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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 '22-'23 Earnings Conference Call of PNB Housing Finance Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Deepika Gupta Padhi. Thank you, and over to you, ma'am.
Thank you, Stephen. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q1 FY '22-'23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian Stock Exchanges and is also available on our website. With me, we have our entire management team across verticals sitting over here, led by Mr. Hardayal Prasad, Managing Director and CEO. We will begin this call with the performance update by the Managing Director and CEO, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances. A detailed disclaimer is on Slide 34 of the investor presentation. With that, I will now hand over the call to Mr. Hardayal Prasad. Over to you, sir.
Thank you, Deepika. Good evening, everyone, and welcome to our Q1 FY '23 results. On behalf of the company, I extend a very warm welcome to all of you. Let me start with the business update. As we communicated about our focus on the Retail segment, we registered a disbursement growth of 96% during the quarter as compared to the same quarter previous year. We disbursed INR 3,451 crores in Q1 FY '23 with Retail segment contributing 98% of the total disbursements. During the quarter, the company disbursed gross amount of INR 76.5 crores under the co-lending, which is in 20:80 ratio. We are also in discussion with other banks for co-lending arrangements. On loan assets, retail loans registered a growth of 2% Y-o-Y and 1% sequentially to INR 50,294 crores as on 30th June 2022. The corporate loan asset declined by 45% Y-o-Y to INR 6,006 crores as on 30th June '22, on account of sell-down and accelerated prepayments. The loan assets for the company outstanding as on 30th June 2022 is INR 56,301 crores, and our asset under management is at INR 64,849 crores. On expansion of our footprint in the affordable housing segment, we have operationalized 10 new locations during the quarter, bringing the total number of locations to 34. As of 30th June 2022, our Unnati segment AUM was INR 3,047 crores. Coming to our asset quality, with our continuous efforts to reduce the GNPA, I am pleased to inform that our GNPA on IndAS basis reduced by 23% during the quarter, primarily on account of corporate book. The corporate book gross NPA registered a decline of 37% in Q1 FY '23 to INR 1,732 crores as compared to INR 2,738 crores as on 31st March 2022. The decline in the corporate GNPA is on account of resolutions through change of developer accounts, closure in 2 accounts, ARC sell-off in one account and write-off in 2 accounts. Retail GNPA declined by 3% during the quarter to INR 1,907 crores as compared to INR 1,968 crores as on 31st March 2022. In percentage terms, the gross GNPA is at 6.35% as on 30th June 2022 as compared to 8.12% as on 31st March 2022. We continue to focus on improving our asset quality going forward. As of June 30, 2022, the net NPA was at 4.26%. With the increase in the repo rate in Q1 FY '22, the company passed on the increase in rates to its customers. The impact of increased interest rate is yet to be fully reflected in the yield. In terms of liabilities, the impact of increase in repo rate is reflected in the cost of borrowing as the overall cost of borrowing increased by 11 basis points. The company has reduced its liquidity in the books of around INR 3,800 crores on a stand-alone basis as on 30th June 2022 as compared to INR 7,085 crores as on 30th June 2021. The profit after tax on a sequential basis increased by 39% to INR 235 crores in Q1 FY '23. The ROA is at 1.47% in Q1 FY '23 as compared to 1.24% for financial year 2022 with increased percentage of retail book, it is imperative to see the ROA of the retail book. Our retail book ROA over time has increased from 1.3% in FY '20 to around 1.5% in Q1 FY '23. The leverage has come down to 5.1x as on 30th June 2022 from 6.33x as on 30th June 2021. The company is comfortably capitalized with CRAR at 23.9% and Tier 1 at 21.4%. The residential sector is experiencing an increase in demand, particularly in Tier 2 and Tier 3 cities. As for ICRA, the portfolio of NBFCs, HFCs is expected to grow by 9% to 11% on account of pent-up demand and increasing level of economic activity. To leverage on this opportunity, we will continue to focus on retail lending, expand our affordable housing loan offering, improve our portfolio credit quality and enhance efficiencies through digital interventions. On the capital base, PNB has received its approval from RBI to infuse INR 500 crores in the rights issue of the company. Further, the company has received the final settlement order, whereby issues raised with respect to the potential issues have been settled under SEBI Settlement Proceedings Regulations 2018. The draft letter of offer is in the final stages and to be filed at an appropriate time. With this, I would like to open the floor for questions and answers. We have the entire management team sitting over here to answer to your question, and we welcome any questions that you have and we'll be more than happy to answer them. Thank you very much for coming and attending this meeting. Thank you.
[Operator Instructions] The first question is from the line of Ravi Naredi from Naredi Investments.
Sir, with regards to all management team, which you are sitting there, want to ask when PNB Housing Finance company will revise your gross NPA 6.40 as on 30th June '21, 4.05 NPA level on 30th June '21, while it is 6.35 at 30th June '22, net NPA rises to 4.26 in 30th June '22. When whole country bank and housing finance company improve their performance, but very sad to know PNB Housing is nowhere in the game. What is the main problem behind this scenario?
It's a fact that the NPAs have gone up significantly, and that is historical reasons why it had gone up and it went up. And then subsequently, in December, because of the November RBI circular, there was an impact on the company where about INR 800 crores of NPA has [indiscernible]. But if you look at the 2 quarters that are important, and one day, it is not possible for anyone actually, any organization to bring down the NPA straight away. If you look at the 2 quarters within the March quarter and the September quarter -- the June quarter, you will find that there is a significant reduction in the NPA that has been done. In the March quarter, we have reduced the retail NPAs of almost about INR 600 crores, INR 700 crores. And in this quarter, there has been a decline of the reduction of almost about INR 1,000-odd crores, which is about 23% of the NPAs have come down in Q1 FY '23 versus only Q4. So it's just a matter of -- I mean, I can't bring it down straight away. But yes, there is massive effort that has been done both on the corporate side or on the retail side. And the reduction has taken place both on the retail and our corporate side. There are a very large number of accounts which are under resolution. We have resolved about, I think, about INR 1,000 crores has resolved, and we have another INR 1,000 crores sitting over there, which we are attempting to resolve. And I'm very sure that in the next 1 or 2 quarters, we should be in a position to resolve. That's on the corporate side. On the retail side, if you look at it, we are very [ thing ] of the matter and we are very clear that we would like to bring down the NPA to less than 2% going forward. I think that's what it's a journey that we are going to take and the journey has already started right from December 2021. 2 quarters, we have exhibited that there we can reduce the NPAs and we'll continue to exhibit the same kind of rigor in terms of reduction of NPAs.
Understand. You see, one figure I would like to discuss with you. Our market cap is INR 6,000 crores. Our AUM is INR 56,000 crores. In the -- nowhere in the history of finance market, we have seen so much low market cap of any finance company in compare to AUM. What I want to know, how many more bad debt line in the company, which need to come outside, why the market is not giving any good value to the PNB Housing. That is my question to all management teams you are sitting there.
I did have missed one word that you said, what is line? Bad debt. I think we have cleaned up everything. In fact, we were among the first HFCs, which recognized the NPAs while the time was up to September '22. We still went ahead and recognized the NPAs, which was as per the Reserve Bank of India direction in December '21 itself. So, I think there is nothing that is lying as hidden either in the retail side or on the part of corporate side. We have gone ahead and we have cleaned up everything. That is one part of it. In terms of the market capitalization, in the market cap and everything, you would have seen that when the issue was announced, the disbursement issue was announced, the market cap -- the share price went up from about INR 440, which was on the day that was trading to almost about INR 900. So there is a potential in the market. There is possibility of growth. It's just a question of because of some reason, and you know the reason, because I'm sure that the kind of investment that you are doing in terms of actually looking at the balance sheet, looking at us, the approval from PNB had not come. I think that is one of the largest things that is there. Now that the PNB has an approval to invest INR 500 crores, it's just a matter of time that the DLF will sign, DLF was submitted and the capital work. There are 3 important things that actually would help us in improving the share price and the market cap and everything. One of them is the capital requirement that was always actually at the back of the burner, but it has come forward, we will come out with a rights issue. The second was on the growth. In 2 quarters, we have shown that there is a growth. In first quarter, we actually showed a growth of almost -- and I would talk only about the retail because we have already 2 years back, we had very clearly said that we will not do corporate. We debuted a growth of almost about INR 700 crores in the retail in the first quarter, the last quarter of the financial year, which is January to March. We have again done a growth of about INR 550 crores. I think there is a very clear green shoots that are coming in. So that is the second part of it. First is the capital, second is the growth. The third is the NPA. If you really look at it in the last 6 months, we've reduced the NPL by about INR 1,700 crores. I think these are the way forward. And I would like -- I mean, I would absorb and I would say that we are now moving in the right direction. And we didn't want to say anything unless we actually demonstrated to you in the next 2 or 3 quarters that there is a growth. If you look at the disbursement, the disbursement has grown about 96% over the June quarter of '21. So, the disbursements are going up, the ENR is going up, the NPAs have come down. So I'm not saying it's the only picture, but I think there is a very clear direction that the company is on the path of recovery.
[Operator Instructions] The next question is from the line of Anand Mundra from Soar Wealth Managers.
Sir, I have one question. You mentioned that you are growing in retail quarter-on-quarter, but disbursement has not grown in Q1 FY '23 as compared to Q4 FY '22. Am I missing something, I just wanted to clarify that.
First, actually the growth has come in. You know that there is a growth, and it is very clearly reflected in the numbers which you would have seen. In terms of the disbursement that you are seeing, I think we did a very good -- almost about INR 3,600 crores, INR 3,700 crores of investment in Q4. Now again, we have done almost about INR 3,400 crores. This is a slower month. And if you would have looked at the results of some of the HFCs, most of them have shown almost about 20% to 40% decline in the numbers in comparison to Q4. Our decline is only 7%. And this is usually a soft period. April, May, June is actually always soft in the terms of the -- in any HFCs that you look at it. You will find that the numbers come down significantly as what it was done in March quarter. I think we've just said that we had a minor blip in terms of the 7% decline, but we remain steadfast in terms of showing the growth. And we are anticipating, we hope that our growth will be approximately in high-single digits. So any guidance for the growth for this year with respect to disbursement of the AUM retail book. So I said about single digit -- higher single-digit growth we are expecting this year. We've already grown by 1%. If you look at it at an annualized basis, it's a 4% growth. While market is slow in April to June, we still have had an annualized growth of about 4.3% or 4.4%. So going forward, there is only -- want to think they are only going to improve. Despite the fact there is one more thing that happened in the first quarter, and that is actually the interest rate. One is the interest rate, where the increase is about 90 basis point interest rate, which actually dampened the market to some extent. The second is that the input costs have gone up significantly. The input costs under construction activity has actually increased, the 20% to 25% increase in the price of a property, which is also a little damning from what the general public achieved, which was among the lowest interest rate, lowest prices and everything for the last year. So that was a little dampening. I'm sure that people will come forward because still there is -- if you look at the mortgage market to the GDP, it's only at 10%. There is massive scope sitting over there in terms of the growth. And I'm sure that people are realizing and the growth will come in. And we are right now after all the cleaning up that we have done, we are suitably placed to actually encash on that growth. We have given a guidance of 15% AUM growth for the financial year FY '23 in retail, correct? No, not 15%, high-single digit -- in mid-teens. It's a high-single digit, which is anything from 8%, 9% there is what we are looking at. High-single digit goes to 7% to 9%, but actually that's the kind of growth that we are doing. We already have done 4.3%, 4.4% at a period which is normally very soft.
Sir, tell me -- sir, in market, you guys are competing with -- I'm assuming you are competing with likes of HFCs HDFC or ICICI Bank and other, it's very difficult to compete with them. Their costs [indiscernible]. What is the differentiation which we give to the -- for the customer. Otherwise, we definitely would like to go with a larger bank, which may offer better products or better pricing as compared to us. Are we focusing on... we are not focusing on that segment.
A couple of things. One is today, for the best customers, who has, say, about 800-plus CIBIL score. Now, interest rates and the competitor interest rates are almost the same, 7.5%, 7.55% is what I also quote and they are also quoting. So as far as the class of customers that we are looking at it, the salaries and others who normally go over there, we still have interest rates which are pretty competitive. So that is one thing that actually -- so I'm in the competition, and that is why I'm growing. The second is that my actually ability to underwrite self-employed and NHL is far superior than any of the bank. So, even if actually this quarter if it has been a little slow, I will ensure that these capabilities that we have in terms of delivering, nobody can deliver in about 3, 3.5 days, we actually have not only delivered it, but we aspire to deliver it by 3 to 3.5 days, 4 days to a self-employed person if he is applying for a loan. I think these make us very, very distinctive in terms of the way we deliver it. So, if the interest rates are competitive, if my delivery is good, people will come to me. Otherwise, what was happening, because of the speed of my delivery, people were coming to me, but then after 3 months to 6 months, I was realizing that people were running off from me. The portfolio was [ shipped ], somebody would take over because you want a loan today, I was able to give it, the bank was taking up a month to give it. So he takes a loan from me, but he comes back to me after 3 months and say, I want actually to move on to some other bank. That we are completely -- not completely, we are significantly arrested. Almost it is 60% down, so we are -- we have significantly reduced the runoffs. So I think these are 2 things because of the interest rates we are covering, the sharpness with which the sale is actually entering into the DNA relationship, the API relationship, the salaries. Our sales is doing very well. We are actually increasing our sales significantly, which actually deleverages some of the risk also. So I think...
Sorry, sir. How much is the balance transfer for this quarter, sir? Earlier it used to be 18% for the year.
9%. So I told you, during the COVID, the problem -- the issue was that earlier everybody was quoting very high interest rates. The differential between me and other used to be about 50 basis points, about the best of the banks. During the COVID when the interest rate regime started coming down, the differential went up to almost about 1%, 100 basis points to 150 basis points. And that was the reason why the numbers that we are giving have resulted into that. We took up -- because there are so many things happening on our portfolio, we wanted to ensure that the company remains steadfast. The moment we realized that it is time for us to go back to the market, we have actually cleared the interest rates, which are very competitive with the market. And that is the reason why this has come down significantly.
So, 9% is what period sir?
Annualized. 9% is annualized, which would mean how much -- approximately 2.25%.
Yes, sir. Sir, another thing, which is very important for the growth is the right issue. When do you -- what is the pricing for the rights issue, sir? Why you've been keeping capital investments for all the management shareholders?
So, one is on March 9, the Board has approved the capital raise of INR 2,500 crore through the rights issue, and that's the public knowledge. Now what has subsequently is that PNB has also received RBI's approval to participate in the rights issue. And that they have done -- the approval is for INR 500 crores, which again has been announced. And they will hold the shareholding at 30%, but above 26% -- below 30% but above 26%. This is the second thing which is one of the most significant thing that has happened. At this time, they were able to get approval, last time they were not able to get approval. The third is that we have already appointed investment banker, legal counsels and everybody is onboard and the draft letter of offer is almost at the final stage. There are certain regulatory and other issues that have been sorted out. Once these are sorted out, we are -- actually the company is planning to file the DLR as soon as possible. And maybe it is within weeks also. So this is what we are going to do it. And then, with respect to the preferential also, we have got it completely. As far as the SEBI is concerned, the settlement is final and everything has been completely taken over. So this is where we stand. I think, if some of those issues can get sorted, I can't give you, I can set [ few weeks ]. But until those issues are sorted out, I will not be able to apply to the SEBI of the draft letter offer. We are working very, very rigorously on these issues. Hopefully we should be in a position to file as quickly as possible. And the biggest advantage is that the capital raise will bolster our capital position and enable the company to accelerate the growth. For the rating agencies and others, this is again one of the most significant things. And with the leverage, almost at 5.1%, which we have brought it down and our capital adequacy at 23.9%, I think this is one of the sweetest thing that could happen for this company to actually go ahead and then book you because this is the growth capital that we are looking at it.
But sir, it would be really helpful if you can give some guidance on the pricing because it's really suspense from last 6 months.
Pricing of issues.
Timing, actually, sir, I cannot actually say to you because there are certain issues that I need to address it. The moment we address those issues, we will be in a position to do it because even if -- I can apply tomorrow. But the point is that it is not going to get an approval, unless everything is complete as far as the rights -- sir, rights issue price will be approved by the Board. SEBI will just confirm that. Actually you can give an indication what price Board is giving you an approval for rights issue.
Sir, I will not be able to give you the price. [ We will let it ] go and then we have investment bankers who are going to come, sit with us -- sit with the Board to come out at what exactly would be the price on the rights issue.
Last thing, sir...
Once we file the DLOS because it is not a fast track, it's under normal track. Generally SEBI takes some time to come back on to that. And once we get an approval from SEBI on the DLOS, we filed the letter of offer and at that point of time is what the pricing gets decided by the Board. The pricing is open in the sense that it will depend upon the market size at that point of time and how the stock is behaving in the market. Basis that pricing will be decided by the Board. And of course, with the recommendation of our investment bankers that the pricing will be decided and announced to the market.
Okay. Understood. Sir, last question from my side. With respect to LOP, it has not grown in this quarter compared to last quarter.
Actually, as we had mentioned to you or we had actually explained that we are -- not only we have created a small vertical, but we have also now ahead of Unnati, which is a Chief Sales Officer, who is looking after the Unnati. She has joined about a month back over here, and we are putting in place complete -- we are revamping the whole product in terms of the [ policy ]. And she comes with almost about 26 years of experience in the mortgage industry and about 10 years to 15 years' experience only on the affordable space. So, the team is being assembled. The policy changes are being done because affordable obviously is realized as a very different thing than what we were doing in terms of that. So the Unnati portfolio is actually going to be completely different. So that churning was taking place during this quarter, and we hope to go ahead and start booking the business as early as maybe September.
[indiscernible] Unnati portfolio last quarter, sir? What was the portfolio? There was no disbursement in Unnati segment last year -- last quarter?
No, no, last quarter, there is about INR 140 crores of disbursement. The whole policy is undergoing change. So there is a new -- completely new approval metrics that are being defined and how it is going to be rolled out, the ticket sizes and the eligibility norms. A lot of things are going ahead, and that is the reason why that slowed down to some extent.
Sir, I understood that. So if there was a INR 140 crores disbursement, the AUM should have grown by at least INR 50 crores, INR 60 crores net of repayments. Why there's a degrowth in AUM by INR 50 crores?
So, actually what has happened is though we have done the fresh disbursement of INR 140 crores, INR 142 crores, but our runoff on the Unnati we seen slight runoff on the Unnati, and hence as Saurabh also mentioned, that our MD has mentioned that we are going through the transformation in Unnati business. We are scaling it up. We are redesigning the entire model. And hence the business that we are doing as usual was on a slowdown method. At the same time, the attrition was a bit higher.
How much was the runoff, sir? How much was the runoff?
We're going to see a new Unnati that we are going to do. Runoff in the quarter one on Unnati portfolio was 25% on an annualized basis.
This is Valli Sekar. I'm heading the Affordable Housing piece here. Currently, in the Unnati product, what we were concentrating was in the lines of priority sector lending wherever loan amount was in the range of up to INR 35 lakhs, but actual affordable housing would be like the EWS, LIG 1 and LIG 2, which the government prescribed, which would be in an average loan rate of approximately INR 9 lakhs to INR 10 lakhs. Since we were doing these loans up to INR 35 lakhs, we were seeing significantly a lot of runoffs in this loan portfolio. As far as affordable housing is concerned, the runoff is generally in the range of 4% to 5% only. So, completely we are revamping the entire product policy procedures, and we are completely coming in line with the actual affordable housing market. So you will see a turnaround in the product and in the policy and procedures in maybe by the end of next quarter. And from October, you will be seeing numbers growing in this as per the actual affordable housing policy in the market.
And very competitive products, competitive interest rates and the delivery and everything is going to be actually, then you can compare that particular portfolio with the affordable or the other competitors who are there in the market doing similar kind of business as a ticket size of anything between INR 8 lakhs to about INR 15 lakhs.
So sir, what is the cost change in Unnati portfolio?
Your voice is actually a little bit...
What is the gross yield? I just wanted to understand, sir, if there's a 25% runoff, what was the main reason for that?
For the quarter, it's 6% actually, 6.25% makes it...
6.25% for 3 months. I'm just wondering, sir, these guys have -- the portfolio has moved. It has moved to bank or it has moved to some other NBFC.
To the banks. Actually what happens with some of the banks suddenly become very aggressive in terms of the priorities, especially when they have a shortfall in the priority sector lending. They become very aggressive in terms of actually capturing that business. And it is at that stage that portfolio starts moving here and there. Even when actually the co-lending side when we go and talk, there are various ways in which banks are looking at it. Some of them are looking at all the sector. Some of them ask for self-employed. Some of them said, I want NHL. So it's a different mix of the portfolio that particular bank would like to build to ensure that -- to actually give a guidance that this is the kind of portfolio I would like to accept under the co-lending platform. So whenever there is a shortfall in the private sector lending, it is then actually we will see this kind of effort. But what Valli is mentioning is that it is normally about 4%. So there is a little uptick between 4% and 6%. The 2% is actually the additional delta on the Unnati platform.
The next question is from the line of Krishnendu Saha from Quantum AMC.
Yes. Most of my question has been answered. But just on the Unnati thing I can ask, what has been the GNP over there?
What has been the change?
Just on the Unnati.
Normally the Unnati after this COVID impact, it is 200 -- 150-odd bps higher than the -- in general we are taking now. So it is in the range of that you can see around 3%.
3% is the number. Okay.
One more thing that we are doing it is actually we are revamping the whole collection system of Unnati. And they are setting up a complete infrastructure right from the ground only for collection of Unnati, because that is much more rigorous collection process than other things. We anticipate that not only the new portfolio that we are going to build will actually the collection will take place of and delinquency is kept low. But with existing also, we are very, very sure with this new Unnati vertical coming up, it will also look at the existing delinquency of the Unnati portfolio. So one is the existing Unnati and then the new Unnati kind of portfolio that we are going to build. And both of them should see, after maybe just as Valli mentioned, that you will start seeing some traction somewhere around October, November. The divestment will start, but the traction that you will see maybe from December onwards, you will find that there is a traction coming up in the business as well as in the collection machinery.
Right.
[Operator Instructions] The next question is from the line of Nikhil Walecha from Franklin Templeton.
Sir, you have shared GS3 as per IndAS. Is it possible to share the GNPA under the IREC?
No, we don't maintain in the IREC, we maintain it under the PAS. I mean, through only the PAS we can give, the IndAs actually also based on the interest rate. But we are monitoring it only for the IndAS. Actually the interest actually component is added to it. We want to give you this numbers also. There will be a differential of about 100 -- how much would be the differential? INR 300 crores. In the IREC and IndAS, there would be a differential of almost about that amount.
Understood. And secondly, I see that the Stage 3 coverage has dropped slightly. I believe some of that would be due to write-off. But given that there is an aging of NPA, so that coverage should increase. So why it has decreased? And I think even the provisioning from the P&L side also, it has dropped. So ideally I think you should have increased the PCR, but what is the reason for the decrease in the Stage 3 PCR?
There's hardly anything to do reversal.
What you're looking at a Stage 3 number, as you have rightly mentioned, it is after the setup of these write-offs with the provision numbers. And then also, we need to understand that there has been a upgradation of one account, which has moved from Stage 3 to Stage 1, right? And then, one account has been sold to the ARC, okay? So that has been -- that has been also exited, but we are maintaining the provision under impairment against the investment side, that net number. In terms of the provisioning under vintage perspective, everything is considered here. So what we have actually written off is the vintage accounts only, which have a large exposure to [indiscernible] for the year after applying all the resolution strategies which we are having.
The reduction is mainly because of those 3, 4 accounts where one is utilized some the sold to the ARC. And 2 write-offs are there, they were fully provided upfront so that, that has been used. And there has been some decline in the NPAs of even of INR 100 crores of retail. So that is all the primary reason. Otherwise, it's not that, that we have actually reduced the provisions.
Okay. And sir, earlier you used to share GNPA of segment-wise, construction finance lap. Can you share it now how it is trending?
I don't think that we were -- only annually, we were doing it. We have not done it quarterly. But I think what we'll do is that, Deepika will get in touch with you in the Investor Relations department, and they will actually share some numbers with you.
Okay. And if I look at...
The retail and corporate GNPA is shared in the presentation. You can have a look at Slide #16, which gives the NPA for retail as well as for corporate.
Actually now recently we are bringing the focus on the retail because we have already stopped doing the corporates. So obviously the corporate, there is no new loan that is being sanctioned. So no new loan has been sanctioned, the NPA -- if the account becomes an NPA percentage terms, it will look very, very scary. But the point is on the retail side, it is very important that whether we are able to actually manage and bring down the NPAs on the retail side. And I think we have -- that's where we have worked towards reducing it.
Understood. And sir, if I look at the spreads, it's at 1.4%, which is, I think, all-time low. And I think the reason that you mentioned is quite -- I can understand that there is a heightened competitive intensity. But on the incremental basis also, if I look at the incremental cost, I think it's closer to 7.5% based on the recent NCDs. So what are the incremental spreads that you are working at?
Spreads, we are looking at more around 1.6x. So -- and how it will come about is that we have instituted -- increase our lending rate by 35 basis points, which has been captured in the quarter. Another 50 basis which will come in July to September, cost of borrowing will not go up to that extent simply because we have certain fixed rate liabilities as well. So we will add to the spreads, that will slightly increase.
One thing is there that our -- within this quarter, the cost of borrowings have actually gone up only by 11 basis points because of the mix of our borrowings that we have. And in terms of the yield, because we are actually focused now only on the retail, it's going to be very different than what you would have looked at. But traditionally, if you start looking at comparing it with that -- those yields were coming from assets, which were very high-yielding interest rate, very high yielding, now it is only going to be the retail loans with retail loans, with more and more focus on the retail loans. Obviously, we'll have to start living with the spreads, which are on the retail side, and we really talked about 1.55x to 1.6x. It is basically the retail that we'll pump in those.
Understood. And then, sir, final question from my side is, as you will do a fresh rate, then I think our Tier 1 will again increase and ROE will further reduce. So unless or until we increase our growth to, say, 25%, 30% level, it would not improve substantially. So can you give some medium- to long-term guidance, like how are we looking at, say, 3, 4 years AUM growth or how are we looking at ROEs from a 3- to 4-year perspective?
We have submitted it to the regulators also, but -- we are going to -- listen, first of all, we still have a large book. It's not that we still have the third largest HFC and we have a large book. So, a small company with about INR 5,000 crores, INR 10,000 crores of AUM. It's very easy for them to say, I've grown back what 20% and all that stuff. For us, it's a little challenging because at INR 50,000 crores, INR 60,000 crores to grow, so when I say that we are going to be on high numbers, even if I say INR 5,000 crores, it's a 9%, 10%. It translates into INR 5,000 crores, INR 6,000 crores of growth straight away. So that is what we are looking at. We are looking at high numbers this year in high-single digits. And obviously, going forward, these numbers will improve. I think we are in a sweet spot in terms of the -- it's a cyclical industry. And we are in a sweet cycle where for the next 4, 5 years, as we anticipate that the going to be good on the mortgage industry. So the going is good, there is no reason for an HFC, especially when it has cleaned up its spoke and it is ready to go, it is demonstrating in the 2 quarters that it is actually growing to actually go ahead and start. And especially another very significant thing is that in next 2 years, you would also find that this Unnati, which is a new Unnati kind of -- affordable kind of Unnati, that will start kicking in. Even if it doesn't give me a very high AUM, but it still gives huge amount of advantage in terms of the spreads, in terms of the margin and NII and NIMs and everything. So that's what we are looking at it.
Understood. And sir, just one more question. How is the co-lending partnership working? I think, forward, you had some co-lending partners. So how is the traction over there?
We have already reported. We are actually with one of them. We have agreements with one private sector and one public sector organization. As on private, we have already given them INR 78 crores -- INR 61 crores, and the lending is 80-20. And we have also given -- to the other partner also, we have given significant number of files. We are also in discussions with some other players, with some other banks to actually provide that kind of it. We are expecting that it's still early times because there is the straight through processing. And the reason is not out. Some of these banks want absolutely a seamless integration with our system. Our systems are ready, my APIs are ready, and I've shared by APIs. But these banks and some of them are large banks, they are not ready with their APIs. Once those APIs are integrated fully is at that stage that the flow will take place, and we anticipate that the numbers will start coming in. Right now, we are pushing the fire through SFTP and we are seeing that actually SFTPs can be booked under them. I think with the numbers that we have given to other bank, we will see some traction in this co-ending.
Understood. So of now, it's very small, but you expect it to pick up?
Yes, sir. It all depends also. And co-lending is good, we'll have to bring in. First of all, even it affects my AUM. When I transferred INR 61 crores, my AUM has come down by INR 61 crores. So we have to actually pair it and see what is profitable for me, what is good for me, what is the customer requirement, is the customer really finite about the interest rate. We will have to bring in a partner where the interest rates are slightly in median between the interest rate of that organization and our organization. So it's a mixed bag of how you would like to handle the co-lending. However, the co-lending also provides a good opportunity for fee-based income, which is what we are also looking at it.
The next question is from the line of Sanjeev Kumar Damani from SKD Consulting.
Sir, am I speaking to Hardayal, sir?
Yes, sir.
Sir, I'm very impressed the way you are all answered. So I congratulate on that to you. Sir, my one first question is that, can you quantify the total loan accounts that, as on today, you hold or as on 30th of June, total accounts that you hold of the loans given?
About 2.52 lakhs.
2.5 lakhs people. That means, total files are 2.5 lakhs.
There will be multiple accounts also.
So, 2.5 lakh accounts we hold where we have given -- to entities we have given loans. Right, sir? Can I know our employee size, sir, as on date?
1,400.
1,400 are directly on our payrolls. And do we have associates also working for us?
Yes. We have another -- on the sales side, there will be approximately 2,000, only on the sales only. Because I think he's also in the sales side. 1,400 people working only for the sales.
Only for the sales, but they are not...
Sales and underwriting.
But are they all employees of the company or they are associates of the company?
No, no, we have our subsidiary, which provides us this manpower.
We have a separate subsidiary where people are recruited to work for this organization. So it saves us some cost. So, in absorbing that your retail portfolio is really going up and you are quite well spread into the middle of India and below down South also, but being a Punjab National Housing company, are you not present in North or PNB Bank also does the housing finance as such, sir, in North area?
Sir, we are pretty strong now in North India. We are across India. We are at 70-plus cities. We have almost 99 branches, and we have also outreach offices. So we are pretty strong in terms of the distribution network, geographically, citywide actually if you look at it. On the North side, we definitely are strong, but I would admit that as a PNB brand name and brand organization, we still have big opportunity to encash on the PNB brand by actually making much bigger inroad into the market, which is what we are planning. And today, if you look at it, in the last about few months, we are seeing that there is a good traction that is coming in the North.
Okay. Because I was seeing...
Traditionally, we have been very strong on the West.
Okay. Traditionally very strong on the West, sir. So sir, now, sir, when we talk about our NPA drop and all that, so I mean do you feel -- or do you face problem in collecting EMI properly every month from even small, small individuals who have taken loan from you for housing or retailing or something like that. Are there failures -- is the sum total that you are showing has gross NPA is largely from retail side or it is an old baggage that we are carrying off the corporates?
No, sir, it is retail. Actually most of the time now, we are talking about the retail. Corporate is something it was completely differently. Because for the last 2 years, we are doing only retail, there is no disbursement that is taking place other than few, maybe INR 50 crores, INR 100 crores of the old sanction. Now in terms of the collection efficiency, we are almost at about 97% collection efficiency. So we are able to collect, we are able to get money. We have feet on street, we have every old arrangement. We have digital tools to actually get the money. So everything is provided on our application where a customer can come, check in EMI, see how much money to pay. He can bear itself to repay by the click of a button. So there is multiple ways in which. We are calling centers that are there. So we actually very -- through the advance analytics, the delinquency was actually the repayment is split over there, something goes directly to the calling center, something goes to the field, depending on the mattresses that we use. And that is the way we actually try and save the money. So the cost of collection has actually come down. If you look at it, there is a big difference in the way the collection is happening. Earlier, most of the NBFCs and HFCs were actually collecting, they would connect 1 or 2 installment and then they would wait the next month, again, they would go. Now we are very clear that we need to remove complete regularities because the very fact that from INR 800 crores that we had actually on the -- because of the Reserve Bank of India in March, we have just about 61 crores of accounts, which are actually less than 90 days. But because of the Reserve Bank of India definition, so we are able to collect the money now. That is the reason why we are able to reduce our NPAs.
[Operator Instructions] The next question is from the line of [ Aditya Doshi ] from Chanakya Capital.
And I just wanted to know that our corporate portfolio has -- sir, our composition of corporate loan book has almost reduced to 9% from 22%. So, will PNBHF again relook at corporate building given that real estate market is picking up and project completion is not much of an issue in today's scenario and we can cross-sell that to retail. So what's your strategy on that? I hope you have heard the first question. Regarding the strategy to corporates where -- okay. And second is a follow-up to the Unnati book. Since Unnati has new products, so why do we require it to again revamp it again? And second, have we outsourced collection of Unnati?
2 things. The first question is, you're actually on the corporate book, whether we are going to restart the business. We have been looking at it to restart the business, however because of the very high NPA that we were holding and the market also was not very supportive. That was one of the reasons why we had not ventured back into the corporate book. One of the reasons why now we find that there is much more order and discipline with the builders, and there are certain type of builders who are pretty good and weak pockets also. We are definitely reviewing it that what should be our sweet spot in terms of doing. We have done projects which are INR 1,000 crores also, but we are going to look at the sweet spot, what we want to do it. At some point of time, at the appropriate time, we will reenter the market. As on HFC, I think it is essential that we have actually present across the mortgage industry. One of the primary reasons why we had pulled back was also because of the capital constraints that we had. And the risk weightages that we have to attach to a corporate loan is 100%. And we did not as the capital at that time to go ahead and do it on the -- to continue to do it. That was one of the reasons. I think the moment the capital is there, I think we should be in a position to start -- restart the business because capital is important. If the growth story comes under retail, I would not like to actually get hamstrung that I do not have the capital to actually go ahead and have to lend. So that is one thing on the corporate book. The second is actually on your Unnati collection. The collection is more or less actually we have insourced it. But yes, we also work with some of the agency -- collection agencies who are accredited to the required trained people on it. We also use them for collection purposes. It is not that it is used only for the Unnati, it is used across the organization also in certain ways.
Okay. So is it fair to assume once the rights issue is through, we can grow? And if you can provide some time line, when we can enter this maybe during this year or the next upcoming quarters?
I cannot give you the time line because I need an approval from the Board because Board in 2020 July, it had asked not to do this business. So I will have to go back to the Board. I will go back to the Board once the situation stabilizes. I have a fairly good capital adequacy, which will support the business and the growth. And so, there was one question that what would be our growth trajectory in the next 2 years. To factor that in to ensure that the capital is adequate to take care of the growth that comes not only on the retail side, but also on the corporate side.
The next question is from the line of Krishnendu Saha from Quantum AMC.
Just about the restructured book, which is around 2% or 1.5% of the book -- of the loan book. So I was just wondering how is that -- what is the number or payments coming across [indiscernible]?
Yes. So, on the retail side, the restructuring book outstanding -- principal outstanding is around INR 2,016 crores. And out of that, around INR 300 crores has already moved to Stage 3 as part of the [indiscernible] and almost 75% of the customers either in the form of principal or interest outstanding has started making the repayment.
Okay. So you expect 25% of the customers to move to Stage 3?
Around 30%. 15%, sorry. INR 300 crores.
Okay. You said that there are also [ 5 things ]. There's nothing less, no moratorium for anybody.
As I said, around 75% of the customers have reverted back to the repayment stream. So, another 20%, 23%-odd customers asked to moratorium.
Okay.
We would book about INR 2,100 crores, INR 2,200 crores, 30% is actually the number over there, but almost about INR 1,500 crore to INR 1,600 restared the repayment. The number that we have given of NPA also, remaining would be 1 DPD onwards, some of them would be 30 DPD or whatever it is, thought will being monitored completely separately in terms of the restructure. The restructured book and the [ mora ] book will be separately relooked at in the way we would like. And there is a big focus in terms of ensuring that these people should -- especially in the months we have started, it should continue to actually repay. And the ones where the business is coming up because we have a very large pool of self-employed other than this, people where the business has restarted, there's no reason for them not to do it. So whether he's repaying it, good with us, bad with others, bad with others, good with us, bad with me, good with others, we are actually looking at the portfolio by exiting it completely. And then seeing to it that actually we reach out and we say that you have to repay it. So if it requires a little tough stance, we've taken, and we are taking those stance. With the opening up of the legal machinery, today [indiscernible] and other things like that, when I spoke to you only on the [ Peter on Street ] and then the collection side or we would have cash collection. However, now we see that there is -- both the administrative machinery as well as the legal machinery, they are allowing us to actually issue and take the position of the property. There are a significant number of physical properties that we have taken. The auction has opened. All these things are helping us in terms of actually putting the required pressure or to ask for the money, there is no reason why I lent, I will not ask for my money. There is a security underlying over there. You need to either retain it to sell it to me or whatever you want to do it, put it on the auction. So we are using all these machineries to ensure that these are brought down progressively.
Right. Just on this auction phase, so we are very well -- just on the capital raise, we already had 21%, 22% capital adequacy. So what is the high that we used to raise the money? Couldn't we wait and clean up the book a little bit more, grow the book and we should have time. Why do you need the money so soon? That was on my thought. So I don't know if you could put in some thought on that part.
It is money required for the growth. We are starting new verticals. We have stopped doing some businesses which require higher capital. And that is the reason why you are seeing this. The moment you start a high-yielding book, I mean how do I do it because if the capital is a constraint to me, everything is interlinked. I just start doing it, suddenly it will come down below 20 or 18 and you will again ask me, what have you done? Why are you doing that? So we take a very, very conscious call in terms of how we want to actually enter the market. It cannot be start and stop. If I enter, I have to be there for some time.
So in the near future, we would like to get in the high-yielding developer or the corporate book. That's what we...
Unnati is also high yielding, affordable is high yielding that Valli spoke about between INR 8 lakhs to about INR 15 lakhs, it's a high-yielding book, which is about 11% to about 12.5%, 13%. This is what the competition is offering also. In fact, competition is charging much more than what we are actually anticipating.
Just on the Unnati book, what is the difference between the tenure of the old Unnati book and the new Unnati book?
New, we have not introduced it. We are going to introduce it. That is the reason that what she was trying to explain that you will see some results from the third quarter. It is a different product, completely different product, different underwriting standards, procedures are different, collection strategy is different. So it is going to be a very different way in which the business is handled, and it is not exactly like a prime business that is handled. This company is very good. It knows how to do prime, but it also needs to actually do as a full suite housing finance company. This is also required to be done.
As there are no further questions, I would now like to hand the conference over to Ms. Deepika Gupta Padhi for closing comments. Over to you, ma'am.
Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call as well as the audio of this call will be uploaded on our website, which is www.pnbhousing.com. Thank you.
Thank you very much. Thank you, everyone, for joining us.
Thank you. Ladies and gentlemen, on behalf of PNB Housing Finance Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.