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Edited Transcript of PNBH.NS earnings conference call or presentation 30-Jul-19 12:00pm GMT

Q1 2020 PNB Housing Finance Ltd Earnings Call

NEW DELHI Aug 23, 2019 (Thomson StreetEvents) -- Edited Transcript of PNB Housing Finance Ltd earnings conference call or presentation Tuesday, July 30, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Deepika Gupta Padhi

PNB Housing Finance Limited - Head of IR

* Sanjaya Gupta

PNB Housing Finance Limited - MD & Director

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Conference Call Participants

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* Amit Premchandani

UTI Asset Management Company Limited - Fund Manager

* Ashwini Agarwal

Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor

* Kishan Gupta

CD Equisearch Private Limited, Research Division - Senior Analyst

* Mayank Agarwal

Anand Rathi Financial Services Limited, Research Division - Research Associate

* Nidhesh Jain

Investec Bank plc, Research Division - Analyst

* Nischint Chawathe

Kotak Securities (Institutional Equities) - Senior Analyst

* Piran Engineer

Motilal Oswal Securities Limited, Research Division - Research Analyst

* Pratik Chheda

IIFL Research - Associate

* Ritika Dua

Elara Securities (India) Private Limited, Research Division - Research Analyst

* Shubhranshu Mishra

BOB Capital Markets Limited, Research Division - Analyst

* Subrat Dwibedy

SBI Life Insurance Company Limited - Investment Analyst

* Viral Shah

Crédit Suisse AG, Research Division - Research Analyst

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Presentation

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Deepika Gupta Padhi, PNB Housing Finance Limited - Head of IR [1]

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Thank you, Margaret. Good evening and welcome, everyone. We are here to discuss PNB Housing Finance Q1 Financial Year '19-'20 Results adopted as per Indian Accounting Standards. With me, we have our leadership team represented by Mr. Sanjaya Gupta, Managing Director; Mr. Shaji Varghese, Executive Director, Business Development; Mr. Ajay Gupta, Executive Director, Risk Management; Mr. Nitant Desai, Chief Operations and Technology Officer; Mr. Anshul Bhargava, Key People Officer; Mr. Sanjay Jain, Company Secretary and Head of Compliance; and Mr. Kapish Jain, Chief Financial Officer. We will begin this call with the overview and performance update by the Managing Director followed by an interactive Q&A session.

Please note this call may contain forward-looking statements which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances. A detailed disclaimer is on Slide 2 of the investor presentation available on our website.

With that, I'll now hand over the call to Mr. Sanjaya Gupta. Over to you, sir.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [2]

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Thank you, Deepika. Good evening, everyone. Welcome all to our quarter 1 financial year '19-'20 earnings call.

Before we get into the business and financial numbers in detail, let me talk about our liability and liquidity position, corporate finance book and capital raised plan. Amidst the continuing challenging environment, the company incrementally mobilized INR 11,550 crores particularly through bank term loans, public deposits and securitization via the direct assignment route. We are the second largest deposit-taking housing finance company with monthly gross mobilization of over INR 800 crores and opening up 12,000 deposit accounts per month.

Deposits as of 30th June 2019 stand at INR 15,446 crores. That is 18% of our total financial resources. With INR 12,400 crores of securitized book as of 30th June 2019, the company has developed expertise and securitization through direct assignment route.

As on 30th September 2019, our securitized book is 37 months vintage with gross NPAs of only 0.22%. With our continued focus on long-term borrowings, securitization and sell-down of corporate finance assets, the ALM gap across buckets is expected to further contract over time. As on 30th June 2019, as a prudent measure, we've maintained over INR 5,000 crore of cash and liquid investments on our balance sheet.

In the recent times, the rating agencies have cited increasing concern over the sector more particularly post IL&FS and DHFL default which have resulted in a series of downgrades, outlook change announced by them across NBFC and HFC space. Consequent to the same, the rating agencies with ICRA changed its outlook on our rating from stable to negative. CARE revised our rating to AA+ with stable outlook from AAA with credit watch and CRISIL changed its outlook from stable to negative. The changes by rating agencies was due to the need to raise capital in this financial year in order to bring down the gearing levels and the impact of elongated liquidity tightening cycle on the real estate sector resulting in increased vulnerability of the corporate loan book.

Considering the current real estate environment and as spelled in last quarter, the company disbursed INR 7,634 crore during quarter 1 of financial year '19-'20 with 92 disbursements -- with 92% disbursements in the retail segment. During the quarter, our retail disbursements grew by 7% year-on-year whereas the corporate finance disbursement was contained at INR 605 crores, indicating a de-growth of 81% year-on-year. In addition to the lower disbursements in the corporate loan, we down-sold INR 842 crore worth of an LRD portfolio. We will continue to focus on building our retail book during the year.

The corporate book as on 30th June 2019 is 20% of the assets under management, down by 1% on a sequential basis. This represents 13% as construction finance, 3% as lease rental discounting and 4% as corporate term loan.

In terms of geographical contribution, West market forms 41% of the corporate book, followed by South at 30% and North at 29%. Our lending in this space is primarily to market real estate developers and repeat customers.

The disbursements in quarter 1 financial year '19-'20 are made to ongoing projects after thorough checking up and compliance to the sanctioned terms and conditions. 98% of disbursement made during quarter 1 of financial year '19-'20 is to repeat customers who are time-tested and with proven track record. The top 20 developers with 63 loan accounts constitute 60% of the corporate book. We have maintained sufficient security cover on our corporate loan book exposure.

Further, we have strengthened our existing teams and created specialized group of skilled professionals from various teams to monitor, measure and mitigate risks arising out of the current environment.

As a part of the continuous monitoring, we had identified 5 accounts that we informed during the last earnings call. Out of these 5 accounts, 1 account with a security cover of more than 2.5x had moved into NPA. The developer has approached the company to clear the loan in a structured manner over the next 2 quarters and has deposited an initial amount. The negotiations are currently underway for accelerated payments. On lines of conservatism and as a prudent measure, we have created 21% ECL provision in these 5 accounts, up from 17% as on 31st March 2019. In addition to this, we continue to maintain steady-state provision of INR 156.5 crores. We would continue to remain cautious on lending to this segment for the next few months.

The Board of Directors of the company today approved a plan to raise capital up to INR 2,000 crores. The Stakeholders Relationship Committee, SRC as we call it, will oversee the capital raise plan as we finalize the mode, time and quantum. The National Housing Bank vide with circular dated 19th July 2019 has advised HFCs to desist from offering loan products under the subvention scheme. The company at all times has been fully compliant to the guidelines and circulars issued by the National Housing Bank. And as on 30th June 2019, such schemes contribute less than 1% to the assets under management.

Let me now talk about the financial numbers for the quarter ending 30th June 2019. The figures are on a consolidated basis and are compared with the same quarter during the previous financial year.

During the quarter, the company registered a healthy growth over quarter 1 of financial year '18-'19. The net interest income grew by 45% at INR 625.5 crores, and profit after tax expanded by 11% to INR 284.5 crores. The spread on loans for quarter 1 of 2019-'20 is 253 basis points. Excluding the assignment income and other indirect adjustment, that is as per IGAAP, the spread on loans for quarter 1 of '19-'20 is 201 basis points. Net interest margin for quarter 1 is 314 basis points. The gross margin, net of acquisition cost and including fee for quarter 1 of '19-'20 stood at 344 basis points against 321 basis points during quarter 1 of '18-'19. The OpEx to average total assets for the financial year excluding the ESOP cost of INR 11.7 crores, being more of an accounting provision, stood at 56 basis points. This includes employees costs of PHFL, our 100% owned subsidiary which largely houses the in-house sales force.

The cumulative ECL provision as on 30th June 2019 is INR 598 crores. In addition to the ECL provision, we've maintained the steady-state provision of INR 156.5 crores as a steady-state provision.

The return on assets for quarter 1 is 137 basis points compared to 154 basis points in quarter 1 of '18-'19 on average gearing of 9.4% -- I mean 9.4x against 8.7x during quarter 1 of '18-'19. The return on equity for quarter 1 '19-'20 is 14.81% compared to 15.75% for quarter 1 of '18-'19. The closing net worth as per IndAS as on 30th June 2019 is INR 7,864.6 crores.

On capitalization, the CRAR of the company as on 30th June 2019 is 15.13%, with Tier 1 at 12.04% and Tier 2 at 3.09% which has improved from 13.98% with Tier 1 at 11% and Tier 2 at 2.98% as on 31st March 2019. These CRAR numbers are as per IGAAP and does not consider the positive impact arising out of IndAS adjustments.

Now let me talk about the business performance. During quarter 1 of '19-'20, we registered 11% growth in loan file log-ins compared to the corresponding period of the previous financial year. The disbursements de-grew by 22% to INR 7,634 crores vis-a-vis INR 9,767 crores during quarter 1 of '18-'19. Retail segment disbursements grew by 7% year-on-year. And the corporate finance disbursements de-grew by 81% year-on-year.

Assets under management registered a growth of 29% to INR 88,333 crores as of 30th June 2019. Geographically, West is our largest market with 39% of assets under management, followed by North with 31% and South at 30%. We have limited presence in the East with 3 branches, 2 in Kolkata and 1 in Bhubaneswar which formed a part of the North zone.

The company during quarter 1 of financial year '19-'20 securitized loan book of INR 2,318 crores of its retail loan portfolio, both home loans and LAP, through the direct assignment route with consistently superior asset quality and good portion of priority sector lending.

The company's portfolio continues to enjoy a good demand from banks, HFCs for pool buyout. Net of the assigned loans, the loan assets are at INR 75,933 crores as of 30th June 2019, representing a healthy growth of 19% year-on-year.

Housing loans constitute 72% of the assets under management and nonhousing loans being the remaining 28% of the assets under management. In the housing loans segment, individual housing loans constitute 59%, and construction finance for residential units constitute 13% of the assets under management. In the nonhousing segment, retail LAP, that is retail loan against property, constitute 18% of the assets under management. Retail nonresidential premises loans, lease rental discounting and corporate term loans constitute the remaining.

During the quarter, 2 branches that had spilled over from '18-'19 were made operational, totaling to 104 branches with presence across 64 unique cities. The company also services its customers through 30 outreach locations. The company has 23 underwriting hubs as on 30th June 2019 catering to the branches and the outreach centers. FY '19-'20 is a year of consolidation for the company, and hence, the company does not plan to open any new branch.

During quarter 1 of '19-'20, out of the total individual housing loan disbursement, around 26% by value was in less than 25 lakh crore -- 25 lakh category which can be termed as affordable housing. With geographical expansion in our branch network in Tier 2 and Tier 3 cities, we look forward to growing the contribution of affordable segment in our individual housing loan portfolio.

Gross NPAs as on 30th June 2019 as a percentage of the loan asset is 0.85% compared to 0.43% as on June 2018 and 0.48% as on 31st March 2019. The GNPA on AUM is 0.76% as on 30th June 2019. The increase in gross nonperforming assets is primarily due to the addition of one corporate loan exposure of INR 150 crores that was already a part of the remedial action, as we have informed earlier. Excluding this account, the gross NPAs would be 0.65% as on 30th June 2019. This is in line with our philosophy to accelerate forward flows during the first quarter, so that we can initiate SARFAESI and resolve the accounts by fourth quarter.

The write-offs by the company life to date is less than 5 basis points on the cumulative disbursements. As on 30th June 2019, our total provision to asset stands comfortably at 1%, and the provision coverage ratio is at 117%.

On our resource profile, 25% is contributed by nonconvertible debentures, 21% by banks and 18% by deposits, 15% by direct assignment, 8% by commercial paper and 8% refinance from the National Housing Bank and 5% through external commercial borrowings. The company has raised ECB of $100 million from IFC Washington on 25th of July 2019, reposing its faith on the operational robustness of the company.

In line with our philosophy to enable the marginalized community in becoming capable and self-reliant, we work in construction labor skill enhancement trainings, day care centers, education and health care under our corporate social responsibility program known as Saksham.

We are a strong 1,690 full-time employee team as on 30th June 2019. The company constitutes to maintain a balanced approach to business and growth with focus on asset quality and profitability.

With this, we would now open the floor for questions and answers. Thank you very much.

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Questions and Answers

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Operator [1]

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Thank you very much. We will now begin the question-and-answer session. (Operator Instructions) The first question is from the line of Amit Premchandani from UTI Mutual Fund.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [2]

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Just on this comment that you made that you let the accounts slip in Q1 and so that recovery can happen in Q4, was it meant about these 5 accounts that you have classified as stressed, or is it general policy?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [3]

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No, that is a general annual policy that we do every year because wing-to-wing the SARFAESI action takes about 6 to 7 months to cure an account. And hence, the start of the forward flows in a growing manner from quarter 1 so that by quarter 2, the peak; and by quarter 3, we start seeing resolutions; and by quarter 4, we are home. So it's an annual feature which always happens.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [4]

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These 5 stressed accounts have nothing to do with this feature?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [5]

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One of the accounts, even when we have received the payment of INR 150 crores, we have allowed it to flow in the NPA bucket so that we can start the legal action.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [6]

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You have received a payment of INR 150 crores -- or the account?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [7]

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We have not received the payment of INR 150 crores, but we have received the servicing installment of INR 150 crores which will have pushed it backward. But we have not allowed it to be like that.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [8]

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So do we read into that and that the other 4 accounts were not -- it was not necessary to...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [9]

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Yes, because the other 4, we are -- yes, because for the other 4, we are able to see some visibility of evidenced cash flows. And we are partnering with the developers so that the projects get delivered even if with a little bit of delay and not get them into any sort of a legal tangle.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [10]

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The probability of them default or classified as defaulting is low. Is it a safe assumption to make?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [11]

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Well, I would always say the credit default is part and parcel of lending business. And even last year, if you were to say the '18-'19, we resolved or cured 3 accounts worth about INR 165 crores. So we are in the business of not only lending but also recovery. And wherever we think that our partnering, our customers would help them to resolve, to save an NPA, we always like to partner. We are collaborative. But where we think that we are not seeing any evidenced cash flows, et cetera, or a resolution there, obviously, we like to initiate the legal recourse so that tomorrow, if we have to sort of take harbor in curing the accounts through that method, we are not found wanting.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [12]

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And then the last 1 quarter, you have not added any account in the stress list while the environment has turned (inaudible)?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [13]

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No, no, no.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [14]

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So for the next 3 quarters or so, do you expect additional...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [15]

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Well, I cannot forecast. We are regularly monitoring our corporate book. And as I also said in our annual earnings call, that annually, we will be detailing out all our corporate accounts because during the life cycle of a project, and you have to think about a year to really take it from one stage to the other. And hence, it is too premature. But yes, as of today, even out of those 5 stressed accounts, 1 we have let it flow into an NPA because we think we will require to augment the pressure on the customer, to repay the loan in full or to repay it faster than what the Corporate House has indicated to us in the first instance. And in the other 4, we think that we will be able to partner with the developer and able to get the projects moving.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [16]

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And finally, sir, any time lines or the capital raise and the method of capital raise?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [17]

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So you will be happy to know that the board has today given us an omnibus approval to raise capital up to INR 2,000 crores. They've also empowered the Stakeholders Committee, I would say, in a carte blanche manner to start with the RFP process to bring on board merchant bankers, investment bankers. And the 2, I would say, routes which are looking most -- and this is my gut feeling because -- let the merchant banks come on board. They will give us the right suggestions. But I think a rise or a limited press is going to be a preferred route.

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Amit Premchandani, UTI Asset Management Company Limited - Fund Manager [18]

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Any time line within this quarter or next quarter?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [19]

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Well, I think we will be -- we are very cognizant of the time schedule. And we would like to first -- we will follow the process because this is a regulated sort of a process. And we would like to do it as quickly and as swiftly. Swiftly will be a better word than quickly in a compliance manner.

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Operator [20]

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The next question is from the line of Subrat Dwibedy from SBI Life Insurance.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [21]

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Sir, a couple of questions. One is on the ALM. In the 6 to 12-month bucket as well as in the 1 to 3-year bucket, there's a cumulative mismatch. Of course, a part of that would have been addressed with this ECB raising from IFC. Any other measures that you're taking?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [22]

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So what is that -- this has come down from the previous quarter. And let me be candid with you. This is not at all hurting us because we have a securitization program. Last year, if you remember, we did something like INR 7,300 crores. And this year, we plan to do north of that figure. And in the first quarter, we did about INR 2,300 crores. And we will -- we are already -- I mean our seasoned book which is having a 37-month MOB only has a gross NPA of 22 bps which is securitized. And so we are already -- you know that I can't say the names of banks, but there are about 3, 4 banks which are already doing due diligence on a handsome sort of a portfolio much in excess to this negative gap. And that will take care of it.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [23]

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And this securitization is largely in the retail segment, retail book?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [24]

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Yes. So on the direct assignment route, basically, the retail home loan and the retail LAP book, even in the first quarter, we almost did 50% -- 50%. In the second quarter also, we are planning to do the same. And then if you recall from my call, we did about INR 850 crores of LRD sell-down. We plan to do another about same amount of LRD sell-down. We have some very marquee LRDs with that with 0 dpd. So we want to harbor them to a nice lending institution so that our customers do not face volatility in interest rates, and we should be able to do. So given a ballpark figure, I think in quarter 2 of '19-'20, between securitization and sell-down, we should be north of something INR 2,500, INR 2,600 crores. And this will take care of this ALM mismatch or gap. So this is by design. This is basically by design, these gaps.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [25]

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So the second question was on the increase in the NPAs. So the increase is roughly INR 300 crores quarter-on-quarter, out of which INR 150 crores you mentioned is on account of that one stressed account which became NPA. What about the balance INR 150 crores?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [26]

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Well, the balance obviously is coming from the retail book. And if you see the retail book NPA as of 31st March was something like 0.67 -- was about 0.79, which has moved up a little bit. And every quarter 1, we have this forward flow of about 20 bps from March or the quarter 4 of the previous year. And this is just a replica of that because, once again, accounts which are recalcitrant with us and have sort of been a little problematic on the collection front, you let them flow into a Stage 3 bucket so that we can take legal action. So it is by design more or less. This phenomenon, if you were to compare because last year was a beautiful year, previous to that was a wonderful year, where there was no corporate finance or corporate book NPA, so the forward flow between quarter 4 and quarter 1 is also of similar nature.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [27]

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Okay. And sir, how much was the disbursement towards construction finance in Q1?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [28]

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As I said, it is nearly INR 600 crores in quarter 1.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [29]

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This would be primarily committed lines?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [30]

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It is almost -- so what we are doing is, as a strategy, we are not on-boarding new loans, we are not sanctioning new loans. But whatever commitments we have from the past because these loans don't get disbursed in a single shot, they happen over the different stages of a project life cycle. So those, I mean, commitments we are honoring to the team.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [31]

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And sir, last question on the CP book. So that has come down from around INR 8,000 crores in March to some INR 6,500 crores in Q1. So any view on that whether it will further continue to come down or it will remain at this level?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [32]

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I think this is a safe stage of CP of about 8% on the overall resources. And if you remember, somewhere in FY '18, we were as high as 18%, 19%, so gradually, we have come down. And this is a level that we would always like to maintain because at this level, the rollovers on this side of the balance sheet is not becoming an issue.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [33]

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Okay. So rollovers are happening.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [34]

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Yes, the rollovers are happening though they are pricier, but that is for everybody, not us alone.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [35]

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And mutual funds will be the primary holder?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [36]

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No. Also the banks, [treasury], the mutual funds, the insurance companies, they are all type of lenders who subscribe to our CP.

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Subrat Dwibedy, SBI Life Insurance Company Limited - Investment Analyst [37]

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And the rollovers are happening even by mutual funds?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [38]

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Yes. I mean, the -- we are a little cherrypicked by some of the big mutual funds, and they continue to support us.

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Operator [39]

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(Operator Instructions) The next question is from the line of Ashwini Agarwal from Ashmore India.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [40]

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I had a couple of questions. The first was that on the 2 budget announcements, one is the transfer of regulatory oversight from NHB to the Bank of India and the other is credit enhancement for some housing finance companies and NBFCs that is likely. Is that sort of getting formalized? Have you seen any notification? What changes do you expect arising out of these 2 announcements?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [41]

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These are budgetary. That budgetary announcement has happened, and the budget has been approved by the Parliament, but the rules are yet to be written. So let me tell you as a regulatory, it does not make much difference to us because there was no regulatory arbitrage. Between what the RBI was subscribing for NBFCs and what NHB was subscribing for HFC. Now there is a little bit of a speculation that when the budget pitch says that the supervision of housing finance companies will remain with NHB, will that include the regulatory supposition also, the regulatory order. So let us wait. We will have to cross the bridge when we come to it. I'm not in a position or I'm not the authority to comment on that.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [42]

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Okay. Sir, the second question relates to the response to the first question on this conversation. Earlier, you said that you allow loans to slip into NPA. You're referring to the one corporate customer where INR 150 crores has shifted into NPA. I mean does that work? I mean I would have thought that anything that is past due for more than 90 days would automatically slip, so I mean how can you influence that outcome? I mean NPAs should be more of an automatic thing.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [43]

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Okay. Now the thing is that there are certain customers, whether it is retail or corporate, who are not regular. And EMI is like a bill to be paid in areas. So even the subsequent months, the previous months EMI is not paid or the interest is not serviced because these are term loans, then it has a dpd. Now for both in retail and in corporate, when we find that the incidence or the propensity to not pay is very high. And quarter 1 is the best time when you don't actively go and collect, right? You don't intervene, and you let the customer default so that the customer passes the 90-plus dpd and is in Stage 3. Once an account is in Stage 3, even if the customer pays, as for the SARFAESI Act of 2002, you could invoke the SARFAESI Act and take a legal recourse. So this is what we did in this account.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [44]

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So Stage 3 is past 90 days?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [45]

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Yes, yes. So for banks and us, it is both the same.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [46]

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Okay. So what you're effectively saying is...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [47]

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Since we have moved to IndAS and in ECL sort of a regime, I stopped calling it as 90 days past due. I'm calling it as Stage 3 because that is defined as Stage 3. So I'm being a little accurate on the terminology.

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Ashwini Agarwal, Ashmore Equities Investment Management (US) LLC - Non-Discretionary Strategic Advisor [48]

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Fair enough. So what you're saying is that you don't do any follow-ups which allows these accounts to slip and, therefore, your ability to invoke SARFAESI kicks in.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [49]

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Yes. Yes. And now these are on the negotiation table because now the customer also realizes that we mean some real hard measures. And especially, when the securities are more than 2.5x of the loan outstanding, and when we say 2.5x, these are the sort of valuations which are dynamic, and we are taking the stretched valuation.

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Operator [50]

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(Operator Instructions) The next question is from the line of Nidhesh Jain from Investec.

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Nidhesh Jain, Investec Bank plc, Research Division - Analyst [51]

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So firstly, again on the asset quality, and it's basically the 5 accounts that we have discussed last -- in Q4 and now again, so do you think there is a chance for the number of accounts and the quantum of loans for around INR 800 crores, INR 900 crores to increase over the course of this financial year?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [52]

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See, I wish I was a harbinger, and I wish I was a god to foresee the future. We are here in the business, as I said, to lend and recover, and that we are doing very determined, in a tenacious manner and a very alert manner. And which banker would like any of his or her account to move into an NPA bucket or even in a delinquency bucket. Our entire team of 45 people who are across the board for corporate finance book are only working to monitor utilization of funds, construction stage, sales velocity, collection efficiency, escrow discipline and the new sort of Indian, I would say, environment which is so full of frenzy of litigations. So we are monitoring them day in and day out. Our 2 executive directors, which is the Chief Risk Officer Ajay Gupta and our business head Shaji Varghese, and a team of 6, 7 people from the corporate finance book are only monitoring them. As a CEO and head of the institution, on a weekly basis, I am taking a sort of a heads-up, and we spend about 2, 3 hours together. Plus even if we are not acquiring new business, out of 167 unique relationships that we have, we are proactively meeting with the developer fraternity which is on board with us. And we are making them aware because we do a very intensive RAG analysis, Red-Amber-Green. And wherever we are having concerns, or even if we have to say "Thank you very much. You are doing fantastically well," we are keeping our relationships warm. So that we come to know of any eventuality, it can be positive, it can be negative, before the world comes to know. And it is always a hard burn to come to know from the market about a project that you are funded rather than knowing it yourself as a first-tell information. And now we -- I mean we have a very, very cherrypicked portfolio of INR 18,000 crores approximately. We love it, we care for it, and we nurture it. And we are taking all possible actions in a very sort of a collaborative fashion to make sure that we remain in the business of supplying homes and not taking away homes from a developing economy.

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Nidhesh Jain, Investec Bank plc, Research Division - Analyst [53]

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Sure, sure. So just 2 -- 1 best. So the metrics that we are tracking, are you more worried about these accounts or overall portfolio of consistent finance versus the position that we were in Q4 and FY '19? Or the positioning on sales philosophy and other matters remains broadly similar?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [54]

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I would say there is a slowdown. We cannot defy that. But we are not reaching -- besides these 5 accounts, we are not reaching a critical level of anxiety in the rest of the portfolio. Obviously, when we do a Red-Amber-Green analysis, the reds are those 5. There are certain amber, but they are manageable, they are doing all right. They need special care, they need special monitoring, they need a closer sort of collaboration on the retail front. We also have a property broking arm which we call it as Property Services Group, PSG, and our retail guys are deploying our PSG folks there on the projects. So that wherever the sales propensity has come down, we can probably augment through our retail focus because when we are doing about 13,000 retail home loans in a month, there are a lot of customers who apply for a home loan to check their eligibility and they are property not yet selected, as we call it in mortgage jargon, PNI. So that sort of a data that we have on a continuous basis is supplied to our property services group. And then they get in touch with these customers who have taken a loan sanction and are looking for a home to check on the budget, on the location, on the preferences. And if they have certain sort of inventory which matches the requirement of a retail customer, then they make sure, as a counselor, they marry the demand side with the supply side and make dreams come through.

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Nidhesh Jain, Investec Bank plc, Research Division - Analyst [55]

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Sure then. And secondly, on the operating expenses, we've seen quite a bit of improvement in OpEx to ATA. So is this a sustainable level and we should expect a slow improvement from these levels, or is there some one-off in this OpEx?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [56]

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You are very correct. As I said, this is a year of consolidation. We are not adding to any sort of a capital expense during this financial year. When it comes to opening new branches, we are not adding to people. We are -- we have 104 branches, 23 hubs, 30 outreach locations. Almost 50% of our branches which contribute about 25% to 30% of our business, as a definition, that is about 2-years-old branches. We will concentrate to make them come to an optimum level of operations. And I think even our Board, which is highly illustrious and experienced, is guiding us. And we are very cognizant of the fact that in today's environment, the only thing which is in the hands of the management is to manage costs. And we -- let me tell you all 1,690 people together are working towards tightening our belts. This is not the time to -- I mean, we are not cutting on costs. All essential expenses are met. We are good pay masters. But we are not sort of being spendthrift, and we are not going to spend money where it is not required. And I think also, let us be very candid, and I thought in yesterday's AGM, there will be far more questions, but they didn't crop up. This entire, I would say, transition from IGAAP to IndAS has actually moved expenses from GR lines, right? So we are also getting used to it. And I think our investor community and our analyst communities are also getting used to it. And I think -- I mean, the biggest -- this OpEx can actually -- if it was IGAAP, it would have only been about 56 bps. There's this ESOP cost, and there's third party -- I mean, our subsidiary, employees cost and all, which was not there in IGAAP, has come in, in the IndAS regime. But we now know how to live with it, and we are managing. And we are very conscious of the fact that this is a time when we ought to be frugal like a good Indian family. And that will be the way going forward so that we have a healthy growth by the end of the year. Our Board was very receptive for capital raise, and they have allowed an interim INR 2,000 crores of Tier 1 infusion. And I think that will also improve our level. It will improve our -- probably if rating agencies get out of their euphoria of downgrading the sector probably and upgrades by quarter 3., and hence, the cost of funds will also come down. And the amalgamation of borrowed debt with NOS, expanded at NOS, will also increase the spread.

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Nidhesh Jain, Investec Bank plc, Research Division - Analyst [57]

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Sure, sure. And then just lastly, on the credit cost, any guidance you would like to put out for the full year because, in this quarter, I think the credit cost is quite elevated and which may not be extrapolated to the full financial year?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [58]

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I think -- yes, I think about 25 to 27 bps as a steady state would be the credit cost. But I have promised to my CRO that in case any major rollback happens from the corporate book, from an NPA or Stage 2 -- Stage 1, we will not reverse this provisioning. And that is why we have taken a conscious sort of a hit on our PAT growth because this company, before we say Jack Robinson, can be a lakh crore company on the loan portfolio. And I would like that we have enough elbow rooms because economic cycle frequencies are convincing that we don't have to look here and there if supposing another one comes after 3, 4 years. So this is a team which has got hundreds of years of mortgage experience. And so I mean for us, these times are not rattling. We -- I mean particularly the top 5, 6 people that we have, have seen about 4, 5 cycles like this and in a much, much smaller economy, in a much guarded economy, in a much tariffed economy. So I would say this is the time to concentrate on operations, on our -- I would say concentrate on orthodox methods to overcome the turbulent times. People who will harbor safely 2020 will be the winners.

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Operator [59]

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(Operator Instructions) The next question is from the line of [Saurabh Kabra] from [Reliance Mutual Fund].

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Unidentified Analyst, [60]

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I have a question with respect to the gearing level and the capital raising plan. So considering the current market scenario and the way rating agencies are reacting, so do you feel that INR 2,000 crores equity and that too, by I think quarter 3 or quarter 4 will suffice to change the outlook back to stable or are we planning to have another round of equity next year?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [61]

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See, as I said, this is an interim measure for 12 to 16 months, right? So -- and I'm neither pessimistic nor I'm optimistic, I'm a realistic guy. And as I said, the frequency of the economic cycles are condensing. We firmly believe that in next 9 to 11 months we will come out of it. And this is an interim measure. And I think by that time, the markets will also correct, the sentiments towards HFCs, NBFCs will improve. The robust organizations will survive and it will be far easier to distinguish between men and boys. And I think everybody will be kinder. Because after all we are in a generic sector. We are not doing something which is highly, I would say, complicated. So the demand is there, the population is there, the nuclear families are there, the stability of employment is there, affordability is there, the prices are stable and they are time-corrected. So why not a better future?

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Unidentified Analyst, [62]

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I totally agree with that, sir. The price is quite strong. But on the liability side, so considering -- so if I include [off-book AUM] and -- and the debt, the gearing as of now is somewhere around 10.5. So with INR 2,000 crore equity also it will be somewhere around 8.5x. So at what level of gearing are we comfortable?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [63]

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So what I would say is that if you see our quarter 1 gearing, it is almost same as March -- quarter 4 of the previous year. And the idea is that with the infusion of this INR 2,000 crores by end of the year, we reach a comfortable level of about a high 7 -- well, 7.60, 7.75, up to 8x. And that will make -- with this product mix on the balance sheet, would make the rating agencies quite comfortable. And that -- and now, I will put the ball back in the court of the rating agencies. If we are able to do that and we are able to showcase a good quality portfolio, robust operations, compliance, et cetera, et cetera, then they should also have guts to upgrade.

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Unidentified Analyst, [64]

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Okay. So whenever a rating agency consider the gearing, they also include the [off-book AUM]. So which, again...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [65]

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So whether it is outlook or whether it is upgradation, whether it is gearing. I mean it's -- let's not have a ping pong game. I mean if the stability is bad, demand is bad, cash flows are bad, velocity of transactions are bad, the institution has been able to demonstrate that the current stakeholders are having 100% confidence in the methods the way the business is done, the business is regulated, monitored, the quality of the management, what else can you do? You can't sort of start putting your heart and your kidneys on the table for the rating agencies.

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Unidentified Analyst, [66]

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And just one more question, how much would be the committed line as on 30th June from financial institutions?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [67]

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Which committed line are you talking of?

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Unidentified Analyst, [68]

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Bank. Banks or financial institutions.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [69]

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We have about INR 6,000 crores, INR 7,000 crores.

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Operator [70]

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The next question is from the line of Shubhranshu Mishra from BOB Capital Markets.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [71]

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I just wanted to check the ticket -- the ticket size of the construction finance has gone up -- has doubled from the first quarter FY '19 and...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [72]

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No, no, sir. Can you repeat your question? I was just maybe in a little lighter mood. I didn't hear you.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [73]

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Sure, sir. So the ticket size of a construction finance has doubled since first quarter '19, but the number of loan accounts have largely remained similar, range bound. So just want to understand how this has happened?

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Unidentified Company Representative, [74]

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I think this was at a group level.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [75]

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These are -- and that was at a group level? Yes, still, last year what happened was, and I will be very candid with you, when people start looking at with periscopes, microscopes and telescopes, then we also started becoming more -- to create this trustworthiness and transparency. So the initial in '19 and all, in the beginning we used to show group-level average ticket size at account level, right? Then people started asking us these fancy questions of top 20 exposures and group exposures and all. So we classed at a group level. And that is how the ATS has gone up. So there is nothing to worry obviously. It is actually the moving [goal post].

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [76]

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Sure, sir. And your yield has gone up substantially on a Y-o-Y basis...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [77]

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Because you know what happened last year that we -- if you have been regular on our earnings call and I have been explaining to you people that it takes wing-to-wing 105 days for a reference rate change to impact at a book level. And we have done 5 of them last financial year. The impact of all 5 has come now. So it has almost gone up by 100 basis points. And this is where I reconfirm this is annuity business and this is not a quarterly business. This is not a manufacturing company, this is not an IT company.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [78]

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Right, sir. And yields are likely to sustain at these levels, sir?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [79]

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Oh, yes. Oh, yes.

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Operator [80]

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The next question is from the line of Kishan Gupta from CD Equisearch.

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Kishan Gupta, CD Equisearch Private Limited, Research Division - Senior Analyst [81]

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To, sir, what sort of -- what sort of corporates are you lending to now?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [82]

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Well, we have our old accounts, and we are honoring those commitments. We are not acquiring any new corporates.

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Kishan Gupta, CD Equisearch Private Limited, Research Division - Senior Analyst [83]

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So sir, is there a cap on a single corporate group exposure?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [84]

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Well, I mean, it is regulated, 15% at an entity level and 25% of NOF at a group level.

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Kishan Gupta, CD Equisearch Private Limited, Research Division - Senior Analyst [85]

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I didn't understand this, sir. Can you please repeat it?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [86]

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Well, that's the exposure. The maximum exposures are regulated. So at an entity level, we can't have an exposure more than 15% of our NOF. And at a group level, we can't have more than 25%.

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Kishan Gupta, CD Equisearch Private Limited, Research Division - Senior Analyst [87]

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Of your NIF? Net...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [88]

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NOF. Net owned fund.

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Kishan Gupta, CD Equisearch Private Limited, Research Division - Senior Analyst [89]

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NOF. Okay. NOF, right. And sir, what is the median ticket size for existing corporate loan book?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [90]

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Well, it is mentioned in the presentation, it's about 150.

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Unidentified Company Representative, [91]

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(inaudible)

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [92]

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No, it's about 150. She's asking median. About 134. But this is all dynamic, please. The loan sanction is absolute but the loan disbursement and the loan repayment is dynamic. It keeps changing.

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Operator [93]

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(Operator Instructions) The next question is from the line of Nischint Chawathe from Kotak Securities.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [94]

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Just a small question. How much did you borrow incrementally during the quarter and from which avenues?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [95]

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We borrowed something like INR 11,550 crores in total.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [96]

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Okay. And how does this break up? This is during the...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [97]

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Well, we did give a break up, and we would -- I would just tell you, I had called out the numbers. We borrowed INR 6,856 crores from bank term loans. Our deposits gave us about INR 2,600 crores. We did securitization of INR 2,300 crores. And the CPs got rolled over. And ECB is outside quarter 1.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [98]

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So ECBs are how much?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [99]

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ECB of $100 million. Not quarter 1, it's quarter 2.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [100]

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Okay. Which you raised now?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [101]

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Which we raised, I think, day before yesterday.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [102]

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Okay. Okay. Sure. And just one, again, micro question. This quarter, you did loan securitization, right? Not assignment?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [103]

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It's a direct assignment.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [104]

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It's a --- okay. So you've not done securitization, it's an assignment.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [105]

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It's a securitization through the direct assignment route. The servicing rights are with us.

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Operator [106]

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The next question is from the line of Pratik Chheda from IIFL.

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Pratik Chheda, IIFL Research - Associate [107]

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So just wanted to understand, within construction finance, what are your outstanding sanctions as of the first quarter?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [108]

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What do you mean?

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Pratik Chheda, IIFL Research - Associate [109]

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The outstanding sanctions, sir, within construction Finance, what is the...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [110]

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What is your -- can you be more objective in your question? I'm not understanding your question.

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Pratik Chheda, IIFL Research - Associate [111]

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Sir, my basic question is that in terms of commitments, what is the amount of...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [112]

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You can be direct and ask what do you think you will disburse during this year? As simple as that. About INR 1,800 to INR 2,000 crores.

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Operator [113]

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The next question is from the line of Viral Shah from Crédit Suisse.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [114]

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I had...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [115]

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Hello? Can you speak a little ascender? I'm not able to hear you, so...

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [116]

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Yes. Sir, I had 3 questions. So one, I just wanted to clarify, so in the last quarter, you had mentioned that you had called out 5 exposures in your construction finance book on which you were potentially seeing some signs of stress. Now in this quarter, you have mentioned 4 exposures, which are outside of the NPA, and 3 exposures under -- which are under NPA. So is this something which is incremental? So last quarter, it was 5 and this quarter, it's 7.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [117]

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No. So last quarter it was 5 plus 3, 8 -- plus 2, so it was 7. Now the equation is 4 plus 3 equal to 7.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [118]

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Okay. Fair enough. So the 2 accounts are already in NPA.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [119]

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Yes. Even on 31st March. That is why that 0.17% NPA figure on corporate book came.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [120]

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Right. I just wanted to clarify that. My next question, sir, I wanted to understand, actually, your -- quarter-on-quarter your Tier 1 actually, in-step merely 100 basis points. Was there...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [121]

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Yes. Yes. That is what is balance sheet management, portfolio management, my dear friend. And that gives you the depth of the management. And obviously, the internal accruals, et cetera.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [122]

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But your proportion of your book in terms of your construction finance and the nonhousing loan...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [123]

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It has come down by 1% when we sold off an LRD, which is the highest risk weight. Then we have internal accruals, we have PHFL, dividend, there are so many things. We also sold off little bit of LAP, about INR 1,000 crores in quarter 1, which has a higher risk weight than a housing loan portfolio. These are the things that keep me busy.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [124]

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Okay. And -- yes. So I wanted to understand that. And the third one was, I was actually looking at the proportion of your disbursement is actually sourced via DSAs. There was a sharp jump this quarter. Why would that be?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [125]

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Very good observation. I'm really impressed. And that jump has gone up by almost 8 percentage points. And the reason that is because we were doing about 10% of our business from our corporate finance team. And that has almost come -- I mean, there's no new acquisition. So -- and the corporate finance, you acquire directly. And hence that corporate finance contribution to in-house channels has been shaved off 100%. And hence, the contribution of our in-house channel has come down and the contribution of the DSA has gone up. So it's actually a re-mix of the channel because new or incremental business of wholesale has stalled for a temporary phase.

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Operator [126]

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The next question is from the line of [Rakesh Jain] from [Jasper Capital].

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Unidentified Analyst, [127]

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Sirji, you got any new lines on the bank during the quarter. And then most of they -- are they private banks or nationalized banks or...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [128]

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They are all -- they are 33 banks. They are private, foreign, public sector, small, big, all sort of banks are there in the fold.

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Unidentified Analyst, [129]

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So are they mostly nationals or private sector? How is it -- mostly...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [130]

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They are private sector, they are public sector, they are foreign banks. All type of scheduled commercial banks, 33 is the number.

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Unidentified Analyst, [131]

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Okay. And are you expecting your cost of funds to increase in future maybe because of this rating -- you touched on some ratings on.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [132]

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Let's see, let's see, let's see. That's our raw material and we are very keen on pricing of our raw material. Because our finished product will -- pricing will depend on the raw material price.

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Operator [133]

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The next question is from the line of Ritika Dua from Elara Capital.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [134]

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Sir, 2 questions, both data keeping. One, you were sharing just on the previous question that -- about how your Tier 1 has increased because of the strategy that the management has taken. So just for my understanding, the sell-down that you have done, both on LRD and LAP that are part of...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [135]

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No. No, no, no. LRD is a sell-down. LAP is a securitized ratio.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [136]

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Okay. Okay. And -- so the number which we have shared of the cumulative sell downs which we have done so far, on the -- which is like some INR 12,400-odd crores.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [137]

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No. That INR 12,000-something crores is securitization. It is excluding sell down.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [138]

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It's excluding sell down? Sure...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [139]

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Because sell down -- one sold down will never reflect in off-balance sheet or on balance sheet. So sell down means with servicing rights. Lock, stock, and barrel. Everything.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [140]

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Sure. Sure. And the second question, if you could just help with the blended cost of funds and blended yields on the various product lines, both on asset and the liability side.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [141]

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Okay, okay, okay. I'll give you. Those figures were with me. Not to worry. So I would say the home loan yield is at about 9.38%. Construction finance yield for residential purposes is 11.73%. Nonhousing loan as a blended is 10.55%. And that's about it, right? And when it comes to the sort of cost of borrowing, our deposits are at -- I mean the blended cost of borrowing for quarter 1 is 8.31%, including our deposit cost.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [142]

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And sir, would it be possible to share the numbers there as well on a liability-wise basis?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [143]

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Well, see the liability, it will not be correct to be sharing and clubbing them under heads because the tenure also matters. So for example, a 1-year bank line will be very differently priced than a 5-year bank line. And supposing, I am taking any ECB and not hedging it, it will be priced very differently than what we have done and hedged it fully. So it would be not correct on my part to give you headers which have broad spectrum of [sublime] and put a cost on that. For example, even CPs, a 45-day CP or an overnighter comes as low as 6%, right? But I can go ahead and borrow CP up to 364 days, but it will come as a CP. But that is not the right way to put a price because they are different maturities. Some are floating, some are fixed. So that will not be correct on my part.

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Operator [144]

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The next question is from the line of Piran Engineer from Motilal Oswal Securities.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [145]

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Congrats on the quarter. Just 1 or 2 questions.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [146]

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Thank you. Yes?

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [147]

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So the account that has slipped, that one account of INR 150 crores, can you just give us some more flavor like which city is it from, what stage of completion, when did you all disburse the loan? And just something more about the project that gives us some sort of understanding.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [148]

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Okay. It's a CTL, a corporate term loan. And this is in the NCR region in Gurgaon. And this is 27 acres of prime land. A few people are interested. We will like to sell it off to you. Fully converted, all licensed, EDC, IDC, all paid, non-encumber. And we are the sole lenders. And it's a beautiful plot of land of 27 acres.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [149]

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Okay. Okay. And secondly, the LRD thing that you all sold down, so what I understand is that it was refinanced by another lender.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [150]

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It was not. So I think -- you see, there's a little bit of a difference. And that's a hairline. When we take balance transfer it's an ugly word as if you are a loser. We go out and we scout for a harbor of a marquee asset. And we are always partnering with our borrowing entity. Because the borrowing entity should also have the comfort with this new lender. Because there is a -- why we can't do it? Because a contract assigns that right to us.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [151]

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No, no, why would you want to let go of a marquee asset when...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [152]

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One? I will tell you one. One is that in a volatile interest rate scenario, LRD is one product which has got limited elasticity on the rate of interest movement. Secondly, LRD has got -- because it is basically on commercial property has got the highest risk weightage, right? So today, if I as a CEO of the company, I am managing the balance sheet, I have to manage 2, 3 things. One is my risk capital. The second one is obviously my spread. And the third thing and more important is the quality of my portfolio. Since I am finding that for NBFCs, HFCs, the volatility is more than a bank. And I'm marginally positive on my capital, and my teams are doing fantastically well to get these new assets. I will have to give this elbow room to my team to get me more accounts. And I will then down-sell it.

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [153]

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Okay. Okay, understood. Sir, just back to the first thing, when you said it has a 2.5x security cover, that account, that's an NPL, does that mean it's net worth is 2.5x your INR 150 crores...

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [154]

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Not net worth value. The stressed value or the realizable...

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Piran Engineer, Motilal Oswal Securities Limited, Research Division - Research Analyst [155]

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Of that land? Of that 27 acres?

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [156]

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Yes. Yes.

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Operator [157]

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The next question is from the line of Mayank Agarwal from Anand Rathi.

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Mayank Agarwal, Anand Rathi Financial Services Limited, Research Division - Research Associate [158]

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Sir, out of your individual loan book, how much would be under the subvention scheme? And what kind of tax would be there in -- after the NHB circular.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [159]

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So one question at a time. The total subvention book is about INR 600 crores which is less than 1% of the total portfolio. Now what was your other question?

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Mayank Agarwal, Anand Rathi Financial Services Limited, Research Division - Research Associate [160]

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Sir, what kind of impact is there -- as per the circular -- recent NHB circular.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [161]

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Well, we are still reviewing. And I don't think there will be much adverse impact, because we have not been a gung-ho lender of the subvention of buyback schemes.

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Operator [162]

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I'm sorry, Mayank. Your voice is breaking up. Can you please check your phone line?

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Mayank Agarwal, Anand Rathi Financial Services Limited, Research Division - Research Associate [163]

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Yes. Thanks. That's all from my side.

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Operator [164]

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All right.

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Sanjaya Gupta, PNB Housing Finance Limited - MD & Director [165]

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Thank you. Goodnight. Thanks a lot folks for joining us.

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Operator [166]

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Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Deepika Gupta Padhi for closing comments.

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Deepika Gupta Padhi, PNB Housing Finance Limited - Head of IR [167]

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Thank you, everyone, for joining us on the call. If you have questions unanswered, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website, that is www.pnbhousing.com. Thank you.