Q3FY26 NTI compression revised down to 8-10 bps from 15-20 bps.

This competition from PSU banks is something which is cyclical which happens every rate cut cycle. So how are we building a strategy so that we can circumvent this especially because we operate in the prime home loan segment? Second is that the home loans have reduced to roughly around 55% of the portfolio. We also used to do top up. So, what is the pure home loan and what is the top up in that 55%? And if we can spell out the yields on each of the categories home loan, LAP, LRD and developer finance?

We take in prime home loan now the competition is going to be the feature rather than the novelty. You called out saying that the competition heats up during the declining interest rate scenario. But if we are looking at last two and a half, two to three years the intense competition is the norm and as we make our plan for the future, we are now taking it as a feature rather than an aberration which will go down. 55% is in the HL book. The IHL contribution which requires, which is a regulatory PBC criteria, we were at 50.45% as of 30th September. The rest of it was either a top up or the fee LAN or the insurance LAN which is not considered as an individual home loan. On the yield product wise, at a portfolio IRR at HL had been at 8.6%, LAP at 10.3%, LRD at close to 8.1%-8.2%, developer finance close to 11.5%. At an aggregate level, we come at 9.26% is the yield what we come at the portfolio.

You did mention about deepening the presence into each micro market. So, are we also increasing our payouts to various developers or various connectors or large national DSAs?

Our COA remains flattish because the payouts are not the only, because our home loan market is largely commoditized, most of the payout structures are also common. So, it is not likely that by increasing the payouts you can increase the market share. It is by making more product nuanced which is catering to the market and having a deeper presence in each of the market is the approach we take. Increasing payout will not result into the higher market share is our assessment and which is not what we follow. We remain absolutely in line with the payouts what is offered by the market or leading player and there is no increase in COA over last year or over last quarter.

I am looking at the guidance that you have put out on the panel 16, it remains unchanged primarily on the margin front. Now for the first half of this year or the two quarters, we have kind of delivered a flat-ish margin, so we are guiding for a 15-20 basis points kind of a decline for the full year perspective. Are we expecting such a sharp decline in the second half or just more of a continuation of the guidance and we are likely to basically beat these numbers?

On a full year basis, we are expecting to be in this guidance range only because of the compression we are seeing driven by attrition pressure across the portfolio especially in the home loan side, also in the construction finance side. That attrition pressure followed with another rate cut expectation in December is what we are factoring in and that's where we are looking at year-on-year level this kind of a compression which we have guided for. So as of today, our estimate remains in this range. However, as the time shifts up, we are able to do better, that is where we look at.

Can you just also spell out... what is the traction that we are getting on the near prime and affordable segment and like what's the size of it? How many locations we are? And what are the customer segments primarily on the yield front that we are targeting?

Just to give an update on the SBU what we started because we had started operating in the near prime and affordable segment before we set up an SBU but we set up a dedicated SBU in the last year. The business is doing well in terms of the milestones what we laid down for this business. It is ahead of the milestones what we thought. Now it operates from top 36 markets with an average size of a range of INR40-INR60 lakhs, while affordable business within that we operate across these markets outskirts as well as in some tier 4 and rural markets as well where ATS is in range of INR15-INR35 lakhs. Currently we are now acquiring close to INR250 odd crores per month business in this line and expecting to rapidly scale further.

On the affordable and near prime business, what I want to understand with respect to the slowing, and we are saying that we are taking it slow. So is this because we are taking it slow as a deliberate decision to understand the customer in that segment? Or are we seeing any demand or specific asset quality related issues?

So, this is not leading from any view on the asset quality or any stress what we are seeing or the demand compression. It is just that we started this business 15-18 months, as practice of the risk management will do, we wanted to take it slow. We are also onboarding the entire team, this is our entire ground s up build that also takes time for us to build. And like I said in the previous question now we feel confident of trying to rapidly scale it up, that is where we are and we expect this business to be much more ahead next year.

With respect to the fall in the derecognition income, the assignment income. So, this was by design or by default. I was wanting to understand, is this like a one off or will we see this as kind of a stabilized number in the going ahead quarter?

Siraj, when we said the yearly guidance during the last quarter, we said assignment we do for two reasons. One reason is, assignment is the treasury strategy. We are excess of capital, we have excess of our capital and we took a conscious decision in the current year to not do assignment for treasury strategy because as a treasury as a means of fund, otherwise we had been normally falling 12%-13% of our assets assigned out to our strategy, even as a treasury strategy for our ALM match. The second reason for assignment for us, is always that if we are falling short of a PBC because if there is more opportunity to acquire non-HL assets and if we have the ability to assign them out, we like to take the opportunity to assign out the assets, maintaining PBC, as well as in the process having a higher ALM where the benefit flows through.

What would be your BT in or out rate, in the overall home loan segment? And second, on the affordable housing side, what would be your BT in and also your AUM size?

So, Rahil at an overall level, because we don't measure it in the segment wise BT in and BT out. At an overall home loan acquisition for the company, our BT in is 15% approximately of our overall HL acquisition, which is perfectly in line with the industry. Industry is 16-17% is the BT in, ours is 15%. BT out is a factor of attrition, which is now attrition -- at an aggregate level if I look at it, our repayment rates in the Q2 FY '26 looked at 27%-28%. At an aggregate level, it's a combination of various products. At a home loan level, it is a 21%-22% kind of an annualized attrition, what we are seeing. 21%-22% which is an elevated attrition because of the pricing in the market.

In this 21%-22% how this would compare to last year or two years back? Just wanted to understand the pace for the increase... what would be your AUM in affordable housing?

Last year it would have been in the range of 15%-16%. So, from 15%-16% it's now upwards of 20%-22%. Largely PSU. We track AUM in two contexts, one is prime and non-prime. Non-prime includes affordable. So, the balance sheet mix in home loan today would be 86:14, 86 will be prime and 14 would be non-prime including affordable.

With respect to a follow-up on was with the NII plus fee income. The fee income has gone up. So, are we seeing more cross-selling and will that be a slight driver for the NIM plus fee?

Broadly, this is insurance income, which is driving that number apart from other charges, etc., which is like bounce charges, foreclosure charges, switch charges, etc. But predominant is the insurance income. It grows in line with the growth in business apart from the non-prime business, which will have higher penetration. But otherwise, overall, it will remain in line with the growth of business.

On the SBU, so what will be the yield difference over that book from our normal book? And as we see that the rates would go down, and one of our recently listed peers said that we try to use our cost-of-borrowing advantage and try to bring in customers and lock them in our book at a lower rate, kind of saying that they'll undercut the competition. So, with that point, how do you see that difference in yield over both the books compressing?

See, each acquisition for each segment is at a point of time driven by the competitive intensity and also what market is available. We don't try to price ourselves lower to answer that question. We try to optimize the price what is available in the market, basis the proposition, of the segment what we are addressing. On an aggregate level, the yield, if I collect the entire non-prime business including affordable, yield will be a differential of close to 1.25 to 1.5% from the pure prime business. From the prime business, the aggregate yield will be differential by around 1.25 to 1.5%.

My question is around the assignment strategy. So, given that our gearing currently is below our target gearing of 7 to 8, so I was wondering if assignment makes great sense. So, while assignment does help us increase our ROA, but then it doesn't help on the ROE side. So, what is the metric we are targeting? Is it ROA over ROE or is it ROE? And given the outlook that we have on the market, so what is the time frame within which we should hit that, say, 7 to 8 gearing or let's say median 7.5 gearing?

So, Satinder, two parts. We do assignment because of two factors, not ROA or ROE driven, but one from a treasury strategy from an ALM perspective. Having said that, last year since we went long on the bond side and our ALM match was corrected, we called out that in the current year we are not falling assignment out from a treasury strategy because our leverage is low, precisely to the reason what you called out. However, the second part of the assignment remains on the PBC, which is on a non-home loan assignment. I think two years is the time frame where we should be. It will depend upon the growth numbers, of course, but as we give a medium term growth guidance, I think two years, two and a half years is the time frame where we should look at achieving that sustainability vision.

Given that we should be now nearing the end of the rate cutting cycle, how optimistic are we that we should be able to revert to our medium term guidance in FY '27?

We cut our guidance for the current year basis the higher attrition pressure, which as of today is not looking to come down. However, as the company focus remains on growing disbursement, which you can see in quarter one and quarter two, the disbursements have grown faster than what they were going last year. But our AUM growth is slightly muted because of a higher attrition pressure. As the attrition pressure weans off with our rate stabilization in the market, with one more rate cut in December, you can expect stabilization in the market in three four months. As we continue to focus on growing disbursement, we feel that by next year, then we can come back to our normalized or the medium term guidance growth in AUM.

On the opex to NTI, what kind of time frame do you see as of today in terms of coming back to a 14 to 16 target?

So, 14 to 16 was not a coming back. 14 to 16 was always a three to four year aspiration number, three to four year trajectory. I think that we remain on that. In a lower interest rate scenario, the reduction in a Y-o-Y basis will be either flattish or a 1%-1.5%. But as the cycle turns, with the income expansion, because opex to NTI has two parts. One is the income expansion, second is the opex growth. We will always be opex efficient, and as we continue to grow, I think next three to four year, you should clearly see the 14% to 15% kind of opex to NTI numbers.

You mentioned there was a lot of competition in the home loan segment. How is it in lease rental discounting, and property developer loans?

Lease rental discounting, the level of competition would be higher than the home loan as well, because these are all, one, the customers are quite evolved. They have an access to each of the large lending institutions and each of the large lending institutions, specifically banks. This is a product which is not offered by housing finance companies. So, the competition is significantly, you can say, in line with what is as a home loan. For developer finance, competition is more from some housing finance companies, NBFCs, and in recent past, what we have seen largely from even some private credit funds to the AIF structure.

As you move with affordable loans, your risk, your credit cost might likely be higher. So how does that align with your low risk model, which is one of your guiding principles?

So, when we guide for our medium term, GNPAs is as well, we always guide for Bobby, from last year, is 40 to 60 bps, because that's the model is constructed for. We are today lower, and we like to be lower in there. But the model what we construct is for that 40 to 60 bps of a GNPA and 20-25 bps of a credit cost. That makes it a mix. See, model is scale, low risk and medium return, or a reasonable return. We don't say it's a scale, low risk and low return. Because if you have to be a scale, low risk and low return, we don't need to do a non-prime business or a construction finance business. But we have to deliver a reasonable return.

On the LRD business, I mean, it's already at one, more than one fifth of the business 20 odd percent. Where do you see this settling? I mean, do we have a mind where we cap it out or anything with respect to that?

No, Siraj. That's because we have a capping of a 60% residential business, 40% non-residential. Basis the opportunity available and the returns available, if it gives better return, there is the capping is only the regulatory capping and there also like I called out in earlier question, if I have the ability to do a assign out, we'll continue to grow because this business fits perfectly with our concept of a scale, low risk, reasonable return. This meets all the three boxes on the criteria what we have. It's a scale, low risk business, it gives a reasonable return because of a low opex. So, there's no cap what we have other than the regulatory cap, which is on a non-home loan business.

We've seen in the HFC space, specifically in these affordable housing space, where a lot of there has been this PE backed over sell, sell side overhang of the PE player exiting. In our case, that's not the case. But we have a high holding with respect to Bajaj Finance Holding, 88%. So, my question is indirectly with respect to the minimum shareholding, with the market cap of INR50,000 crores to INR1 lakh crores, within three years from listing 25% has to be achieved.

The guidelines have already come. It's not a consultancy paper in any case. So, we have time till September '29 now to get it. It's not gazetted yet, but the guidelines have come. So, it will get gazetted. The guidelines have come. So, we'll have time till September '29 for the parent to dilute. By the time I think we will require one additional round of a capital or primary capital and the basis. The other -- it will be decided by the BFL board it because it's a decision given by parent to dilute. We are not in a hurry to dilute because we have not got any urgency to raise primary capital.