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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
On behalf of team IIFL, I thank you for joining us on this call. I am R. Venkataraman, Managing Director. I'm accompanied by Nirmal Jain, our Group Chairman; Sumit Bali, CEO, IIFL Finance; Karan Bhagat, Managing Director, IIFL Wealth Management; Monu Ratra, CEO, IIFL Housing Finance; Balaji Raghavan, Head, Real Estate Finance; and Kaumudi Biyani, our Financial Controller. I'll now ask Nirmal, our Chairman, to comment and give an overview of the group's strategy and plans.
Thank you, Venkat. And a warm welcome to all of you. First, a bit of backdrop on the macro environment. So we are passing through volatile times where everybody knows. And globally, there are worries about China-U.S. trade war escalating and its consequent impact on interest rate, currencies and also the risk appetite for emerging markets. And in that background, we also have elections where uncertainty is looming large because nobody has clarity on how -- what will be the final outcome, but it's just a matter of few days. Also, during the last year, as we sit down to review, we had quite of an interesting and challenging times and the liquidity freeze in NBFC is something that everybody is very keenly working and curious about. In that environment, I think we are very happy to report good performance and maybe as all of you know that we have 3 businesses that are getting reorganized. The Board has -- so just a quick update on that. The Board has already approved the demerger of IIFL Securities and IIFL Wealth, and the record date, if I'm mistaken, is already set on 31st May. So what that means is that the IIFL holding shareholders as of 31st May will get shares of IIFL Securities and IIFL Wealth. IIFL Wealth in the ratio of 1 share for 7 shares and IIFL Securities 1 for 1. And after the record date, therefore, the listed company primarily will continue -- will represent NBFC because the holding company will not have any significant business left. It will have a step-down subsidiary company, which is NBFC and which has 2 more subsidiary companies which is housing finance and microfinance.And the 2 companies, IIFL Securities and IIFL Wealth, will get listed in due course. So this process has started last year and now it's consummating. So as I see now that within maybe a month or 2, we'll have 3 different entities separately. And then the -- we'll -- I mean just to complete the process. The holding company -- our plans are to merge NBFC with the holding company, and that will require us to seek RBI's new license for NBFC and the holding company and then merge the NBFC into holding, although holding company will be more like a sale company after the transfer of these businesses. But that's the -- that's how the process will run. Coming to performance for last full year. IIFL Finance has recorded 55% post-tax profit growth. But again, just for exceptional item, which is a gain on slump sale of commercial vehicle financing business. Then IIFL Finance profit after tax has been INR 633 crores, which represents a 36% Y-o-Y growth. More importantly, in last quarter alone, our loan AUM or our total loan assets grew by 7.6%, which is almost around 30% annualized growth. Now there are some -- the numbers have to be understood from a like-to-like basis. So when we look at our loan AUM growth in FY '19 vis-à-vis FY '18, the growth is 29% if you exclude CV financing business because that business is now sold. So if you exclude from FY '19, it doesn't exist on 31st March FY '19 because the deal consummated just before that. So if you exclude in FY '18 as well, then comparatively, we have a 29% growth in loan AUM which is corresponding to 30% increase in interest income and similar increase in interest cost and so on, which basically has driven the profit growth by 36%. A few things about our business. 85% of our loan book is small-ticket retail granular loan book comprising primarily of 4 segments, home loan. Again, we are in affordable home loan segment because our average ticket size is INR 18 lakh. We are significantly present in Tier 2 and Tier 3 cities for our home loan business. 85% of our branches in number are also in Tier 2 and Tier 3 cities. So the first home loan -- the second segment of business is business loan, which comprises the small-ticket business loan of INR 4 lakh, INR 5 lakh from large [indiscernible] sector and larger loans above INR 50 lakhs are compulsorily secured against property as per our internal policy. And then the third segment of business is gold loan. There our book was around INR 6,200 crores as of year-end. And the fourth segment of business is microfinance, which also has grown well, and we were INR 2,300 crores. So the business loan is about INR 8,100 crores, and gold loan is over INR 12,000 crores. Now these 4 are the core growth drivers for the company. Other than this, we also have the construction and developer financing or the construction and real estate development -- developer loan, which in aggregate is INR 5,000 crores. It comprises INR 3,500 crores in NBFC and INR 1,500 crores in SFD. I'm told there are lots of questions about this, and therefore, we have Balaji Raghavan here with us for the first time on analyst call. But he has been heading this business for more than 10 years with IIFL. And he'll talk more about this business segment giving you more granular details of how we do this business and what is our portfolio like. 85% of retail loan assets that we have, they are easily sellable to bank. Banks are always willing and eager buyer for that because most of that would meet their [ priority ] sector requirement as well as -- even in nonpriority, the regional assets they are very -- they are willing to buy. So this is the performance of our IIFL Finance. The fact that our loan book grew at almost around 30% annual growth rate in last quarter shows that liquidity is not a concern for us because we are able to sell down our assets to bank as we generate them. And besides, in last 2 quarters, approximately, we have raised about INR 2,000 crore in each quarter from long-term sources such as external commercial borrowing or refinancing by NHAI and so on. We are planning to raise money through -- by way of ECB in various forms that can be dollar-bond or a bilateral multilateral distribution funding. A few months back, we have raised from CDC, who's also an equity investor in asset finance, and we plan to further diversify sources of funding. As you're aware that we had a successful public issuance of INR 1,200 crores in the previous quarter.So having covered asset finance in terms of our performance as well as liquidity, I move over to IIFL Wealth. We also have Karan Bhagat on the call, who will answer your questions and give you more detail. This business has ended the year with 4% Y-o-Y growth, a 10 -- sorry, 4% Y-o-Y growth in the quarter with 10% Y-o-Y growth. Given that we changed our accounting as well as business model, this growth is very satisfactory. Because if you look at our top line, more than 50% of it is annuity and fee income which is very sticky and sustainable regardless of the environment. Last quarter, we had discussed that we have moved to a revenue model in terms of the way we do our accounting because more of a accrual business and also the kind of products and services and offerings, we are trying to encourage our customers to move to. And IIFL-ONE is a primary driver of that, where we are trying to move away from the transaction-based fee to a advisory fee which is more transparent and which is in a way is win-win for the customer as well as the wealth manager. For the customer because it charges at lower and transparent. And from the first point of view, it builds and fosters long-term relationship. IIFL Securities, a lot of you are aware, had headwinds. We ended the year with 8% decline in post-tax profit, primarily because investment banking revenue income was significantly lower. And investment banking, as all of you know, that our spend is the ECM, equity capital market, comprising IPO and QIP. And there, I think a lot of these were significantly fewer than last year. Hopefully, if there's stability on the political and economic front, then lot of -- there's a lot of pent-up demand for equity capital there and a number of decent pipeline. And hopefully, things will recover in this year.So everything put together, our consolidated profit is INR 1,253 crores, 23% Y-o-Y growth. After minority interest, it's INR 965, crores, which is 22% Y-o-Y growth. With this, now I hand over to Kaumudi for -- taking you through the -- this year's line-by-line of our profit and loss account and balance sheet for the NBFC business -- for all the businesses, and then we'll have Sumit and Balaji to talk about their businesses.
Good afternoon, everyone. To take you through the [ basics ] of the numbers. For the year, the group net profit was INR 1,253 crores, which is up 23% year-on-year. And net profit after minority interest was INR 965 crores, which is up 22% year-on-year. For our NBFC business, the loan AUM was INR 34,904 crores, up 29% year-on-year and 7% quarter-on-quarter. These numbers are excluding the CD AUM, which was divested in March 2019. Profit after tax for the quarter, excluding the exceptional items, grew by 13% year-on-year and 56% quarter-on-quarter to INR 169 crores. Our full year profit after tax is at INR 634 crores, which is up 37% year-on-year.Our Tier 1 CAR stands at 16% and total CAR at 19.2%. The primary drivers of our AUM growth are small-ticket home loans, which grew by 42% year-on-year; gold loans, which grew by 53% year-on-year; small ticket MSME loans, which grew by 18% year-on-year; and microfinance loans, which grew by 172% year-on-year coming off a very small base. On the other hand, construction and real estate finance, land and capital market loans will continue to have declining share in our portfolio. In home loans, our focus remains primarily on small-ticket loans and affordable home segment to both salary and sales employee sections with average ticket size of INR 13 lakhs. Our small-ticket home loan product is especially designed to support the informal income segment in fulfilling their dream of owning a house. As on 31st March 2019, we had over 9,000 approved housing projects, up nearly 1.5x from 6,200 approved projects a year ago. 57% of home loans were made through these approved projects. We expect that this approach will reduce our operating cost and credit cost going forward for our housing finance company. IIFL Home Finance has been a significant player in prime -- in PMAY-CLSS scheme. To date, it has benefited over 29,800 customers and disbursed subsidies of more than INR 690 crores. In the near term, we plan strategic deeper penetration in certain geographies and further innovations in our digital processes to grow our granular book and ensure heavy portfolio quality. Retail loans, including consumer loans and small business finance, constitute about 85% of our AUM. Another strong characteristic of our loan book is the large proportion of loans that are compliant with RBI's priority sector lending loan. About 57% of our home loan, 54% of our LAP, 44% of our SME and nearly all of our MFI loans are PSL compliant. In aggregate, nearly 41% of our loans are PSL compliant.The large share of detail on PSL-compliant loans are of significant value in the current environment where we can sell down these loans to raise long-term resources. Our average cost of borrowings rose by 9 basis points year-on-year and 59 basis points quarter-on-quarter to 9.1% in fourth quarter full year '19. Our NIM was at heavy 7.2% mainly driven by a granular retail portfolio. 85% of our AUM comprises loans that are secured and about 50% of our loans are unsecured. We believe our AUM mix is well balanced, with some scope for a share of high-yielding and unsecured assets to go up.We currently have 1,947 branches primarily for our HFC gold and microfinance businesses. Consolidated GNPAs and NNPAs recognized as per RBI's prudential loans and provision as per expected credit loss method prescribed in Ind AS stood at 1.95% and 0.62% of loans, respectively.Under expected credit loss provisioning under Ind AS, provisioning coverage on NPS stood at 139%, which is including standard asset coverage. Our return on assets for full year '19 was at 2.2% and return on equity at 18.3%. Our funding mix is well diversified, including 18% from NCDs, 5% from subordinated debt, 38% from bank term loans and HDB Finance, 26% on securitization assignment and 12% from commercial paper. Following the 10-year subordinated bonds raised from CDC, we have initiated discussions with other institutions to raise long-term funding. We have a positive ALM. Thereby, [ enclosed ] and undrawn bank line covers are exceeded, expected outflows across all buckets. On the asset side, our loan book has a relatively short maturity pattern, with 25% of loans having maturity of less than 6 months and 39% of loans having maturity of less than 12 months.From the analytics perspective, we continue to drive the use of credit scores and automated decisioning across products and strengthen our risk mitigation processes by developing and deploying behavioral collection and fraud scorecards. There is continuous focus on cross-sell and win back with our analytically driven gold loan win-back generating strong volumes for both gold business as well as group byproduct. Moving to our wealth management business. IIFL Wealth PAT, profit after tax, computed as per Ind AS was at INR 84 crores, which was up 10% year-on-year. Our assets under advice management and distribution have grown 5% quarter-on-quarter and 28% year-on-year to reach INR 1.69 trillion. IIFL Wealth offers a broad range of products and services to participate in the largest share of the client wallet. This includes financial product distribution, advisory, brokerage, asset management, credit solutions and estate planning. We now have presence in 33 locations across 7 major geographies. Net new money collected in fourth quarter full year 2019 was INR 5,377 crores. AIF assets grew 33% year-on-year to INR 15,661 crores. IIFL Wealth Finance, which offers loan against securities to high-net worth clientele, had a loan book of INR 4,798 crores as at March 2019. Moving to our capital markets business. IIFL Capital Markets, which largely comprises retail broking, institutional broking and investment banking businesses, saw it's net profits for the quarter decline to 36% year-on-year to INR 38 crores and 8% year-on-year to INR 171 crores for the year ended March 2019, mainly due to market volatility.During the quarter, our average daily cash turnover was up 5% quarter-on-quarter to INR 1,239 crores versus 1% quarter-on-quarter growth in exchange cash turnover. Our average daily total turnover, including F&O, was up 5% quarter-on-quarter to INR 17,134 crores. Our NSE market share in the cash segment was around 3.5%. We are continuously enhancing our offerings on digital and mobile platforms for retail customers and our broking business. Our mobile trading IIFL Market has had over 2.6 million downloads. Presently about 52% of our retail broking clients trade through the mobile app. We completed more than 15 transactions across various products and investment banking in the year-to-date, including 3 IPOs, 4 QIPs and 1 real estate IP despite the market volatility. We will now open the floor for question and answers.
[Operator Instructions]
Maybe before we start, I have Balaji Raghavan who's here with us. Or maybe we just take our question and answer. We can take it as a part of question and answer over. Okay, start the question and answer then.
[Operator Instructions] The first question is from the line of Viral Shah from Crédit Suisse.
I have 4 questions. So one is -- basically, I'll start with the NBFC business. There was a quarter-on-quarter meaningful margin expansion. So what basically drove that, if you could highlight that?
So one is that CV business is taken away from, which has relatively lower margin compared to other businesses. Two, the entire growth is driven by high-margin retail products. So if you really notice the growth is significantly there in business loan, in gold loans. Both the products yielding 18%, 19% to 20%, 21%. So these 2 factors basically have resulted in a margin expansion. But base effect because of the CV business is our is also to be adjusted there.
So right, sir, if adjust for that also, I am getting a quarter-on-quarter increase of nearly 180 basis points in the margins.
And also the GNPA -- see, what happens is if you see our last quarter, GNPA [ has 5 ]. So when the GNPA is higher, then you can't take the interest income because the GNPA resolution also has resulted in bad fund. So as I said, the CV is out which are relatively lower -- actually, it's -- yes. And the microfinance disbursement is significantly up, which is about 806 -- so microfinance is high-yielding product, gold loan, business loans. So if you see the last quarter growth is primarily in these 3 segments. So microfinance itself is up from INR 1,750 crore to INR 2,285 crores. So about INR 550 crores of AUM growth is from microfinance, which is a high-yielding product. And so all these factors are combined. And on the exit of CV business, microfinance, gold loan and business loan and that is how the margin has expanded on the gold business. And the GNPA resolutions because when the GNPA [ at 5 ] then you can't book interest on that. Basically, difference is your interest income as well.
Okay. If you could correct my understanding. So under Ind AS, you can recognize the interest on GNPA or not?
You can recognize on -- which can be standard 1, standard 2.
So under Ind AS, from an interest accrual perspective we can recognize the interest, and you can correspondingly create an ECL provision on it.
Okay. Right. So my second question was on actually the same NPAs. So your reported NPAs did come down. But seems like your provisioning -- absolutely on provisions have also reduced. So as a result, it was largely because of write-offs...
No, it's also CV -- no, no CV business is taken away. So there was almost about INR 150 crores, INR 200 crores of provision component for CV alone. So if you see now and the -- so both the thing. One is that CV is out and also there have been regulations of NPAs. So both things put together. And thus, they are certain fully provided for assets, we'll write it off. So then you'll see that our total ECl has come down to INR 800 crores. But I see that -- if you notice last quarter, CV had almost 8.5% GNPA, which was skewing our average in terms of everything. So if you take that away, then all these numbers fall in place.
Right. I have 2 more questions actually on wealth management if I can ask them.
Yes, please.
Yes. So there was actually a sharp decrease in the employee expense and the overall OpEx expense in the wealth management. So this is something which we have been seeing for last couple of quarters. And this at a time when a lot of bankers have actually increased. So what is driving that? And how sustainable is this?
So Karan is here on the line and -- Karan? One minute because I think Karan also -- if he's available, he will answer it. Karan, are you there? Give me a minute. Has -- Karan couldn't attend the call or not? Karan, can you hear me? Okay. I think Karan is not there. But what has happened is the variable component of our employee cost has gone down significantly. Because this year, if you notice, then with the change in business model the fee income also has changed. And actually that is what is showing in the lower employee cost.
Right. And what -- how should we look at the trend going ahead?
The trend going forward I think will stabilize. So there's a new [ number ]. So again, over a period of time gradually it will increase. But I think the base that you are seeing is now the -- certain numbers that you're seeing is more like the base.
Right. And one question on the yield. So basically, I was trying to calculate the retention yield for the full year, which is the net commission income that you have disclosed. So it is different. It is coming different from what we have in the presentation.
So I'll tell you. Out of INR 163,000 crores, INR 31,000 crores are [ custody ]. So this yield is net of that. I think Karan is on the call. But I just asked the agent, or the operator I'm just trying to connect, Karan? Is he not...
On mute.
Is he on mute or -- okay. Hello? So yield if you see, then the -- I think the 85 basis point that you're seeing is based on ex custody asset. So out of INR 163,000 crores, possibly INR 31,000 crores are custody asset. If you do the numbers, that then I think you'll get the correct number. But if you guys just wait, I'm just trying to patch in Karan Bhagat also. Give me a minute. But -- okay, we can move on to the next question. He will just -- as soon as he's in, he'll take more questions on this. Any more questions?
The next question is from the line of Shiv Kumar from Unifi Capital.
Sir, my question is with regards to the construction finance loan segment. There, instead of -- for a GNPA of 4.4%, you have provided fully and you have a net NP of 0%, which is very good. But going forward, what is your strategy? Will you continue to fully provide for whatever GNPA is there in the construction finance business? And what is your outlook going forward in that business or stress?
So this is Balaji here. I head the real estate, the construction finance business. So essentially, to answer your question, yes, we did fully provide. And of course, we also have some resolutions, which had happened in the last quarter, which resulted in this. And going forward to answer your question, we will review each transaction on a case-to-case basis and see whether it is necessary to fully provide or whether there's a resolution which is possible, which covers the entire exposure of the business.
Like, sir, can you give more granularity on the resolution? Like how much was the GNPA at the beginning of the quarter and how much was resolved during the quarter?
No. At the beginning of the quarter, we had INR 480 crores, which was there which we had recognized and out of which about INR 214 crores is what we managed to resolve. So basically, these were the resolutions which has happened is where we had initiated certain facility actions and so on. And we had taken possession of the land. And during the quarter, we managed to recover all these lands. And therefore, we resolved it.
And what will be the number of accounts, sir, when this -- when you started the quarter, INR 480 crores, what will be the number of accounts?
I think -- see these are all largely ticket sizes. So these would be I think about 4 or 5 accounts. And now we will be probably left with maybe 2 or 3 accounts. So that is how the sizes are -- the ticket sizes are. The tickets sizes are roughly in the range of, I think, around INR 80 crores to INR 90 crores.
And what's your outlook, sir, going forward? Do you think you're done with the recognition of stress and -- or do you still expect some stress to come onboard?
So I think we are done with the recognition of the stress. Because I think the most stressful time is what we saw was between November and March. And the reason for this, of course, was multiple. One, of course, is that we saw much lower sales because of the GST impact and the announcement of reduction of GST and so on. And plus, of course, we saw liquidity issues at the beginning of the third quarter, where there was stress on disbursal of home loan and so on and so forth and construction finance. So I think that what we have seen in the last of our 2 quarters or I would say a little over 2 quarters was probably the worst of time. And I think going forward, we don't see an issue at all.
Sir, one question for the wealth business. I don't know whether you already clarified on this. The retention yield on ex custody assets was 84 bps for FY '19. What was it for Q4 specifically? And what is your guidance going forward now that you have moved to advisory more of...
Karan? Is Karan there now?
Sure, sir. I'll unmute his line. Just give me a minute. Sir, Karan is in talk mode.
Okay. Karan, can you just take that?
Mr. Karan Bhagat?
Hello?
Karan, we can hear you now.
[ Hello ]. Great. So I'll quickly answer all the 3 questions. So the employee expenses variated, like Nirmal wisely pointed out, only to the extent of the variable provisions. Otherwise, the fixed component more or less remains in line. I think we'll be able to get a little bit of efficiency there over the next 1 year to the extent of 5% to 7%. But otherwise, it's pretty much going to be around the number, the trend is to continue. On the margins and the yields, like Nirmal again pointed out correctly, apart from the INR 31,000 crores, the INR 84,000 crores is 85 basis points calculated on the ex custody assets. In quarter 4, the retention on the assets excluding the custody assets would be slightly lower. It'll be in the region of 70 to 75 basis points. The new normal because of the revenue recognition on all our distribution products being in the region of -- being on a trail basis instead of an upfront basis, I think will get our retentions down. We have to discover that over the next 3 to 6 months as we move plans to advisory. But given our experience over the last 3 to 4 months, I think we'll be in the region of 70 to 75 basis points on a gross basis, pretty much what we've seen in the last quarter.
Sir, one last question on the listing part. What are the time lines for listing this IIFL Securities and IIFL Wealth?
Sure. As I said, the record date is 31st May. So if you're a shareholder then and you've be a shareholder on 31st May, you get the shares of IIFL Securities and IIFL listing. Then the procedure of exchange can take up to 45 days. So I would think that it can happen by not later than July 15 but probably depending on how exchanges are through and processed. It can happen anywhere between June, end of July, mid-July.
The next question is from the line of [ Saptarshi Chatterjee ] from Centrum Broking.
So my question again on the developer finance. So around we had 4.4% of the GNPA. And out of that -- so out of INR 480 crores, INR 240 crores we have resolved. But the rest INR 240 crores, which is roughly around 2.2%, we have written off. So I just want to understand, apart from the concern in the underlying segment itself, where did it go wrong? And how do you plan to correct in our underwriting skills? And what changes you are bringing?
Okay. So to answer the first part of your statement. So we have not written off INR 240 crores. As in all these are in the process of resolution and disposal of the assets and so on, so you will see a further reduction here onwards. So there is, I think, barely anything that we will end up writing off. So that is the first part. Second, coming to what you said is that what have we done to improve? Now, of course, too, one has to also get into a root-cause analysis of what was the cause of these issues which came up. See the issues which had come up mainly were I would say due to the market and the environment to a large extent. So if you see over the last about 8 to 9 months or even a little bit more, the liquidity as well as the sales velocities have been fairly low as far as the entire sector is concerned. The sales velocity was low as there was a anticipated reduction in the transaction tax, which is GST, which the government had announced sometime in November. However, it came into effect only in the month of April. So, therefore, for a good about 5 to 6 months or so, there was barely any buying or purchasing which was happening in the sector. Secondly also is that post-September about at least for, I think, about 2 months or so, most of the housing finance companies had slowed down disbursals in this segment because of liquidity issues. So, therefore, again, there were cash flow issues.So I would say that the last 8, 9 months was more of environment rather than anything else. And of course, we also saw 1- or 2-odd delays, which also happened because of certain regulatory approvals, et cetera, which were delayed beyond a point, which eventually, of course, came. So I think the -- as far as the learning is concerned, I would say that as far as the underwriting process is concerned, we have been robust, and we continue to strengthen the underwriting process. In fact, now that we -- now we have, in fact, external independent directors also on the investment committees that we are taking calls on any transaction that we are doing, number one.Other than that, we have -- I think most importantly is that we have really strengthened our asset management capability. So we have now got dedicated a team in order to take care of asset management on a day-to-day basis, where we have in fact a little presence on all the project sites. So I think that is one of the most important steps that we have taken in order to ensure that we are in control of the entire project cash flows and know well in advance whether there is going to be stress or not. Yes. So also, other than that, so as far as this sector is concerned, we have always been focused on the mid-market and the affordable residential segment. So I think we are one of the few players who have never ventured out into any of the high-premium residential project. And therefore, we see -- probably you see 1 or 2 quarters of lower velocities and so on and so forth. But otherwise, given the depth of demand in the segment in this country, I think we are fairly all right as far as the segments that we are operating in continue to be growth segments.So as I said, temporarily we view the issues like what we saw in the 2 quarters in the past. But overall, I don't see a issue which is there as far as the future of this segment is concerned. Now if I look at the portfolio mix, which is also given I think in the presentation is [ there]. Now if you look at the areas in which we are operating, these are -- if I look at Bombay, for example, we would be operating in places like Boisar, Borivali, Panvel, Thane and those kind of places where that unit price itself is fairly low. So we are not really operating in, let's say, Central Bombay, where the actual problem is there. So we have always stayed away from those segments as a strategy. And over the last about 10 years, we have also been maintaining our relationships with a preferred set of developers with a good reputation and track record of having delivered and paid, which has actually paid off for us. And most importantly is that in every transaction that we have done, we have always kept a minimum cover of at least about 2x as far as the asset value is concerned. So we have always -- even though, let us say, we might have temporary situations of maybe 6 months, 12 months. However, given the kind of covers that we have, we always have viability in all these projects. And therefore, to come back to the first statement, we do not end up writing off anything.
Okay, sir. And in terms of going forward disbursals, so out of the 3 geographical zones, which will be in your focus and which ones you will try to mostly avoid?
Well, I would say that, firstly, is that we are not really focusing on increasing this business in this -- in the balance sheet as far as the sector is concerned. So we -- our proportion will probably either remain same or be reduced. We -- as far as geographies are concerned, we still believe that the depth of markets do exist in NCR, some parts of Tier 2 cities in the north and to some extent not -- I would say not in Central South Mumbai. But if you go to the far suburbs, et cetera, Pune, for example, is slow today. So as far as future strategy is concerned, to answer your question, this is something which is a review which we do strategically where to invest, not to invest or lend every quarter or so. So for example, one quarter we might find that there is a opportunity and the markets are doing well in, let's say, Pune. But after a certain point in time, we find that the markets are probably not doing well over there because of oversupply situation. For example, we've stayed away from Hyderabad for a good many number of years. But, however, we have started looking at lending transactions, and we are doing there in the last 1, 1.5 years after the political stability has come and the demand has picked up again. So these are things which are, I would say, dynamic in nature and do keep changing over time.
The next question is from the line of Anitha Rangan from HSBC Asset Management Company.
I just had one question. In terms of like your business loans, your NP actually has gone up and -- but still your net NP is also like around 2.3. So in your developer book value, were you able to like resolve what is the kind of asset quality you are seeing here?
Can you repeat your question, where is [ asset quality ]?
In the business loan segment. Yes. So I'm curious, net is also 2.3 versus your developer book value at -- NPS is like -- net is 0. Here you have kept your net [ NPS ] around 2.3. So what is the status of resolution here? And if you can give some clarity here. And my second question is under developer segment. Will your loans actually be like exclusive to the developer? And is he actually facing any underlying liquidity and how are you hand-holding some of the developers? Because if there are low ticket sales, I'm sure developers will be facing some kind of a liquidity from other sources as well, liquidity pressure. So how you are hand-holding them in terms of [ putting ] them in this point in time?
So I think Sumit [Audio Gap]part of the question. But for clarification is that when you look at net NP -- so you see in accounting, now there are 4 types of provision. And only the state [indiscernible] provision [indiscernible]. Or to put it differently, other than this, we have a significant standard as a provision, which is not at -- [indiscernible] 39% coverage that means that [indiscernible] provision is 139% of GMP in aggregate. But other that, 69% is my provision against specific assets, and the remaining is my standard asset provision. So that is also [indiscernible] a question. But specifically, our strategy for taking billions in [ case ] of business loan, Sumit will just take up the question. And about developer, Balaji will [ take it ]. Sumit?
So on the business loan, a slight overview. We are about INR 8,100 crores; 70% of the book is collect [ like ]; 3% only is uncollected. It is predominantly lend to business owners backed by cash flows and collectors. For us, the assessment of cash flows is pretty important. You see the yield -- the growth last year has been 10%. If you see the yield on this businesses is about 15.7, and it is moving up. And therefore, 2.3% GMP on this is not a very off number. There is property collateral, which takes time to get resolved. So the equity [ conflict ] you see resolution happening on this. But overall, given the yield and the kind of growth rate at the moment towards granularity where we are only looking at incrementally average ticket size of INR 22 lakh onboarding. I think we are in good shape to go to this.
And is this the book -- what was the mix between SME and business loans and [ lat C ]?
So effectively, these are all medium and smaller microenterprise. 70% is collateralized. 50%...
70% is lat and 30% is nonlat. Yes.
So coming to your question on hand-holding of developer in times of [indiscernible]. Now essentially, I would put this as a spectrum, right, which is starting from [ legacy ]. Now as you see, we have got a fairly local with distribution and branches, which is there, both on the home loan side, gold loan side and the security side. So we do have various methods by which and processes by which we do quite a bit of cross-sell. So wherever we find that there are depressed deals and there is direction required, so we have gotten into such projects and use their own distribution in order to accelerate sales in a lot of instances, so which obviously enrich cash flows. Second is that there are instances where we have actually bought into the project itself and decided to redesign the product in order to make it more suitable for the micro-market, make it more affordable with the changing time. So that is the second step we have done so far. And the third is the -- is that we have also had very -- have had various instances where we have got stronger partners to -- [ and to do ] the equity and take some -- and do some sort of commercial contract with the existing developer by which we are able to infuse equity and take the project forward, and by mere strength of brand and financial strength, we are able to carry the project forward. And the last, of course, is the least desirable, which is to go the completely legal route and where you need to take over the asset, which maybe we may have done in, let's say, a couple of instances. But otherwise, between the first 3, we are able to help developers manage the cash flows and so on because in most of these relationships that we have, as I mentioned, we have been carrying a lot of these relationships for the last about 10 years, where we have seen a lot of developers returning the money, coming back, borrowing more, in at least about 2 to 3 cycles if not more with most of these people. So therefore, we believe in hand-holding. We have done all these 3 things, which I mentioned.
Okay. And would this be exclusive like you will be the only exclusive sole lender? Or this will be like a consortium?
So generally what happens is that impacted all the incentives we have -- all incentives we had the single-lender growth project. So we might have projects which are other projects which are probably mortgaged to others. But, however, as far as we are concerned, we are always the sole primary lenders to any our projects that we're funding. We don't share anything.
The next question is from the line of Digant Haria from Antique Stock Broking.
Yes. Just wanted to know that we did around INR 2,800 crores of securitization or direct assignment this quarter. So what would have been the income generated on that point?
Yes. So from an -- at least the consultant sector, we had an income of around INR 68 crores, which had come into our books for this particular year, financial year. As anticipated, it has been on the assigned portfolio.
Okay. Okay. And then most of it is direct assignment, right? So we under-indexed? We have to book everything as in when the direct assignment is done, right?
Yes. So under Ind AS, in case of a direct assignment, whatever is the excess credit income which you're going to get in the future, you're supposed to book it upfront in the year you do the assignment. And also, the P&L impact for the payment is around INR 68 crores.
So you mean all the entire INR 8,000 crores or INR 9,000 crores of assignment that we did in the year, the income effect of that is only INR 68 crores.
Yes. That's basically because whatever has been booked in the previous years also gets reversed out and amortized during the year. So the net impact into the P&L is INR 68 crores.
Okay. Okay. And after the sale of CB Finance to Indostar, what is the net worth of our -- this IIFL Finance or our NDSP?
Yes. So the IIFL including the [ adjusting ] and everything are closing at what is around INR 4,300 crores.
Now my second question is mainly on this growth strength that -- I see that we have grown our microfinance book pretty fast. And I understand that real estate now we are -- maybe a lot of other players may not want to grow just because of the kind of backlash that investors would have in the future for this business. But then microfinance, we have tripled our loan booking just 4 quarters. So are we again trying to like reduce one segment which could probably become less risky in the future, which is real estate, and maybe go and grow fast in a segment which is probably going to be risky in the future because we have seen 3 years of fantastic growth in microfinance. And we have seen these cycles definitely come again and again and again.
Good question. So first of all, as you rightly said, that the real estate might be seeing the drop and -- so we are not exiting the segment and we are not reducing our exposure as a group. But what we are doing is [indiscernible] is that the new exposure to developer we are taking through a fund structure. Very recently, we raised in the housing fund in which even [ Fairtech ] has started a sponsor. DG, which is generally [indiscernible], come as a partner. And we raised about I think INR 2,200 crores plus, and we have started deploying that. But what -- so what we have done now as a strategy, we believe that real estate in a good sector, but -- and we will be taking a lot feedback. Some of them may sound problematic, but also what you need to do is you need to pull it together. And that's what we are doing. And until now, we have raised 7 funds, 2 of them are more or less fully exited with a yield of almost around anywhere within 16% to 18%. So we have a fairly good track record in managing the financing of real estate developers for the last 10 years or 9 years. And so we continue to grow that but not through the balance sheet of NBSC as much as through the fund structure. So that is your question #1. The second part of your question in microfinance. So this growth what we are seeing is on a small base. So there are 2 ways to look at it. You can say that the book has tripled, and there is about INR [ 1,500 ] crores growth in the book in the whole scheme of things, which is INR 36,000 crores probably. So on a small base, the growth may appear in percentage term higher, but this is not something which is under review and extraordinary. When we have [ 5 ] microfinance, we were very clear that we obviously have to bring it to scale and size so that it becomes a meaningful part of the portfolio. And it doesn't make sense for us to do the entire [indiscernible]. Having said that, the [ rift ] that has happened in microfinance sector over the last few years has been primarily driven by political factors which have been localized in some geographies. So what we have done strategically is that when we acquired this company, it was predominately operating in 2 states with a very a minor presence in another 2. Today we are there in 16 states. So -- and that is our [ growth ] because what we have done is that we have expanded the -- given the synergies with our network -- because in any case we have other microfinance, we're almost above 40 million [indiscernible]. So we have synergized in that. We have responded in 16 states so that geographically can be anticipate that if we don't. So based on that, I think growth on an overall base will continue, but is that's surely under control.
I have one question. And in terms of -- even in terms of this SME, we have now clubbed or [ LAP ] portfolio with the smallest. I mean so one portfolio was there 13%, 14%. You let one portfolio was around 20%. Now we are treating that as one portfolio. So in that [ deal ] with the old LAP portfolio, like how are the -- how is credit trend? And like will we see a reduction in ticket size here because I believe we used to do between INR 50 lakhs to INR 1 crores kind of ticket size there? Can you give any focus here?
No. No, I think it's very relevant [indiscernible] and a good question. What we have done is that when we started the business 10 years ago we used to do INR 7 crores, INR 8 crores of LAP as many other players in the industry do. Then over the last 2, 3 years, we realized that the competitive pressures in this segment have brought the pricing down to a level that just gives the [ not ] property pricing. So supposing there are people who are getting LAP at 10%, very excessive cases of 9.25, 9.5 or so. So then when we thought it better to do affordable housing finance at that current year. So we exited the last ticket [ averages ], say, between INR 2 crores or INR 10 crores kind of. I think where we -- we were there earlier. So that segment of portfolio is running down. But the common characters [ peak ] of this portfolio has [ reduced ] the larger ticket with large or reduced smaller ticket with unsecured is that the primary reason to give credit is based on cash flow and not character. So even if you have [indiscernible] between [indiscernible] for loans [indiscernible]. But the primary driver is that the cash flow should meet the repayment and not anything else. And when you do cash flow assessment, then obviously income tax records have one small part of the whole assessment exercise. Because in Indian context, we are very finely, well-developed [Technical Difficulty]and things like that. So this portfolio, we increasingly see -- incrementally we are not doing large ticket. [ Let me just say. ] Today, we are not looking at doing a big [ LAP ] in case. Even the last business, there is a smaller ticket and securing even smaller, 4.5, 5 -- or 6 LAP of this ticket size. So you can see further decline in the average business loan side. But these are all loan given to business based on cash flow. This is one. Two, we look forward in this [indiscernible] because the business was keep getting renewed and the cash flow also grows around with you. So now, that is how the business has shaped out.
Last question, if I may. Your gold loan business has done exceedingly well. So no questions on that. But just the other parts on how much liquidity are we holding? And what have been the borrowing rates for us both in the NBSC and the wealth business?
So I think, as Balaji pointed, that our borrowi3G rate has gone up by 58 basis points on a Y-o-Y basis. And on the total portfolio for the business, I think it's a similar trend in our [ residence ] business also. And in terms of liquidity. So you look at our wealth, we are out of [ CPs ] completely reduced our book size and all the assets are -- [ you can say ] callable against liquid security. So in the short term I mean you can renew them. And then as far as our [ leases ] are concerned, we can sell them all to the bank, as I said in my opening remarks. So 85% of our loan book in fact is something that banks can be willing to buy. So I see that we should be able to manage the liquidity for failed or so-called crisis well.
The next question is from the line of Megha Hariramani from PI Square Investments.
My question is on the growth side. For all the 3 division finance, wealth and investments securities, what kind of growth do we see going forward?
So I think NBSC sector last quarter trend if I look at it -- because I really can't make forward-looking statements. But I'm saying that if you look at the trend and we are growing around 25% in volume terms. Last year, we grew about 36% post tax profit. So more or less, we should plan to maintain the trend. Wealth is -- currently there, it would just depend with what is guidance or...
On wealth, I think the number to closely track for us would be the growth in assets, and we hope to continue our 20% to 25% growth in asset number there. We expect retentions to be potentially in the same region to round about 10% lower. But -- and simultaneously to that, increased productivity of [ variance ] because the weighted average productivity of [ variance ] has gone up substantially for us. Our weighted average maturity or 10-year [ pattern ] with us in the fund is now exceeding more than 5 years as our attrition rate continues to be sub 2%. That's a factor which we believe will drive growth and productivity in a large way. So I think we should be able to, in spite of being at a large asset base number, be able to maintain our growth in assets in the region of 20% to 25% going forward.
So the business is volatile, and it has a higher EBITDA, and it also depends on the market. But what is happening over the years, we have seen is the -- even segment is becoming resilient to the cycle because of whether that -- first of all, okay. So there are 3 segments in the securities business. It is our [indiscernible] booking and investment banking. So in region now significantly moving towards all [indiscernible], so you have a high operating leverage. And also with the many -- of the new customer, new millennials, they are looking at not only equities but also [indiscernible] the market for investment even. So they're looking at multiple products. So if you look at our portfolio, within the retail and the bond equity has been rising for the last 4 years -- 5 years. It's just a business -- again, the domestic mutual funds part of it will drop more now. And that's the fairly steady flow of money to domestic mutual funds as compared to foreign investors. And there again, that why we should see that volatility . Investment banking is dependent on [ equity capital market IPO ] and [indiscernible] again. I mean [indiscernible] but as the market become larger, deeper it should stabilized. But as a matter of fact this business is dependent on capital market cycles.
Okay. Next is on the interest cost. For the quarter, our interest cost was like just 3% as compared to the last year. So is there any -- in all locations why interest costs went up?
No, you're looking at consolidated number?
Correct.
Okay. Maybe the better way to look at it will be [indiscernible] because what will happen is that the interest cost on [indiscernible] might have gone down as the book has gone down and even in holding a [ securities ] business at the margin book has also fallen. But IIFL Finance interest cost has gone up by 24% for the full year. And interest income has gone up by 30%. But again, as I said, our net interest volume has gone up for 3, 4 reasons, which I explained. CV business is relatively at a lesser interest margin as compared to gold and business loans. The growth has been significantly higher than gold business loans and microfinance. So you can see those. But you know what happened? In gold and microfinance and we are expanding our network. We have had operating cost increases significant. So if you look at the number of branches, yes, there are significant that are [ developed ] almost by maybe 500 or 600 to 1,000 [ here ], so almost 50% growth in the number of branches of microfinance and gold. And therefore, you see that operating costs also have gone up by 57%. But then, this [ in fact ] should be good for us to extend -- to sustain the growth over the next few years.
Okay. And how many branches would be at profit on the operating level?
So very broadly, our branches they've given in 1 to 12 to 18 months’ time. And also, the -- even the -- so I would say that at these 2,000 branches will be [indiscernible] for sure. And many -- from the remaining also, the losses or the deficit will be very marginal.
The next question is from the line of Nischint Chawathe from Kotak Securities.
This is Nischint here. Just a couple of data-keeping questions from my side. First of all, I think if I look at the overall interest income for the quarter, what was the contribution of your loan assignment?
Loan assignment?
Assignment income, which is sort of tends to be one-off.
For the quarter you say? For the quarter how much was it?
It was a [ loss ]. It was kind of -- it was a [indiscernible] of INR 14 crores.
So actually, the full year INR 68 crores is done. But the -- in the quarter, actually, there's a negative INR 14 crores.
Sure. So if I really look at this, your income has gone up on -- a quarter-on-quarter basis, interest income has gone up from INR [ 11 75 ] crores. And I remove this INR 14 crores, it becomes something like around INR 1,309 crores. If I look at your -- it's a fairly large, almost like a 12% sort of rise in interest income. And if I look at your reported loan yield, that has just gone up from 14.3 to something like 14.7. So what really explains the difference? And if anything your average loan book for the quarter has gone down? So there is something that we are really missing over here.
Yes. So around 185. But I think [ adjusted ] from the CV business high [ volume ].
No, that's not a part of the interest income like that's...
No, the CV business also happened on 30th March -- 31st March.
But if I tried to look at it -- and not that the loan book -- loan [indiscernible] increase in loan book for us to say that...
No. No. What happened is that CV interest income has accrued but the CV business [indiscernible] happened toward the end of the quarter. So you are seeing that in the loan book.
But can that be the only reason because [indiscernible] becomes all that would happen is INR 26,000 crores would have been liked INR 29,000 crores or INR 30,000 crores.
So what INR 35,000 crores of GMP also in this.
But that's a part of the interest income?
No. No. That's the [indiscernible].
[indiscernible]. As I understand your query, it's more on the interest income line the reason for the quarter-on-quarter increase in the interest income. Okay? So on a quarter-on-quarter increase of interest income, as also highlighted in the beginning of the call also that there has been quite a few resolutions which we've done in this particular year. The moment you do a resolution for the cases which were [indiscernible] cases, you have an interest recognition coming up into your books. So in this particular quarter, because of the resolution of GNPA cases, we have a significant interest recognition appearing in our books.
But this would be like P&L interest or something, is it?
No, not the P&L interest. The actual interest on those loans which have been resolved. So the moment you classify them into an NPA, you cannot recognize the interest income. If you resolve those...
I guess what you also mentioned was that under Ind AS you would continue to recognize interest income in the interest line item and make a corresponding NDA provision.
Yes. So then under NDA, that is what we do. And that's the reason I'm saying that the moment I tried to -- if I clear the ECL provision, then the net impact on the P&L is 0.
That's right. But I'm just looking at the interest income line item. I'm not looking at the overall P&L.
No. So I correct myself in terms of saying that when you [ obtain that ] an interest income in terms of accrual [indiscernible] cases of provision is also created under the same interest income line because I can't [indiscernible] my income and come and create an ECL provision on interest under the provision length. So for NPK, it happens...
Is [indiscernible] interest income.
Yes.
You adjusted with the interest income itself and you take [indiscernible]?
That's right.
Yes. It's not in the [indiscernible]. That's how the interest will be deferred for the quarter in the GMP line.
So can you give the ECL numbers on stage I, stage II and stage III for third and the fourth quarter? We are just trying to kind of figure the [indiscernible] with provision number.
So when we're talking about the ECL number in terms of you're looking at an overall basis, right?
Yes, overall.
The provision that [indiscernible] are one stage [indiscernible].
No, 31st March, we are [indiscernible].
Yes. So on 31st March, we have INR 800 crores. So from a stage I perspective, we are at INR 87 crores, which is including principal line interest elements. On stage II, we are at INR 50 crores. We have on the SCIR cases, which is around INR 257 crores. And on stage III, we are at INR 469 crores.
But you said 87 50. What is 2 57?
So [indiscernible] even if they are performing assets. But if you're seeing there is a significant increase in risk, then you make a provision against all assets.
And for March 31st?
This is March 31st only.
I thought you said December [indiscernible]?
These are March 31st numbers.
Okay. And if you could share December numbers so that we just kind of look at the reconfiguration.
December would be higher because CV hasn't [indiscernible], but we'll give you the numbers.
Yes. For December, our overall provision was INR 1,258 crores. This is including the CV business. So stage I was INR 239. Stage II was INR 32 crores and INR 222 crores and stage III of INR 764 crores.
Okay. This is very helpful. Now just quickly moving on to the wealth business. We wanted to just understand during this quarter what was the components of upfront fee which possibly cannot be or may not be recognized either next year when you would kind of move more towards the new regime? And any guidance in that line that you could share with us?
[indiscernible],very quickly. I think this is overall thing around about 57% to 58% of our overall revenues are annuity based already even including the last quarter. The remaining 40% is essentially a function of distribution as well as a little bit of brokerage but mostly distribution fees, which is recognized upfront. Now out of that 42% brokerage, which is part of it, which is a function of equity, real estate, fixed income, that will continue the way it continues, which makes up close to around about 7% to 10% of our income line. So 58% plus 10%, 68% to 78% continues as normal. The remaining 30% of distribution income effectively amortized for the year more or less falls to half the number as you build it out through the year, which therefore makes it around about 15% through the year. From the first quarter, the impact can be slightly higher. And that's the number which kind of has to correspondingly being made up by the increase in the fee income through the full quarter.
Yes. Increasing AUMs essentially.
Yes. That's right. So increasing the yield among the advisory side on [ ISO 1 ] has moved from round about INR 180 crores, INR 200 crores at the end of 31st December to around about INR 7,400-odd crores on 31st March.
So [ ISO 1 ] essentially INR 7,000 crores? So total [ advisory ] is around INR 10,000 crores?
At an average fee of around about 48 basis points.
Okay. Just on the net worth of the [indiscernible]. I think you did not share it this quarter.
It is there in the balance sheet.
They're in the balance sheet around INR 3,000 crores.
Sure. And on the wealth business, what was the investment book? That was one of things I did not really see.
So the investment book is mostly in liquid funds and a little bit of [indiscernible]. But otherwise, the loan book is INR 4,800-odd crores. And plus we have our own [ ES ] investment, which will make up nearly INR 450 crores, INR 500 crores. There we are acting as a sponsor for [ our own ] alternative investment funds.
So next year, the number will be similar to previous quarter, I think INR 500-odd crores last quarter?
Yes.
Sure. Just now on the -- just one thing. What are the total number of outstanding shares now.
Netted up [indiscernible] investment, yes. The number will be the same.
Now IIFL Holdings for the parent, what are the outstanding number of shares?
[indiscernible] as a growth?
No. No. Sorry. Just IIFL Holdings what's are the outstanding number of shares?
IIFL Holdings, [indiscernible].
Sorry, how many?
[indiscernible].
[indiscernible] 31.94.
INR 31.94 crores.
INR 31.94 crores. And how much was the capital interest in the NBFC?
No, we didn't on the [indiscernible].
During the quarter or during the year in the [ yearly interest ] something?
No. No. So NBFC, we have 85% is owned by the holding company, and 13% is owned by CBC.
So was there any intrusion during the year?
No. No. No. No. There only [indiscernible] housing finance for NBFC, but that doesn't make any difference because housing finance is [indiscernible].
Sure. And can you just give us the total share count for the wealth business as well as the housing -- wealth business as well the securities business? I guess the number of shares for housing will not change and IIFL Holdings will...
No [indiscernible] wealth I think is...
NO, wealth will also not -- the number of shares will not change.
[indiscernible].
It's around about INR 8 crores, 85 [ like shares ] on a fully diluted basis, out of which 52.5% to 50% held by asset holdings, which will -- basically is around, what, 4.5 per shares will get allotted to shareholders of asset holdings in the -- for the proposed [ operation ].
Sure. And securities?
Security [indiscernible].
The number of shares.
[indiscernible] same number of shares.
Sorry, same number of shares, right?
Yes.
You next question is from the line of [ Nikki Nawaljah ] from [ Suondamon ] Mutual Fund.
I had a question on the wealth side of the [indiscernible]. Could you just explain the changes that you made in the [indiscernible] remuneration is this related to the [indiscernible] decline in the OpEx [ on particular services]?
So no changes as in compensation. It's a function of if you actually see the fixed plus the variable put together as a function of the revenue, it's more or less constant in the region of 30% to 35%. So there's a sequential decline because of the component of variable coming down. The fixed continues to be more or less -- remain the same.
So the variable, I guess because we are now -- somehow -- how is the variable linked now -- how is it linked to the top line because I think we were recognizing around 40% of the part of the [indiscernible]. Is it the variable is also linked to a [indiscernible]? Or how is it?
[indiscernible], the best way to look at compensation is as a percentage of the top line. So if you look at compensation for last year, for example, you had 250 plus 140, which was around about INR 400-odd crores on a wealth income of around about INR 900-odd crores. Okay. So that's the broad number round about in the region of 40% to 45%. In the current year, you will have around about INR 336-odd crores on a top line of around about INR 950-odd crores. Okay. It's a similar number. 40% is the compensation number either coming from fixed or variable as a percentage of top line.
Okay. And you also mentioned that since 42% of the -- our revenue is still upfront, if I heard correctly. Now, I think...
No. No. I'll explain again. 55% to 60% of our revenues come in the form of either management fees our advisory or part of our loan syndication fees. 40% is essentially made up of 2 components. It could be distribution income or brokerage. At a minimum, brokerage happens in the region of 7% to 8%. It's a mix of not only equity but a lot of asset classes, predominantly fixed income, structured products, equity and so on and so forth. So around about 70% is a function of [Audio Gap]fee income, 10% brokerage, and the remaining 30% is essentially a function of distribution fees from third-party products distributed off other manufacturers. That 30% is going to be recognized on a trail basis and should have been recognized on an upfront basis.
Okay. And you said that the impact on the first quarter will be higher.
Right.
So why only first quarter? I mean this [indiscernible] was a full year, right?
No. No. So the distribution fees starts coming to you on a trail basis instead of coming to you on an upfront basis, right? So effectively, business done through -- business done in the first quarter and second quarter, in the third quarter they start coming to you cumulatively as a trail basis. Only in the first quarter the impact is larger because you're not accounting trail for the ongoing basis.So, for example, hypothetically, if you, let's say, do INR 100 crores of distribution in quarter 1, you would have accounted only for around about potentially INR 50 crores if the businesses happened through the quarter. You'll only get round about 45 days of trail income. But in quarter 3, you'll end up getting the full 3 months of trail income. And the asset side also increases for the distribution business done in quarter 1 as well as in quarter 2.
If I remember exactly, I mean we had -- given the [indiscernible] upfront acquisition upfront was closer to INR 500 crores and not INR 1,100 crores. Now I just want to understand this part of the business. I think from what I understood that this part of the business will reduce by around 25% to 30%, right? So effectively, our top line it will be closer to INR 200 crores to INR 300 crores. Am I right?
Yes. Because of the impact of recognizing distribution on a trail basis instead of upfront. That's right.
The impact will be INR 300 crores, right?
INR 240 crores to INR 250 crores.
I would now like to hand the conference over to the management for closing comments.
Thank you so much for being patient and being on the call. If any more queries, please feel free to send us a mail or get in touch with us. You can get in touch with Pooja at -- the Investor Relations manager. Thank you so much and have a good day.
Thank you.