Q4FY26 shifted from restructuring to execution: co-lending ready, retention dept launched, affordable vertical announced, April +21%.

So I first had a question on credit costs. So our guidance was 9 to 15, right? And our credit costs are much higher than that range this quarter. So what -- how does it pan out going ahead because recoveries don't seem to be coming through in the way we had envisaged? And anyway, a lot of people are reporting, however small, some incremental stress in asset quality. So where do we stand on that front?

Okay, Mahrukh. As regards the credit cost, the credit cost for Q1 of FY '25 is at 5 basis points, right? And if you compare this for the last -- whole of last year, it was about 9 basis points. Yes, I do agree. Like others, we are also witnessing some pres sure on the collection efficiencies. There is a slowdown in the month of June. But we are not worried because by and large, our June quarter is slow, largely because we, here in LICHFL, during the months of May and half of June, I would say, first half of June, this is the promotion and transfer season for all of us. So there is a lot of movement of personnel from place to place and from vertical to vertical. So that does dampen the kind of effort and the focus that there is. So we're not worried that the guidance, which we had given for the credit cost, I believe we'll be able to maintain it going forward. There has been a slight increase in provisioning as well as a slight increase in NPAs. NPAs have gone up by about INR500-odd crores during the quarter. But we are not worried. I think we can recover that. We are seeing signs of recovery already in the month of July now that all my personnel or my resources are settled down and in place, have taken over their new positions, new postings.

And sir, what was the softness? You said there was some softness in June. In which pockets in general?

It was basically in the retail segment, Mahrukh. It was basically in the retail segment. So whatever NPA increase we have seen, the INR500 crores, as I said, it was mostly in the retail segment only, and that is where we are seeing some pressure on the collections. But I believe it's nothing worrying. And I think going forward, this can be made up. We have intensified our recovery operations.

And sir, just on growth then, the disbursal growth is soft this time. I'm talking about Y-o-Y, not Q-o-Q. So how do we scale it up from current levels? Because competition is also intensifying, and I'm told that PSU banks are now trying to compete across segments and the rates are also very favourable. So in that context, how do we build up?

Yes, true. As far as the competition is concerned, competition is intense. And unfortunately, LICHFL, we are competing with banks because we are mostly into the prime segment, into which banks are. So yes, there is a lot of competition. There is a rate war going on. And literally, of course, as far as the rates are concerned, we have also come down to the bank level. So we are offering loans at 7.50%, which most of the bigger banks are offering. The other part of it, why I would say, growth in disbursement was slightly low in Q1, partially the rate cuts of February to April, 100 basis points. And if you must be knowing, banks are directly linked to the repo rate. The lending rates of banks are directly linked to the repo rate. So as soon as there is a repo rate cut, the rates automatically get reflected the lending rates by the banks. Unfortunately, we have -- fortunately or unfortunately, both ways, I would say, we are linked to our PLR, not to the repo. So we have to take a call on what to do with the rates as and when the rate cut is there.

Now, I mean, as RBI has cut 100 basis point repo rate and the housing loan interest have gone down. So my question is that, I mean, on your existing book, that is largely, I mean, floating rate, the individual loan, how much of that book has been repriced? And how much is yet to be repriced? So basically, assuming that, I mean, the rate is still where it is in repo rate, what kind of yield side compression you see over, I mean, the next 2 quarters? And given that your borrowings are also repricing quite fast this time, what kind of overall NIM compression do you see over the next, say, 2, 3 quarters?

Yes. Avinash, as far as 100% repo rate has been cut, and you have said that the cost of home loans have gone up -- gone down everywhere. Well, that's not true. Public sector banks have done it because they are linked to the repo rate. They have no choice. They have no alternative. But if you look at the NBFCs and HFCs, as far as I know, from my personal knowledge, apart from LIC Housing Finance and Can Fin Homes, nobody else has cut rates. As far as we are concerned, we have cut our rates by 25 basis points for existing borrowers also. This came into effe ct from 1st of June. And now since our loan book is comprised of loans with monthly reset and quarterly reset, approximately one third of our book has already been repriced. The remaining two third gets into repricing from 1st of July. If I talk of yield on advances, the increment yield has -- incremental yield on advances has come down by about 50 basis points from 9.4 at the end of Q4 of last year to 8.9. And cumulatively, it has come down by about 19 basis points from 9.79 to 9.60. Co mparatively, if you look at the incremental cost of borrowing, the incremental cost of borrowing has come down by 69 basis points from 7.66 to 6.97, and the cumulative cost of borrowing has come down by 23 basis points from 7.73 to 7.50. So whereas there is a compression in the yield on advances, there is also a compression on the cost of borrowings. Net-net, I do not believe my NIMs, which are at 2.68% as at the end of Q1, I don't think there'll be too much of a deviation in the NIMs.

My question was more that, okay, is this 25-basis-point cut, I mean, next year kind of an offering attractive enough to kind of control balance transfer? Or will you be required to kind of bring in more cuts? So I mean is this 25-basis-point cut sufficient? Or will you be required to kind of respond with the higher cuts because your competition is public sector banks?

Yes, true, Avinash. Competition is public sector banks. And as of now, we have taken the call of 25-basis-point cut across the board. As of now, right now, we are not contemplating another -- any further cuts. Let's wait and watch. There is not too much of an impact on our, let me say, BT. The BT -- yes, they have gone up slightly, but it is not -- the increase is not significant for us to get into panic mode and start cutting immediately. So right now, it's wait and watch. We are waiting and watching. BT is at manageable levels. And I think we need to watch what happens over a period of time. And if required -- I'm not saying no. If required, yes, we may be required to cut again. But I thin k we would try to manage our portfolio within the existing levels of rate -- of cuts, whatever we have done.

Actually, I have questions on project finance growth. So if we see in this quarter, it is quite muted. So is the LIC Housing Finance want to grow the project finance or both? And how we -- how the management is seeing the growth in that sector?

Yes. Vansh, yes. It is not that we are withdrawing from the project finance market or the construction finance market. We are there. We are there. Yes, we are slow because we want to finance only reputed and builders with pedigree. Our past history, as you all know, in the project finance space has not been great. There was a point where 54% of the construction finance book was NPA. So we have recovered from that. We have recovered from that, learned our lesson, and we are going slow. But we are definitely there in the project finance market, and we want to grow our books. The project finance are there. We have sanctioned about INR800 crores of project finance in Q1 of this current year. But the disbursements are linked to 2 stages of construction, right? So over a period of time, as the project starts getting constructed, the disbursements will happen. So I'm not worried.

And the second question is on my liquidity. Is there any excess liquidity at the end of Q1 with us?

Our liquidity -- no, I think we don't have any such liquidity because our borrowings are exactly linked to what we need or what our requirements are. So maintaining liquidity would be a cost. We are very calculative as far as how much we need to borrow, and that is linked to our internal approvals as the kind of disbursements we expect to make over a period. Overall, the liquidity in the system, we see there is -- as I said in my opening remarks, the liquidity in the system is there. The RBI -- the steps taken by the RBI has improved liquidity in the system. Just for example, very recently, we borrowed INR2,000 crores at 6.75%, which -- whereas our overall borrowing cost is at 7.50%, the incremental borrowing cost for the quarter is at 7.50%. So hopefully, going forward, with liquidity in the system, our borrowing costs will reduce.

And the last question is in my GNPA and NNPA. Like if I go by the numbers, exit numbers, it is approx INR400 crores to INR500 crores increase in the GNPA if I'm right. And our NNPA, I mean, the provision is increased by INR150 crores or INR200-odd crores only. So is there another increase in GNPA just for a technical write-off or just because the -- like because of 1, 2 days or 1 week, there is a customer ,just for bookkeeping, it came into GNPA numbers because of that. And how much recovery management is expecting for throughout the year if you have odd number in your mind?

NPA ratio, yes, it has gone up slightly. If you look quarter-to-quarter, it was 2.47% as at the end of Q4. Right now, it is 2.62%. Year -on-year, of course, there is an improvement, partially because, yes, in Q1, I would say the NPAs, the Stage 3 has gone u p by INR514 crores. Yes, there was -- we have witnessed some pressure on collections. Delinquencies in the retail, I would say, have been simply more. But this has also been contributed by, I would say, a movement of personnel or resources because the month of May for LICHFL is a month of promotion and transfers. But I'm not worried. I am not worried. Usually Q1, this is a trend year after year, and Q1 is just slightly slow. We do tend to recover in Q2, Q3, Q4. So I am sure that the asset quality will improve further going forward, and there should not be any such problems. Our PCR continues to be in that 50%, 51% bracket. So adequate provisions are in place. Current quarter write -off was only -- INR30 crores of write -off was done.

So firstly, maybe you indicated not too much of pressure on balance transfer at this moment. But generally, in the past, we have seen that LIC Housing has the history wherein -- it comes in 1 quarter wherein there is a lot of repricing pressure, and we res et the rate lower and then yields come off and decline in one single quarter. So how we are protecting ourselves against that kind of risk? Because I think any which way competition is huge, and we will see the pressure, and we have just cut the PLR by 25 basis points, yes.

Yes, Kunal, yes, answering your question. As I said, right now, we are not witnessing too much of a pressure. And I would say, we are not witnessing any abnormal pressure. Yes, historically, you are right that BTs have been sort of higher for LICHFL. That means there is no business moving out than moving in, in the form of BTs. So the current trends, they continue to be at those same levels and are not alarming at all. So what we've done, yes, we have made a provision called rewriting of interest rates available to our customers. Any customer currently, say, probably at 9%, 9.5% can rewrite his loan at 8.75% if he wants. So we have made that facility available to the bor rowers. Many of the borrowers are opting for that rather than transferring their loans. They are opting for rewriting. But again, since the market is so competitive, it is all -- at the end of it, it is going to be a book -- a big game of margins versus growth, right? So we, as a company, we need to take a call as to whether we really need to grow the book at almost minimal or no spreads, or we need to protect our margins. And what I personally see, given a push and a shove and with our -- if our backs are to the wall, I would prefer to protect the margins rather than look at growth. So that is what the strategy is at the moment.

So for the benefit of everyone, just trying to understand, you took your first PLR cut of 25 basis points effective 1st April. And then did you share that you've taken your second 25 basis points rate cut effective 1st of July? Is that understanding correct?

Abhishek, we took only -- we have taken only one rate cut across the board. 25 basis points was on 20th of -- 28th of April. Now since our book, one third of the loans are on monthly reset, so immediately on 28th of April when we took it, they went on -- the rates got -- for these one third loans, the rate got cut on the 1st of June, right? 1st of June, yes. And -- May, sorry, 1st of May. 28th April was the date when the cut was taken. So from 1st of May, one third of my book got reset. The other two third of my book is on quarterly reset. So that get -- that got reset on the 1st of July. But there has been only one rate cut of 25 basis points across the board.

So the other question I had was around the asset quality. I'm just trying to understand right now, I mean by this quarter, we might want to call out the slippages that we saw as seasonal. But sir, what I'm trying to understand here is within the different product segments that you ha ve, are you seeing more stress building up today in the LAP segment? And sir, a related question, if you could also share your segment-wise gross Stage 3 that you share every quarter in the earnings call.

Yes. Abhijit, well, if you look at LICHFL, unfortunately, we don't have a big LAP book. We are mostly into IHL, 85% of our loans in the IHL segment. The LAP segment hardly would contribute to about 12% to 13% of my book. 11% of my book. So there is not too much of a LAP book. Whatever delinquencies we've noticed in Q1, my Stage 3 EAD has gone up by INR514 crores. Most of it has been in the retail and IHL segment, which has not significantly increased in the LAP or the LRD segment. So most of it is in the retail segment. Our worry or concern is in the IHL book, where the -- most of the delinquencies have taken place in Q1. As regard the number, you're asking for the Stage 3 numbers for Individual Home Loans. Our Stage 3 in IHL is about 1.22% -- the EAD percentage, 1.22%. And the EAD is INR3,211 crores. In IHL, the EAD is INR3,211.32 crores, and the EAD percentage is 1.22%. In NHC, non -housing commercial and projects, it is INR3,497.77 crores. The EAD percentage is 24.82%. In the NHI, it is INR1,406.18 crores, and the EAD percentage is 4.25%. And in the -- and the overall ECL, it stands at INR8,115.27 crores, with a percentage of 2.62%.

Sir, can you tell us the monthly disbursement that you have done in April, May and June?

April, May and June, okay. April, it was INR3,265 crores. May, it was INR4,580 crores. And June, it was INR5,125 crores.

Okay. So basically, if you were to derive, so last year, I think we were at a monthly average of, say, INR5,500 crores. Now that we have hit INR5,000 crores plus in June itself, maybe this Q2 being better, should we take it to something like a INR6,000 crores of monthly disbursement average run rate? That would not be too far figure, right?

Should go up there. It should go up there. July has been about INR5,500 crores, right? So we should be -- August onwards, we should be hitting INR6,000 crores, INR6,500 crores every month. And this will -- actually, festival season, it will be higher. Festive season, it will be higher than that.

And sir, on the spread, so I think since we had this benefit of cost of funding being upfronted this quarter, while the repricing of the yield was slightly backdated because of the 1/3, 2/3 thing. So we had the spread improvement. But going into the next quarter, when you have 2/3 of your loan book getting repriced, do you think that the benefit of the cost of fund will be sufficient enough to cushion you?

Yes. Right now, as of June, our spread is 2.10%. And I earlier told that our incremental cost of borrowing has come down by 69 bps. And in the coming quarters, we are expecting that it will further come down by 5 to 10 bps. So in a nutshell, what guidance we have already given, that is between 2.6% to 2.80%, then definitely we'll maintain that.

Just want to follow up on your earlier comment that for borrowers who want to BT out, we have available facilities allowing them to reprice at a lower rate. I just want to double check. Did I hear you correctly that they can reprice 75 bps lower if they chose to ask for it?

Yes, Mr. Gao. It's something like this. Yes, not all our borrowers are at very high levels of rates of interest. But the borrowers trying to go out our books, we do -- we are offering them this facility. This is available for everyone. It is not that this is a special facility available to only those who want to go. This is available to across the board to our borrowers. Any borrower who, right now, has a, I would say, a rate of interest -- effective rate of interest of more than 8.75%, we are offering them a rewriting at 8.75%. So that is one of the tools we are employing to retain the existing borrowers who want to move out.

I just want to know how much of the bank borrowings are repo linked? And how much of them have a T+1 pass-through? Just trying to get a sense of how much of our entire 31% of our liability book has been repriced with the second 50 bps cut.

Yes. So our 25% of total borrowing is EBLR. And in the current year, the remaining 9 months, almost INR22,000 crores of NCDs will be repriced. So if you take it bank borrowing plus repricing of NCDs, the total book of around 42.96% would be floating. And the remaining 57% would be fixed.

Second, just how large is the TWO pool? And just any sense on how much recovery you expect during this year?

So we've already hardly written off INR30 crores only in this quarter. And total is about... It's about INR4,000. So many proposed by -- many cases are in pipeline, and we are expecting a good recovery in the coming quarters. And this quarter, we already recovered INR60 crores.

Just last question, I think last year, about 8, 9 months back, started about an affordable housing, which is at 250 bps higher. Maybe some color on where we are in that process, how large a book that is today?

Chandra, well -- Chandra, right, we just started it last year in September onwards -- end of September onwards. So we're still in the process of sort of -- we're in the process of building up the infrastructure and the capabilities right now. We are not ve ry aggressive on that, taking it slow and steady because this is a risky segment. We do not want to sort of entangle ourselves in something which we would not like in future. So planning to -- we are very much into this segment. We realize this is a segment which has the growth potential and also the margin potential. Right now, it's pretty slow. But yes, there is some traction going on month-on-month. Last year, for example, about INR458 crores of business came in from the affordable. This year, not having a huge target as such. We would be happy with somewhere about INR1,000 crores and a lot more buildup in the infrastructure and the capability.

I just wanted to -- it's more like a clarification. Can you -- you said you are expecting double-digit growth during the year. Is it AUM growth or the NIM growth?

No, no. We're talking about the disbursement, the book growth as well as the disbursement growth.

Sir, just trying to understand one small thing. If you look at your reported yields, it was 9.79%, yes, as of March, which you have reported at 9.6% as of June. So my understanding is this is based on a period end, right? So these numbers are as of March a nd as of June. So first, is this understanding right? And the other thing I was just trying to understand, sir, is that if you look at your PLR cuts, you shared that you've taken a 25 basis points cut, where 1/3 of the customers are on monthly reset. So this 19 basis points Q-o-Q decline that we have seen in the yields, right, is it partly because of this 25 basis points rate cut and the remaining delta coming from the newer origination, which are happening at lower rates? Is that understanding correct? Or how should we understand this 19 basis points Q-o-Q decline in yields?

Perfect. Yes, this is the cumulative, 9.60% and 9.79% as at the end of last quarter. This 19 basis points is on the cumulative yield on advances. Yes, definitely, the one third cut, which we -- 25-basis-point cut on one third of our book, which came into effect from 1st of May would have contributed to some of this, and the other would have been at the incremental lending, which we have done in the current financial year at near about 7.5%.