar of SBI .
Yes, sir. Am I audible?
Yes, very much.
Sir, I'm just looking at the real estate part, and you mentioned that some INR 1,800 -- around INR 600 crores is left in DCCO quarter-on-quarter. And we also see the NPA in that segment rising. So do we assume that despite the DCCO, some of these projects could not complete in time. Is that what you're looking to do?
I know. I would agree it actually the problem with the current -- the sudden RBI's circular where even if there's a one-day delay or existing, then obviously, it has to be recognized as NPA. But this kind of a scenario, it doesn't actually increases the risk of the asset, what it was, but the reporting is a little different from the reality. So what happens in Indian conditions that people sometimes they get delayed or the payments get delayed by a few days. And obviously, you get -- you're first to report NPA, but it should not impact the recovery or the quality of assets.
No, what I was trying to understand was specific to real estate. If we look at the performance of the projects that have come out of this year. How do they look? Would any of that slip into NPA number?
No, no, no. So okay, some of them have been paying after that where some of them have paid a little bit of -- so most of them, I think, are on track. In 1 or 2 projects, we've got a developer transfer. So we got the project transferred to a new developer who is financially stronger and has a track record which is good so doesn't have any delinquent track record . So I think things are looking better there.
Sure. Sir...
Projects are something a lot of businesses are not getting into trouble, they're getting out of it.
Got it. Is there a watch list or something that you're tracking? And are you able to quantify that?
Yes. Actually, we see there are about 20, 25 projects that basically account for almost entire thing. So we review it every week. And now we've got a team. We allow our team so kind of from project monitoring to the financial division. So we will increase our resources there. So we are tracking them very, very closely. I mean we understand that there's a large chunk of asset that obviously require close monitoring and recovery effort.
No. Sure. I just trying to get a sense of -- and just one other question on the Gold Loan side. This quarter and last quarter from the disbursement you've done, what is the average interest rate and tenure of the loan in gold?
So average interest rate, there's a slight downward pressure on that, but the tenure has not changed. And if you look at our portfolio yield, it's come down from 18% last -- maybe by March end to around 17.4% now. So there's a 60 basis point decline in the overall portfolio. The voting yield, which is the incremental yield might have fallen by about 1%. So I would have those numbers, but my guess is portfolio yield has -- also would have come down by around 100 basis points. Portfolio yield has come down by -- in this financial year has come down by 60 basis points, 60 basis points, which is an entire portfolio of INR 14,600 crores.
And that's maybe because of bank competition or...
Yes, it's a massive competition at this point in time. And so what has happened is that there are many new players that are funded and also the banks are getting into this in a very aggressive way. And sometimes they have been pricing the risk properly, but at least in the market, there are competitive pressures in the yield. And if you ask me, we have seen these kind of bulk of competitive pressures earlier also. So they happen sometimes. Another thing that happens in gold loan is that typical product is that you start with the low interest rate, and those low starting interest rates have come down to a very low level now. And when the customer actually is not paying in time or is taking tenure or some other exchanges or whatever, the interest will go up over a period of time.
The next question is from Sharda Singh of Laburnum Capital.
Hello?
Yes.
Sir, on the gold loans. So where do you look at this base stabilizing? I mean do you see it already bottom up? Or where do you expect this to stabilize?
I think some of the players who had offered these what we call teaser rate, if you have seen the advertisement like of 49 basis points percent. So some of them have already withdrawn or they understood that there is no merit in this. And maybe this quarter, next quarter, okay. Over a period of time, they may stabilize at a little lower level. There will be a common indemnity of 50, 60 basis points, but they should stabilize in this or next quarter.
So do you expect the banks withdrawing -- the banks only being temporarily aggressive here?
No, banks are not temporary. But the problem is that the more profit from NBFCs see that wherever banks can reach out or customers can afford the process and time the bank -- turnaround time the bank takes, they'll go to bank. So something you go to State Bank of India, they can you hold on at 6.5%, 7%, which obviously -- but you go there to branch, sometimes some of the banks basically take your gold today and give you a loan tomorrow or a day after they approve your loans. So the way this product is that many customers who take on for a very shorter duration and they want to have it quickly done in flexible terms. So those are the customers that come to NBFC. Then there are areas and places where banks would go default or even in banks and branches, they don't do gold loan. So -- and the market is huge. There's a bit of a significant part of market still with money lenders and pawn brokers who charge an exorbitant rate of interest. So banks should be there. I don't think banks will withdraw for any -- they'll continue. But NBFCs that were trying the teaser rate, that might -- that activity might slow down.
Okay. Okay. And sir, the next question is regarding the provisioning on the NPAs. So on these increased gross NPAs due to the RBI norms, are we taking some excess provisions here? Or are we sticking to the ECL loans?
So ECL norm is broader, which actually can be higher than typically in this under the GAAP accounting, which we'll require for RBS. So we are taking higher provisioning brought on an overall basis. It's not that we are trying to link it to RBI circular. But ECL is a more prudent way of estimating losses and doing this. But we can make sure that we are conservative in our provisioning requirement. So if you see the RBI requirement, if you look at my entire book, then as per RBI norms with the revised guidance, everything, our provision requirement would have been INR 493 crores, which is in Slide 17, INR 493 5 crore. There is actual provision that we have taken in our books is INR 1,246.3 crore, almost 2.5x what is required by RBI.
Yes, yes. Okay. Okay. Okay. And sir, one last question. In the affordable housing finance that we're going, what are our yields in LTV? And who are we competing against effectively? I mean customer profile, if you could give some more on the customer, exact customer profile that you think to?
Monu?
Yes, yes. So I'll just mention that. So if you see that we are -- if you see our overall portfolio mix, about 60%, 65% of our customers are salaried people. So these would be blue-collared employees who are seeking home loans. And we have a very vast majority of our customers who are also eligible for the CLSS subsidy, nearly 50,000 customers we have given the subsidy as well. So these will be first-time homebuyers. Their annualized incomes would be for surely annualized income below INR 6 lakhs, and they would be largely into the blue-collar segment.
Okay. Okay. And sir, what would be the yields on these notes which we offer?
Yes. So these yield the incremental yields, which we are able to get today is about 9% to 9.5%.
Okay. Okay.
Yes.
And the LTVs?
LTVs would range the classical because we are in the affordable segment. So these LTVs would be somewhere in the range of 75% to 78% average LTVs for a portfolio level.
The next question is from [indiscernible] of Investec Capital.
So I have a couple of questions on the assignment assets and the income. So firstly, if I heard it correctly, you did about INR 3,600 crores of assignments in 9M FY '22. Is that right?
No, you're saying INR 3,600 crores you assignment in...
9M FY '22.
In 1 quarter, I can give you the number.
Yes, in 1 quarter.
And that's in the last quarter itself.
Okay. And what would be the number for 9 months, sir?
Okay. The assignment is gross assignment then because some of them want to get feedback as you remember this 1 second. INR 6,400 crores actually, 9 months. So if you say INR 3,000 last quarter, then 3,000 was quarter 2. Yes.
Quarter 1 typically.
Quarter 1 was not much. Quarter 1 is typically COVID -- correct, COVID-affected quarter.
Okay. Sir, in that stage, can you please provide the breakup of the assignment book like the kind of INR 3,000 core assignment HFC? What is the breakup of it on segmental basis?
Our segment book -- segment [indiscernible] using the asset light product, right?
Yes, yes.
So I can give you a broad breakup. One second. Monu, how much is we are home loan assignment, one second, give the numbers...
So home loan assignment is nearly about INR 6,000, INR 5,800 crores is home loans.
And gold loan is also about INR 6,000 remaining will be microfinance and business loans.
Okay. Fine. And sir, next sir, if we look at NIM on assigned assets, so it is about 6.6% for 9 months. So if we take the INR 400 crores of per segment during 9 months and 6.6% of NIM, sir, income should have been around INR 315 crores, INR 320 crores, but we see INR 850 crores of income. So...
No, but there'll be a time [indiscernible]. You are saying what should it be INR 600 crores, you're saying? No, no, no. So what happens is this is an incremental assignment, but we have assignment of earlier also and some of the assignment gets repaid also. So it's a flow. I mean, it's not a settled number. So there is an assignment of the last year also flows into this year. There's some income on that also.
Okay. Okay. So it's the recurring income, so once the assignment's here. Okay. And sir, just one last thing. So if you look at your total assignment income, so it forms a significant part of your PBT for 9 months, it is about like 70% of your PBT. So if that is so, how do you view the stability also be income stream going [Technical Difficulty] ?
This is -- See, the assigned assets are like also our loan assets with which we continue to earn. And so this is -- I think this has to sustain and grow as we keep growing our assigned book and our core lending book. That's the key strength of our balance sheet and the financials because there's a flow of income where we are not blocking any risk. We are not taking any risk or we don't have any capital block and it will be a sustainable income until the assets fully mature.
The next question is from Vivek Ramakrishnan of DSP.
I thought I'd ask about the business loan segment, where, after a long time, we've seen sharp growth in disbursements. It's, I think, about INR 970 crores in the last quarter. And the collection efficiency also has been the best we've seen in a long time. So does that reflect the fact that you were talking about a positive macro view? Does it reflect that the business loan segment is picking up pretty well and they are confident to grow the business? And also, I wanted to ask in the context of this. Your loan book is about INR 5,886 crores, out of which, I mean INR 345 crores is NPL and INR 256 crores of restructured loans. So do you expect that the 6.6% is probably peak GNPA level? And do you expect that to come down? And is the restructure book performing well?
I, Vivek, very much I think what you are saying is back on the restructure -- sorry, the MSME segment, we are seeing a very strong recovery with the economic recovery. And the asset quality from here should improve significantly. And we have seen -- what you are saying is absolutely right that the traction last quarter has been very positive. And hopefully, the numbers will be reflected in the next few quarters in this particular segment of business. Also, our DIY model now is getting very established in terms of quality of credit delinquency and growth. So overall, business loans should do well going forward.
Excellent. And just one, so the AUM I notice was INR 7,000 crores, and the loan book was about INR 5,886 crores. So the balance would be ones that have been assigned [Technical Difficulty].
Right. That's right. Absolutely right.
Okay. And is the performance difference between the 2 significant in the sense that, in the sense, would the number be even better than that going forward?
Yes, numbers will be better. And I see it improve will be able to assign more see what happens in assignments that you have a first of all, 3 months or 6 months seeming after that what we can assign. And if there's a slight delinquency, then obviously, no bank will take it. So banks will take only assets which throughout the season period have been performing well. So the assignment basically will improve as the quality of book improves. But both -- so the finally small part of the total book in the business or segment. But on a period of time, it can become as significant as home loan and gold loan also.
And I presume the collection efficiency is a leading indicator that things are improving.
Absolutely.
The next question is from Vikash Agarwalla of Bank of America. Please go ahead.
I missed the early part of the call, so maybe I'm not sure if this question has been answered. I actually have 2 questions. One is I wanted to understand if there's any challenges you're facing given the recent Omicron and -- in the current quarter. So that's one question. And the second question is I wanted to understand a little more on the co-lending side. Obviously, there is some announcements which has come in terms of partnership. But what sort of disbursement are you seeing under this model? What's your target in the next year or so? And how does then it impact your assignment strategy? I mean why would the bank choose a co-lending over assignment, which you quite proactively do? So if you can share some thoughts on that, that will be helpful.
Good. What was the first question? Omicron, yes. So Omicron, Vikash, has been impacting the December and beginning of January, we were very worried, but thankfully, it has not impacted much. I think people have -- the business momentum continues. And more or less, people are reaching to the fact that this is spreading rapidly but it's not fatal and not something very serious. So Omicron is not a big threat, at least in my understanding. And more or less, it's behind. It should completely -- from here on, I think things should get better. That has not impacted much. Secondly, about co-lending and assignment, that's a good question. And so I'll tell you the difference. In case of assignment, it's a transaction by transaction. So banks will come and say, okay, this quarter, we want to take your asset INR 500,000 crores assets. The advantage and disadvantage both the advantages banks will take in terms of net liquidity. But the disadvantage is that banks also don't have continuity of asset flow because they also plan their balances. So they should know how much retail assets they're going to get from this channel. And from our point of view also, the co-lending was better because, one, there's no secret. It happens in the origination. It's a continuous process. So you don't have to really worry about the transaction consummating, but you know that, okay, there's a partnership model. You only have to keep 20% on the book, which you can easily do through the retained earnings, and you don't have to worry about liquidity. You worry about risk. And obviously, the challenges are that every transaction get credit operated by both the distribution bank as well as NBFC, so technology, your processes, your work flow, everything has to be very smooth. And resources are required from both sides. But longer term co-lending a good model because the risk assessment is happening at origination. And what the partners know that this is how liquidity and asset flow will happen. So banks also know that, okay, we can expect so much of assets from this co-lending partner. They also plan their liquidity and balance sheet, and we also plan. And as the process has become deeper, it becomes easy for both parties to work. But the challenges are that you set system, every transaction we approved in case of assignment, okay they will set up a team, they'll go through a bundle of asset fees, what the like can take. So these are -- there's a difference. I don't know whether that answers your question, Vikash.
It does. It does to some extent. And maybe if you can also elaborate on what sort of targets you have in this co-lending model in terms of disbursement in coming quarters or even say, next financial year FY '22. I know these are -- this may not be very hard target, but any feelings, thoughts on what's sort of different per month or this product. Are you targeting more on the co-lending model?
So I think as you said that because these are unprecedented -- we probably are doing co-lending at a scale -- at scale for the first time. I think next year, almost half of our disbursement, the total overall disbursement of the company can be through co-lending model, and that should be our internal target.
The next question is from Ashwin Kumar Braman of HSBC.
Are you able to hear me?
Yes.
My question, again, is on the co-lending model. I believe you mentioned that you did about INR 850-odd crores of disbursement in the home loan segment through co-lending. So does -- when you say 50 out of that, only 20% will be on your balance sheet, right? I mean, is that the way to understand this number?
Yes. Yes.
Right.
And so when you're mentioning in your presentation that you've done INR 1,600 crores of disbursement, that also includes INR 800 crores, not...
Yes, that includes INR 800 crores. Out of that INR 600 crores go on to banks. So basically, INR 1,000 crore in your book.
Right. Right. And the other thing is that so this disbursement which you then that will show up in the assigned portion or I mean like when you're saying on balance sheet or balance sheet mix, which you have given in the presentation.
Comes from our benefit. This is part of loan AUM yes, it will be part of our assigned asset, will be part of loan AUM but it will not be in our books. So 80% will be part of our assigned assets.
Okay. And one more general question on the co-lending model. So will the customer segment here be sort of similar to the customer segment which you otherwise lend to? Or I mean, considering that these are -- I mean...
So [indiscernible] the customer so when we negotiate with banks, we say that these are the customer segments that we target. So broadly, they have to be in agreement that only the whole thing will take off. But having said that, when we source the loans, we have an option, something we like to credit. But we say that's not fitting into the co-lending criteria given by the bank, we can keep it on our books. So not 100% of the loans that we source will be co-lend. But there are certain -- so we have certain policies and the banks have certain policies. So whatever fits into their policies, we give it to them. And the remaining, if we are comfortable with credit, we keep on our books.
Okay. And just one additional question here. So the loans that are lent through this model, would they have sort of a higher, like, let's say, turnaround time as compared to the loans that are not co-lend?
No, because the way practically it is happening is that -- and RBI will also allow that, that we disburse. And then -- so if the bank is doing the co-lending day, we work like the agent and we get money reimbursed by the bank and then the loan assets. So customers sign a track record agreement. We have the option to allow 80% of loans to go to bank. And then banks, it may take a day 2 or a few days or whatever. And if they are approved, then they take it from the beginning. And for 1 or 2 days, interest adjustment is done. But otherwise, it does -- as far as the customer is concerned, there's no delay.
Okay. But the customer will have a different interest rate, right? Like if it's co-lend loan, it might be at a lower..
No, no. Interests remain the same. So supposing customer's interest rate is 10%. And co-lending element in the bank is 8% of [indiscernible]. We collect interest at 10%. We give bank the 8% share on 80% because we have bank agent. The remaining interest in return.
Even on the 80%?
So supposing I'm charging 10% to customers at $100, so which is INR 10 right. On 80, I'll pay INR 6.4, right. At INR 3.6 I'll retain in buyer books. And in terms of accounting, what will happen is that on 20 will go as interest and the remaining 1.6 should be part of assignment income or part of other fee income.
Right, right. So in essence, it's very similar to assignment.
And the operating cost is to our accounts. Obviously, that's how the economics work.
So it's very similar to assignment transaction in the way it works, except that you don't need to hold it on your books for the seasoning period and all that.
That is correct. It's very similar to assignment transaction. But we have -- like every loan gets -- and an assignment is a bundle. And in assignment, what happened is the bundle is rated by agencies, rating agencies, here, it's a loan by loan.
The next question is from Ray [indiscernible] of BCP Securities.
Just one minute, I'm on the clock.
Just quickly want to have 2 housekeeping questions. One is actually because we are just starting to have IIFL Finance. And can I just have a quick one as to who the IR is [indiscernible] . And secondly is [indiscernible]
Ray, we can't hear you properly. Can you...
IR. IR.
IR is -- Anup Varghese is our IR. And the main ID is ir@iifl.com, simple to remember, ir@iifl.com.
Yes. But who is the person if you don't mind sharing me the name.
His name is Anup Varghese.
Varghese. I'll look for it.
Varghese. We will circulate the name also.
Okay. Good. My second question -- i mean on my second question and to my second question on whether this meeting will be recorded or later on, if I would like to replay.
Yes, it recorded actually. Okay.
Is this on a website?
Yes, transcript is there on the website. It will be put up on the website in a couple of days.
Okay. Good.
You can put your -- Q&A on the website, and we'll send you a link also.
So it would appear that we have no further questions. And I would now like to hand the call back to Mr. Nirmal Jain for some closing remarks.
Thank you, everybody, for being on the call. If you have any more queries or clarifications questions, please get in touch with our Investor Relations or CFO department. Thank you so much.
Thank you very much, sir. Ladies and gentlemen, on behalf of [indiscernible] Stockbroking , that concludes this conference.