On NHB thematic audits - are things okay or are we looking at something like the overbearing seen from the central bank in NBFC sector 2-3 years back?
Our stance has been slightly different earlier as well even if you call the earlier instances. We always believe regulators are there to improve the market or set right any, let us say any imperfections or any pattern what they see which is not in rightful interest of a long-term development of the market or in customer interest. I would not call it in any way impactful to the company, but rather it will help the sector in the long run to grow in more resilient manner and better manner. So we don't see any impact of these. And I think overbearing is probably a harsher word. At least to the best of our understanding, we have not experienced it.
On opex to NTI — maintaining at 19%-20% with this growth rate. Would it not improve and get towards medium-term guidance range?
So Kunal, it would be sideways because there are two parts to the opex to NIM equation. What are the growth in the NIM? If we are calling out for the moderation of a NIM, that means that impact that also impacts the equation. Second side is what we continue to make investments. So there will be, it will be a downward from the last year, but largely we are assuming it to be sideways from the last year because we are assuming a margin compression and a NIM downward.
Loan growth guidance bakes in a lower BT out rate — does it or is there scope for an upgrade?
Slightly lower BT out rate but not very it is what we are. See because in last year also what happened is the BT out rate jumped up from July onwards because there was a 50 bps cut in June, July onwards the BT out rates had significantly gone up. So one quarter which has been it is slightly lower than the previous quarter, but we are just holding on for us to assess it quarter two if we see the downward trajectory further, then I think we will be more confident.
On the NIM guidance for FY27 of 20 to 25 basis points compression, what part comes from borrowing cost pressure? And on limited upward repricing, MCLR has gone up 5-10 basis points and NCD borrowings have been higher. Is there a case for increasing PLR?
Largely coming from the yield part. In the stable interest rate regime, whatever book is attriting, that book attrites at largely a historical book which is at a higher yield than what the book is coming. So a natural process in the stable regime is that your book what gets replaced is of a lower acquisition IRR than the portfolio. On the question second on the upward pricing portion, you have rightfully called out, banks might have increased MCLR and NCD borrowings in the market are priced higher specifically post Q4 onwards. But the pricing opportunities in terms of a market acquisition are linked to the market players' pricing, which you have rightfully called out, we have not seen any trend for large scale acquisition pricing upward movement. To an extent, whatever opportunities are coming is because of a balanced mix like we had called out today we are 84:16 in our mix within home loan of a prime to Sambhav. By the time we exit the year, we will be 80:20.
A lot of large HFCs are moving to encashment basis of cheques. How do you recognize disbursements and interest income?
For last 6 years we had always been on encashment while regulator gave the guidance 2 years back. Whatever numbers are reported had always been reported even when we were unlisted company long back is always on encashment. We start charging interest only on encashment from last 6 years. There is no cheque handover interest start principle in BHFL since last 6 years.
Credit costs at 5 basis points this quarter, yet guiding 10 to 15 for the full year — are there one-offs?
So this quarter we had done a assignment out of a close to INR2,300 odd crores. That is what the difference in AUM you look at. So that's why the Stage 1 provisioning is lower and which results into credit cost being lower. Second part also is there in the quarter 4 of last year, we had enhanced significantly our Stage 2 asset coverage because of a uncertainty due to macroeconomic factors and a Gulf war where we have not seen any impact now, so we have not done that similar accretion. So there are 2 one-timers. So that's why, for the year we are still guiding at 10-15 bps, which is the normal range for BHFL credit cost to be there.
Loan yields flat, cost of funds down 7 bps, yet margins declining by 13-14 bps while spreads are flat — can you explain the mathematics?
Spreads are largely flat because the spreads are basically computed basis portfolio yields and cost of funds. So portfolio yield as on the quarter end versus what you see as cost of funds as on the quarter end or for the quarter. Spread predominantly flat, it's a 3-4 basis points movement, but that's why you're seeing 1.7 remaining 1.7. Portfolio yields overall have come down because of the reasons which Atul had mentioned earlier, attrition and higher yield book going out, lower yield book coming in, etc. Predominantly that is what will flow through on the NII and NTI compression as well, while some benefit will come from the cost of fund movement through the year, but largely it will still have compression because of the yields going down.
How are July cost of funds looking compared to Q1 exit?
We'll be sideways, Gaurav, for the current quarter 2 in cost of funds with a tendency overall to be minus from what our cost of fund had been in Q1. So overall Q2 cost of fund would be sideways with a downward bias.
Sambhav disbursement run rate at INR450-465 crores but average ticket size constant at INR28 lakhs for 2-3 quarters. How is affordable progressing and what should average ticket size look like?
The current mix of affordable within the Sambhav book is close to one-third, so that's what remains stable 33% to 36% is the mix of affordable within the Sambhav housing. Affordable ticket size is close to INR18 lakhs. We are generally not in the sub INR10 lakhs or a sub INR12 lakhs kind of a bracket because affordable also we are largely towards if we have to say there is, if there is any upper segment of affordable, then we are there. Average ticket size of affordable should remain INR17 lakhs-INR18 lakhs. A bit of a bias going downward for overall Sambhav housing ticket size from INR28 lakhs in the current year to INR26 lakhs-INR27 lakhs because as we continue to grow more in the non-top markets.
Construction finance NPAs increased quarter-on-quarter — is there anything to worry about?
No, this is only one account, Gaurav. This was Stage 2 account in the last quarter which has moved to Stage 3 where our teams are working to resolve that account. There is only one account.
FY26 NIM was 3.9 bps, now at 3.7 bps. With 20-25 bps compression guidance from FY26 levels, are we looking at only stable to 5 bps further from current level?
Yeah. So from 25 bps, 20 bps-25 bps when we are saying we are calling out from the last year. In the first quarter there is a 14 bps decline, so you can say 6 bps to 10 bps of a further decline what we can we may envisage in Q2 and Q3.
Movement from Stage 2 to Stage 3 in LAP and developer finance but no increase in provisioning — why?
In developer finance, the provisioning happens on the estimation basis the way we are seeing the account to move. The account in Stage 2 itself was provided at a much higher level, that's why it remains there is no requirement to increase provisioning on it as it has moved to 90 DPD. The account is provisioned at a higher number than what it is, what it would have right provided already at a 48%-49% while at a entry level it is, it would have been required let us say at a 90 DPD when it moves to, so as per the ECL model it requires a provisioning of close to 33%-34%.
LAP GNPA increase — any specific geography or customer profile stress? One NBFC called out stress in salaried tech employee sub-segment in Bangalore.
No. So Viral, if I take you to last seven quarters LAP GNPAs and you will be able to refer them. Q3 FY25 LAP GNPA was 0.76%, Q4 it was 0.65%, Q1 FY26 it was 0.62%, Q2 it was 0.59%, then it came down to 0.52% and 0.46%, it has gone back to 0.62%. So year-on-year or the previous years' GNPAs on LAP book had always remained because it's a bit of a, it is a customer segment which comes under a cycle there. We are not in affordable LAP, we are in largely in a prime LAP or a high ticket LAP. There is no exception or nothing to call out in terms of any segment or any geography outcome what we are looking at.
What led to the 7 bps cost of fund improvement sequentially?
So one part of the hedged book, Viral. Second part is the natural repayment of a older higher cost borrowings because there is a maturity cycle which happens of an older higher cost borrowings as well and there was some reset of the old borrowings at a lower price which has happened, which at an incremental which has helped us to reduce our incremental cost compared to existing borrowing and that's what has resulted into overall COF reduction. And what we are calling out also basis of trend what we are seeing and the number what we are projecting in the quarter two also we are looking at it a sideways with a bit of a downward revision from here on as well.
On margin guidance of only another 5-7 bps compression — shouldn't cost of funds lower plus DA income share increasing make margin guidance conservative?
No, Viral, I think we are estimating it in a, I'll not say conservative, we are cautious in estimation, I'll not say conservative basis. Our estimation, it should result into 20 bps-25 bps with even a cost of fund a downward because the yield computation in terms of because we are able to see every month what is going out at what yield and what is coming in at what yield. So that's where we are projecting doing a mathematical projection, we are not being either being aggressive in assumption nor being conservative in calculation.
Fee income line has a fairly large increase this quarter — how should one think about it?
Fee and commission income predominantly considers insurance incomes, foreclosure, bounce, penal, etcetera and all other those charges. Predominant movement year-on-year is because of as the disbursements have increased, basis that the insurance incomes have increased. Other income lines are predominantly in sync with year-on-year, whether it is any kind of penal charges or stuff. So it is all business linked variable incomes.
Overall demand dynamics — do you see industry going to double digits or mid-teen levels?
Overall demand dynamics is slightly I will say slightly muted versus what previously we used to see. The industry growth has been muted last year and to the best of my understanding probably industry growth is likely to be in the similar range or a bit muted only from what normally we used to project at a 12% kind of a industry growth there. My estimation it may not be in the range of 11%-12% what we normally assume the market to be there. Sales are also a bit muted. I will call it a stabilization phase more rather than a downward phase because the price momentum has stopped.
Portfolio attrition reduced — is this in prime or across the board? Who stepped off the pedal in competitive terms?
The tailwind is purely the outcome of various actions what we had been taking in the prime side, in the prime home loan side what we have been taking actions of deepening and widening there. We have seen a reasonable uptick in the disbursal momentum. So all businesses or all units in the company, we are still very small, Abhishek, what compared to the overall market. So if we gain a bit, it is from a we are taking a slightly more from the market growth, we are not taking from someone. So our higher growth cannot be interpreted by someone else ceding the space, it is we are just taking a bit more from the growth in the industry because industry is that large.
In Sambhav disbursements — how much would be affordable and how much near-prime?
One-third would be affordable and two-third would be near-prime. It hovers between 33% to 36% odd mix affordable within the Sambhav. In some months it can be 33%-34% some months 35%-36%. But you can take a ballpoint figure of one-third to 35%.