© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the Q1 FY '23 Earnings Conference Call of LIC Housing Finance hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Praveen Agarwal from Axis Capital. Thank you, and over to you, Mr. Agarwal.
Thank you, Margaret. Good morning, everyone. And from the management team, we have Mr. Y. Viswanatha Gowd, MD and CEO; and Mr. Sudipto Sil, CFO, to take us through the key highlights of the call, post which we'll open the floor for Q&A.
Over to you, sir, for the opening remarks, please.
Thank you, Praveen. Friends, very good morning, and a hearty welcome to everyone of you for the post earnings conference call of LIC Housing Finance Limited. As you are aware, we declared our results for Q1 FY '23 yesterday. Prior to detailing the operational aspects, I would like to highlight that a strong momentum in the economy was witnessed throughout the quarter as compared to the previous quarters over the last 2 years, which is reflected in the robust growth in the disbursements.
The quarter under review also witnessed a 90 bps policy-reported hike. In aggregate, the 2 consecutive MPC meeting held in May and June. And also the -- also another 50 basis points hike today. As a result, the company also raised its benchmark lending rate by 60 bps in June '22 in response to earlier 90 bps policy-reported hike.
As reflected in the strong disbursement numbers in Q1, the current year promises to be better than the last 2 previous years. The financial highlights of the quarter are as follows -- key highlights of the quarter results. Number one, the total revenue from operations were INR 5,285 crores as against INR 4,867 crores for the corresponding quarter of the previous year. It is up by 9%. Outstanding loan portfolio stood at INR 2,55,712 crores against INR 2,32,548 crores as on 30th June 2021, reflecting a growth of 10%, out of which the Individual Home Loan portfolio stood at INR 2,09,599 crores as against INR 1,82,055 crores. It is up by 15%. And now it comprises 82% of our total portfolio. It is also up from 78% 1 year ago.
The total disbursement for the quarter was INR 15,201 crores as against INR 8,652 crores. It is also up by 76%. Out of the disbursements in the Individual Home Loans were INR 13,131 crores as against INR 7,650 crores, with a growth of 72%. Disbursements in project loans were INR 309 crores as against INR 237 crore for the same period previous year.
Net interest income rose by 26% to INR 1,660 crores (sic) [ INR 1,610 crores ] as against INR 1,275 crores for the same period in the previous year. Net interest margins for the Q1 FY '23 stood at 2.54% as against 2.2% for the Q1 of FY '22.
Profit before tax for the quarter was INR 1,140.36 crores as against INR 192.93 crores in Q1 of FY '22, with a growth of 491%. Profit after tax for the quarter stood at INR 925.48 crores as against INR 153.4 crores for the same [indiscernible].
It is loan disbursements during the quarter was very strong, with 76% growth in total disbursements over Q1 of last year. Geographically, the growth remained evenly distributed across the various regions, with South Eastern, Western and Southern in the leading.
Our mobile platform, HOMY app, it continues to add value, and it accounted for over INR 6,500 crores in the sanction during this quarter.
In terms of asset quality, Phase 3 exposure at default as on 30th June 22, stood at 4.96% as against 5.93% as on June 30, 2021.
The total provisions as on 30th June 2022, stood at INR 6,141.03 crore as against INR 4,727.02 crores as on 30th June 2021, and INR 5,839.11 crores as on 31st March 2022. This includes INR 619.10 crores for COVID-19-related provisions. As of June end 2022, we have seen INR 4,500 crores approximately exiting out of OTR.
On the funding side, our cost of funds were 6.7% as compared to 6.88% as on 30 June 2021. Despite the rising interest scenario in the market, we have been able to bring down our cost of funds on a year-on-year basis. Incremental cost of funding stood at 5.44% for Q1 of FY '23.
With this brief introduction, I would like to invite you for your queries. Thank you.
[Operator Instructions] The first question is from the line of Sanket Chheda from B&K Securities.
My question was on asset quality. So last quarter, we had a restructuring of INR 7,800 crores and which was sitting in Stage 1. This quarter seems to be there is some flow to Stage 2 and Stage 3. So what was that flow? And how much restructuring is outstanding?
Yes. See, out of the INR 7,800 crores was the total OTR that has happened. And every quarter, as you know, some of it is exiting. As of today, including last few quarters put together, about 4,500 exits have been there. In terms of movement in the various stage buckets, you would have seen an increase in the Stage 3 by roughly around INR 1,000 crores. That is partly due to the movement in the OTR and partly due to the non-OTR accounts.
So how much is the OTR outstanding now in Stage 1?
In Stage 1, total OTR outstanding right now is about INR 2,060 crores to about INR 2,100 crores, you can say, which is both having interest and principal moratorium, and about INR 1,000 crores, which, you can say, it is partly in OTR because they are servicing the interest, but they are having a principal moratorium.
Okay. So INR 3,000 crores is what sits in Stage 1 against INR 7,800 crores last quarter. Is that right?
No, not in entirely Stage 1. As you would note that this quarter, what we have also done is that we have actually marked those specific accounts in the buckets that they were belonging to pre-OTR. So some of these accounts, which were in Stage 1 earlier, we have actually put them in Stage 2 as was the -- their specific DPD prior to the invocation of the OTR.
So sir, can you give a simple math, like INR 7,800 crores last quarter in Stage 1? Around that, how much are you [indiscernible]?
It wasn't in Stage 1. It was in Stage 1 and Stage 2 put together. It was not in Stage 1. The OTR was not in only Stage 1. It was in Stage 1 and Stage 2 put together.
Okay. So how much of that has...
The OTR outstanding number, which I have told you, is about INR 2,000 crores, which are both in interest and principal moratorium, and about INR 1,000 crores, which are servicing the interest, are bearing principle moratoria.
So last quarter, you gave INR 78 billion. Against that, what is the number this quarter in...
Yes, that is about a little less than INR 3,000 crores.
Okay. And second question is, sir, this quarter now, we have increased our PCR on Stage 2, but that has entirely come because we shifted INR 392 crores from Stage 1 as a provision. As a result of which, now the provisioning on Stage 1 is just 7 bps. I think regulatory requirement on standard asset is also 25 bps, right? It's much lower than that now.
No, it is not that way. Actually, if you look at it, the regulatory provisioning, which is there, that is as per the RBI IRAC norms, and it is actually fully and adequately provided. This what you are talking about, stage 1, Stage 2, Stage 3. This is basically on an ECL provisioning account. And this also, if you see on a year-on-year basis, there has been an increase. Of course, there has been a movement from Stage 1 to Stage 2 as we have rightly identified, and that has happened because some of these OTR accounts, which were earlier being marked as Stage 1, are now in Stage 2, not because of any change in the DPD but because we have actually migrated them to a position which was there prior to the invocation of the OTR.
So 7 bps is adequate, you mean? And annualized next quarter, we need to move to IRAC.
No, next quarter, we don't have to move to IRAC. I'm not able to understand your query.
No. So IRAC reporting...
IRAC reporting is primarily happening. No, there is no change in that. That's we have been calling since December, if you're talking about the November 12 circular.
No, so in Stage 3, we have 4.96%, right? But there are certain assets as per that RBI circular which we are still having in Stage 2, right? This 4.96% number is not the IRAC number. Is that right?
No, the IRAC number is separate. IRAC number is different. [indiscernible]
So that's what I'm saying. So we are not reporting IRAC as of now.
No, that is fully adequately provided. If you look at the provisioning [indiscernible].
[indiscernible] Yes, sir. What I'm saying that there will be some increase in the next quarter, right? As we have to...
If you look at -- I'll just share with you a few data points that will help you understand. The total coverage ratio sequentially on INR 2.5 lakh crores of assets has moved up from 2.3 to 2.40.
That's correct because asset determination is [indiscernible].
[indiscernible] The total coverage ratio on the project loans, that has also increased from 11.6% as of March to 13.45% as of June.
And stress has also increased, so Stage 2, Stage 3 has increased. But anyways, so this, I wanted to confirm that both these numbers would be different, like 4.96%, which is not the IRAC number. That's a different number you are seeing.
Yes. RBI IRAC is independent and different. And there also, if you look at the IRAC -- as per the IRAC provisioning norm, whatever be the IRAC NPA -- GNPA number, which is at 5.350, so separately disclosed. There also, it is fully provided as per the extant IRAC norms. Because you are kind of on the regulatory requirements, so there cannot be any leniency or any relaxation on a regulatory requirement.
Sure, sir. And keeping 7 bps on Stage 1 is also fine as per you, right?
Yes. If you look at on a year-on-year basis, it has improved.
[Operator Instructions] The next question is from the line of Mahrukh Adajania from Edelweiss.
I have 2 questions. Why I -- just following up on Sanket's question. So you said that the total exit from OTR over the last few quarters have been INR 4,500 crores, right? And those have been over the last few quarters. So what has been the exit in the first quarter? As in INR 7,800 has gone down to INR 3,000 or...
No, actually, the INR 7,800 crores was the total amount of OTR granted.
3% of our entire loan.
It was 3% of our -- so that was the figure that, in fact, in the public disclosures also, we would have seen that, that is the total amount of OTRs, which have been given by the company ever since the OTR program has been announced by the government -- by the Reserve Bank. So that is the total 3%, which was translating around INR 78 billion or INR 77 billion. That was the total figure. As of now, the outstanding figure I just shared in the previous [indiscernible].
Yes. INR 3,000 crores. But what I'm saying is that at 4Q may not have been INR 7,800 crores, right? it could be lower.
[indiscernible] It should have been lesser, yes. It would have been lesser.
Okay. And any quantification on how much are made from restructured in Q1?
Sorry? How much...
What is the slippage from restructured loans into Stage 3 in Q1?
Yes. See, roughly around, you can say about INR 400-odd cores, INR 400 crores to INR 450 crores.
INR 400 crores to INR 450 crores. Okay. Got it. Got it. And just one question on spreads. So you've given the portfolio yield and the portfolio cost of borrowing. And if you deduct these -- I mean if you deduct costs from these, you get a spread of 1.3%, whereas if you actually see your net interest income and then try to calculate the spread on the balance sheet, it comes to a figure higher than 1.3%. So how do you tally the thing?
I'll explain it this way. The spread that is reported in our communication, that is basically taking into consideration the yield on the entire advances and the weighted average coupon on the -- you can use the word coupon, the weighted average coupon on the total liability side. So that is on a quarter end or end of quarter reporting debt. Now if you look at the way the interest rates have moved, April was fairly stable. It was only from May when the cost of fund had actually started increasing. So that, I think, will answer your query.
The next question is from the line of Shubhranshu Mishra from UBS.
A couple of questions on the demand and second on the liability mix. So first...
Can you speak a little loudly, please?
Can you hear me now?
Yes.
So what sort of demand are we seeing in the individual housing? And can you please split it in the top 7 cities versus the rest of the country, let's say, first, on Individual Housing Loans? And what's our own estimates going forward for the next 15 to 18 months?
Second is on the construction finance. Have you been seeing incremental competition there from banks because very high-quality developers are remaining right now on more debt? So is that the reason that disbursements are low? Or is it because that we consciously want to keep it low as a proportion of our AUM? So if we can speak on that as well, that will be very helpful.
And the second question is on the cost of funds. What proportion of our bank borrowings are on EBLR versus MCLR? And what sort of pass-through do we think banks are going to give us going forward?
Yes. Okay. As for the demand, what you're asking is there is a robust demand even in Q1, we could see. And even going forward also, there will be very good demand for Individual Housing Loans across all the regions. One good thing actually after COVID vaccination in full momentum now -- almost actually -- now again, across all regions, there is a very good what you call on demand for housing especially, which is a basic need. The demand is mainly driven on 2, 3 factors in that main one is now the property rates are almost stable for long. So probably people would like to now lock in at this rate. That's one thing driving. And here, there was -- small spikes in interest rates may not be a major deterrent for the people to go in housing loans.
That's one thing as far as the Indian housing loans are concerned. And for the whole year, we are also positive that there will be steady growth, and we are also expecting that the demand -- at least our growth rate will be more than 12% to 15% in the range as far as the India Housing Loan disbursements are concerned for the whole year -- current year.
Then the second question, you were asking about the construction finance. In that, of course, we are also very cautious. We are also what we call present in the market. We are also giving loans, not that we have -- we would like to reduce that one. Only thing what happened because here and there, 1 or 2 slippages were there into the NPA. That's why there is engage in that, what you call a debt portfolio.
Otherwise, the project finance, now it is -- or it should have been around 5%. But in the days to come, we are very sure that this definitely will increase, and we are also focusing on more smart cities where we can give the very good project loans even to the range of INR 100 crores or so. So what happened over there, we can have very good presence and how to expand our loan book in the project finance. This is one thing as far as the project finance matters are concerned.
I think regarding cost of funds, you are inquiring -- no, is that regarding the second question?
Yes, if you look at the bank funding, so what proportion tendency is on EBLR versus MCLR? And what sort of pass-through would we likely to see going forward in the next foreseeable 12 or 15 months.
Yes. As far as the bank funding is concerned, about 32% of our total fund is drawn from banks. And most of them are linked either with an external benchmark or with a report. So now as you would know that there has been a -- today also, there has been an increase in the report. To that extent, a portion of that will get replaced higher. As far as the external benchmark is concerned, there is a little bit of remission in terms of the T-bill cutoff rates because already, it has run up quite sharply in the past couple of months.
So I would say that there will be some impact, but obviously, you would note that in the last month, we have increased our PRR by about 60 basis points. Today, post RBI's decision also, we will take a decision at our ALCO in the next few days.
Understood, sir. Just a clarification on the construction plan, sir. Could you give a number on the growth? What sort of forecast or estimate we have for the disbursements -- for the construction finance?
Construction finance, actually, what happened now, we are very much focused on that also. [indiscernible], and there now we have strengthened our systems. And our team is also well equipped and trained, and we have a very good monitoring system. And our digital operation is also in full swing. So we expect at least we'll have to at least in our total disbursements to the market. So our share of the -- our share in the project finance will be at least close to 78%. That's what we're looking at.
78% growth. Is that correct, sir? [indiscernible]
78% share in our -- now it is around 5%. Probably by end of the year, we'd like to have nearly to the level of at least 78%. That's what we're looking back. And moreover, nobody is there focusing on the line of credit. That is one good business opportunity we are looking into that.
The next question is from the line of Kunal Shah from ICICI Securities.
Yes. So the first question, again, just if you can give the exact numbers in terms of what has gone into Stage 2 from the restructure. So overall, there was INR 2,400 crores increase in Stage 2 and INR 1,000 crores increase in stage 3. So how much of that is coming from the restructure? You said INR 400 crores, INR 450 crores in Stage 3. But how much would be in Stage 2?
Yes, you are talking about the transition from the March number, right?
Yes. Yes, just this quarter. Yes, just this quarter.
Yes, total about INR 2,000 crores have moved.
To Stage 2?
Yes.
And INR 450 crores to Stage 3?
Yes, that is actually NPA. Yes.
Yes, yes, yes. So that has come into Stage 2. So this is the movement from...
Kindly note this movement that this movement is not because of any movement in the DPD. Let me be very clear on the call.
Yes, yes, yes. It's pre-COVID delinquency bucket is what you have considered and moved [indiscernible].
It was reflected in S1. Now we have put them in S2. Again, to repeat, there is no movement in the DPD per se. It is exactly whatever it is because obviously, the clock has frozen when the OTR is in operation.
Sure. And Stage 3 would be INR 450-odd crores, no?
Yes. That is the -- stage 3 was really -- it means that it is a...
NPA only. Okay.
Yes.
Okay. Got it. And secondly, when we look at this entire hike, which has been there, okay, from 1st of July, which we did it on 22nd of June we announced. So given the profile of the book, would it be fair to say that everything will get reset? Maybe if 96% are pure floating rate loans on our outstanding portfolio, then how should we see maybe in terms of the reset of this? Is this like 1 month or it will be -- everything will get reflected in Q2?
So everything gets reset as of 1st July '22. That particular date, all accounts, whatever is linked with the PLR, gets increased by 60 basis points from 1st July '22.
So fair to assume that yields which are there, which are reported as of now or maybe 97-odd percent into 60.
I'll tell you. It's the -- here, if you actually look at what is going to translate, obviously, the loans which are in NPA, there will not be any benefit because -- and which [indiscernible] NPA. Apart from that, the loans which have been disbursed in the last 1 or 2 months, that also there is a minimum walk-in of 3 months. So those 2 months of disbursement will also not qualify for this hike. Apart from that, everything which is linked to the PLR, whether it is retail loan, whether it is a nonhousing corporate, whether it is nonhousing individual or whether it is project loan, all will get moved up by 60 basis points.
Perfect. This is very useful. And lastly, so there would be no discounting, which will be provided to this. I think there was some discounting, and this quarter, yields have actually come off on a sequential basis. So would we offer that as well with the increase in the rates or no?
No. Let us very clearly mentioned, there is no discounting. There was a special exercise, which was conducted in the month of April to retain some customers, which are basically retail customers on the bulk side, retail customers working with some corporates, et cetera, where we wanted to retain those customers because, obviously, of the good credit scores. So -- and that has also yielded very good results considering the fact that, as of March, the year-on-year portfolio growth was roughly around 8%. It has increased to about 10% in the June end quarter. So there was a specific, you can say, exercise being conducted to retain the portfolio to increase the growth. And that also was in the backdrop that we are looking at an interest rate hike almost imminently.
Yes. No, so the only thing was maybe that 30 bps sequential decline that is quite huge. So maybe that came all of a sudden because of this discounting on a larger part on -- and I would say now that proportion was also quite high, which is resulting on 30 bps decline, so I just wanted to be sure that there will be no such exercise going forward, which will create pressure on yields.
Yes.
The next question is from the line of Krishnendu Saha from Quantum AMC.
And just a couple of understanding the same. Most of the questions have been answered. Just a couple of things. Your cost-to-income ratio was -- it's low for the last 3, 4 quarters. You could throw some light at 12.8%. So what is the total debt. Then coming back to the yield and the post discounting 8.1%, do we -- the increase in the home loan individual assets, that will be on top of 8.1%? Or you uphold the discount not being there, so it should be higher? And could you just talk about the incremental cost of fund that's also gone up. So how do we see that net debt effect looking at the NIMs and the spreads for the next 2, 3 quarters? Can you just talk about [indiscernible].
First question [indiscernible], full question.
First question was, Krishnendu, on the...
Sudipto, on the cost to income. So this has been low. 12.8%, I suppose, according to my calculation, so it will be helpful to [indiscernible].
The cost-to-income ratio, if you look at in the entire housing finance space, I think LIC Housing has got one of the lowest cost-to-income ratio. And historically, so cost to income, you take, you compare it with cost to assets, whatever. It is -- and last year, there was an elevation because there was a one-off payment regarding wage earners. Now that it is not there this quarter, it has actually come to normalize there. Further, if you look at the actual -- the expenses on account of employee costs, et cetera, that has actually, I mean, remained very stable, with a slight decline sequentially. As compared to March, we have a slight decline only. There has been no increase.
So that way, if you look at it, I think cost-to-income ratio, it will be very stable, and it is reflecting the kind of cost discipline that the company has always maintained. And going forward also, by and large, this ratio will be maintained.
I see. Okay. And Sudipto, on the -- what you call on the NIMs and the spread. So increment cost of fund has gone up by, say, about 30 bps. So what -- how do we see that cost of fund for the coming quarters? And the 8.1% to 30 bps, also a change in yield. So the increase in -- which we have refreshed the assets. So is it on top of 8.4% or 8.1% for the quarter? So I just wanted to get that clarity.
[indiscernible] First question that regarding the margins last year, when we had the annual call, I was very emphatic that we will maintain margin stability. Very clearly, we had indicated -- irrespective of the fact that we were looking at an increasing rate scenario, the management has very clearly indicated that margin stability will certainly be there, and that has been delivered by and large. There has been an increase in interest cost, as you know, across the board. 2 repo hikes in the first quarter, 1 more today morning. But despite that, we can share with you that in terms of margins, it will be stable last year. Full year margin, as you compare, there's volatility inter-quarter. But on a full year basis, there will be margin stability to improvement.
Regarding cost of funds, yes, cost of fund has increased overall. The 140 basis points, including today's reported hike that the Reserve Bank has increased. But despite that, if you look at the 90 basis points rate hike, which happened in first quarter, has translated to about 20, 25 basis points increase in costs.
Okay. Okay. Okay. So net-net, more than what -- in the further NIMs, you expect that these levels to be maintained or maybe a little bit slightly better for the coming quarters because we'll be replacing assets.
Full year basis, it will certainly see improvement.
Certainly, yes. Marginal [indiscernible], yes.
And if you can, just could you give us the breakup of the GNP 4.96%? What was the breakup, which individual [indiscernible] came from. That will be helpful for my calculation.
Yes, yes. [indiscernible] we can share it. Just one second. I'll share it with you.
As for the India housing loan is concerned, it comes to 1.9%. And then nonhousing commercial and nonhousing, if you put together, it comes to around 7%. Then project, the constructional finance is 35%.
35% and that is increase. Okay.
[Operator Instructions] The next question is from the line of Rikin Shah from Crédit Suisse.
Sir, just had a question relating to the effective tax rate. It has been low for us in the last few quarters. Any specific reason for that? And how does it trend from here?
Effective tax rate -- the full tax rate is 25.168%, but you are aware that under Section 36(1)(viii), we receive a benefit on the amount of transfers that we make to special reserves. About 20% of our long-term -- the income from long-term lending activities, that benefit we get under Section 36(1)(viii). The effective tax rate is around 18% to 19%. Around 18%, we can say, 18% to 18.5% effectively.
And this 18% to 19%, would -- should sustain going ahead as well?
Yes, obviously, because there is -- as of now, there is no indication in the change in tax rate from the government.
The next question is from the line of Hitesh Gulati from Haitong.
So my question is on the breakup between the restructured -- INR 3,000-odd crores restructure that you mentioned. What is the breakup between wholesale and retail?
The retail piece is about INR 2,000 crores. The wholesale piece is about INR 1,000 crores.
Okay. And sir, how much of upgrade recovery have we seen in Stage 3?
Sorry, I didn't...
So what is the recovery that we have seen in Stage 3, sir? Have you seen any recoveries in Stage 3 assets?
Stage 3 OTR, you're thinking about OTR recovery out of Stage 3.
No. It's a normal recovery also like in Stage 3.
Yes, normal recovery. There has been some recovery on the Stage 3 accounts, both on the OTR as well as on the non-OTR out of about INR 4,000 crores.
So INR 4,000 crores. Sir, INR 4,000 crores is OTR recoveries. And just [indiscernible] Stage 3 recovery, sir, in NMA?
Sorry. Can you be a bit more clear?
In the Stage 3 assets as of last quarter, so have there been any recoveries basis? Sir, what is that number?
[indiscernible] recovery. Certainly, there has been some recovery. Actually, it is offset by -- I'll just share with you some numbers. So for example, on the project side, we have a slippage of about INR 500-odd crores, but there has been a recovery of INR 140 crores. So net-net, on the -- net-net, there is an increase of about INR 395 crores on the project side. Similarly, there will be a similar kind of experience on the retail side also. Recoveries, INR 500 crores of slippages. Around INR 200 crores of recovery on the retail side.
[Operator Instructions] Next question is from the line of Nischint Chawathe from Kotak Securities.
This is, again, just trying to understand the coverage on Stage 2 loans. Your total ECL on Stage 2 loans have gone up by around INR 590-odd crores. And what you mentioned is that the ECL transfer on account of the OTR transfer is around INR 400-odd crores. So the balance would be on account of what?
No, it is not INR 400 crores. I totaled, the number I shared was around INR 2,000 crores.
No, that's the principal amount, right? So you move INR 2,000 crores of the loans from Stage 1 to Stage 2 for whatever the OTR transfer. Along with it, moved around INR 400 crores of provision.
Provision was INR 400 crores.
Yes. Now that [indiscernible], if I look at quarter-on-quarter increase in Stage 2 provisions, as we have reported, this is up by around INR 590 crores.
Correct.
So I was trying to understand what could be the difference for the balance. It's almost [indiscernible].
The balance is a genuine increase in the coverage.
Okay. Because for the INR 300 crores of balance increase in Stage 2, you have almost a INR 200 crores of balance increase in ECL.
Correct. Correct. There are 2 parts to it. One is that what I have mentioned is that because of the movement -- or I would say, a migration from the Stage 1 to Stage 2 to the pre-OTR DPD. So there -- for that, there is an attempted movement of the provision from Stage 1, which was earlier residing in Stage 1, to Stage 2. Apart from that, on the Stage 2 itself, the coverage has been placed.
That's good.
Which is fair. So ex of OTR, whatever is the Stage 2 coverage that we can provision to be a more steady stage coverage.
Yes, yes. Correct, correct, correct. That's it for that.
The next question is from the line of Param Subramanian from Macquarie.
I wanted to ask on the OTR pool, the remaining INR 3,000 crores, when will it move out of OTR? That's my first question.
Yes. It will come out almost every quarter now. It has started moving out from the last 2 quarters. This was the third quarter it was moving out, and it will probably go on for another 3 more quarters. Now as you can expect the bulk of it happening in September and December and a bit of it in March.
Got it. That's clear. So..
Also on March, there is much more happening in March.
Got it. Got it. And I wanted to understand, of the book that has moved out from OTR, that INR 4,500 crores, what is the sort of collection efficiency or some sort of color you can give on how it is performing, that INR 4,500 crores book? You said INR 250 crores have flipped. But apart from that, how is that portfolio performing?
So regular means that the collection efficiency will be close to 100% only.
No, 99%. More than 99%, of course.
On interest and principal overall, right? The collection is close...
[indiscernible], yes.
Okay, okay. And my last question is, what is the interest accrued on the OTR pool currently -- the outstanding OTR pool?
Outstanding OTR means the...
The INR 3,000 crores -- whatever this INR 7,800 crores, if there is any interest accrued and not paying. What is that?
No, if you look at it, what I mentioned on the INR 3,000 crores, about INR 1,000 crores is the interest-earning service. So there is no accrual that is actually received.
Okay. Okay. And even on the overall INR 7,800 crores, there is no interest accrual and not paid now, and that's not a significant number. It's not yet.
That INR 7,800 number doesn't exist today. Now the number is not INR 7,800 crores. It is actually -- I don't know whether you were there in the beginning of the call. That number is now not INR 7,800 crores.
It's okay, sir. Sir, just wanted to understand the amount that had moved down, they have repaid the accrued interest segment or that will still be accrued, right?
No, no. See, there are 2, I mean -- let me again clarify. People who have actually come out on the OTR, it means that for them, it is -- I mean the repayment is as regular, and as for the earlier...
So they all come to Stage 1 full, as full as it is.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
The first one is, I mean, while you have already shared the Stage 3 number was 7% on the nonhousing, if you could just get it into commercial -- nonhousing commercial and nonhousing individual. And then maybe I can take the next question.
I'll give you the number. We can just [indiscernible]. About INR 200 crores in the nonhousing commercial and about INR 187 crores -- sorry, INR 1,879 crores in the nonhousing individual.
Okay, sir. So now on the individuals, you said INR 1,879 crores. And nonhousing commercial, you said INR 200 crores.
Correct.
All right, sir. This is useful. Sir, now kind of coming to my question, I wanted to understand -- I mean how are our contracts -- are just, I mean, structured? Basically, what is the repricing frequency? Kind of trying to understand that you suggested that you took a PLR hike of 60 basis points in June, which becomes effective from 1st July. And now that there is another reported hike of 50 basis points, you suggested your ALCO committee might again meet and kind of decide on the next course of action. So just wanted to understand at what frequency does the repricing of the back book happen.
See, there are 2 ways -- I mean, 2 defined. Of course, you have asked only specific to the back book. But as far as the new business is concerned, that can happen any time. So for example, just to give an example, if it is decided to increase rates today, it can increase today. If it is to say the increase will be tomorrow, so we increase on tomorrow like that. Now as far as the back book is concerned and the time of signing the loan of our letter, there are 4 dates on which it will be moved. That is 1st July, 1st October and like that, 1st January, 1st April. That is subsequent to the completion of the quarter.
So those are the precontracted bits. That is for the old loans. New loans, we are free to decide depending upon whatever contractual obligation or contractual arrangement we enter with the new customers.
Sir, if I understood this side, so newer customers, incremental lending, like you said, I mean, whenever the new PLR kicks in, it's effective. And on the back book, after the completion of the quarter, the 1st of the month -- basically, the next one could potentially be 1st October then. So there could be a lag in the transmission is what we are suggesting. So of course, go up, but the back book can get replaced now only on the 1st of October?
I will put it this way for both sides. Today, we are looking at a scenario where the rates are increasing, and probably in the next few quarters, the same query will be when the rate will start coming down. So this, I think, in a declining interest scenario, it was -- I mean the mechanics -- they are different results.
So fair point taken. And just squeezing one last question. So while we have a provision cover of about 40% on our gross Stage 3, if you just kind of give the split of this provision cover based on project loans, nonhousing commercial/individual and individual repayments. What is the provision covered that we are carrying on these 3.
Yes, India housing loan, if you look at the PCR, it is 44%, and nonhousing commercial comes to 37%, and the nonhousing individual also, it is almost to 38%.
On project loans, sir?
Project loans, it is 38%.
[Operator Instructions] The next question is from the line of Pankaj Agarwal from AMBIT Capital.
Sir, this INR 30 billion of restructuring is part of Stage 2.
Yes, sorry?
This INR 30 billion outstanding restructuring where there is a principal and interest moratorium, is it already part of Stage 2?
It is not INR 30 billion. Principal and interest moratorium is INR 20 billion, not INR 30 billion.
Yes, So [ 20,000-plus ] separately, right? So total 30 million [indiscernible].
1,000 is principal only. And 20 million is principal to the interest. It is passed in both 1 and 2 depending upon the DPD at the time of invoking the OTR.
Okay. But would it be fair to say that a majority of this 50 million will be in Stage 2? I mean this...
Stage 2, yes. Yes, yes, yes. Correct, correct.
Okay. Okay. And second thing, so this time, leaving aside the provisioning coverage, given the quality of collateral we have, right? And given your Stage 3 assets and the structured loans, what could be the ultimate LGD on all these loans based on quality of collateral LTV, everything and based on past experience?
So you are talking about the book in entirety or separate buckets?
Especially like your restructured plus Phase 3, I mean, do I know regulatory requirement is different? But ultimately, how much you can use on [indiscernible]?
I can share with you the loss rates of the company or the write-off rates, which is actually the LGD. The ultimate LGD, basically the write-offs which have happened cumulatively in the company since inception, is INR 411 crores, less than INR 500 crores over 33 years. And out of that, we have collected about INR 140 crores. And INR 240 crores we have recovered out of those INR 400 crores or INR 500 crores. So actually, if you look at the actual loss rate, I would say it is in single-digit basis points considering the fact that over the last 33 years, we have disbursed almost INR 5 lakh crores of assets.
And you believe that future won't be materially different from the past when it comes...
Adequate, the provisioning coverage that you have seen on the Stage 3 -- or you leave aside Stage 3. You look at on a total coverage ratio basis, TCR basis. TCR basis is also around 2.5% now, whereas if you actually look at the loss, that is in single-digit basis points.
The next question is from the line of Prashant Kumar from Sunidhi Securities.
My question is on credit growth side. Although the disbursement dipped sequentially but the total advances inched up a bit, it must be due to lower prepayment. So is it fair to assume the steep competition from banks due to lower pricing are easing in rising yield scenario? And if you could give some color on growth side of the individual housing loan as well as the whole book for FY '23.
Yes. As far as the disbursements now, what you are inquiring is down. Actually, the current quarter, Q1 was very good. And going ahead, Q2 also, of course, this is a very big -- in the actual market, there will be certainly competition among all when banks will be [indiscernible] they all are there. And one good thing is our strength lies in our EMIs and our reach across, especially the EMIs, nearly our market intermediaries, is more than 10,000 people. They are providing good support in our reach as well as even our what we call volumes.
So with that, I think the -- we will have fair enough. Our share will be there in the market. Then recently, we have also what you call equipped our -- the other line of officers. We call that the processing centers at some important centers for what happen now. The cards are maintained very well. Our digital operations, what we now engaged into there, also giving good results. So going forward, I think we'll have a very good edge in the market as for the new disbursements are concerned. And growth for the current year, we are almost aiming at 12% to 15% in our disbursements. That's one thing. Then as -- given our existing book, the total portfolio also will be more or less moving in the same range of 12% to 15% by end of the year.
The next question is from the line of [ Ajil Maka ] from Baroda BNP Paribas Mutual Fund.
So just regarding the yields, so the decline that we had Q-o-Q during the quarter, can we attribute that entirely to this repricing that we did?
Yes. And also some high-ticket -- some high-yielding loans getting prepaid.
Okay, sir. And as you disclosed that this 60 basis points increase in the PLR, that would be applied to, I think, all the loans going forward, and that is going to help our yields going forward. Is that understanding correct, sir?
Yes, correct. This quarter already did [indiscernible].
This quarter onwards like entirely. Sure, sir.
The next question is from the line of [ Vipul Kumar Anuptan Shah ] from Sumangal Investments.
Sir, I have a small suggestion. If you put all this individual project and nonindividual, all these provisions and all these figures in your presentation, it will be really helpful. And if you put a name and phone number of the person in your Investor Relations team to be contacted in case of any further queries, it will really be helpful.
Yes, we'll consider that. Thank you.
The next question is from the line of Sanket Chheda from B&K Securities.
Yes, sir, just a follow-up question on [indiscernible] that maybe the certain number [indiscernible] [ INR 78 billion ]. So what would have been that number?
Sorry to interrupt you, Mr. Chheda. Voice is breaking up. We cannot hear you clearly.
Is it fine?
Yes, now it's better.
Yes. Sir, just a follow-up question on what [indiscernible]. Then maybe last quarter that the [indiscernible] number [indiscernible] than [indiscernible]. So can you give me [indiscernible] that number last quarter -- OTR number?
Your voice is breaking. It is not at all clear.
What year number -- which quarter you wanted, March?
March quarter, yes, sir.
Total OTR given till March is INR 7,800 crores.
That is almost 3% of the book size.
Okay. So in previous years, as you just alluded, that debt number would have more. And the INR 148 crores that we have provided on the back of RBI notification of reclassifying and which sits in Stage 2 -- Stage 1, what would be that quantum in absolute terms against which you have created INR 148 crores of provisions?
Can you come again, please?
So as per RBI notification of November, you have mentioned at bottom that you have provided INR 148 crores or created INR 148 crores of provisions. I'm saying what would be the absolute quantum against which you have created this provision.
Okay. Okay. See, it is about INR 1,400 crores.
Okay. Okay, sir. Sure. 10%.
The next question is from the line of Rikin Shah from Crédit Suisse.
So the first one is on funding costs. Last quarter, your incremental funding cost was 5.1%. This quarter, it is 5.4%. And despite of that, the overall funding cost has moved up from 6.5 to 6.7. So any color on why the overall book has moved up, even if your incremental funding cost is still at least 130 bps lower than your overall book? That's the first one.
And second, just wanted to clarify, out of INR 3,000 crores of remaining outstanding restructured, INR 2,000 crores will be in the Stage 2 and INR 1,000 crores will be in the Stage 1.
And the last one is the nonhousing commercial NPA, was it INR 200 crores or INR 2,000 crores? That's it.
Your first question regarding the cost of funds. The incremental cost of fund has increased, but there is also repricing on the back book. Just like there is repricing on the back book on the asset side, there is also pricing on the back book on the liability side because of the linkage with the external benchmarks of the repo.
Right, but if your incremental repricing is happening at 5.4%, that is the incremental cost of funds. And why would the overall book move up?
Because the back book also -- the back book, 30% of the value, you have to see the number -- the amount of the back book and the amount of incremental borrowings. Incremental borrowings in the first quarter will be around INR 10,000 crores. The [indiscernible] the 30% of the back book is around, say, INR 60,000 crores. So obviously, a 5-basis-point increase in the INR 60,000 crores and a 5-basis-point increase in the INR 10,000 crores will have a different kind of an impact.
Got it. Fair enough. And the remaining 2 questions, sir.
Remaining 2 questions, can you please refresh?
The restructured INR 3,000 crore split: INR 2,000 crores in Stage 2 and INR 1,000 crores in Stage 1. Is that correct?
Yes.
Correct.
Okay. And last one, the nonhousing commercial NPA. Is it INR 200 crores or INR 2,000 crores?
Yes, sorry, INR 2,000 crores. My bad, it is INR 2,000, sorry. INR 2,000-plus crores nonhousing individual, INR 1,879 crores, total around INR 3,888 crores. And the total outstanding is INR 3,500 crores. So it is about 10%, if you add the contract. Sorry, it was my slip. Thank you for correcting me.
Correct, correct. Yes. Also, coverage ratio also...
About 10%.
Yes, it's correct. Yes.
The next question is from the line of Gaurav Jani from Prabhudas Lilladher.
Two questions. One is you mentioned that about 60 basis points is the yield hike that we have taken. Proportionately, by what amount or by what percentage would the [indiscernible] cost was?
Estimated cost of funds, which has increased in Q1, on the book is 18 basis points. Obviously, there will be further increases because of further repo hikes, et cetera. Today, we had a repo hike of around 50 basis points, and we'll see what is the translation or transmission of that to the various markets in terms of the wholesale market and then the bank loans, et cetera. But it is expected that after this rate hike, there will be some indication of stability. That is number one. If you look at the 10-year bond yields, there is already a reduction from the 750 levels to about 720, 730 levels. So that is one thing. There will be increase in the cost of funds, but that will be more than made up by the increase in PLR that will be effected by us, including the one that has happened -- that is effective 1st July.
So you would mean, sir, that the 50 basis -- the increase in cost of funds will be lower than 60 basis points on the yields.
I will give you just one data point that will help build and help drive the point well. Almost 60% of our liability book is on the fixed rate side. And 90%-plus as of the assets are on the floating side. I think your answer is -- the question is answered.
And that will take [indiscernible].
Got it. Got it. Sir, just last question from my end. We are at the Stage 3 at about 5%. Taking forward one of the previous questions on recoveries, so do you see that recoveries would exceed slippages in the coming year so that our overall GNPAs would come off? Or how would should you look at that?
That's suppose to also -- I think what happened now, the recovery teams are well in place and more of the effort -- even efforts also in full swing. So on all fronts, maybe what we are or maybe even in our -- the other what we call defaults. On a regular case, also excellent follow-up is being made now so that what happened to overall collection efficiency will improve in all the segments, maybe regular or even defaults and more. And even what happened even in the nonhousing sector also, like nonhousing commercial loans also, the teams have put in place to what we call [indiscernible], make them regularized as well as following this quarter. So mostly, there will be an improvement. That's what we are very positive.
So because where I was coming from, sir, in the coming quarters, you will also see the OTR pool coming up for payments, right? So ex of that or after that, could we see next slippages being negative or the higher recoveries? That is what I was trying to get at.
OTR case also what happened, our teams are even in association with the grassroot [indiscernible] working for the past even 2, 3 months already. So what happened [indiscernible] brought out of this OTR. And adequate information is being shared, if they come out, what is the benefit and all. So teams are working for that or a better improvement in the whole year also. In that, we are very pleased that I think probably slippages will be less and then the [indiscernible] will be better.
Ladies and gentlemen, due to time constraints, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you for attending this and as well the queries you are putting very nicely. And we are now in an improving economic cycle with impact of core almost reduced very, very significantly. Despite increase in interest rates, the housing demand continues to be very, very healthy and robust, and we are highly confident of improved performance on the back of a very good first quarter.
Thank you, and wish you all the best. [Foreign Language]. Wish you all the best.
Thank you. On behalf of Axis Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.