What about next year? How do you perceive the growth for next year?
The kind of queries and the response we are getting Rishi. In fact, I have to double or triple the size of my BD team because we are yet to go every nook and corner of this country. We are flooded with requests from almost all states of the country. So looking forward I think for the next 5 years or so or maybe a decade, we will be really flooded with the kind of businesses. What we need to do is for the confidence of all my shareholders, we need to do the cherry picking for the asset quality within government also. This mixture is going to give a very good result and return for our shareholders because there won't be anything cyclical. I can only perceive with my experience and tell you that next year and year next to that, we'll be having an upward trend in terms of our asset also, in terms of our PAT also.
With the present framework what we have, is it ever possible that we can grow our loan book by something like 20% or something like that?
Now you see when I was speaking in the beginning of the quarter, we gave a number of INR 60,000 crores asset to be taken by signing agreements and disbursal of INR 30,000 crores that we wanted to disburse. But going forward, with the kind of requests, as you rightly mentioned, we are actually flooded with the requests. We feel that looking at the prospect of the government as government has come out with the papers about the GDP growth and everything, next 5 to 10 years, I mean, we'll have upward trajectory not only in AUM, but in the PAT also. I'm not putting a number of CAGR. But I can assure you that the kind of queries we are getting.
Historically, we have been giving loans to the Indian Railways, and there we did not require much human capital in the form of sales, underwriting, collections. So how are you approaching this challenge with respect to building this human capital when you're going outside the realm of Indian Railways?
We are choosing the right kind of people. The best of the talents that are available in the ecosystem. We have added a few experts from the railways on deputation. We've also taken lateral entry from various sister CPSEs. The kind of buzz that my company has created, we are attracting best of the talents. My business development team is headed by a very seasoned senior guy from NTPC background. We have got other verticals also in place. And we have got mentors and risk management officers from the ecosystem, people who have done more than 35 years of service in NBFC parlance. Our motley team has grown by 50% now from 40 odd, we are nearly 60, and we want to grow by attracting depth of the talents. We are kind of setting up a system where we should excel and should be at par, if not better than any of the private or public player in the ecosystem.
On PPT, I want to understand what is the difference between sanctioned limit and agreement limit as you have written for NTPC BOBR rakes that you have sanctioned INR 700 crores, but signed the agreement of INR 250 crores.
Generally we follow a process, where we take credit approval from my Board and my Board gives me a sanction for that particular lending. And after that, we have to execute a transaction document. So, we are saying, for NTPC my board has given a sanction for INR 700 crores and we have executed the transaction document of INR 250 crores and for remaining amount, it's yet to be executed. And for other things, as CMD sir has apprised you regarding this INR 45,000 crores, this is what we have already sanctioned and a transaction document has been executed for the same.
What is the financing opportunity, whether it is going to be upstream or downstream for railways?
For the ecosystem, it has to be upstream only. We have already got a good pipeline. So going ahead, it will be upstream.
What are your expectations for the disbursement and AUM growth for next quarter?
If you know my guidance, we have given a guidance of INR 30,000 crores disbursement in this FY. Now the pipeline is there. We have already done INR 7,000 crores. Q3, we'll be doing additional maybe INR 10,000 crores to INR 15,000 crores. And whatever rest is there, we are very confident that we'll be doing it in fourth quarter. So, INR 30,000 crores disbursement guidance is pretty much intact.
Whether you guys are doing project financing on a milestone basis and what are the timelines for project completion?
For Project financing we are doing based on the milestone and whenever we do credit appraisal, we ask from the prospective borrower what would be your plan for achieving this COD and based on their PERT network and their CPM chart, we will generally determine the milestone and based on that we are monitoring and we are appraising the thing.
Given the cost of deposit would be coming lower for you, has the rate processing already been done? Or do you think there is further scope of rates which will come down and give a higher boost towards our NIM?
Since we are not directly linked with the repo system, so repo is a benchmark, we generally land with a benchmark of AAA+ PSU lending rates. So typically, we used to do business with 40 bps margin with the railways on cost-plus model. The new diversification model that we are working on, despite being very competitive, our experience in the last H1 with around 10 clients where we mopped up around INR 45,000 crores, more than INR 50,000 crores in fact, you take the 3 quarters. So our rates are 2x to 3x in terms of margins, which is reflecting in our NIM also. So NIM is continuously growing from last FY, it was 1.4% and now it is 1.55% further going forward, we believe that with the diversification and the outside Indian Railways asset that we are coming to our kitty, despite the fact that we are competing with the banks also for the quality assets right now, going forward, our NIMs will be showing a better margin.
Given that a large part of it is wholesale business you're doing outside railways, and competition will be pretty stiff, and so far there have been no delinquencies, how do you perceive delinquency stages coming about a year later or two years later?
We have embarked on a whole of government approach. So the only difference right now in my clientele is I'm not only limiting myself to Indian Railways, but there are many ministries and the state governments who are doing business, including CPSE. My first 4 assets came from NTPC. Now I don't have to speak about NTPC. They are AAA rated asset and their subsidiaries are also that well rated. Similarly, we are funding to those Gencos who are having a link with railways, and they are very strong. So we have right now with our very low overhead cost and very competitive rate, spoiled for choices to pick up which asset within government I want to pick up. So going forward, since we are only lending to the entities who are in the whole of government ecosystem, we don't perceive any kind of risk so far as our lending is concerned. Yes, it is not directly sovereign as it used to be in Indian Railways. But the kind of clientele that I mentioned to you, we have lended to an entity, which is promoted by my siblings, CONCOR and RVNL and Government of Orissa. We believe that within the whole of government approach concept, we have almost zero risk of having any NPA.
Given the cost of funds is 6.5%-7%, the rates at which you are rolling out will give a fairly thin spread. Is the business model continuing to remain the same way that you will only disburse to quasi-government entities with extremely low risk and idea is to lower cost of funds as much as possible?
The kind of thin margin that you mentioned to us, for us getting a margin of 100 bps or 120 bps is coming out to be 3x of margins that I used to have for donkey number of years. So you may feel that 100 bps margin or 120 bps margin is a small margin compared to the peers. But for us, going for a very quality asset in the government with absolutely zero risk quotient, getting a margin from 40 bps to 120 bps, we are very pretty happy with the kind of impact it will have a positive impact, it will have on our PAT. We are finding very happy getting a margin of 2x to 3x from what we used to get from the railways. And that is where we are differentiating ourselves as a product compared to other peers and the banks.
In this model, I do not see a risk for dilution in the business because the current equity, the current profit itself will fuel the growth. Am I right?
You are absolutely right. After paying highest ever dividend, interim dividend of INR 1.05 paisa, we are still pretty happy with our CRAR, our Tier 1 capital. So that is the beauty Rishi that we are having with the grace and best wishes of more than 55 lakh shareholders of this company. The business is there. 70% of the Capex, the capex has to come from the govt sector and we are the best suited people sitting in IRFC to cater to the requirement of the govt sector for capex and here is the business here is the growth and here is the profit without having any risky affair.
We presently do not pay any MAT on our profits because we have got an exemption in 2020. Do you think that one of the risk where maybe it can come back in the future?
As of now, around INR 3,000 crores of unabsorbed depreciation is still with me for which I can take benefit in future years. And apart from that, because of our business model, we have a project asset funding of INR 2.5 lakh crores for which a lease agreement yet to be executed. And these assets would get capitalized in coming years and against which I'll have a good amount of depreciation in my P&L in coming years. So we don't foresee in the next 5 to 7 years, there would be any MAT liability on us. There is a good reasonable assurance for next 5 to 7 years that this liability would not come because of the business model and because of the unabsorbed depreciation level we have as of now.
Now that IRFC is starting on the journey to diversify aggressively outside of the railways, do you have any caps within the non-railway segment like what would be the percentage caps that you would have beyond which you would not lend to this segment?
The sweet spot for this company is there is no cap for any segments. So per se, theoretically, I can have 100% of my AUM from the railway ecosystem on diversification. Now where is the limitation? Limitation comes from the RBI guidelines. RBI has made a mandate for everybody that 30% of my net worth for a single entity. So today, my net worth is nearly INR 55,000 crores. So you can put 30% number. So one client or one state, I cannot do more than that. And for a group of the company, it is 50%. So, if you take NTPC and take all the subsidiaries together, I can fund them up to 50% of my net worth.
I want to understand the current AUM breakup between railway and non-railway segment, and in the future where do you intend to keep it?
Right now, you can add total AUM is INR 4.6 lakh crores. Out of that disbursement has started. So slowly, but surely, the target is that in next 5 years, we should have a mix of 75% - 25%. That is 75% should be from the railways and 25% should come from the diversified thing. And let us see how things unfold in coming year.