Bajaj Housing Finance Ltd — Q4 FY26

Bajaj Housing Finance Ltd Q4 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=aV4JPBMMyJE Published: 2 weeks ago

0:02 2 seconds Ladies and gentlemen, good day and welcome to Baj Housing Finance Limited Q4 FI26 earnings conference call hosted by IFL Capital Services Limited. 0:14 14 seconds As a reminder, all participant lines will be in the listen only mode and there'll be an opportunity for you to ask questions after the presentation 0:22 22 seconds concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. 0:32 32 seconds Please note that this conference is being recorded. And now hand the conference over to Mr. 0:38 38 seconds Viral Sha from Capital Services. Thank you and over to you Mr. Sha. Thank you NRA. Good evening everyone. 0:47 47 seconds This is Viral Sha from Capital. Welcome to the 4Q FI26 earnings conference call of Bajage Housing Finance Limited. On 0:55 55 seconds behalf of IFL Capital, I would like to thank the management of Bajage Housing Finance for giving us this opportunity to host the call. From the management 1:04 1 minute, 4 seconds team today, we have Mr. Atul Jane, managing director, Mr. Goro Kalani uh chief financial officer and other senior 1:11 1 minute, 11 seconds members of the management team. We will have opening comments from the management team post which we will open the floor for Q&A. With that I would 1:19 1 minute, 19 seconds like to transfer the call to Atul for his opening remarks. Over to you Atul. 1:24 1 minute, 24 seconds Uh thank you Vad and the team for hosting this call. A very good evening to all the participants on the call. Uh 1:31 1 minute, 31 seconds I have with me Gorab our CFO Jinder Vipin and Pawan uh SBU heads for prime near prime and commercial along with the 1:39 1 minute, 39 seconds other senior team members. Now I'll be referring in during my conversation on the invested tech which we have uploaded on our website and on both the stock 1:47 1 minute, 47 seconds exchanges. I hope you had a chance to go through the same. I'll take approximately 10 minutes to quickly cover important panels on the deck with 1:54 1 minute, 54 seconds focus on key updates for the quarter and there thereafter we'll open the forum for Q&A. Uh moving to first panel number three 2:03 2 minutes, 3 seconds overall a good quarter across AUM asset quality and operating efficiency where AUM grew 23% crossing one lakh 40,000 cr 2:10 2 minutes, 10 seconds of AUM. During the quarter PBT grew 20% while PAT was up by 14% due to onetime tax benefit of 34 cr in Q4 FI25 uh 2:19 2 minutes, 19 seconds excluding which normalized patch growth also would have been 20% for Q4 FI26 opx to NTI has improved to 19.2% in the 2:28 2 minutes, 28 seconds last quarter compared to 21.8% 8% in last quarter of FI25. While assess quality has remained stable with GMPP at 2:36 2 minutes, 36 seconds 27 beeps which is stable sequentially while yearon year there was a improvement from 29 beeps to 27 beeps. 2:43 2 minutes, 43 seconds Net NPS remains at 11 beeps and annualized sales cost at 19 beeps during the quarter. Geographical network of the company now spans across 226 branches 2:52 2 minutes, 52 seconds and 182 locations. The company maintains comfortable capital adequacy position with car at 22.46% and PBC at 60.88%. 8% are both above regulatory threshold. 3:03 3 minutes, 3 seconds I'll move to the next panel which are having quarterly financial indicators. 3:09 3 minutes, 9 seconds I have already covered overall EU growth. Uh EUM addition during the quarter was 7,294 cr as against 6374 3:18 3 minutes, 18 seconds 70 crores in Q4 FI25. At a product level for home loans, AUM grew 18% 24% in lab, 3:26 3 minutes, 26 seconds 44% in lease center discounting and 13% in DF. DF AUM growth was subdued as we continue to see higher cash growth from 3:33 3 minutes, 33 seconds the funded projects. Portfolio composition remained well diversified with home loan being dominant product with 54.1% mix, LAP at 10.8, LRD at 22.4 and DF at 11.5. 3:45 3 minutes, 45 seconds Disbburments on a Y basis grew 23% from 14,250 crores to 17,56 cr on a 3:53 3 minutes, 53 seconds sequential basis dispersement growth for this quarter was 6% which improved against 4% growth in Q3. So Q3 to Q2 sequential growth in disbust was 4% 4:02 4 minutes, 2 seconds while Q3 to Q4 it was 6%. Last year in the Q4 we had seen higher sequential growth versus Q3 at 13% it was driven by 4:11 4 minutes, 11 seconds uh two reach and large commercial transactions. I move to the next panel. 4:17 4 minutes, 17 seconds Year oneononear cost of funds are moderated by 60 bips to 7.3% against 7.9% in Q4 FI25. Sequential cost reduced 4:25 4 minutes, 25 seconds by four beeps on account of rate transmission on existing borrowing while there was no repo post number but on account of a few rate transmissions on 4:32 4 minutes, 32 seconds the existing borrowing. It partially offset the impact of incremental money money market borrowing at a higher rate because last quarter the money market 4:40 4 minutes, 40 seconds borrowing was at a elevated rate from the Q3. Boring mix remained well diversified with money market composition at 49% bank borrowings at 41% and NHB refinance at 10%. 4:52 4 minutes, 52 seconds Gross spreads overall have moderated by 10 to 1.7% in Q4 FI26 uh comparing to 1.8% in Q3 FI26 on a sequential basis. 5:03 5 minutes, 3 seconds This was pertaining to portfolio yield reduction by 14 beeps from lower acquisition pricing as well as portfolio attrition of a higher rate book 5:11 5 minutes, 11 seconds partially offset by four beeps due to the benefited cost of funds thus resulting into spread compression of 10. 5:18 5 minutes, 18 seconds Net interest margin for the quarter it dropped by 12 beeps sequentially from 4% in Q3 FI 20 uh 6 to 3.8% 8% in Q4 FA26 5:27 5 minutes, 27 seconds largely due to moderation in net interest income as I explained above opex to NTA which we have covered in the previous panel improved to 19.2% 2% in 5:36 5 minutes, 36 seconds Q4 FIA 26. I'll move to panel six. Asset quality continued to remain healthy with G&P in line with Q3 FI26 at 27 beeps and NNP also stable sequential at 11 beeps. 5:48 5 minutes, 48 seconds Annualized trade cost for the quarter was 19 beeps as compared to 11 beeps in Q4 FI25. This is only on account of on a Y basis we have strengthened our provisioning coverage on stage 2 assets. 5:59 5 minutes, 59 seconds If we exclude the strengthening of provision which you can see in the provisioning coverage that stage three we have improved our coverage by 6%. If you exclude that then the overall credit 6:07 6 minutes, 7 seconds cost would have been 10 beeps against 11 beeps of last year. By and large stable profit after tax as called up grew 14% 6:14 6 minutes, 14 seconds from 587 crores to 669 cr while excluding one time impact it grew 20%. 6:20 6 minutes, 20 seconds Annualized ROA was 2.3% in Q4 FI26 compared to 2.4% in Q4 FI25 while ROE 6:27 6 minutes, 27 seconds was stable at 12.2 2% against 12.1% in Q4 F25. As of March 26, net worth of the 6:34 6 minutes, 34 seconds company stood at 22,527 cr. I'll move to panel number seven. Uh this is a new panel in the deck to share an update on actual performance as 6:43 6 minutes, 43 seconds against the FI26 as we had shared in July 25. All metrics were in line or better against the initial assessment as 6:50 6 minutes, 50 seconds the company performed well across AUM growth, opex, asset quality and return metrics. EM growth was at a higher end of assessment range at 23% for the year 6:58 6 minutes, 58 seconds amongst competitive intensity and also increased portfolio attrition. 7:03 7 minutes, 3 seconds Company managed n moderation to 7 beeps as against our initial assessment of 15 to 20 beeps on account of higher fee income and assignment income than planned. 7:11 7 minutes, 11 seconds Opex to NTA improved to 19.7% against 20 21% of initial assessment. Asset quality also improved with GNPA remaining at 27 7:19 7 minutes, 19 seconds bips and NNPA at 11 BIPS that is 35 to 40 bs and 15 to 20 bips respectively what we had uh estimated ROA and RO were 7:28 7 minutes, 28 seconds also ahead of the initial assessment for the year when we published the assessment in July 25. I'll move to panel 19. 7:37 7 minutes, 37 seconds Uh I have talked about majority of the quarterly metric on the previous panel. 7:41 7 minutes, 41 seconds In terms of other metrics, net interest income grew 15% in Q4 FA26 while net total income grew 20% on Y 7:49 7 minutes, 49 seconds basis supported by higher P and assignment income. Coming to fullear performance, net interest income grew 25% to 3,752 crores in FI26 and net 7:58 7 minutes, 58 seconds total increase income increased to 4391 cr a growth of 23% over the previous year. Opex grew 16% to 867 cr. 8:08 8 minutes, 8 seconds Pre-provisioning operating profit was up 25%. Overall PBT grew 20% and PAD by 18% excluding onetime impact of tax benefit. 8:17 8 minutes, 17 seconds Last year PAD was also up 20%. Opex 2A improved from 20.9% to 19.7. 8:23 8 minutes, 23 seconds This is a full year against a quarter number. What I was saying improvement of 120 beeps on a year-on-year basis. 8:30 8 minutes, 30 seconds Credit cost for the full year was 17 beeps against seven beeps in FI25. Last year we had an overlay release of 60 crores in FI25. If we exclude then the 8:39 8 minutes, 39 seconds credit cost for FI25 would have been 13 BS and if we exclude the strengthening of provision what we have done in stage two would have been by and large stable in the credit cost for the current year 8:48 8 minutes, 48 seconds versus the last year excluding overlay release. ROA as called out stood at 2.3% 8:54 8 minutes, 54 seconds against 2.4% and ROE at 12.1% uh in FI26 compared to 13.4% in FI25. FI25 was a 9:03 9 minutes, 3 seconds partial year for the capital birth capital raise happened during the year middle year middle of the year that is where the the amount of capital on an 9:11 9 minutes, 11 seconds average deployment was lower. Moving to panel 21 on the portfolio yield it has contracted 9:19 9 minutes, 19 seconds by 14 bits on sequential basis as I called out earlier uh cost reduced by four beeps resulting into moderation of 10 bits in the spread other matrix we 9:27 9 minutes, 27 seconds have already covered on the previous panel. I'll move to next panel which is 22 panel. Uh the company continued to have a diversified borrowing mix with focus on longer the funding enabled by 9:36 9 minutes, 36 seconds highest possible credit rating of AAA table and relationship with 18 banks. 9:40 9 minutes, 40 seconds Sequential basis bank borrowing mix has improved by 1.4% or 140 bits CP by 110 bits and NHB refinance by 120 bits which 9:50 9 minutes, 50 seconds was a reduction of in NCD mix of 370 bits. So 140 bits of a bank increase CP of 110 and NB refinance of 120 bits 9:58 9 minutes, 58 seconds increase offsetting reduction in NCD mix. Moving to panel 25 portfolio mix remains well diversified 10:05 10 minutes, 5 seconds across products with sequential increment in LD by 50 bips and lab by 10 bips offsetting reduction in home rooms by 50 bips and construction funnels by 10 bits. I'm on panel 27. 10:17 10 minutes, 17 seconds Now this new panel we had added last time to provide an update on Sambab housing uh which covers our constant target metric. Dedicated front-end teams 10:25 10 minutes, 25 seconds are deployed for both nearime and affordable businesses with differentiated underwriting models. We have centralized hub based model for near while having a regional for 10:32 10 minutes, 32 seconds affordable. Summer loans now are acquiring range of 400 to 425 cr of average monthly disbburments during the 10:39 10 minutes, 39 seconds quarter the quarter gone by and business is well on track to achieve 600 cr plus of a monthly disbbursement over next 12 10:46 10 minutes, 46 seconds months as we called out uh in the last update. Business is operational across 73 locations at 72 tier four locations. 10:54 10 minutes, 54 seconds This business has a ATS of average size of 28 lakhs with salaried customer segment mix at 68% and customer having civil score of greater than 750 at 11:03 11 minutes, 3 seconds around 65% in quarter 4 FA26. I'll move to panel 31. 11:10 11 minutes, 10 seconds Uh stage one assets increased by one beeps on a sequential basis from 99.36 to 99.37. Stage two improved by one beep 11:17 11 minutes, 17 seconds sequential to 36 bips. GNPA in line uh with 27 bips and NP also flatter 11 bits. provisioning coverage ratio 11:24 11 minutes, 24 seconds improved slightly to close to 60% in as of Q4 FI 26 moving around 1.2% 2% from 11:31 11 minutes, 31 seconds what it was on Q3 FI uh at Q just a quarter before I'll come to the last which I'll cover the final panel number 11:39 11 minutes, 39 seconds 32 healthy provisioning coverage across products which is about 50% in terms of sequential movement in product level 11:46 11 minutes, 46 seconds GNPA home loans in step by one beeps to 35 beeps lab G&PA reduced by 6 beeps to 46 beeps mill G&PA in LD and flat G&P 11:55 11 minutes, 55 seconds for three beeps in construction funnel overall NNP was flat at 11 beeps with improvement across products. That's all from my end on key updates for the 12:03 12 minutes, 3 seconds quarter. Myself and management team uh are happy to take uh address questions. Over to you V. 12:11 12 minutes, 11 seconds Thank you very much. We'll now begin with the question and answer session. 12:15 12 minutes, 15 seconds Anyone who wishes to ask a question may press RN1 on the touchstone telephone. 12:21 12 minutes, 21 seconds If you wish to remove yourself from the question queue, you may press R2. 12:26 12 minutes, 26 seconds Participants are requested to use handsets while asking a question. 12:31 12 minutes, 31 seconds Ladies and gentlemen, we will wait for a moment while the question Q assembles participants. 12:40 12 minutes, 40 seconds You may press R and one to ask a question. 12:52 12 minutes, 52 seconds The first question is from the line of Shabbranch Mishra from Philip Capital. Please go ahead. 12:58 12 minutes, 58 seconds Uh hi Apple hi gorav uh so quickly what is the uh home loans or the percentage 13:05 13 minutes, 5 seconds of alien 54% that's because I think last quarter we were at around 50.7 13:11 13 minutes, 11 seconds second is uh uh we've been growing the nonhome loan part a little faster my sense is that we still have a pressure 13:21 13 minutes, 21 seconds on our book so how do we uh look at the prepayments what are the levels of prepayments 13:28 13 minutes, 28 seconds And uh how uh of that fe payments what would be uh part payments foreclosures and what is the actual BT out from the 13:37 13 minutes, 37 seconds customers and who is this BT out going to who are the major competitors where it is located. 13:45 13 minutes, 45 seconds Uh thanks Shranchu. Uh so the question first question you on the IHL I think IHL we enter 50.45 13:53 13 minutes, 53 seconds 50.45 50.45 because that's not homeown there's a Il definition. So uh which is a regulatory definition where we are required to be 50% of the total assets 14:02 14 minutes, 2 seconds which includes the investments and the cash flow for what we hold. So that number is 50.45% which is a regulatory number which is different from the home loan composition of the balance sheet. 14:11 14 minutes, 11 seconds Your second question that non-h home loan had been growing faster prepayments in HL quarter 4 had been the 14:19 14 minutes, 19 seconds same trend as it had been on the quarter three. So it has not come down and the BT out rate also remains in the same 14:25 14 minutes, 25 seconds range of what we had uh in ter that is the attrition is 20 BT out will be 14 10% uh BT out would be in the range of 12 10%. 14:35 14 minutes, 35 seconds 10% BT out range will be 10%. So out of a totalition of a 20% BT out will be 10% rest would be on account of a sellown sale of property by the customer or uh 14:44 14 minutes, 44 seconds the part payment or the natural retrition because on the lower interest rates customers have increased their EMI. Uh the reason for non- home loan 14:52 14 minutes, 52 seconds quantity because at a industry level as well if you look at basis the data which we got last published on IHL growth in 14:59 14 minutes, 59 seconds the industry is close to 9.5%. uh so at a 9.5% growth uh and if our ambition is to grow much faster that which which we 15:08 15 minutes, 8 seconds have put out at 21 to 23% naturally the opportunity in the nonl will be better or higher which we can manage through 15:15 15 minutes, 15 seconds still the PBC mix by ability to assign out the nonl portion which is which has which 15:23 15 minutes, 23 seconds which is which is precisely the strategy what we have followed during the last one and a half two years 15:30 15 minutes, 30 seconds who is uh competitors who are getting uh BT out. 15:35 15 minutes, 35 seconds So this is largely the banks. Public sector banks are the largest company followed by SDFC or IC. So largest is public sector. 15:43 15 minutes, 43 seconds Largest is public sector bank. I don't have the mix right now but largest is we significant I I think the largest part or the launch share is public sector banks. 15:54 15 minutes, 54 seconds Understood. Just one followup question at the Il part. we uh it has been contracting despite doing the assign 16:02 16 minutes, 2 seconds assignment of the nonls. So uh one are we likely to get some kind of a regulatory observation because it's been 16:10 16 minutes, 10 seconds contracting that's just a speculatory question I'm asking. Second is that uh uh are we uh can we also do portfolio 16:18 16 minutes, 18 seconds bios of uh individual home loans which flop surplus this number as a percentage of our answer. So uh the question is uh 16:28 16 minutes, 28 seconds s pranchu vs because see regulations is 50 and 60 as long as you are above 50 and 60 there is no ticker from a 16:35 16 minutes, 35 seconds regulator which can be there on the number what should be there because that's a regulation so we remain there has not been any single month because this regulatory report has to be 16:43 16 minutes, 43 seconds submitted at every month not at a quarter or a year we had been submitting this report at every end every every month end and there's no single month 16:51 16 minutes, 51 seconds till now in our history where we have not maintained the regulatory requirement and yes that portfolio acquisition can be pursued co- lending 16:59 16 minutes, 59 seconds can be pursued. We have looked at in the current year we will look at a co- lending to uh do uh to add on to that 17:06 17 minutes, 6 seconds but that co- lending or pool purchase cannot address a very large part because see our overall acquisitions are very high. Our acquisition growth in the home 17:15 17 minutes, 15 seconds loan also had been very high. Our normal organic let us say home loan acquisition versus what we can acquire through a pool lending or a pool purchase. it can 17:23 17 minutes, 23 seconds add on to a certain part but it can't substitute it can't it can't make a HL growth percentage very different from uh 17:31 17 minutes, 31 seconds what it is through the organic so we'll continue to focus on organic where we are growing putting our weight on the prime housing which is the widening and 17:39 17 minutes, 39 seconds the deepening of funnel as we called out last time and through samb home loan where we continue to be in a investment mode and we are looking significantly to 17:48 17 minutes, 48 seconds keep on expanding in our samb loans as well as in the prime housing so we'll focus largely on organic but inorganic in terms of a portfolio we are looking 17:55 17 minutes, 55 seconds at it but that doesn't that won't move the needle that's what I'm saying understood thank you so much and best of 18:03 18 minutes, 3 seconds luck for MC quarters thank you thank you thank you very much ladies and gentlemen you may press star and one to ask the 18:12 18 minutes, 12 seconds question next question is from the man of God of Kandelwal from JP Morgan please go ahead 18:21 18 minutes, 21 seconds hi hi good evening Thanks for taking my questions. I've got a couple of those. 18:26 18 minutes, 26 seconds First on the margin decline by 12 basis points. A lot of this came from assets decline. Can we know which product 18:33 18 minutes, 33 seconds segments drove this? Was it largely home loan or are we also seeing some sort of decline in the corporate uh on the 18:40 18 minutes, 40 seconds nonhome corporate side and uh how much was the what was the lowest sourcing road uh sourcing rate in home loans uh 18:49 18 minutes, 49 seconds in the quarter? That's my first question and I've got one more after this. 18:55 18 minutes, 55 seconds Yeah. Uh hi Gor. So two questions you have asked. So margin decline of a 12 beeps is largely by lower acquisition 19:02 19 minutes, 2 seconds price and also 15 beeps of a pass through what we had done in our PL in December. So uh the full impact of that 19:10 19 minutes, 10 seconds 15 bits of a pass through what happened on in terms of uh in December came in the current also 25 bits on the repo side. 19:19 19 minutes, 19 seconds Yeah. and 25 bits on the repo side which repo cut was in November because there is a 15,000 to 17,000 of a portfolio which is repo link that pass through had happened in December because the 19:27 19 minutes, 27 seconds November policy cut happened first December then the PLR cut of 15 beeps had happened in mid of December which have passed through on the current year current quarter the full impact on the 19:36 19 minutes, 36 seconds margin has come now the home loan versus non non-h home loan rate differential in terms of yield yes quarter four in home 19:44 19 minutes, 44 seconds loan the acquisition front the yields have compressed because of a competitive intensity. Q4 is normally a high 19:52 19 minutes, 52 seconds competitive intensity uh market and the yields the acquisition prices come down to a certain extent but it is also 20:01 20 minutes, 1 second resulting from a change of a mix. You look at see the largest mix or the highest margin product in our 20:08 20 minutes, 8 seconds balance sheet is uh construction sensor developer finance that has grown 13%. 20:12 20 minutes, 12 seconds versus one of the least versus home loan which is lower margin or a lease rental discount which is a lower margin has grown faster. So the change of a mix it 20:21 20 minutes, 21 seconds is not an individual product but a change of a mix also which plays a bit of a role in terms of a margin uh movement. The lowest sourcing is in line 20:29 20 minutes, 29 seconds with whatever public sector bank lowest sourcing will happen. I'll not have the exact number but it is in the prime housing we exactly compete with all the 20:36 20 minutes, 36 seconds banks including SB SDFC up front. So it would be absolutely in line with whatever the banks are happening. 20:44 20 minutes, 44 seconds Got it. And and given what we know right now, is it fair to assume that at least of first quarter the yields should 20:51 20 minutes, 51 seconds should broadly remain stable if not fall down? 20:56 20 minutes, 56 seconds So yields in quarter one uh quarter uh there would be slight compression we'll see there also while cost of fund 21:04 21 minutes, 4 seconds side also we'll see some marginal benefit of uh 3 to five basis points but uh on the yield side we we may see 21:11 21 minutes, 11 seconds slightly higher impact see because the current acquisition pricing in month of April we have not se seen the banks moving the needle on there the current 21:20 21 minutes, 20 seconds acquisition pricing remains in line more or less in line with what was quarter 4 A slight uptick in small small compression may or may not be there. 21:30 21 minutes, 30 seconds Small comp it would be by and large sideways. That's what I can say. 21:34 21 minutes, 34 seconds Got it. Okay. And my and my other question is slightly on the medium. In fact, so in the interest of transparency since you asked on a quarter one uh 21:42 21 minutes, 42 seconds through year through the year we are likely to see some compression because largely the new acquisition as the old acquisition keeps on attracting. 21:50 21 minutes, 50 seconds Normally interest rate reduction cycle impact is not only in the current year but in the next year as well because the book which has get accumulated during 21:58 21 minutes, 58 seconds the last year is a lower margin book and a lower priced book and the book which is going out is a higher price book. So through the year we will see some 22:06 22 minutes, 6 seconds contraction in the margin which will get partially offset by opex efficiency and partially offset by lower loan losses because last year we have strengthened 22:13 22 minutes, 13 seconds our quarter uh our provisioning coverage both on stage two and stage three normally otherwise the 17 bits would have been a 101 bits. So some benefit 22:22 22 minutes, 22 seconds you will get from there. Some benefit we'll get from better opics efficiency which should to a large extent offset the impact on the uh yield compression. 22:33 22 minutes, 33 seconds For the year it will happen. Quarter one can be sideways from quarter 4 but for the year as the portfolio keeps on going up uh new portfolio which is at a lower 22:40 22 minutes, 40 seconds rate keeps on going up. There will be some impact. 22:44 22 minutes, 44 seconds Boris. Thanks. This is very careful and this brings me to my next question because we ended the year at 2.3 ROA. 22:51 22 minutes, 51 seconds Your medium-term guidance is 2 to 2.2. 22:54 22 minutes, 54 seconds So in that case uh given what you're saying some limb compression offset by cost efficiencies plus uh hopefully 23:01 23 minutes, 1 second better credit cost uh plus leverage should also increase slightly in FI27. 23:08 23 minutes, 8 seconds In that case, FI27 could be another year when you are above the medium-term ROA guidance. Is that a fair conclusion? We 23:16 23 minutes, 16 seconds should be towards the upper end of the medium guidance may not beat that leverage doesn't have an impact on the RO. In fact, it compresses 23:24 23 minutes, 24 seconds as you but roe it will improve to a certain extent but we should be in the medium-term range with a bias towards the hitting the upper end of the medium 23:32 23 minutes, 32 seconds range in the ROA which is our computation consider but of course I must call out the current times are very volatile uh we are so that's where we 23:42 23 minutes, 42 seconds will come with the we last year also gave our full year assessment uh in the with along with the quarter one call this year also we'll give a full assessment for the year in along with 23:50 23 minutes, 50 seconds the quarter one call but I'm answering broadly because I thought interest of transparency since you asked for Q1 and I said the Q1 is largely going to be stable. I did not wanted it to lead to 23:58 23 minutes, 58 seconds impression saying that we are saying go forward also stable because we estimate in full year it will have a some impact. 24:05 24 minutes, 5 seconds Uh so that's where I just elaborated on the question. 24:09 24 minutes, 9 seconds So so effectively then some decline on margin is what will take us to closer to the 2.2 ROA mark from the 2.3 RA mark. 24:18 24 minutes, 18 seconds Yeah. So 10 bits of a kind of a differential in ROA is likely to happen in case of a but that see there are many 24:26 24 minutes, 26 seconds ifs and but that's why I said that quarter one we will do if there is a policy rate change from the regulator we generally will not have an impact 24:33 24 minutes, 33 seconds because then the ability to pass on will be there. We are assuming a scenario where the money market rates are higher but the policy rates are not moved up. 24:41 24 minutes, 41 seconds So our ability to pass through is not there. Now if the ability to pass through is there which is in case of a policy rate change scenario uh then that scenario will not apply. That's where I 24:49 24 minutes, 49 seconds said Goro we'll wait for quarter one because there are too many balls in the air as of now. Uh so we'll wait for quarter one. 24:57 24 minutes, 57 seconds Absolutely. Yeah. Yeah. Absolutely. I understand. Sorry the final housekeeping question. 25:01 25 minutes, 1 second What is the duration of your money market uh borrowing? 25:06 25 minutes, 6 seconds We generally borrow between 3 years to 5 years. Generally borrow three to five year with some part of 10 year but last year I think generally it was three year and a five year. We generally borrow three year and five year. 25:16 25 minutes, 16 seconds This is just the money market. This is NCDS. MCDs. 25:19 25 minutes, 19 seconds Yeah. No exactly. So I wanted to know the money market duration. How short is it? 25:24 25 minutes, 24 seconds No the CP is hardly 2 3% of the CP is how much of the book on 5% of the book that's a 3 month to one year. That on average would be around five six months. 25:34 25 minutes, 34 seconds Okay. Got it. Okay. Thanks for that. 25:38 25 minutes, 38 seconds Thank you participants. You may press star and one to ask a question. 25:44 25 minutes, 44 seconds Next question is from the line of Ra from Ambit Capital. Please go ahead. 25:50 25 minutes, 50 seconds Hi uh good evening and thanks for the opportunity. I have a few questions. Uh one uh can you give me the segment on 25:57 25 minutes, 57 seconds book is for the full year F26. So if you can divide this uh uh you know between home loan flat developer finance and LRD 26:06 26 minutes, 6 seconds that'll be very helpful you will have yeah so broadly at a portfolio level uh 26:13 26 minutes, 13 seconds rav home loans would be around 850 860 corridor uh lab would be around 150 26:20 26 minutes, 20 seconds basis points above that uh LRD around 798% corridor and uh developer finance would be 11 and a half 1175 forever. 26:32 26 minutes, 32 seconds Understood. Uh and uh can you help me understand at what rate are you borrowing uh from the MCD market? I 26:39 26 minutes, 39 seconds think the last issue uh that you would have done in January was price of 7.1%. 26:45 26 minutes, 45 seconds What would be the incremental rate on MCDs if you were to borrow today? So incremental rate works in two ways. 26:53 26 minutes, 53 seconds So like let us say in December, November, January we would have been borrowing only six and not covering it through a OS. Now in last month whatever 27:00 27 minutes we have borrowed a three-ear NCD at the coupon rate is 7.5 7.6. However you match it with OS 27:09 27 minutes, 9 seconds because now then you convert fixed to floater. So the rate is much finer because there's OS opportunity. So in the current scenario where the fixed 27:17 27 minutes, 17 seconds pricing is higher because of volatility in the market, we largely take a fixed money and then convert through the OS to a floater which is completely 27:25 27 minutes, 25 seconds competitive completely competitive to the bank rate. 27:31 27 minutes, 31 seconds Understood. So does that effectively uh result in a lower overall cost of fund when you much lower much lower on but it book gets converted to floating. So it's not 27:39 27 minutes, 39 seconds a fixed money but you get it converted to a floating near to repo. 27:44 27 minutes, 44 seconds Uh sure. it it gets converted to in a floater sub 7%. 27:51 27 minutes, 51 seconds And then I think for this quarter your cost of fund is somewhere around 6.99 or 7% I think that's what I saw. I think 27:59 27 minutes, 59 seconds you mentioned that you expect it to go down further. Now how would that happen that your cost of fund will decline further? It will be marginally sideways 28:08 28 minutes, 8 seconds like we're saying sideways two three bits of a reduction should come because there is some reset of the boring like there is a NHB rebing and also the 28:15 28 minutes, 15 seconds maturity of a older higher cost NCDS in the first quarter which even in the new rates when it gets substituted there is 28:22 28 minutes, 22 seconds a some uh release which comes it to partially it will get offset from a higher cost of new borrowing in the quarter one which we are seeing in a 28:31 28 minutes, 31 seconds current market there but still at a overall level we should see a minor reduction sideways but a minor reduction towards a minor reduction in the cost spend in the quarter one from quarter 4. 28:42 28 minutes, 42 seconds Understood. And just last question the incremental yield on the book is how much for you right now? On book I think is 8.5 8.6 incremental is how much? 28:51 28 minutes, 51 seconds Incremental average would be plus 8 plus 810 85 because you're saying average because this is inclusive of near prime 29:00 29 minutes affordable prime everything put together. Uh so incremental will be 8258 29:09 29 minutes, 9 seconds and that's why you're saying that there will be spread compression in F527 also from 1.7. 29:17 29 minutes, 17 seconds Yeah spread compression but uh result not resulting equally to ROE completion because partial offsetting through the loan loss and partial there but still 29:25 29 minutes, 25 seconds ROE compression of around 10 weeks. uh but that will depend like I called out in earlier call also depend upon how does the policy rate environment 29:32 29 minutes, 32 seconds happens. We are assuming no policy uh uh throughput which that means that we don't have an ability to pass on the uh 29:41 29 minutes, 41 seconds impact of cost of fun to the market. If you have an ability to pass through then the impact can be positive. 29:47 29 minutes, 47 seconds Understood. And and uh say for example there is a referate height. Do you think that considering the comparative 29:55 29 minutes, 55 seconds intensity out there and the moderation in real estate sales uh the industry will generally be in a position to hike 30:04 30 minutes, 4 seconds the home loan rates or do you think that uh the competition is so high that even though there may be a refer rate hike 30:11 30 minutes, 11 seconds the industry will still not want to pass on the the hike in case of a policy rate hike one in any 30:19 30 minutes, 19 seconds case we are assuming that we what we normally see from month of May onward in the year generally the rates the ease tend to harden up from what it are there 30:27 30 minutes, 27 seconds in the February market quarter that's a normal pattern in the uh industry. Uh leave that aside as well but if there is 30:35 30 minutes, 35 seconds a policy rate hike it has never happened that there is no pass through has happened the pass through may not be full pass through maybe 10 15 beeps instead of a 25 beeps but it is not a 30:44 30 minutes, 44 seconds scenario where uh banks or anyone will not pass through when there's a policy rate. There's a transmission of a uh transmission of a hike in the cost which 30:53 30 minutes, 53 seconds gets reflected in the portfolio. Not exactly apple to apple not 25 to 25 bits but let us say 15 20 bits which will be 31:00 31 minutes there but portfolio will completely get reprised. So a large portion on the repo side if the repo repo rates increase then it will 31:08 31 minutes, 8 seconds and in case there is a repo hike uh the breads uh would not compress is would that be the right understanding? 31:17 31 minutes, 17 seconds Yes. Yes. Yes. Because the ability to pass through the cost of fund because today we are assuming whatever the incremental cost of fund in the money markets is there. Because of in absence 31:24 31 minutes, 24 seconds of a repor rate hike we will not have an ability to pass it through. That means we are factoring the scenario that we are absorbing that impact. But in case 31:32 31 minutes, 32 seconds of a policy rate hike then that ability to pass on is there. So there will not be uh a compression. 31:40 31 minutes, 40 seconds Understood. That's all from my side and thank you for for the thanks. 31:46 31 minutes, 46 seconds Thank you participants. You may press star and one to ask a question. 31:54 31 minutes, 54 seconds Next question is from Lanov Sha from Capital. Please go ahead. 32:00 32 minutes Yeah. Hi Atul. Uh I have three questions. One is uh first of all uh if we assume let's say there is no uh repor 32:08 32 minutes, 8 seconds rate hike uh do you first of all see any need and requirement for say reducing the PLR rates further given what is 32:16 32 minutes, 16 seconds currently there in the market competition elevated GC yield etc. So viral uh if there is no repor rate hike 32:24 32 minutes, 24 seconds I don't think this I think the scenario of a cut of rate is over uh because if we are looking at to cost of funds to 32:32 32 minutes, 32 seconds marginally in the marginal cost of fund is already up in quarter four and it is given the after all also it's looking up and on the even on the portfolio 32:41 32 minutes, 41 seconds repricing what we are looking at is not sideways what we called out and from a quarter two it will start to inch up in case there is no money market remains as 32:49 32 minutes, 49 seconds it is. So the there is no pass through further is what can be invested in the current scenario in case of a uh until 32:56 32 minutes, 56 seconds unless the market because in these days I don't know whether you should be predicting markets or not so if the 33:03 33 minutes, 3 seconds markets completely turn on their head and there are uh so we don't know but on the on the normal scenario uh there is 33:11 33 minutes, 11 seconds no in case of a there I don't think there is any cut scenario further in the PLR uh which is envisaged as of 33:20 33 minutes, 20 seconds Got it. And uh on the OS piece that you mentioned uh the one that you are using to say convert the fixed into floating 33:28 33 minutes, 28 seconds uh how will this behave in say a rate hike scenario and secondly basically what is the share of currently say on a 33:35 33 minutes, 35 seconds behavioralized basis the floating rate loans or rather the borrowings I mean 33:40 33 minutes, 40 seconds floating rate borrowings are today 63%. that is including the OS portion. 33:48 33 minutes, 48 seconds So 63% is a floating rate borrowings uh where which includes the OS portion. Now this gets converted to fix to floating 33:56 33 minutes, 56 seconds means then it remains if you are holding till maturity it behaves like a floating rate uh uh book. So whatever in the policy rate movements is there that we'll move on from there on. 34:07 34 minutes, 7 seconds Got it. Uh my second question is with regards to the uh stage 2 PCR increase that we did. uh was that uh purely just 34:15 34 minutes, 15 seconds a strengthening measure or are you seeing any uh trends uh in terms of say early delinquencies etc. uh because the 34:23 34 minutes, 23 seconds some bureau data analysis uh was showing uh early bounce rates not now this is still a 3 four month old uh scenario and 34:31 34 minutes, 31 seconds thing that I'm referring to but uh do you see any of those things uh in your portfolio and secondly about the stage 2 PCR increase 34:39 34 minutes, 39 seconds no so vir in our portfolio in all the metrics whether it's a first bounce or first 12 month bounce early bounce 34:47 34 minutes, 47 seconds whether it is prime non-prime affordable uh LD in In case you don't have lab, all the bounce metrics also are showing a 34:55 34 minutes, 55 seconds downward trend. We map our portfolio bureau spread bureau uh uh at a portfolio level on a quarterly we do a 35:03 35 minutes, 3 seconds scrub to see where portfolio stands. It is showing improvement quarter on quarter every quarter including on March 26th it is showing improvement. So there 35:10 35 minutes, 10 seconds is no microlevel stress we are seeing given a overall macro scenario we just thought that instead of creating any 35:19 35 minutes, 19 seconds other overlay then which creates another problems we just thought that it is better that internal stage two acid because stage two assets in any case we 35:26 35 minutes, 26 seconds know are in uh they are not stage one they are they have moved to a a certain kind of a difficulty level we to just to protect ourselves we just thought that 35:34 35 minutes, 34 seconds we will increase our stage two coverage purely from a prudence point of view from uh the current market scen current 35:42 35 minutes, 42 seconds macro environment. No micro input has gone in this. 35:49 35 minutes, 49 seconds Got it. And uh for April month also you are seeing similar trends uh in terms of bounce rates etc. 35:54 35 minutes, 54 seconds Absolutely same. Absolutely same across portfolios and 36:03 36 minutes, 3 seconds got it. And my last question to just more of a data keeping question. uh what's the size of the Sambber book now? 36:09 36 minutes, 9 seconds Last quarter we mentioned around close to 5,000 cr plus uh and the mix of it uh between affordable and near prime. 36:16 36 minutes, 16 seconds So close to 9,000 cr is the sambar vium. 36:19 36 minutes, 19 seconds Now 9,000 cr is the vium roughly uh the mix you asked for the mix of near prime and affordable. I had to do the uh mix 36:27 36 minutes, 27 seconds we so I have to do the mix. I'll come back to you with that. Uh Ravi will uh inform you later. Okay. 36:35 36 minutes, 35 seconds Sure. Yeah, thank you. 36:37 36 minutes, 37 seconds Generally we generally look at it as a samub uh put together. So but roughly 36:42 36 minutes, 42 seconds you should take 70 30 60 70 30 right uh between affordable and near 36:51 36 minutes, 51 seconds we'll come back to you. I don't want to give you a wrong number. 36:53 36 minutes, 53 seconds Got it. Got it. Yeah. Yeah. Okay. Thank you. 36:58 36 minutes, 58 seconds Thank you. Next question is from Omar from Ascendency Capital. Please go ahead. 37:05 37 minutes, 5 seconds No, thank you. Thank I think all my questions are answered. Thank you. Thank you. Thank you. 37:13 37 minutes, 13 seconds Next question is from the line of Abijit Braval from Oil Law. Please go ahead. 37:19 37 minutes, 19 seconds Yeah, good evening sir. Thank you for taking my question. Just one question I have. U we've heard from leaders like 37:26 37 minutes, 26 seconds you that whenever uh interest rates or policy rates stabilize u the propensity for BTO comes down. uh probably that's 37:35 37 minutes, 35 seconds more a function of uh the aggression from these uh PSU banks coming down. So so what I'm trying to understand is 37:44 37 minutes, 44 seconds while you mention that uh you've guided for a 10 basis points uh decline in ROA 37:51 37 minutes, 51 seconds where the margin of margin decline could be offset by opex efficiencies credit costs. Just trying to understand um is 38:00 38 minutes the competitive intensity today at a point where uh even without uh policy 38:06 38 minutes, 6 seconds rates moving up the the large HFC's who are catering to the prime customers can take uh a rate hike. 38:17 38 minutes, 17 seconds Uh so Abijit uh we in the prime market the market which we operate uh it is the banks which set the rate it is SV and 38:25 38 minutes, 25 seconds SGFC or the rate setters we are not the rate set so we have to follow the market pricing uh what they are there but the 38:33 38 minutes, 33 seconds your observation of whenever the policy rates are stable over a period of time BTO rates go down that is what we are estimating we we estimate the quarter 38:42 38 minutes, 42 seconds four was an exception because normally as per normal process it should have gone stabilized By February, March, February, it should have because Noar 38:49 38 minutes, 49 seconds was our last cut. 3 months after the rate cut, last cut should have stabilized. But quarter four, February, March, we saw uh significant 38:58 38 minutes, 58 seconds high intensity competitive activity in the market on the pricing side from both public sector banks as well as the private sector banks which is showing us 39:06 39 minutes, 6 seconds that in the Q4 our BTO rates have not declined from what they were in Q3. But our estimate would be that April is largely a spillover from March because 39:15 39 minutes, 15 seconds lot of cension letters, lot of checks gets cut in the March from the bank's point of view which get deposited in the April. But my sense would be that now we 39:22 39 minutes, 22 seconds should see start starting down of a BT out rate from May onward to certain extent is 39:29 39 minutes, 29 seconds I think my knowledge of financial system says that it should go down. uh of course but in now as far as the prime housing is concerned we consider 39:37 39 minutes, 37 seconds irrational competitive activity as a feature not as a novelty so we we prepare for that scenario that's the scenario which we called out we said 39:46 39 minutes, 46 seconds when we said that we did not guide it for that I'll just put a nuanced view I said that uh as of today we estimate that is but we said that we'll guide for 39:54 39 minutes, 54 seconds in the quarter one uh as we come in the quarter one result because we'll have a far better clarity on the macro issue on the global scenario and also what is the 40:02 40 minutes, 2 seconds stance of the regulator or the super in terms of a policy rates or where it is headed to because if the policy rate hikes are there like we called out then 40:10 40 minutes, 10 seconds we may not have a margin compression. So there is uh but we are today estimating the policy rate hikes are not there but the money market remains elevated but 40:19 40 minutes, 19 seconds we'll come with the full guidance in the quarter one along the quarter one results. 40:24 40 minutes, 24 seconds Sure. That is fair. And the only other question I had is while you mentioned that March the money market rates 40:32 40 minutes, 32 seconds particularly in cities the rates are elevated. I mean that same thing continues in April as well or yeah in April we've seen 40:41 40 minutes, 41 seconds money market money market continues to be at a significantly elevated portion even today as well uh because it is 40:49 40 minutes, 49 seconds linked to the rupee as a rupee largely rupee and expectations of uh you know if 40:55 40 minutes, 55 seconds you look at a today it prices in a 75 bits kind of a rate height scenario which I'm not fully certain uh I'll not 41:04 41 minutes, 4 seconds speak that is my estimate of a 75 pips high but OS market which is a money market does so that's why money market looks ahead so it is pricing in a 41:13 41 minutes, 13 seconds significant uptick in the uh policy rates if I have to say so because the OS rates and the money market rates are 41:20 41 minutes, 20 seconds implying a significant uptick in uh the policy rates as it moves forward but we have to wait I think if the scenario settles on my own assessment if the 41:28 41 minutes, 28 seconds scenario settles on in matter of weeks we should have we should be 41:36 41 minutes, 36 seconds We we should see normalization of market fast but we have to wait for the market to shape up. 41:43 41 minutes, 43 seconds So what about banks? Are they also lending at maybe 5 10 basis points higher than the rate at which they were lending say in January. 41:52 41 minutes, 52 seconds So by and large the same price by and large the same price the same. So they have not increased their pricing. It is only the money market. Yes. 42:01 42 minutes, 1 second So the difference is because the banks normally land at a floating. So till the rates don't move up they'll not move there but money market works ahead looks 42:10 42 minutes, 10 seconds ahead because it is at a fixed. So that's a differential. So money market and the banks normally behave in a different manner because the underlying 42:19 42 minutes, 19 seconds is different one is floating one is fixed. 42:23 42 minutes, 23 seconds Okay. Can this just to conclude this then that means on the liability side if I look at the cost of borings they have 42:30 42 minutes, 30 seconds largely bottomed out and from here in the subsequent quarters there's a good probability that the cost of bings now inch up. 42:38 42 minutes, 38 seconds Yeah. Uh so it will in it will depend upon whether the money market prices remains elevated. Let us say after this quarter one as well. uh because quarter 42:47 42 minutes, 47 seconds one we are likely to see the similar even if the money market price remains elevated the offset which we get from the uh higher cost maturities uh will 42:56 42 minutes, 56 seconds mean that we will be either at the same price or a marginal uh tone down of the cost of for the quarter one quarter two onward depends upon how do the money 43:05 43 minutes, 5 seconds market either see one thing has to move either the policy rate will move or the money market rates will come down that's what tabit I'll say after the after 43:12 43 minutes, 12 seconds after there is a stability in the macro factors either there is the policy hike, rates hike or the money the entire rates move up or the money market starts 43:21 43 minutes, 21 seconds becoming normalized. So we'll have to wait for the quarter to pass abijit for for us to and the geopolitical uh market 43:29 43 minutes, 29 seconds to get stabilized for us to have a firm view saying that which side of the which side the market is waving but we are by and large our portfolio is floating. 43:38 43 minutes, 38 seconds server ability uh to pass through the cost impact is there to that extent. 43:45 43 minutes, 45 seconds Got it s this is very very useful and thank you for patiently answering all my questions. I wish you and your team very best. 43:52 43 minutes, 52 seconds Thanks. Thank you. Thanks. Thanks. Thank you. 43:57 43 minutes, 57 seconds Next question is from Chawat from Kodak Securities. Please go ahead. 44:03 44 minutes, 3 seconds Hi uh you know just looking at the trends in fee and assignment income. I mean both the line items uh for last two 44:10 44 minutes, 10 seconds years we have been sort of consistently ahead of the overall loan growth. So how should one think about it kind of you 44:18 44 minutes, 18 seconds know continue to sort of see acceleration in these four items. 44:23 44 minutes, 23 seconds Yeah. So uh loan growth nation we would want to be significantly ahead the way we we always want to grow 2x of industry 44:32 44 minutes, 32 seconds that is what we always stated and we want to grow and we want to cont that there is no change in the growth chance of the company we remain very 44:39 44 minutes, 39 seconds comfortable with wherever the portfolios are there and that of course I'm uh a general cave I'm giving that that we'll wait for how the overall macro and 44:47 44 minutes, 47 seconds overall economic situations goes but as of today based the current scenario we remain uh significantly ally upbeat and 44:55 44 minutes, 55 seconds uh significantly in the growth mode. So we want to grow much faster than what uh is there and which is either in line with what we have been growing or even 45:03 45 minutes, 3 seconds we want to grow a bit faster than what we have grown during the last year as well as far as the current year is uh concerned. Assignment income is a 45:10 45 minutes, 10 seconds function of the growth mix home growth mix versus a non-h home loan growth mix. 45:16 45 minutes, 16 seconds If we have a higher home loan because we have a leverage levels available for us to be able to leverage our balance sheet more. That was the reason for the assessment when last year we gave out an 45:25 45 minutes, 25 seconds assessment of a uh that our assignment income is going to be lower because we said that if our home loan portfolio growth is able to sustain our overall 45:34 45 minutes, 34 seconds growth without our assigning we will not like to assign uh because we have the right now the widths available to go for more leverage and in the process earn 45:43 45 minutes, 43 seconds more ROE. However, if it comes to that situation where home loan BTO rates are not climbing down and the home loan growth versus the non-h home loan growth 45:52 45 minutes, 52 seconds remains a bit subdued then to balance that assignment income will assignment will be play balancing factor nitions always to continue to grow all 46:01 46 minutes, 1 second portfolios whatever we can grow minus the growth what we can organically grow in the home loan. 46:08 46 minutes, 8 seconds Have I answered your question because sure just just on fee income actually you know some has sort of shown acceleration versus loan growth 46:16 46 minutes, 16 seconds fee income versus so uh so fee income uh last year was 200 crores and uh this year it was 297 crores uh broadly driven 46:25 46 minutes, 25 seconds by uh uh insurance income and some part of foreclosure income but broadly expected to grow line with 46:33 46 minutes, 33 seconds the overall uh loan book yes with the growth in the business. 46:37 46 minutes, 37 seconds Perfect. Perfect. That that answers my question. Thank you very much. All the best. Thanks. Thank you. 46:46 46 minutes, 46 seconds A reminder to all the participants, you may press R and one to ask a question. 47:03 47 minutes, 3 seconds Ladies and gentlemen, a reminder to everyone press start and one to ask the question. 47:26 47 minutes, 26 seconds A final reminder to all the participants you may press R and one to ask the question 47:38 47 minutes, 38 seconds as there are no further questions I'll now have the conference both Viral Shra for closing comments. 47:45 47 minutes, 45 seconds Thank you Nero. Uh thank you Atul Goro and Bajad housing team. Atul do you want to make any closing comments? No, no, thanks Vir and thanks uh everyone on the 47:54 47 minutes, 54 seconds board for patient uh listening and giving us an opportunity to tell uh our quarterly result. Thank you all very much. 48:03 48 minutes, 3 seconds Thank you very much on behalf of Capital Services Limited. 48:08 48 minutes, 8 seconds That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.