Satin Creditcare Network Ltd
NSE:SATIN
Satin Creditcare Network Ltd
NSE:SATIN
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Good morning, ladies and gentlemen. Welcome to the Satin Creditcare Network Limited Q1 FY '23 Earnings Conference Call.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. HP Singh, Chairman cum Managing Director of Satin Creditcare Network Limited. Thank you.
And over to you, sir.
Thank you. Good morning, everyone, and thank you all for taking the time to join us and discuss our financial performance in Q1 FY '23. I hope you and your family are safe and keeping healthy.
I'm hoping you have already seen our quarterly results and investor presentation. Those who have not been -- those who have not seen them can do so via our website and stock exchange notices.
The microfinance sector in India has traversed a turbulent journey. However, we are pleased to inform you all that the company has witnessed a turnaround. And we are confident that the difficult times are behind us, as evident in the performance of the quarter under review. Further, we are confident of having a very good year in terms of growth and profitability.
Now let me start with the key developments that took place during the quarter. As a progressive institution, we have proactively [ envisaged ] strategies time to time and have demonstrated resilience in the challenging environment. Optimizing our business acumen post demonetization in 2016, we strategized to diversify out of unsecured MFI portfolio to secure product offerings through rolling out of our subsidiaries. The strategy to diversify portfolio yielded results for the company and the subsidiaries have taken great shape over the years. In order to better reflect the embedded value of the investments in these 3 wholly owned subsidiaries, we have revalued our investment in the subsidiaries through our profit and loss and recorded an increase in fair value of INR 351 crores in the stand-alone financial results.
During COVID-19 pandemic, many of our clients and their family members lost their lives, while countless lost their livelihoods. This coupled with lockdown affected the marginalized sector and in turn repayments. As a measure to provide relief to the impacted clients, the company restructured 21.4% of the loans amounting to INR 1,151 crores and provided moratorium wherever it was necessary. Restructured book is reduced to 11.6% of on-book AUM as on Q1 FY '23, amounting to INR 584 crores, with an ECL provision of INR 295 crores and collection efficiency of 72.1%.
The company monitored the performance of this portfolio and realized that a certain set of clients are still economically unstable and hence are unable to repay their loans. Therefore, the company decided to write off loans amounting to INR 275 crores, which is 5.4% of the on-book AUM, during the quarter under review. Post write-off, the GNPA of the company has reduced to 4.3% as on June '22, as compared to 8% as on March '22. Despite this write-off, our gross AUM remained on similar levels as of March '22 at INR 6,389 crores on a stand-alone basis and INR 7,569 crores on a consolidated basis.
Furthermore, we have created sufficient provisions to address any contingency in our portfolio, maintained on-book provision of 319 crores -- INR 398 crores as on 30th June 2022, which is 7.9% of our on-book AUM. The profit and loss account of the company now stands insulated from any additional stress that may come in. The profit for the quarter stood at INR 60 crore. Additionally, the company is well capitalized with a healthy CRAR of 22.6%. The company has maintained sufficient liquidity of INR 1,017 crore as on 30th June 2022 and had undrawn sanctions worth INR 350 crore as of quarter end.
However, as per the consolidation procedures set out in Ind AS, this increase in profit is due to the fair valuation of investments in subsidiaries of INR 351 crore, which have been eliminated in the consolidated financial results. Due to this, the consolidated result has net loss as per the accounting standards. A fair value has been determined on the basis of independent valuation report obtained from Category 1 merchant banker.
Also, we are elated to share that all the group companies have reported profit during quarter 1 of this financial year.
During the quarter under review, with our conviction of being determined, definitive and decisive, supported by our robust in-house technology, we were able to adopt the new RBI regulation swiftly into our system and started disbursing from April 2 onwards under the new regulations. As a responsible organization, we are guided by our long-standing resolve of reaching the underserved sections of the society, cater to their needs and economically uplift them. And going ahead, the organization aims to ensure a healthy growth with a risk-adjusted cornerstone. And we as one of the industry's leading players are expected to regain our growth trajectory and advanced [indiscernible].
Now let me run you through the financial and operational highlights of our company, starting with the consolidated operational highlights.
Our AUM as on 30th June 2022 stood at INR 7,569 crores. We have a customer base of more than 27 lakhs as of 30th June 2022. Our disbursement for the quarter stood at INR 1,709 crore, as compared to INR 282 crores in quarter 1 FY '22. Our assigned portfolio stood at INR 1,304 crores. We are seeing disbursement activity to pick up, and we had one of the best first quarters [ in the last few years ] in terms of business. As of 30th June 2022, 100% of our disbursements are made through cashless mode, while cashless collections stood at about 6%. We have also adopted website payment option and UPI auto debit.
Now on the stand-alone operational highlights. Our stand-alone disbursement for the quarter stood at INR 1,554 crore, as compared to INR 222 crore in quarter 1 FY '22. With disbursement back on track, we expect growth to come in the coming quarters. Our average ticket size of MFI lending for the quarter stood at INR 41,000. We have made adequate provisions of INR 398 crores, including INR 295 crore assigned to the restructured portfolio.
Our collection efficiency for the quarter stood at 97.3%, excluding the restructured portfolio. The collection efficiency on restructured portfolio for Q1 FY '23 stood at 72.1%. Collection efficiency for July '22 stood at 98.5%, excluding restructured portfolio, showing all the signs of improvement. We have a well-diversified customer base, a well-penetrated branch network across states at 76% rural exposure.
On-book GNPA reduced from 8% as on Q4 FY '22 to 4.3% as on Q1 FY '23, from INR 412 crore to INR 217 crores. Out of this, INR 105 crore pertains to Assam. New PAR addition of loans disbursed from July '21 onwards was 0.6%, representing 70% of our on-book AUM as of July '23, which is very encouraging.
Geographical expansion. As of 30th June 2022, our total branch network stood at 1,224 branches, which is spread across 397 districts. We have a total state and UTs count of 23, which make us a well-diversified pan-India microfinance player. As of 30th June 2022, 96.5% of our districts have less than 1% of portfolio exposure. Exposure to the top 2 -- 4 states contribute 53.6% in Q1 FY '23, at 77.3% in FY '17.
Our well-thought-out diversification strategy has enabled us to sail through difficult situations; and capitalize on our idea of enriching our clients' lives through financing of various products, which includes loans for bicycles, solar products, home appliances, consumer durables and water and sanitation.
An update on subsidiaries. Satin Housing Finance Limited has now reached an AUM of INR 331 crores, including DA of INR 27 crore, having a presence across 4 states with 3,810 customers. SHFL has a 100% retail book comprising 66% affordable housing loans and 34% of LAP. The company has 16 active lenders, including NHB refinance; CRAR of 54.7%; and gearing of 2.2x. Total equity stands at INR 101.6 crores. The quality of portfolio remains intact with GNPA of 0.09% as on June '22.
Satin Finserv Limited, our MSME, has reached an AUM of INR 176 crores with 3 consecutive profitable years. Business correspondent services under Taraashna Financial Services Limited has reached an AUM of INR 674 crores as of 30th June 2022. The company operates through 155 branches and has more than 3.4 lakhs active loan clients.
And to update you on amalgamation of the 2 wholly owned subsidiaries Taraashna Financial Services Limited and Satin Finserv Limited. The order against the first motion application was pronounced on hearing dated May 17, 2022, by the honorable NCLT, while the -- both the companies have filed joint second motion application with honorable NCLT on May 25, 2022. The said joint second motion application was admitted by honorable NCLT in its hearing dated July 8, 2022 -- and issued necessary direction of serving notices and newspaper advertisements, which are under process.
With this, I would like to open the floor for questions. Thank you.
[Operator Instructions] The first question is from the line of Varun Ghia from Dimensional Securities.
I wanted to know -- I have 2 questions. One is if you could tell us about the slippages [indiscernible].
Yes, yes. Can you repeat the question again?
Yes. I wanted to know the slippages this quarter and, secondly, if there were any interest reversals.
So on the slippages, as we mentioned, that the new portfolio that we have created, which is representing 70% of the portfolio that we have created from July '21 onward which has run on 1-year kind of a tenure, there the PAR 1 is about 0.6%. So we are confident that the new portfolio is behaving well and there's no concern. Whatever were the issues with regard to the old portfolio [indiscernible] on restructured book, that has already been taken care of in the results, so there are no major concern on the [ pay slippages ]. And what was the second question?
[indiscernible]...
What is the amount of slippages this quarter?
So first, as we said, that our gross NPA has come down from 8% to...
4.3%.
4.3%. So there are no major...
So there are no fresh slippages. And if I can give you [ the same ]: 0.6% of -- which is at PAR, which is PAR 1. Technically there is no GNPA technically from the -- from whatever we disbursed since the last 1 year [indiscernible]. So if you [ can counter that ], you can probably look at that.
Okay. And any interest reversals?
So we are doing it in line with Ind AS, so -- wherever we are writing it off, so to that extent, interest has also been reversed.
[Operator Instructions] The next question is from the line of [ Abhishek Agarwal ] from [indiscernible].
Sir, my question are pertaining to cost-to-income ratio. When we look at cost-to-income ratio, our cost is quite high, okay, compared to other industry peers in our same industry, so how we are looking to bring it down? Because if we specifically take our employee costs, it's quite high compared to other players with the same AUM size. So in the future, how will -- how we are planning to reduce it and, secondly, on the provisioning side also. Because with this kind of cost ratio -- how our business will be profitable in the future. This is the first question.
So let me give you an answer to that. So 2 things which you have to bear it in mind: One, because of the write-offs and all, our denominator has probably been flattened for the last for -- even this -- for this quarter, it's probably been flattened. So that is the reason why, when you look at it, the cost-to-income ratio probably is slightly higher as compared to what it was. So that's point number one. The second is because of the COVID pandemic and whatever was -- recovery was being done, we had to deploy additional resources now. Technically we were looking at getting money [ back ] from the PAR clients as well as from the write-off clients as well as from the other clients. So that is probably also one of the reasons [ which has been here now with ] write-offs happening across to a large level. And we have just lifted now a portfolio which is technically very, very clean. And there is collection efficiency, as we mentioned earlier in our previous statement, which is close to about 99.0 -- 99.4%. I think for us now this will start coming down. And if you really look at it, because of the latest guidelines of risk-based pricing, technically the profitability, which never used to, arrives earlier to a -- maybe to a lower extent because of the margin [ gap being there ]. I think that has been [ filled out ]. So that will also look at in a positive way of enhancing our profitability in the future as well as in this quarter.
[ So sir ], can you particularly guide about your employee cost? As you said, that it was one times. Kind of because of COVID, employee cost has increased. So at the AUM percentage, what percentage we can take as employee cost.
Because -- I don't have a reference on the employee cost, whatever it is, but I think we only look at numbers how we can probably bring it down. My own sense is I think, out of the total OpEx of close to about -- whatever it is, about [ 6%, 7% ], I think 70% is the employee cost. I think that is what the -- and that is what the entire industry probably works on, and that will probably be the same for us also.
Okay, sir. And second question, like in the next 4 to 5 years, what the AUM size we are targeting. Because we have already a pan-India presence right now, which were earlier, 5 to 6 years back, we have mainly catered UP and Bihar, but now we have the pan-India presence. So how we are looking to [ see ] our AUM size in next 5 years.
So what we are looking at is about a 25% growth year-on-year for the next 5 years. That is what our benchmark is and that is what we will achieve. And going forward, because of the pan-India presence and all these things which we have put together, I think, for us, achieving 25% is not something [ which is difficult then ]. So that is what we are doing.
[indiscernible].
Including the [ subsidiaries, right ].
And -- okay, sir. And my last question: Like some -- we have allotted some equity to some of new [ P/E fund ], okay? So RBI only finance -- are financing business. Or they will take some Board seat. Or how it is...
So that is something which is probably [ not there. It's not in public domain ]. So right now there is no Board seat technically. The warrants have to get converted. And I think -- when they come in, I think...
But in future, it will be possible that they will take some seat...
I can't comment on that right now.
The next question is from the line of Rajiv Mehta from Yes Securities.
Am I audible?
Yes, yes, yes, please. [indiscernible]
So sir, a few questions from my side. Firstly, sir, if you can share the PAR 0 number. Because you have done a good amount of write-offs in this quarter and the reduction in gross NPL. But overall, PAR 0, how should we look at the movement between 2 quarters? Have you seen any reduction in the intermittent buckets because of better collections? If you can just give that flavor.
So Rajiv, the PAR 0 for last quarter was 9.4%. And this quarter is 9.2%. It has slightly reduced. And the PAR 30 is around 7%.
Okay, okay, yes. And sir, this -- when I look at our disbursement in the first quarter, you have done really well in terms of disbursing a significant amount of volumes. And we had this implementation also of the new guidelines kicking in from 1st of April, so I mean, was it not leading to any significant changes for us in the systems and we were able to kind of navigate that more smoothly as compared to others? Because when I reflect on other players' disbursement activity in the first half, they would have done much lesser disbursement. Or their momentum would have slowed down significantly, but for us that is largely continuing.
So Rajiv, frankly, I will not be able to comment on the other players [ of ours ], but we were very upfront. The moment the guidelines [ kicked in ], our process policy team as well as the IT teams were set in motion. And we had fixed up our target that we will not lose business technically because of this. And thankfully so, that we were able to disburse within a couple of days the moment this begin there in our [ elements ]. So I think we've always taken -- and as we've said earlier, I mean, we've got a very strong process as well as a technology team, [ I think ]. I would like to give it to our team basically to have done it in probably the shortest period of time [ and all ].
And sir, any changes in rejection rate? Because I don't see because since the disbursement rate has continued. So there was no major change in the rejection rate after the process change and before the process change.
No. The rejection rates have inched up. They have increased by about 5% to 7%. They are higher now, but we are sourcing more in terms of to have maybe the 25% growth which we are talking about for this year. And that is on track for us.
Correct. And sir, pricing-related changes. So whatever price increase we would have taken. Just to recollect: We would have taken about 1.5%, 2% price increase. And would that be uniformly applied to all geographies and all customers? Or there is some differentiation.
No, there's no differentiation. The same is applied to all the geographies basically and that came in from April onwards, [ yes ].
Right. And what was the lift in pricing that we took?
Sorry...
What was the increase in price that we took?
Up to 2%.
Okay, got it, okay. And sir, with regards to our -- so we have a restructured accounts of INR 580 crore. And then we also have NPLs of 220 crore, 217-odd crore. I'm sure there will be an overlap here also because a lot of restructured would have flown to NPL buckets in the recent months because of nonpayment. So what is that overlapping pool [ a year ]?
So I -- technically what we are tracking -- which is probably the stressed asset, which is the restructured pool of INR 584 crores, Rajiv. So we are working on that. And as we mentioned earlier, that the 70% -- 72% collection efficiency is still there. [ Though we don't provide it ], basically looking at not -- to be very, very frank: We wanted to build up our -- and we wanted to insulate our P&L, basically. That's the reason why we've shored up our provisioning to a large extent to really look up. So our sense is, once this pool -- because this got restructured last September. So [ by this September ], we will probably have a year ahead. We could have probably also not been able to really look at it from that angle. So the moment 1 year passes by, by September, we'll have a fair idea. And that is the reason why we were able to build up that provision and insulate our P&L. So that is where it is as things stand. There are some of the other things that are probably going [indiscernible] as I told you. [ The new asset class ] is absolutely fine, which has probably no GNPA coming in. So our sense is that the pain is over. We have adequately provided -- as an institution, we brought our GNPAs down. We are profitable. So I think, whatever we possibly could do, we have done it in this quarter.
Correct. So you mean that, if the current collection efficiency holds up, then we may not require more provisions in the coming quarters.
You're right. We probably would be able to release provision, in fact, not building more provisions. So that is the positive which we're -- we've been trying to let people understand.
And that would be because a lot of -- a bulk of the customer pool in restructured asset and even in -- right now in NPL after write-off must be paying, right? Because we used to typically give that breakup between paying and not paying, so...
So we've taken [indiscernible] that about 73%, 75% are paying. And let's say about 25% will be irregular in paying. I am not saying that they are not paying. They will be irregular in paying, so they probably will remain in NPA for some point of time or, after a certain time, may also probably be -- come down to PAR 0 once their demand and everything finish off.
Right, right, right. Sir, just lastly, on Assam...
And one more thing. [ 50% ] of the gross NPAs are from Assam; [ and that ], as on today, there's all the, so to say, probability that, that money will come from government slightly early, slightly late. So that is also to be kept in mind, that 50% of the [ gross NPAs are from Assam ].
Yes, exactly, Rajiv. So Rajiv, if you really look at the complete picture as such, including 2% of Assam which is there which -- we hope that the money will -- which the signs are that the money will come from the state government. Technically we don't have. [ Practically ] we have huge provision now which is there, which is about [ 180% ] of our [ on book ], whatever the NPLs are. So if you really look at it, it is all positive, positive [ down from here ], which has been captured in the results for this quarter.
Correct, correct. Sir, I have a few more questions. I mean, if there is a queue, I'll come back. Or else I can continue if you permit.
No, no. Please go ahead, Rajiv.
Yes, yes, okay. So on this Assam situation, I know it's a very small part of our portfolio, but how have -- so in the last couple of weeks, have you seen any major improvement in collections in Assam? And when do you think can it fully normalize?
Yes. So just to give you an update. So whatever we've disbursed -- again, in Assam we've started disbursing about 6 months back. So that portfolio is behaving absolutely fine. What happened is, for people who were under stress because of the government or whatever the Assam things have been going on, there has been improvement, though it has been slight. I can just probably -- I don't have benchmark numbers and such, but there was [ about ] 5% to 10% increase in the collection efficiency even for the Assam portfolio also over there. So that [ probably ] goes on. We are just waiting for once -- whatever has been decided by the state government and everything, once that [ starts releasing ]. And then probably we'll have some windfall also coming in.
Yes, yes, yes. Sir, more specifically, I was wanting more color in the recent weeks because we had major floods in May and in June. So July was a stabilization month. So maybe, towards the second half of July...
[indiscernible]...
Yes. Toward the second half of July, have you seen improvement?
So there has been no disruption in terms of floods. So that is very key. There has been no disruption because of floods in Assam.
Okay, great, great. And sir, in terms of liquidity now that we had to kind of address the stress in the book and we took upfront provisions and which led to a loss. So first quarter, we started off with a meaningful loss in the book. Would it kind of impact liquidity availability for growth? So while we would want to grow at 20%, 25%, but -- with this loss, do you anticipate some kind of moderation of liquidity availability? Or I mean -- or otherwise, I think the decision was taken to -- taken in to confidence the lenders and the liquid should then come through.
So Rajiv, when you talk of loss, which loss are you talking about, the consol loss?
Yes, consol, yes.
So consol has no bearing. So let me give you a perspective. I think Jugal will give you a very clean perspective about it. I think [indiscernible] really not been able to understand because -- I think you are also mentioning a lot. There is no loss as such even if we take out the unrealized gains through the fair value of the investments. So let Jugal clarify this to you, the numbers.
Sure, sure, yes.
Rajiv, there are 2 things that I think everybody should understand. One, that the valuation gain that we have booked is [ not theoretical ]. It is actual valuation gain. We have been investing into these businesses for last 3, 4 years. Slowly, we have invested that money. And then we have not specifically raised money to invest into subsidiaries, so that money has gone out of our borrowed funds/equity. And the approximate cost of [ funding ] that we have invested into subsidiary over a period of time is close to 100 crore on costs. And in case we take it on lending basis, it is almost double. So almost 100 crore in costs and 200 crore on revenue side has impacted our P&L for the last 3, 4 years, which is purely accounting.
On the other side, we have actually created value in those businesses. So to that extent, the value that we have created, we had accounted for that to show the real picture as to what the actual financials are. So if we are talking about stand-alone financials, there is a INR 70 crore PBT, INR 69 crore PBT; and INR 60 crore of PAT, which is [ actually not theoretical ]. And on a consol basis also, that value had been created, though because of the accounting standard, we cannot reflect it there. So that is one point that you should be convinced that this is actual profit which is being accounted for technically [ for the standalone ] and financials. And on the other side, in case we eliminate both the credit cost and the valuation gain, we are still [ operationally into profit ]. Close to about 45-odd crore of profit, operational profit, is there in case we eliminate both the valuation gain and this 5-odd percent of loss. So there's no lost effort. The value that we have created, we have brought it on to record to show a right picture.
Correct. So Jugal, how frequently will you keep on revaluing the investments in subsidiaries? So this was the first time we did to reflect the fair value of our investment. So would this be an annual phenomena? Or so how do we go about taking incremental up or down in the value in the P&L going forward?
So we are still in the process of discussing it with the auditor. As per standard, it has to be done on every reporting date, but we are still in the process of finalizing that, unless there is a meaningful up or down, should we do it at every reporting date, once a year and on. We will have more clarity by the end of next quarter.
Got it. And I think sir spoke about 30%, 35% growth. So sir, even in this year, are we looking at 25%, 30% growth FY '23? And...
[ Yes, correct ].
Okay. And if that comes through, would we require capital by the end of the year?
I don't think so. I think we are profitable technically. Or the other thing which we will probably do is the warrants have to get executed. So if required, we will roughly prepone our -- one is because the end date is sometime in July '23, but if required for growth, I think you will prepone the warrants before that. So technically we do not require any further capital [indiscernible].
Got it, got it. And sir, just last question about, ROEs, ROEs in FY '24, because I believe that the true franchise efficiencies will reflect in FY '24 when the credit costs will normalize and when also our spare operating capacity will come into play. Because with the growth coming, the costs will not increase along with that. So in FY '24, what should be an ROE number that one can expect on a reasonable basis?
So it's all positive. The way -- I think, if somebody reads the result truly, I think it's all been positive. My own sense is it will be north of about 2.75% to about 3% ROE [indiscernible].
[Operator Instructions] The next question is from the line of [ Vishwinath Singh ], an investor.
My question is basically I just wanted to know. Can you shed some light on the 5,000 crores [ finance ] which we recently mentioned? How is this going to be utilized? And specifically now that you have subsidiaries also, right, can you also give us the breakup? Like if you are going to raise 5,000 crores, how are you going to utilize? And what exactly will be invested in the subsidiaries?
So that is the enabling resolution that, whatever money we borrow and -- whatever money we want to borrow through [ NCD ] route, we need to have an annual approval from the shareholders. So that was more like an enabling resolution that we want shareholders to pass. And that is the same amount, so at no point in time, our outstanding [ NCD ] can go beyond 5,000 crores as on today. So that is more like a enabling resolution that we have to pass every year at the shareholders' meeting, but to achieve this year's budget, we have to raise close to about 6,500-odd crore of money. We have already raised 1,300-odd crore in the first quarter and have received another of 500-odd crore till date post first quarter. So we are on track and sitting on 1,000 crore liquidity, so on track to raise the money to achieve [ budget, the year's budget ].
Okay. And also, within subsidiaries, I think -- I mean, as an investor, we are expecting more from the Satin Housing Finance because, as we understand, there is a lot of scope of growth from this business. So can you shed some light on, I mean, what is the expected growth in terms of percentage in terms of AUM which we can expect by the end of this year or maybe for next 2 years? How much growth do you expect in the Satin Housing Finance loan book?
So housing has been growing at about 50-odd percent year-on-year. I -- our sense is, I think, they will continue to do that in the next couple of years to about 50%, 60% growth because the base has been small. That will keep on continuing, so I think -- whatever we require in terms of capital for them, I think [ we'll be able to ] put it across to the parent company...
Okay. Sir, you like mentioned 50%, I mean, [ but is that tracking ] the financials or the numbers for the competitors? I think, as the portfolio -- where we stand, right, shall we -- shouldn't we expect like 100% growth year-on-year? Or is it that we are being more conservative just to see how the market goes and then go for the full...
You're talking about housing.
Yes, specifically for housing finance, yes, correct.
See, we've always been very prudent and conservative in how we go forward because you never know when a crisis do arise and everything. And thankfully, during this crisis, since we had built up a very solid portfolio in housing, we had a 100% collection efficiency. There was absolutely no collection efficiency going down or GNPA coming in. So I think that is probably the pure reason why I think housing has been one of our stars and which reflects in the valuation which we've done. So I think, going forward, we would like to have more stress on portfolio quality rather than looking at numbers, numbers we'll achieve in any which ways maybe 2 years hence or maybe 1 year hence, but portfolio quality is probably the best thing which we want to really look at across all the subsidiaries as well as the parent company...
Correct. So like 50% which you mentioned, I mean, it's on the conservative side, right? I mean you can...
Well, you can interpret it in any which way.
No. I mean I just wanted to like -- I mean so you're saying it's a reasonable 50% growth which we can expect. Or it's the maximum growth...
Yes. 50% is something which will happen, definitely. I think, anything more than that, I think you win on that and I'll lose on that.
Yes. No. I mean, as an investor, I mean, I have high hopes from Satin Housing Finance because I've been tracking this business closely and I see a lot of potential in the next few years. So I was particularly interested in how we are trying to drive the growth of this housing finance...
Hopefully, we won't let you down. I think that probably can be seen in the valuation which has probably come in. So I think it will -- definitely will be very [ clear ]...
The next question is from the line of [ Ronak Sangui ], a retail investor.
I had most of my questions answered in your conversation with Rajiv from Yes Securities, but I have a few other questions. One is on this fair value revaluation which we have done or valuation we have done. From a regulatory and lenders perspective, will they sort of look at from a positive perspective in terms of increase in net worth? Because otherwise adjusted net worth has come down considerably due to the write-offs and the 328 crores of provisioning which you have taken from -- in the current quarter. So that is an important point which I just wanted to understand.
Our understanding is that the regulation permits that. And as I explained in reply to Rajiv's question, that this is the actual valuation that we have created. And because of accounting, the notional cost of that fund that we have invested is close to about 100 crore on costs and 200 crore on revenue side. So unless we do this kind of accounting, we'll continue to have negative carry in the stand-alone financials, and to that extent, the stand-alone numbers will always be understated. And we have tried to explain that in our investor presentation, and then we'll communicate and explain that to all the stakeholder, that this is the right way of looking at the performance of the company both on stand-alone and consolidated bases. The value is actually being created. And we want to scale up these subsidiaries out of our own resources for some more time. So we feel that this is the right approach to do the accounting. We don't see any challenge from lenders side or regulator. We will explain that. We have discussed it with the auditor and taken all the financial help to reach this conclusion, so we'll be able to communicate that to all the stakeholders positively.
Sure. And I just also wanted to understand the write-off of INR 275 crore and ARC sale of INR 100 crores this year. This is like close to INR 375 crores being taken off the book from -- practically. So I just wanted to understand. On the INR 375 crores, how much has been from the restructured book? Or these are all from the GNPAs.
I think the restructured book, out of this INR 375 crores, was close to about INR 225 crores, about...
[indiscernible]
Yes, about INR 225 crores [indiscernible].
Okay. So because I was seeing that the slippages in the quarter from -- primarily from the restructured book would be then around a net of 180 crores, and some 45 crores would have sort of come back. I'm just doing a basic math from INR 217 crores. It looks...
Yes, yes, so -- yes, yes, exactly, exactly. That is what the real math works out to be right now basically.
Yes, yes, yes. And the pre-provisioning operating profit. And I am just talking about the operating profit because, in the press release, the pre-provision operating profit also includes the fair value. [ It's obviously not an ] operating profit per se. [ It's ] coming at around 47 crores. Is my math correct there?
So broadly, yes. Our PBT is about INR 70 crores. So if we exclude both the fair valuation of INR 351 crore and credit costs of 324 crore, so -- this number is close to about INR 45 crore, INR 47 crore. So your understanding is correct [indiscernible].
Okay, yes.
Yes. [ Ronak ], just to add up [ very last thing ]. When you look at these numbers, I think this is what -- we mentioned it to Rajiv and to you also, I think. This is exactly what it is. So technically it's not an operational loss. It's an operational profit of about INR 45 crores, practically pre operating profit of about INR 45 crores. So where people do understand that it's an operational loss, it's not [ that actually ].
Yes, yes, yes.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Aditi Singh, Head, Strategy, for closing comments.
Good morning, everyone. I take this opportunity to thank everyone for joining this call. And it was a very intense call; and I hope we've been able to address all your queries and explain everything, to your satisfaction. However, should you still need some more information, you can reach out to me. My name is Aditi Singh, and I head the strategy for Satin Creditcare. You can also reach out to my colleague, Ms. Shweta Bansal, DGM investor relations. And we shall be able to provide you with whatever information we shall be able to within the permitted limits. And any clarification you want, we're happy to discuss.
Stay healthy. Stay safe. Have a great day. Bye-bye.
Thank you. Ladies and gentlemen, on behalf of Satin Creditcare Network Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.