PNB Housing Finance Ltd
NSE:PNBHOUSING
Earnings Call Analysis
Q2-2024 Analysis
PNB Housing Finance Ltd
The company welcomed investors to its second-quarter FY '24 earnings call, highlighting that it had performed well across various parameters such as disbursement, growth and margins, asset quality, and profitability. Disbursement grew by a healthy 18% year-over-year, reaching INR 4,165 crores, and the loan book exhibited a 5.2% growth compared to the same quarter the previous year, reaching INR 60,852 crores. The guidance for the loan book growth is optimistic at 17%, based on the anticipation that the second half of the fiscal year will outperform the first half.
The affordable segment is showing strong traction with the business growing rapidly within just eight months of operation. Retail loan assets also saw a solid growth of 12% year-on-year to INR 258,471 crores, and the company is on track for an expected annual growth of 17% to 18%. In contrast, the corporate book experienced a significant degrowth of 63%, currently standing at INR 2,381 crores.
In an effort to improve the book's risk profile, the company is focusing more on the salaried segment and taking a deliberate approach to slow down lending to the self-employed. They are also prioritizing home loans over non-home loans and emphasizing retail granular business, resulting in 88% of their new credit being allocated to lower ticket loans. This strategic shift is likely in response to improvements in asset quality, which improved from 6.06% to 1.78% year-over-year, indicating a healthier loan book.
The profit after tax (PAT) increased substantially by 46% to INR 383 crores in Q2, and revenue experienced a 6% year-on-year increase to INR 17.80 crores. Excluding a one-time benchmark rate reset from the previous fiscal year, the revenue growth stands even stronger at 17%. The company sustained a net interest margin (NIM) of 3.95% for the quarter, up from the previous quarter and maintains its credit cost guidance at 0.6% for the full year. The return on assets (ROA) increased to 2.14% for the first half of the fiscal year, demonstrating improved profitability.
Operational expenses (OpEx) rose by 24% in Q2, influenced by investments in the newly established affordable business sector. Capital adequacy remains robust at 30.38%, including a Tier 1 capital ratio at an impressive 28.5%, indicating strong capitalization and the company's ability to withstand potential losses.
The borrowing mix is expected to see minor adjustments in the upcoming quarters, with a slight increase in non-convertible debentures (NCDs) and commercial paper (CP) usage. NHB refinance is projected to rise as the company will be availing more finance from NHB. Reflecting the company's solid performance, credit rating agencies CRISIL and ICRA upgraded the outlook for PNBHFL to 'Positive' from 'Stable', indicating a favorable view of the company's financial health going forward.
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Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY 2023-'24 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, Head, Investor Relations and Treasury. Thank you, and over to you, ma'am.
Thank you, [ Darwin ]. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q2 and H1 FY '23-'24 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 management team over here, led by Mr. Girish Kousgi, our Managing Director and CEO.
We'll 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 27 of the investor presentation.
With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.
Good evening, and welcome to all the investors to quarter 2 FY '24 earnings call. Second quarter was very eventful. We have done well on all the on all the parameters: disbursement, growth and margins, asset quality and profitability.
If you have to talk about disbursement, quarter 2, we disbursed INR 4,165 crores. This compared to last year quarter 2 was INR 3,528, registering a growth of 18% Y-o-Y. And on -- sequentially, we have grown by 13.6% on disbursement. In affordable, we are seeing very good traction. We just started this business about 8 months back. And quarter 1, we had done 228 routes. And quarter 2, we have done [Technical Difficulty].
Ladies and gentlemen, the line for the management seems to have disconnected.
And we are very confident of crossing INR 1,000 crores in the short term.
On logins and sanctions, the growth is about 31% Y-o-Y. So we have seen overall growth not just in disbursement but also on logins and sanction. Market is quite robust. We have seen very good traction. Our loan book guidance of 17% stands, so H2 would normally be better compared to H1. And quarter 3 and quarter 4 will be very good for the company, and we'll be able to maintain 17% to 18% of [ the growth ]. On the loan book, overall loan book, quarter 2 the book was INR 60,852 crores. This compared to last year quarter 2 was [ INR 67,832 ] crores. On a Y-o-Y, the growth is 5.2%, and sequentially it is 0.8%. So we had resolved one large NPA account in the corporate, and therefore, the book has [ degrown ]. The corporate book has been [ degrowing ].
Talking about the corporate book, the book as of September is INR 2,381 crores, which was INR 5,700 crores last year quarterly, which is a degrowth of [ 63% ], and this is as per plan because they've taken a call to degrow the book, work on resolution, bring down the NPA and then at the right time, restart corporate business.
The restart of corporate business is well within our plan. So very shortly, we're going to restart in a different form altogether, focusing on select projects, select location [Technical Difficulty].
You may go ahead, sir.
Okay. I'm not very sure whether I was heard. I spoke about retail disbursement, sanctions, logins. Okay. Now let me continue.
On the corporate, we have a plan to restart business that will start in a few quarters. We'll be doing it in a totally different format, focusing only on construction finance. We'll be picking and choosing on developers, locations, projects. The ticket size is going to be about INR 150 crores, and this is a plan, and we will restart.
The plan was to degrow the book. At one point in time, the book was INR 18,000 crores. We have degrown. As of September, the book is INR 2,381 crore, same number last year, Q2 was INR 5,700 crores. So there is a degrowth of 58% in last 1 year. And sequentially, the degrowth is about 30%. Retail loan asset grew by 12% Y-o-Y at INR 258,471 crores on September 2023. With H2 FY '24 expect to perform better than H1, we are on track for -- as mentioned earlier, we are on track for 17% to 18% growth on book. Core retail book runoff reduced to 17.1% in quarter 2 FY '24 from almost about 20% in quarter 2 of last year. So we had taken those certain decisions that we need to get the mix changed on the profile side.
So we have been increasing salaried segment. We are going a little slow on self-employed. And in terms of product, we are focusing more on home and slightly less on the non-home piece. And we have completely moved to retail granular business. So if you look at our 1 CR, it is now close to 88% incrementally compared to 85% in quarter 1. So this is due to our increased focus on lower ticket loans.
So I'm not very sure because there were some disturbance, let me repeat on sanctions and logins. I mentioned about the disbursement in quarter 1 and quarter 2. We have seen a very good traction. On logins and sanctions on a Y-o-Y basis, we have shown a growth of [ 31% ]. So we see very good traction, market is very good, it's quite robust, demand is robust. And our disbursement guidance and book guidance is on track.
We also thought we should do some bit of tweak in terms of geographical concentration. So we have been increasing our share in South. South is a very good market. If you have to look at H1 FY '23, the South contributed to almost about 29.5%. And if you see that now quarter 2 FY '24, it has gone up to 37.5%. So significant increase in contribution from South.
If you look at West, West was 36%, and this is by design, we have come down to about [ 20.5% ]. North, for us, North includes a couple of locations from East as well, which was 34.64%, which has now come down to 33.12%. So I think broadly, North is the same, West is slowly coming down, and South is going up. On asset quality, on a Y-o-Y, last year, quarter 2, we were at 6.06%, and now we are at 1.78%, that is 427 bps lower. And compared to quarter 1, we were at 3.76%, now we are at 1.78%, which is 197 bps lower. In terms of retail GNPA, compared to last quarter, which was 2.49%, now it is 1.74%. On a Y-o-Y, which was 3.39% last year, quarter 2, now we're at 1.74%, which is 165 bps lower.
On the corporate side, last quarter, our GNPA was 25%, and now it has come down to 2.86%. So net NPA is now at 1.19% compared to 2.59% last quarter. And a year back, quarter 2 FY '23, it was 3.59%. So there has been a very good traction on corporate with resolution of one large account. And on the retail side also, I think it has been a combination of aggressive cash collection and also a bit of -- we took a one-off call on the retail side, and we also increased the [ PCR ]. On the [ borrowing ] mix, there has been a very little change compared to last quarter. But however, in the next 2 or 3 quarters, there'll be a slight change. Our bank borrowings, which was 42% last quarter, now it has come down to about 40%, and this might further come down by 1% or 2%. Deposits, it was about 32%, and now it is 31.4%. I think it would remain where it is, maybe it might go up by 1% or 2%.
NCDs, we are slowly increasing. We are now trying to raise from market in terms of both [ NCDs ] and CP. CP, which was 0.7%, now it is 3.3%, so slowly, we are increasing. NHB refinance, as of now, it is [ 4.8% ], but this will go up since we, very shortly, will be availing the finance from NHB. So on the liability mix, not much of changes, but there is will be a slight tweak in terms of bank borrowings, NHB, NCD and CP.
On margins, I think we had guided a spread of 2.5% and NIM of 3.5%, and this would be maintained. On credit cost, we had guided 0.6% for this year. And from next year onwards, it will be 0.4%. I think we are very much on track. If you look at H1 credit cost, it is 31 bps. Last quarter was 37 bps, and this quarter it is [ 27 ] bps. CRISIL and ICRA has updated the outlook of PNBHFL to Positive from Stable in quarter 2 of FY '24. [ KF ] updated the outlook in quarter 1. I would request Vinay to cover on financials.
Good evening, everybody. I will take you through some of the key financial highlights. So as you have seen, PAT, we have reported around INR 383 crores of PAT in Q2, which has grown 46% year-on-year. For H1, our PAT grew by 47% to INR 730 crores.
Revenue grew by 6% year-on-year to INR 17.80 crores in Q2. However, there was a one-off of INR 160 crores in Q2 FY '23 on a signed loan due to benchmark rate resets. Excluding the one-off of last year, revenue grew by 17% year-on-year. Similarly for H1, revenue has grown 13% to INR 3,487 crores.
Yield on cost of borrowing is at 10.58% and 7.99%, respectively, during Q2 FY '24, which are maintained at similar levels on a sequential basis. Spread is also maintained at 2.59%. NIM for the quarter is 3.95%, up 9 bps quarter-on-quarter. On a year-on-year basis, again, NIM shows a decline by 19 bps due to the one-off that we spoke about in the interest income line last year.
Excluding one-off, NIM has actually improved by 83 bps on a year-on-year basis during Q2 FY '24. Credit cost for the quarter is 26 bps for Q2 and 31 bps for H1 FY '24, which is within our guidance of 0.6% for [ FY '24 ]. We maintain our guidance on the credit cost for full year at 0.6%.
ROA, which was at 1.6% for FY '23, is 2.14% for H1 FY '24. We have also registered an increase in ROA on a sequential basis. ROE for H1 is 11.1%. In Q2, OpEx has grown 24% year-on-year. And in H1, OpEx has grown 25% year-on-year. This is primarily driven by royalty expenses and investment for affordable business, which was not there in the last year. Capital adequacy is at 30.38% as of 30th September, which includes Tier 1 capital at 28.5%.
Handing it over back to Deepika.
We can now open the floor for Q&A, please.
[Operator Instructions] The first question is from the line of Varun from Kotak Securities.
I had a question on cost of borrowing. Your cost of borrowing looks to have flattened out. But still, there must be some impact left of NCDs repricing, right? Do you [indiscernible] expect this to settle?
NCDs are all fixed rate, so there is no impact-elect. And again, for MCLR also, most of the repricing has already happened. And hence, our costs of finance are flat right now.
I mean to say that as they mature, you need to refinance it. If you'd be raising NCDs or getting [ other players ] the other kind of borrowing. So your incremental must be higher than what you have borrowed something like 2 years or 3 years ago?
No, no, no, not really. The cost is actually almost same or, in fact, slightly lower than what it was like 2, 3 years back.
Okay. So this is what you would expect for this full year and going forward, maybe slightly benefit?
Yes, yes. It should be -- it's a regular course of business, we will keep replacing. This should not have any [ impact ].
The next question is from the line of Shubhranshu Mishra from PhillipCapital.
I was just looking in the slide that says 14,000 channel partners. This is for all retail loans. Is that a fair understanding?
Yes, this is for all the retail loans, largely on the prime side and deposit agents, both put together, we have 14,000 partners.
Understood, sir. Also, that was like entire 100% of your sourcing. If you can follow on what would be a concentration in the channel partners? Let's say, top 100 channel parters contribute to what percentage of disbursements versus, say, top 500 partners contributing to what percentage of distribution at this [indiscernible]?
No, there is no concentration. We have multiple channels, one is [ DST ], second is DSA; third, we have digital. And of course, to a small extent, we have branch [ pocket ], which we call as direct. So there is no concentration because our -- if we have to look at the sourcing mix between [ DST ] and DSA, DSA is about 40% and [ DST ] is 60%. So there is no concentration with respect to sourcing from DSA.
Understood. And in terms of branch concentration, top 10 on this contributing to any particular number of [indiscernible]?
No, there is no concentration in terms of branches. But of course, there are -- the top 5 states for us is Maharashtra -- this is on a book level, Maharastra, Delhi, Tamil Nadu, Telangana and Karnataka. And typically, if you look at -- these 5 states would always be the top 7 or 8 states for us.
So it is -- we had changed our strategy. And we wanted to get better share from South, and therefore, we were a little bit more focused on South. And that is why we saw that there is a shift in business, and there's an increase, almost by about 9, 10, in the mix from South.
Understood. And if I can just have one last question on the South strategy. It's actually South, the credit would be slightly [ more significant ] because of the number of organized players that could be slightly more salaried versus North India. So then, are we necessarily taking the yield compression building into the business?
I couldn't hear you properly. I think your question was that we are now focusing more on South because we want to increase our salaries. I think it is not just South, it is across the country, all geographies we want to [ change ] our profile mix. We wanted to increase our sourcing from salaried. And typically, South happens to contribute on the higher side on the salaried side. Otherwise, we are present across the country, and our focus remains -- focus on 22-odd states where we are present.
Is that a fair understating -- would be that [indiscernible] yield compression, lets's say, focus more on salaried?
Not really because within salaried -- see, one is in terms of profile, we have changed mix slightly -- incrementally slightly skewed towards salaried, but what we are doing on salaried also, we are now focusing more on the affordable side, affordable income salaried, so that the yields could be higher. So there is no yield compression because of the change in profile mix. Within salaried, we have identified opportunity where we can build the book at a higher yield.
The next question is from the line of Renish from ICICI.
First two questions from my side, one is on this excess [ provision buyback ], which we handed to the large corporate account, [indiscernible]. So in P&L, what does it reflect? I mean, the safety provision is also sort of flat. There is no subsequent increase in the PAT as well. So does it try to assume that we have done a write-off in the retail side?
So on the retail side, we -- of course, obviously, we got a write-back of provision on the corporate account. And that we have utilized for three purposes: One is ECL [ drop ] on retail, corporate, and also we took some one-off on the retail apart from cash collection.
So you mean retained write-off -- I mean, one-off retail write-off?
Yes. That's right.
Okay, okay. Got it. And secondly, sir, this slightly from a medium-term strategy point of view, so let's say, pre-COVID our leverage used to be 7, 8x, we and used to generate 14%, 15% ROE on a 1.5% kind of ROA. Given our ROA has improved significantly and considering our guidance, be it on NIM, credit costs, albeit on the [indiscernible] side, it seems to suggest that current trajectory, more or less, will sustain. So why does our ROE should settle maybe in the medium term, considering the past leverage?
See, if we now look at our affordable business, I think incrementally, it is contributing to about 9%. So I had earlier mentioned that this year, it will be close to 10%. I think it looks like we might exceed what I had indicated earlier. So we are pretty aggressive on the affordable side, and we are able to build traction on the affordable side. So maybe this year, we'll end up with slightly more than what I had indicated earlier.
So with every quarter, the mix between prime and Roshni is getting changed. Roshni is affordable. So -- and I also mentioned that we'll be able to maintain margins at the current level. So going forward, it has to only improve. It will take time because affordable, it is small ticket loans and therefore, it takes time.
But I think we probably would be one of the housing finance company to build a book of, let's say, INR 1,000 crores fastest. And so with every quarter -- with every passing quarter, the mix keeps changing. So I think eventually, I think, the [ ROE ] profile also should improve.
So I mean, the steady-state ROE should be 17, 18?
So our gearing now is 3.77, okay? So we plan to take that up to 6, 6.5 since we are now focused on growth also, along with profitability. So we have a vision of building book to INR 1 lakh crore. And therefore, leverage, which is now less than 4, might go up to 6, 6.5. So this might happen in the next 2.5 to 3 years. Now ROE is less -- is low because, obviously, we raised rights -- we did rights issue recently, and there will be a drag for some time, but that will catch up with growth in volumes.
Got it. Got it. And sir, just last question on the growth side. Considering our first-half growth is slightly muted, I mean on YTD basis, it is close to 1.5%, now even if we have to go with the lower end of the guidance, which is at [ 17% ], which implies a very solid half in the second half, implying maybe [ 7%-odd ] sequential growth rate in Q3, Q4, so just wanted to reconfirm that we are confident of maintaining this run rate in Q3, Q4, right, sir?
If you look at last 4 quarters, we have done a lot of tactical changes in our strategy. And just to mention a few, we wanted to reduce the ticket size, focus on retail. Today, as I mentioned, we are close to 90% of the [ 1 3 half ]. LAP ticket size has come down drastically. The focus is now more on home, focus is more on salaried. So we've done all of these things. And also the book, what we're going to build in the future has to be pristine.
And therefore, we've taken -- I know last time I was mentioning we have taken some call in terms of certain geographies, certain products, we have fixed some of the processes. So basically, if you see last 3 to 4 quarters, we've spent a lot of time to get all of these things right so that a few quarters from now, we will be one of the best housing finance companies and would be comparable, right?
And I had guided book growth of 17% to 18%, that is the intact. So we will be able to grow at 17% this year over last year. And we had guided disbursement growth of 22-plus percent, I think we'll be there very comfortably.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Just following up from the last participant, your guidance of 17%, 18% loan growth is on retail, right, not on...
It is on retail. It is on retail. But however, if you look at the corporate book, it is degrowing. So now the book is less than INR 2,400 crores. So the guidance, what we had given was on retail, yes, you're right.
Sir, the other thing is, again, coming back to that write-off that we have done, so it seems like -- I mean, excluding this 1 corporate account that we have resolved, the gross piece has come down by about INR 400 crores, excluding that corporate account. And out of that, we've taken around INR 320 crores of write-offs in retail. So if you could just explain this part a little better that whatever releases we had from the corporate NPA account, almost INR 200 crores of releases is what I see, how did we kind of -- because this -- I mean one would have thought we will want to increase the provisioning cover on your, maybe, retail loans. But contrary to that, we've chosen to kind of write-off. So if you could just explain the thought process behind that?
So if you look at our overall GNPA last March, it was 8.13. Now last quarter, it was 3.76. And this quarter, it is 1.78, right? Now even if you look at retail, last March was 5.5%, and last quarter was 2.49%. So what I'm trying to say is that there has been a consistent decline in the retail GNPA as well, not just the corporate.
Now, whatever provision write-back would be, we have utilized that for three things: One is ECL, [ two ] is PCR on retail and ECL on corporate. And we took -- we'll utilize that amount for a bit of write-off. So it is a combination of all these three.
Perfect, sir. And sir, just one clarification here. I'm just referring to Note #4 of the SEBI results release. There, it says that from this corporate NPA account, which has been resolved, we have recovered INR 828 crores. Am I reading it right?
Yes, you're.
Got it. And so all of this INR 828 crores, we have received it in cash, correct?
Yes, it's 100% cash deal.
Got it. One last question. Again, I mean, kind of talked to, I mean, senior leaders like you in the industry. Somewhere, there is an acknowledgment that maybe in mortgages, particularly smaller ticket mortgages against INR 15 lakh to INR 25 lakh, INR 30 lakh kind of ticket size, there is some slowdown that people are talking about.
Are you also seeing that because, I mean, obviously, it doesn't reflect in the disbursement numbers that you've reported? But are you structurally seeing some slowdown in, maybe, urban affordable or lower ticket affordable housing?
So if we talk about affordable income base, the competition has increased. But if you talk about overall affordable, which typically all the NBFCs and HFCs focus, I think there is no slowdown. There is no slowdown. As I had mentioned, there are 4 segments, Super Prime, Prime, Affordable Income, Affordable Assessment. So if you're talking about, I think, a bit of Prime on the lower side and Affordable Income, I think there, for some time, there was a bit of slowdown, but we have not seen any slowdown. . For us, we had to correct a lot of things internally. And therefore, we had guided a disbursement growth of 22%, and we have already shown 18% growth. So in next 2 quarters, we will catch up and we will be more than 20%, 23% growth on disbursement. On the book, we had guided 17% to 18%. And in the next 2 quarters, we will catch up and we will be able to show growth of 17%, 18%.
So we have not seen -- even if you look at affordable, even though the size is very small because we started about 8 months back, if you see whatever be the size, I think we are seeing significant traction, given the number of branches and team size. We have seen significant traction. We've been growing at about 60% quarter-on-quarter on the affordable. So we have not seen that slowdown. However, even I have read many reports which spoke about a bit of slowdown in the segment.
Got it, sir. And sir, just one last question. My line was too bad when you were explaining the ROE improvement and consequently, ROE also improving as leverage picks up. Is the understanding right that, I mean, obviously, we are diversed on the borrowing cost side. I mean going forward, there could be potential credit rating upgrades, which could feed into an improvement in what the decline in borrowing costs at the same time.
As you keep doing affordable, maybe yields can improve marginally from here, which suggests that margins could remain stable to a minor improvement. But I mean, in terms of your guidance of credit costs of 40 basis points for next year, OpEx, I mean, I don't know how much of a room is there to further optimize OpEx. So just trying to understand, I mean, what is it that you were telling about [ ROA ] expansion from next year onwards, '25 onwards?
In terms of OpEx, I think we will be more or less stable. In terms of percentage, we will be somewhere between 80 to 90 bps. In terms of credit cost, I had guided 40 bps from coming year onward. This is blended. I'm not talking about short term. I think long term. I think 40 bps will be the credit cost, given the blend of prime and affordable, right?
And the mix, as I mentioned, is changing. So incrementally, this year, we will -- probably looks like we will be at about 12% and add on Roshni out of the overall disbursements what they're going to do this year, and this will keep improving.
So I think directionally, I think our effort is to ensure that we identify pockets where we can build book at a much higher yield on the prime side, increase Roshni penetration so that the yields would be higher and -- which will help us in better profitability. On the OpEx side, we'll be able to maintain at the current levels between 0.8 to 0.9. I think on the credit cost, it will be [ 40% ] coming year around onward. I think this is the overall direction what we want to go.
The next question is from the line of Omkar [indiscernible] from Shree Investments.
Yes, as the overall NPA has come down drastically, what would be the guidance or trajectory of [ NPA ] coming 2, 3 quarter as well as the next 2 years?
See, I think in next 3 to 4 quarters' time, we would want to be one of the best in the housing finance industry on asset quality. This will be a combination of [Technical Difficulty].
Sir, you are not audible. Ladies and gentlemen, the line for the management seems to have disconnected. Please, stay with us while we reconnect with the management. Omkar, I would request you to please repeat your question.
Yes, I was asking about the net NPA trajectory for, say, next 2, 3 quarters as well as for next 1, 2 years on a gross level.
Yes. So I think whereas the MD has responded, so that right now is at 1.74. We are trying to bring it down in line with any other comparable with a housing finance company. And we shall be comparable on this parameter in the next 2, 3 quarters with any other -- the well-managed housing finance [ companies ]. Even on the credit cost, we have guided around 0.6% for this year and 0.4% from next year onwards.
This in line with the other NBFCs or best in the class you are talking about?
Yes.
For individual as well as for the corporate loan, right?
Yes. Overall, yes, because largely, we are now retail, 97% is our retail loans. So it's overall.
Okay. Just wanted to know what are the cost of funds for this quarter and incremental cost of funds right now?
It's almost same as previous quarter. We have closed this quarter at 7.99%, and incremental also is somewhere in the same range, 7.9%.
Okay. And there were a couple of one-offs in this quarter, say, like for pre-provisioning profit and for NIMs and all that. So that would continue for the next quarter as well? Or that will normalize in the coming quarters?
No, no, there are no one-offs in this quarter. Runoffs were in the last year same quarter. So for comparable purposes, we have excluded and given a comparison. But this quarter, there are no one-offs. Even on the credit cost side, there are -- I mean those one-offs are utilized for financing provision on corporate side and taking certain one-off on the retail side. But other than that, there are no one-offs in the financials in this quarter.
Okay. Can you just highlight your guidance on ROA front?
ROA, right now, is around 2.24 this quarter. It has been improving sequentially. Previous quarter was 2.1, and now we are at 2.24. Our endeavor is to keep improving and keep working on it. I mean, we've not given guidance on this. We have given guidance on the spread and NIM, which we are going to maintain.
As far as the [ gearing ] is concerned, you have already mentioned in the next 2, 3 years, you will be at 6.5%, 7%, right?
Yes, 6% to 6.5% is what we have [ given ].
The next question is from the line of Kunal Shah from Citi Group.
So the question is with respect to fees, given that now the focus is also going to be on the individual as well as the [ loan ] portfolio. And given the ticket size of almost like INR 29 lakhs and INR 32.5 lakhs in [ net ], how do we see the risk in terms of the balance transfer, given where we are in terms of big cost of borrowing? . And over last 3-odd quarters, how much has been the pricing power which -- when we were growing the retail portfolio, how much have we been able to pass on in terms of the lending rates? So if you can just kind of let us know in terms of the incremental lending rate, particularly in this category of ticket size?
Runoffs, perhaps, have been very stable and consistent. We have been in the range of 16% to 17%. This is total runoff, including the regular EMI payoffs and BPs and foreclosures. The total there has been in the range of 15 to 18. It used to be in the range of 22%, 23%. So it has been now in this particular range for the last few quarters, and we intend to maintain it. I didn't get your second part of the question, can you just repeat?
I just wanted to check [indiscernible] credit, it's somewhere around 4.5% run rate for the quarter, which leads to like almost 18% in Q2 [indiscernible] runoff, but just in terms of risk on the [ EBIT ] side, okay, because this is going to be extremely competitive. And have we seen the pricing power for us [indiscernible] the rates have gone up.
To what extent have you also have been able to pass it on over the last 3-odd quarter in terms of -- particularly based on loan portfolio, how much is the lending rate increase that we have taken?
So we have completely passed on the entire increase that we have seen on the repo rate. So that has been completely passed on, roughly 240 to 250 basis points has been passed on. And this is the rate now on a steady-state basis after all the [indiscernible] are done.
Okay. So incremental would be how much now on loan and [ lend ]?
Incremental is between 9.6 to 9.7.
9.6 to 9.7 compared to our book yield of 10 points?
Correct.
Okay. Okay. And lastly, in terms of -- for the breakup, so this INR 45 crores, if you kind of help in terms of how much was the write-back, how much was the write-off? And there is some [indiscernible] was not able to give in terms of how much will write-off in the recovery. So INR 45 crores is the net amount?.
Yes. So INR 200 crores -- was INR 199 crore was the write-back that we have got on resolution of 1 corporate account. And the net P&L impact is 45. So you can work out the math of that.
Okay. And this entire amount would be write-off, then, largely or it would be provisioning as well?
It is used for both for sensing Stage 1 ECL on the corporate and for strengthening ECL on the retail and for certain one-offs that we have taken on the retail side.
The next question is from the line of Jigar Jani from B&K Securities.
Sorry to just continue with the previous participant's question. If I look at your presentation in terms of the ECL provisioning, Q-on-Q, your total ECL provision has dropped from 1,485 to 1,196. This is despite you taking the INR 245 crores kind of provisioning, which is the INR 199 crores back and the INR 45 crores to the P&L. So is it fair to understand that the overall write-offs would be somewhere around INR 400 crores to INR 450 crores?
No, no, no. It's not...
So can you just explain me the bridge as to why our ECL provision is kind of going down despite having write-backs and provisioning to the [ P&L ]?
No, I think that, we can take up offline. I mean that is like a lot of numbers, so we can take it up offline.
Sure, sir. No worries. And just wanted to know what is the incremental yields that we are doing on the affordable housing portfolio, on the HL and the [ NOF ] side? Or we're just doing it [ HL ]?
Overall, as I said, it is between 9.6% to 9.7%. On the affordable side, our overall yield is around 11.5%.
And we'll be doing both HL and [ non-HL ]?
Yes. Both HL and [ NOF ] put together.
The next question is from the line of Anusha Raheja from Dalal and Broacha.
So you said that on construction finance, you would want to grow this book back again. So if you can throw some light in terms of strategy, like how you're planning to grow this book? How much would be the average ticket size? And what share we can expect from this book in an overall loan book?
So I think as a mix, going forward, when we start doing corporate business, in the overall mix, this will be less than 10% at its peak. So we will restart this business in a few quarters from now. And when we restart, we'll be focusing only on construction finance. We will be picky and choosy on builders and projects and locations.
The next question is from the line of Harshvardhan Agrawal from Bandhan Asset Management.
So just wanted to get some more color on the write-off that you've taken on the retail part. One is, could you share the quantum of the write-off? And secondly, you gave some more color as to what kind of ticket sizes those loans were? Were there specific in geography with the independent houses or apartments? If you can give some more color on that, please?
The write-offs, as I stated, it was on the P&L side, around INR 200 crores we had, which was available to us. The net P&L is INR 45 crores, so around INR 245 crores we have used between write-offs and for strengthening the PCR on Stage 1 assets of corporate. So it is basically a combination of these two that where the funds have been utilized. It was largely a [ doubtful 1 and doubtful 2 ] category.
And sir, this was like -- what ticket size of loans that we had written off?
These are normal retail cases. So there is no any -- no specific pool as such, but these are normal retail cases, which were in NPA in [ doubtful ] 1 and 2 category.
Sure. And then just one last thing as to -- because the guidance that you have given on the asset quality, it tends to increase from further year on. So any one -- any such one-off write-offs that we are planning in future quarters?
As of now, there is no plan. There is no plan for any one-off in future. We'll not be able to comment on that. But definitely, as our endeavor is to tie and bring down the NPA on retail side as well, I think largely it will be driven by collections and [ legally ].
We have the next question from the line of Bhuvnesh Garg from Investec Capital.
A couple of questions. Firstly, sir, what was our CP out rate for this quarter and for the last couple of quarters?
See, overall, we have given a runoff rate of 16% to 18%, this includes normal runoff as well as [ BP ] and foreclosure. It will be somewhere between 7% to 8% for only for [ BP ].
And what was it for sales Q1 and Q4?
Q1 was also -- it is in the same range for the last few quarters. It used to be in the range of 9% to 10%. It has come down to the level of 6% to 7% now for the last few quarters.
And in terms of growth, sir, if I look at on our Slide 6 that we have growth path for retail loan book. So in Q2, I mean our retail loan book has gone by INR 1,493 crores, similar -- slightly lower than what the growth was in Q1. But generally, what we have seen that Q2 is a better quarter than Q1. So what explains this lower growth in retail loan book?
Retail has grown better in quarter 2 than quarter 1. And if you look at disbursement sequentially also, there has been a good 13.5%, 13.6% growth over quarter 1.
Yes. But in your Slide 6 top left here, so I see from April to June, INR 1,507 crores. And then from June to -- July to September, INR 1,493 crores retail loan. I just want to understand, sir.
Yes, there is some impact of write-offs in that. So hence, it is looking lower. But if you see gross disbursement, that has grown 13% quarter-on-quarter.
Considering that our total disbursement for H1 has grown at about, I think, 13% Y-o-Y and we are guiding for 22% Y-o-Y growth for the full year, so what do you feel confident that you -- that it will accelerate in H2? So what are the key drivers that you are witnessing?
So I think last 3, 4 quarters, as I mentioned earlier, we were really working on trying to change some of this mix, profile mix, product mix, geography mix, moving away from Super Prime completely and moving to Prime and Affordable. So we were focusing on all these things. And therefore, it was by-design. Consciously, we had to grow at this level. . And H2 is always better than H1. And within H2, you will see that quarter 4 would be really very good compared to quarter 3, and quarter 3 will be far better than quarter 2. And we will cover up in quarter 3 and quarter 4. So -- which is what I mentioned earlier as well, 17% to 18% of book growth and 22%, 23% of disbursement growth is well in sight.
The next question is from the line of Ravi Naredi from Naredi Investment.
My question is regarding your comment in your comment in press release, the INR 160 crore one-off in Q2 financial year '23. And so it excludes [ NII ] grow 35% year-on-year. So please elaborate this INR 160 crore one-off income. It's a comment not in last year Q2 results also. So...
See, as I said, whenever there is a benchmark rate reset, even on the securitized book, you have to change the rate for that book. And you have to take an upfront gain. So that upfront gain came as a one-off in Q2 last year when we changed our rate reset by around 100 basis points. So it was one-time gain that came last year, which is not there in the current quarter. So hence, it has been called out separately.
And the next question is regarding the COVID-19-related stress assets, INR 1,600 crores approx. So what is the average tenor of this exposure? And what is your assessment related to this exposure?
So I think you're referring to [ restructured pool ]. So the tenor is on par with the entire portfolio tenor, so there is no difference. But the [ number's ] only changed that during the restructuring period, some of these customers would have opted for morat, interest morat, which could be for maybe ranging from 3 months to 12 months or maybe 15 months. So otherwise, the tenor is broadly in line with the entire portfolio -- retail portfolio.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Just one question. Initially, you were, in your opening remarks, talking about restarting construction finance in a couple of quarters. You've also mentioned the ticket size that you're looking for. Can you just elaborate on that? What ticket size you're looking for in construction?
So yes, we are still working on that, but there is a plan to start corporate business very shortly, could be 2, 3 quarters from now. So when we restart, we'll be really [ picky ] and choosy. We will do corporate business more from a strategic point of view, which could enable our retail growth. Ticket size would be about INR 150 crores to INR 200 crores, that is what we would be looking at. And we'll be very [ picky ] and choosy on the developer projects and -- we will do in select locations.
Got it, sir. And sir, typically, these projects that you're planning to do, I mean I understand, I mean, maybe 2, 3 quarters away and too early to comment, given that maybe you've not started working on this piece yet. But broadly, will the yields in the corporate book that you will be building be lower than the yields that we have in retail today?
Not at all. I think the yield on corporate will be much higher than the retail book. But yes, I know since we are going to focus on select developers, good developers, the yield may not be significantly higher than the prime yield. But definitely, if you compare to, let's say, our affordable business Roshni, it will be on par or maybe slightly less than that because today, Roshni, our yield is about 11.5%. I think this would increase over a period of time, and this could grow beyond 12%. So even the corporate book yield would be on similar lines.
We have the next question from the line of Varun from Kotak Securities.
So if I look at the restructured book, that was about INR 1,700 crores and there is some movement of that into NPA and some of it has been [ paid ] off. There's still some [ 1,500 ] standard book. So is this coming out of resolution or all of it moved out of moratorium? Where are they right now in stages? And what's the provision?
So as of now, there is nothing in the restructured window. So all those cases which were restructured, EMI have fallen due and they are servicing. So whatever we see today in various stages, Stage 1, Stage 2, Stage 3, is post the completion of a restructured period.
And are there any additional projects on this restructure or as per retail model, that's what you've provided?
There is nothing additional.
As per retail model, the provisioning is done.
Varun does that answer your question?
Yes.
We have the next question from the line of Omkar [indiscernible] from Shree Investment.
Yes, you were talking about overall loan book growth of 17%, 18%, that was only for retail category or overall loan book you're talking?
The retail category because corporate we are degrowing. And by the time we start, it will take another 2 to 3 quarters. So the growth what we were talking was only on retail.
And what about the overall growth there?
I think more or less, it will be in line because today, if you see out the overall portfolio, retail is about 97%. And even if you see what the book was last year, I think the gap is going to be about maybe 3%, 3.5%, otherwise -- largely the growth is going to come from retail til we start corporate.
So overall growth would be similar to the retail only?
17% to 18%, what I mentioned was on retail.
Yes, correct. But once you start growing the construction finance...
Yes. No, construction finance, it will be a very small business for us. At its peak, it will be less than 10% of the entire portfolio.
Okay. And right now, the retail is consisting around 97% of the overall loan book?
Yes.
We have no further questions in the queue. I would now like to hand it back to management for closing comments. Over to you, sir.
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 and audio of this call will be uploaded on our website. Thank you.
Thank you. On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.