JM Financial Limited (JMFINANCIL) Q2 FY23 Earnings Concall Transcript

JM Financial Limited (NSE:JMFINANCIL) Q2 FY23 Earnings Concall dated Nov. 15, 2022

Corporate Participants:

Vishal Kampani — Non Executive Vice Chairman

Manish Sheth — Group Chief Financial Officer

Analysts:

Himanshu Upadhyay — O3 Capital — Analyst

Pranav Shenoy — O3 Capital — Analyst

Kunal Shah — ICICI Securities — Analyst

Dhruvesh Sanghvi — Prospero Tree — Analyst

Rajat Sethia — Idot — Analyst

Anuj Sharma — M3 Investments — Analyst

Unidentified Participant — — Analyst

Manoj Dua — Geometric Securities & advisory — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the JM Financial Limited Conference Call to discuss the company’s financial performance for the second-quarter and half year ended September 30, 2022. As a reminder, all participant lines will be in listen-only mode. And, there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

Kindly note that any forward-looking statements made on this call, are based on the management’s current expectations. However, the actual results may vary significantly and, therefore the accuracy and completeness of this expectation, cannot be guaranteed. I now hand the conference over to Mr. Vishal Kampani. Thank you. And, over to you sir.

Vishal Kampani — Non Executive Vice Chairman

Thank you. On behalf of JM Financial, we extend a very warm welcome to all of you to the conference call of JM Financial Limited, to discuss our results both for the second-quarter and half year ended September 30, 2022. We have uploaded our result presentation, press release on the website and stock exchanges. I hope all of you had a chance to go through the same. Our consolidated revenue for the half year ended FY ’23 is INR1,683 crores, which represents a decrease of 14% Y-o-Y. For the same-period profit-after-tax is INR350 crores, a decrease of 7.3% Y-o-Y. This represents earnings per share of INR3.67 vis a vis INR3.96 for the last quarter.

Our FY ’23, quarter two revenue is approximately INR77 crores. PBT for the same-period, it’s INR318 crores which is almost flat on a Y-o-Y basis. PAT for this quarter increased by approximately [Technical Issues] with the Y-o-Y from INR174 crores to INR180 crores. As on, September 30, 2022, net worth excluding minority interest is INR7,916 crores, translating into a book-value per share of INR82.91. Our consolidated loan book it’s now at INR14,670 crores, which is, up 32.5% year-on year.

I will now take you through the breakup of the loan book of INR14,670 crores. Wholesale mortgages constitute the largest part of the book at 49.9% which is approximately INR7,321 crores. The wholesale mortgage book registered a Y-o-Y increase of 11.3%. The capital market loan book is 7.8% at [ INR1,141 crores ]. The capital market book has registered a Y-o-Y growth of 42.5%.

Our Bespoke [Phonetic] financing loan book which includes both our corporate loans originated by our Investment Bank as well as the promoter financing book constitutes almost 26% of the loan book at INR3,821 crores. This loan book has registered a Y-o-Y growth of 39.6%. The retail mortgages loan book which constitutes our affordable housing loans and our loan against property business is approximately 9.5% of the loan book which is at INR1,392 crores and this loan book has registered a Y-o-Y growth of 62.9%.

Our Financial Institutions loan book which primarily funds smaller NBFCs, MFIs, and a few fintechs. Constitute 6.8% of our loan book at INR995 crores.

Coming to asset quality. The gross NPA of the lending business is at 3.9%. Our net NPA is at 2.4%. And our SMA 2 stood at 1.3% on a consolidated basis as of, September 30, 2022. On leverage and liabilities, on a consolidated basis our Group debt-equity is at 1.21x. And during the half year ended FY ’23, we raised approximately INR1900 crores through long-term borrowings. We raised more than INR600 crores through NCDs of which almost INR300 crores or in the 10-year bucket. We raised almost INR1,300 crores through banks and others. Our borrowing comprises over 80% from long-term sources and 20% from short-term. Almost half of our short-term borrowing it’s for working capital requirements for our brokerage business.

Moving on segments. Our first segment is Investment Bank segment. For the half year ended September 30, 2022, the Investment Bank segment had revenues of, INR607 crores. Profit-before-tax of INR256 crores and a profit-after-tax of INR203 crores which is an increase of 29.7% year-on year. The annualized return on assets in this business is at 6.1% and return-on-equity from this business is 16.4%.

The second segment in our Group is mortgage lending which includes both our wholesale and retail mortgage business. For the half year ended September 30, 2022 the mortgage-lending segment reported net revenues of INR353 crores with a pre-provision profit of INR193 crores, profit before-tax of INR198 crores. The annualized ROA for this business is 2.9% and ROE is at 7%. In quarter two, FY ’23, our net revenue and pre-provision profit stood at INR178 crores and INR148 crores respectively. And the PBT of the business is at INR190. On the retail mortgage business we, have a very granular retail mortgage book of INR1,035 crores across INR8,583 customers with an average ticket size of 12 lakhs carrying an average yield of 13.3% and LTV of 55%. Our book is well spread across nine states and 75 branches. And on the wholesale mortgages the loan book has increased from INR5,409 crores as of June ’22 to INR6,668 crores as of September ’22.

Our third business segment is our distressed credit business including our ARC and the alternative credit business. Our AUM on September 30th is INR11,349 crores, an increase of 6.2% Y-o-Y. For the half year ended September 30, ’22 the segment had net revenues of INR54 crores with a PBT of INR32 crores. In quarter two FY ’23 the net revenues stood at INR44 crores with a PBT of INR28 crores.

Our fourth segment is platform AWS. The business is completely focused on providing an integrated investment advisory and transaction services platform. For all the individual clients of the company this comprises of asset management, our equity broking and securities business as well as our wealth management business. So we integrated we call this platform AWS. For the half year ended FY ’22 the platform AWS business segment had revenues of INR283 crores with a profit-before-tax of INR16 crores. The profit-after-tax for this segment is INR14 crores.

In-quarter two FY ’23 our revenue stood at INR163 crores. Profit-before-tax at INR9 crores and PAT at INR8 crores. We operate both through our own branches and franchises. We have been growing our franchise network which now stands at 682 locations in 197 cities. On wealth management, our private wealth caters to-high net-worth individuals with an AUM of INR58,000 crores. As you know we have started our elite wealth business in 2019. We’ve added 91 advisors across eight locations and have an AUM of close to INR1,150 crores, demonstrating a 46% growth Y-o-Y.

On our retail wealth business which predominantly deals with retail customers through our IFA network, we have 7,500 active independent financial advisors/distributors and this business has recorded a steady growth of 18% Y-o-Y and its current AUM is INR22,250 crores. Over the last year, we have built-out a full PMS team. We have made very senior hires and our total team size in PMS now is 25 people.

In the AMC business again we’ve added a lot of people and our engagement efforts are picking pace and we’ve been rebuilding all our relationship with several key distributors. Our total AUM stands at INR3,000 crores almost INR600 crores in equity and the balance in debt. In a bid to grow our AUM and folio base we have added people across all functions investment teams, products, sales, risk cooperation and technology.

With this I would like to conclude my initial remarks and, we’ll be happy to take any questions. Over to the moderator.

Questions and Answers:

 

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen we will wait for a moment while the question queue assembles. We have our first question from the line of Vivek from [Indecipherable], please go ahead. Mr. Vivek can you please unmute your line. Since there is no response, we’ll move on to the next question from the line of Dhruvesh Sanghvi from Prospero Tree. Please go ahead. Ms. Sanghvi can you please unmute your line. We will move onto the next question from the line of Himanshu Upadhyay from O3 Capital, please go ahead.

Himanshu Upadhyay — O3 Capital — Analyst

Yeah, hi, am I audible.

Vishal Kampani — Non Executive Vice Chairman

Yes, I can hear you clearly.

Himanshu Upadhyay — O3 Capital — Analyst

Yeah, so I had a question on wholesale book. Sir Ahmadabad nobody has suddenly become 6.5% of Credit Solutions which was 3% in last quarter. So is it a new focus market for us or it is one or two relationship which has grown-up? Can you elaborate on the opportunity and…

Vishal Kampani — Non Executive Vice Chairman

It is one or two relationships which have become larger. I don’t think Ahmedabad will beyond these levels, because they get capped out that between 6% to 7%.

Himanshu Upadhyay — O3 Capital — Analyst

Okay, and another question on wholesale is. The growth in wholesale what we are seeing pretty significant in last one quarter of around 22%. Is it because of existing relationship or we have signed a significant number of relationships and hence there is some strong growth we are seeing. So can you give some color on what is driving the growth?

Vishal Kampani — Non Executive Vice Chairman

Good question. I think we’re seeing growth in both. I would think the growth is almost 50% weighted for existing relationships and 50% in terms of new relationships. We’ve added four new accounts real-estate and around three new accounts on the corporate side.

Himanshu Upadhyay — O3 Capital — Analyst

Okay and one last thing. We’re seeing pretty good growth in financial institution funding. Can you give an idea of what type of lending are these NBFCs in and how granular are these loans? What mechanism we have put the misallocation of capital does not happen at the end — NBFC — yield on NBFC loans which is part and the business model of NBFCs to whom we are lending? Is it sustainable? The business models, so some idea more on this.

Vishal Kampani — Non Executive Vice Chairman

Yeah. Sure, I’ll give you a quick final rundown on it. We’ve been preparing for this business almost for 2 to 2.5 years. We have a fully built-out risk team. There are almost seven to eight people who are in risk management. We have another four or five people in origination and we also have a big origination of our Investment Banking which knows many of these NBFCs. All of the NBFCs, each and every NBFC that we lend to as an extremely granular focus and retail book. We do not onward lend to any wholesale NBFC we only lend to retail NBFC. Almost 80% plus of the lending that we have done are NBFC is rated between AA to double-A minus. So A, A-plus or AA-minus and, 20% will be A-minus to sort of BBB.

The sectors across-the-board, I mean the MFI there is vehicle financing. Some are into MSME loans, and [Technical Issues] so all kinds of assets and the idea is to basically increase book quite substantially over the next five years and make it as large as our spoke which does corporate and promoter lending as well as our real-estate book and after ILFS [Phonetic] and COVID both, there has been a big shakeout and we realize that many of the smaller NBFCs, don’t get access to capital markets easily so what we do is, we start with the lending we build a relationship with them and then we will offer our debt capital market products or equity capital market products as well as many of our MLD and NCD product which can be sold down, through our institutional distribution as well as wealth distrubution. This business is both being built from a balance sheet perspective.

It is also being built from a syndication perspective and also two or three years down the line when we have enough data and we have a data platform, build which is able to run a lot of analysis. I think will also get into the securitization business of the end-product which we will be able to source from many of these NBFCs. So that is the broad plan. We have almost a 15, 16 member team and I think it will be by March 31st, it will be close to 20, 25 member team. And I think that team itself over the next 18 months to two years will further double to around anywhere between 50 to 60 people.

Himanshu Upadhyay — O3 Capital — Analyst

One last thing what is the yield on these loans to NBFC?

Vishal Kampani — Non Executive Vice Chairman

Yeah, so it’s average yielding around 11.5% to 12%.

Himanshu Upadhyay — O3 Capital — Analyst

Okay. Thanks. I’ll join back-in the queue for further queries.

Operator

Thank you. We have our next question from the line of Pranav Shenoy from O3 Capital. Please go ahead.

Pranav Shenoy — O3 Capital — Analyst

Yeah, am I audible?

Vishal Kampani — Non Executive Vice Chairman

Yeah.

Pranav Shenoy — O3 Capital — Analyst

Yeah, my question is we have seen high-growth in retail mortgages, can you give me in percentage terms the NPA and stress in loans which we were given two years back?

Vishal Kampani — Non Executive Vice Chairman

Yeah, I have Manish Sheth on the line. He will answer the call.

Manish Sheth — Group Chief Financial Officer

So the growth in retail market is basically out-of-the new branches, and we have a low-base last year so last year and after COVID we actually expanded to now 75 branches, and that is where the growth has come through on the retail deposit side. The NPA number is [Indecipherable]. So that is on the NPA side. Collection if you can see [Technical Issues].

Pranav Shenoy — O3 Capital — Analyst

Okay, thank you and my next question is in our broking business the ADT [Indecipherable] has increased but the value of cash paid has reduced in absolute terms and what impact is it having on the profitability of the broking business?

Manish Sheth — Group Chief Financial Officer

Yeah, so I think [Indecipherable] has gone up a lot. I think cash is not down as much but as you can see from [Indecipherable] resolved. I mean option trading sort of is the most attractive segment for most investors and traders in the market. So yes the derivative volumes have gone up a lot. But overall, I think there is an impact on yields because derivative yield is obviously way lower than cash. But on a gross basis it’s increasing revenues. So, I think we are okay as of now, but I think cash is not down more than 5% even the derivatives was up sharply cash is not down more than 5%. See for us cash is very strong because we, do a lot of direct equity advice. And we want a lot of direct customers on our platform trading with us and we’re going to continue to push and grow that business and we are getting lot of customers from our private wealth, elite wealth, and our retail channels also which we are converting into direct equity customers and therefore we, have not seen a significant decline in our cash [Indecipherable] been almost stable to flat.

Pranav Shenoy — O3 Capital — Analyst

Okay, another question, I had was in private wealth AUM the size of business has reduced significantly in the quarter and it is more in recurring revenue, can this be explained?

Manish Sheth — Group Chief Financial Officer

Yeah so. I think couple of things as I said we are pushing more for a lot of direct customers on our broking platform so we’ve catalyzed a lot of the focus on growing that base. Secondly on the both recurring as well as the transactional side we had a lot of debt AUM. And because of the interest rates having adverse movements, specifically over the last three-four months, we ourselves advised many of our clients to exit some of those funds. So I think that is short-term in nature. I think you will see some of that reverse over the next six months.

Pranav Shenoy — O3 Capital — Analyst

Okay. I just have one last question many of the competitors are reducing the wholesale book and not lending currently can you give some sense of competitive intensity and [Indecipherable] improve from here in the wholesale book?

Manish Sheth — Group Chief Financial Officer

Yeah so, that’s a great question. So couple of reasons many of the competitors who are exiting the business, I think I’ve seen rating downgrades. If you see a lot of rating downgrades and automatically some of the wholesale businesses will become sort of uncompetitive right so. Having said that, at least on the wholesale mortgage side we are seeing a big market-share shift away from smaller developers to the larger developers so. I think for example the top 50 developers in, Mumbai who will have almost 70% to 80% of market-share in terms of new sales and the same thing is happening in our book. We are seeing more concentration with the larger developers and we used to have a higher concentration with the middle — small to middle developers earlier.

So that has put some pressure on ease, but it’s not competitive pressure. It pressure from our yield which used to be north of 15 and our incremental yield for new loans which is going-in at around 13.5 to 14. So, therefore there is almost a 100, 225 basis-points reduction in yield but with that even the risk is coming down because we are funding higher-quality and much better developers compared to what we were doing, I would say pre-COVID or pre-ILFS.

So yes, that is the yield pressure but on the competitive side, I think the environment is pretty benign, it’s pretty soft. Lots of players have exited the market at the same time, we are seeing a new category of AIF who want to come and lend and do business in real-estate but that is coming more at the land stage and if you look at our portfolio, our portfolio is 11.3% land. So it’s not very large and therefore we are not really seeing that much of the AIF competition with us. Secondly, most of the AIFs are wanting in, 15% to 16% percent kind of IRR at minimum and we are at anyway at 13.5% to 14% so it’s a very-very different market almost 152 order basis-point spread and as I said our book is only 11.3% in lands so-far.

We still haven’t face that competition. And you know 11.3% also is high for us we’d like to keep land at less than 10% and also the new regulation from RBI are making it very complicated to do land acquisition finance because no land financing can only be done post approvals. So, I think automatically land will drift down to sub 5% in our book and construction finance book will further increase and the lending and takeout lending for projects in advanced-stage will further increase.

Pranav Shenoy — O3 Capital — Analyst

Yeah, thank you — thank you for entertaining my questions, I’ll just join back into the queue.

Manish Sheth — Group Chief Financial Officer

Thank you.

Operator

Thank you. We have a next question from the line of Kunal Shah from ICICI Securities. Please go ahead. Mr. Kunal Shah, can you use the handset please, your volume is low.

Kunal Shah — ICICI Securities — Analyst

No, I am on the handset only. Yeah, so in terms of the pipeline so definitely this quarter we have seen scale-up in the wholesale mortgages but if you can just highlight in terms of the pipeline as well and this is — is this more sustainable or this is a short-term and it would run-down over a period so if you can just explain them and how are we moving towards that in INR1,500 crores of target in the wholesale mortgage?

Vishal Kampani — Non Executive Vice Chairman

Yeah, so I think the — So Kunal the pipeline is very healthy. It’s very-very strong. And. I think that the pipeline will become even stronger over the next year year and a half. Specifically because of some competitive actions in the market. And some mergers that are going out are going through so. I don’t see a issue on pipeline. I don’t see any issue on loan book growth. The only thing is you know our diligence takes time, right. As you as you very well know that we are pretty slow at disbursing loans. We do our diligence properly. So you may not see that same jump-in loan book every quarter and you may see it every two quarters because you know it takes almost three to four months-to do complete diligence documentation everything and close the loan.

We are also looking to expand our team size. We would be expanding our wholesale mortgages team by more than 30% in the next 18 months-to two years. Because right now our team is completely choked. We have absolutely no bandwidth to take any more pipeline at least for the next six months with the amount of work that we are seeing ahead of us. So we are looking to add people and as I’ve said we’ll be growing our team by more than 30% over the next 12 to 18 months.

Kunal Shah — ICICI Securities — Analyst

Sure, so what I am suggesting is maybe whatever was there in terms of the evaluation and the due deligence that is largely done until Q2 and then maybe a wait out plan finally in six months will see a further build-up of the overall book.

Vishal Kampani — Non Executive Vice Chairman

That’s absolutely correct. So see lot of the loan book growth that you saw — that came in sort of in August-September the work has started for that in March, April and May right, so it just takes time to close. So that is the nature of the wholesale business. Yeah, like retail where you can disburse even like 10 days. In wholesale you’re giving INR100, INR150 crores to someone it requires a lot of detailing work. So that takes time. So the whole focus was to get this growth out for the six months and the whole team’s focus now is — we really don’t have a December focus. We actually have a March focus. We really have a Six-Month focus that we want to get we have certain targets if you want to meet in March. There is enough pipeline frankly. Pipeline is not an issue, it’s just our team size and our execution capability right now which is, a little bit of a bottleneck but as I said we’ll address it very quickly.

Kunal Shah — ICICI Securities — Analyst

Okay, and in terms of asset quality so how — maybe once we transition to the RBI norms from 1st of October do we see any chanage or maybe whatever is the conversion from say SMA 2, GNPA that is largely taking into effect the revised norm.

Vishal Kampani — Non Executive Vice Chairman

Yeah so, let me give a — good question, and important question, I’ll just give a broad perspective on all of it. I’m not seeing sort of any major effect in fact no effect from the RBI changes which are required but as you know we have a big restructured — we had a big restructured book because of COVID and the DCC year book, right which is almost 19% of our book. I’m happy to report that that 19% book is now at 13%. So 6% has been repaid or refinanced. Now in that 13% almost we believe almost 80% is sort of running on-time to repay and to get refinanced. So it’s literally a small percentage of 2% to 3% where we are closely monitoring and maybe there could be some slippages, not all of it some slippages from that could flow into SMA 2, which is still not into SMA 2. We are very well-covered on the book. I mean I’ve personally seen each and every account.

Our committee, our Board has seen each and every account and the cover even though they service to almost 18 months of additional interest on average our covers are still healthy and they are above 1.3 to 1.4 times today. One reason being is that in most of the cases we have seen appreciation in the selling price. The selling prices are up anywhere between 10% to 15% even 20% in certain cases in certain projects and plus the sales have been strong. It is only about making sure that these get refinanced or some other asset sale happens and they’re able to repay on time. So that 3% number is what we are watching very-very carefully.

Now what percentage of that 3% slips into SMA 2 over the next six months-to one year it’s hard for me to say. Well, nothing slipped no, I can’t even say that. I’m just saying we are monitoring it very-very closely. Does it give me sleepless nights, not at all because we are very well-covered on the asset side and the expected LGD from that should be very, very low.

Kunal Shah — ICICI Securities — Analyst

And then it get offset from — resolutions of the current NBN commercial book because we used to highlight [Speech Overlap]

Vishal Kampani — Non Executive Vice Chairman

Yes, so there is a distinct possibility that may happen because incrementally we don’t need provisions on our book and I think I told you that last quarter — I mean, two quarters back also that, I think we’re almost done with the provisioning cycle. I mean we don’t even need to report what is COVID non-COVID. I mean, business is back to normal completely.

Kunal Shah — ICICI Securities — Analyst

And lastly, in terms of the guidance which we had given so obviously with respect to mortgage-lending it seems to be on-track. Net NPA plus SMA 2 is also less than 5% and investment bank is also getting into mid teens to high teens. How confident are we about platform AWS and scaling up the mutual fund [Indecipherable].

Vishal Kampani — Non Executive Vice Chairman

Yeah, so we’ve added a lot of people. We are working very hard. We don’t talk about the investments you’re making in digital but, believe me a lot of investments are happening right now. Few of our products will be ready to hit the market in calendar year ’23, on the broking side on the distribution side. On the asset management side, many of our products are already rolling. The interest from distributors. I mean you can imagine that we are going back and doing a NFO after 14 years, last NFO was almost 14 years ago and so we are getting good traction from the distributors and my view is this space is wide-open. I mean the growth that we are going to see on investment products literally, whether it’s coming directly through equity two asset management like mutual funds, PMS, AIF or even through our wealth management advisory business. I think we’re just at the tip of the iceberg in terms of what is going to happen to India next 20 years.

So I’m right now more focused on making investments then really seeing any short-term returns. My horizon is extremely long-term in this business. And with, a very clear sort of goal that we really want to be in the top-five players, in this space on a consol basis by 2030, so we’re going to keep investing, so at least for the next two to three years every Dollar of profit that we make we’re going to keep investing in infrastructure whether it’s physical or even digital we’re going to keep investing back.

Kunal Shah — ICICI Securities — Analyst

Yeah, thanks a lot, and all the best, yeah.

Vishal Kampani — Non Executive Vice Chairman

Thank you.

Operator

Thank you. We have our next question from the line of Dhruvesh Sanghvi from Prospero Tree. Please go ahead.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Yeah, am I audible now.

Operator

Yes.

Vishal Kampani — Non Executive Vice Chairman

Yeah, go ahead.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Thank you, so a couple of questions. First congratulations on the loan book on the mortgage side increasing substantially now. So the first is on the retail mortgage side. So when we see the disbursement they are generally far more than the net increase in the loan — the net loans outstanding. So is it because of the competitive — competition taking away other customers and getting it refinanced or some thoughts on that line?

Manish Sheth — Group Chief Financial Officer

Yeah, that’s right Dhruvesh, Manish here. That’s exactly right we are getting [Indecipherable] what we thought at the beginning of the year was 1%, a month that is around 2% per month. That means we are actually underwriting a good credit and which has been taken over by the banks once the CIBIL has been kind of corrected and credit history is being created all these banks and they take it out it is like 8.9% rate, whereas I lend at 12% to 12.5%.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Okay.

Manish Sheth — Group Chief Financial Officer

So, but that is not — I mean what has happened is our NPA levels have been extremely low in this business right so what has happened is that anybody who is a good customer and, not a fragile customer through COVID. And even in our financial institution lending business we have seen this, that lot of the banks have literally blindly just taken those customers away, who’ve been basically good through COVID, right and they are offering them very-very low rates because that is just such a phenomenal data point that in the last two years we were not being able to default and you manage your cash-flow completely on-time, with the business volatility as well as the volatility generally in-market, you know, I think you have very-very good credits so. I don’t know but. I don’t think we will see the same level of [Indecipherable] going-forward which we’ve seen just coming out of COVID in this year, but that’s my guess. I could be wrong. I think we’ll have better data points on this next year same time.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Okay, and second thing, when we look at the history a lot of companies did small-ticket retail lending and initially it went very well and over 5 to 7 years somewhat of the other big mistakes happen then we have cases where underwriting was poor or recovery was poor. All these learnings are being embedded and would you like to, talk a little bit on that area to highlight that how are we entering and what are the strategies here?

Vishal Kampani — Non Executive Vice Chairman

Yeah, so I will request Manish to give a five to seven minutes sort of download on what he is doing and how we’re thinking about building the [Indecipherable].

Manish Sheth — Group Chief Financial Officer

Yes so basically there is another example what you gave are all those who actually kind of aggressively build. So some of the [Indecipherable] affordable side build portfolio of around INR4,000 crores in five years’ time-frame. And, although they were doing all the detail but it was basically a beta tie-up in a wholesale financing in a retail format. Secondly like if you understand the credit side of that business verticalized, meaning it was a branch banking concept where the branch manager himself was originating underwriting and disbursing. So these are some of the mistakes of others which we have [Indecipherable] — what we have done is our typical branch of ours, we’ll have a separate sales vertical, separate credit vertical. This is an operation — there is a collection guy already sitting there and on-top of it legal and technical.

What we do is once we get a file there are five customer touch points, basically before we disburse the loan, sales pick up a file, credit independently goes and underwrites, although we have not delegated, a single power down to the branch. Every reason has been centralized at an actual level of all these 9,000 customers or what we are talking about. Apart from credit, we have a third-party legal and technical vendors who independently goes, do their own inquiries and give directly report to H.O. And lastly our customer with their family history comes to our branch to pick-up a check.

In our business the most important thing is to avoid a fraud and which is what last five years we invested heavily in terms of people, in terms of processes, and in technology. So although to my mind we were slow because we were spending a lot of time on building this entire infra out but now we are changing the gear, we are at 75 branches as we speak, by year end we would be at around 90 odd branches. And next year onwards we will see growth. So to answer your question yes, there were some mistakes, we have understood from that mistake, we have put all the barricades in place. And now after five years of our license now we will kind of change the gears.

Dhruvesh Sanghvi — Prospero Tree — Analyst

One more question on that side is let’s say by next two years FY ’25 this INR1,000 crore could be some number if you can, help us understand. I mean if you have some thoughts on that?

Vishal Kampani — Non Executive Vice Chairman

The idea is — we already said by end of FY ’24 we will get at around INR3,000 odd crores.

Dhruvesh Sanghvi — Prospero Tree — Analyst

FY ’24, INR3,000-plus what, right? Yeah so that is yeah all from my side on the retail side, on the AWS part when we see the profitability. And I hear you that there is a lot of investment going on is it because of those investments that the profits of AWS divisions are down for the last two-three quarters is that a correct reading?

Vishal Kampani — Non Executive Vice Chairman

No there are two reasons, one is these types of investments way back almost 18 months ago, so literally in April of last year when we start investing heavily. There is also some amount of IPO funding income in platform AWS. And that income is not there this year because as you know that both because of SEBI and RBI that product is almost discontinued. So that is the reason why there is both sort of decrease in revenue and more investments, but having said that even if you ignore IPO funding. I think our brokerage and distribution businesses performed exceedingly well. They’ve grown in the last six months. And that is function again — a function of deeper penetration as well as more hands-on sales and distribution. To give you the, exact number, I think this half — comparable half last year, just our PAT, a profit-after-tax from IPO financing activity was INR57 crores and for FY ’22 to the full-year was INR123 crores. So literally that INR123 crores for the full-year and INR57 crores for half year is 0 this year.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Right, so where I was coming from is that now that is 0 and that has gone and I mean we probably cannot count it maybe it can come in some other form at some point in time, however, if I see AWS today in the half year the net profit after taxes are INR15 crores is that — I mean is my reading correct or am where am I missing? Again if everything is so good why the numbers are so less?

Vishal Kampani — Non Executive Vice Chairman

Yeah because that’s exactly — because IPO funding income. It’s completely missing right and that was almost 70% margin product which is not there. So assuming for example if the IPO funding product was there. As I said we started our incremental investments almost 18 months ago. This number would still be lower than last year’s PBT and PAT but won’t be [Indecipherable]. So, I can’t really give you a number. But assuming that I have put through, at least — at least two months of the last six months had decent IPO activity for three-four months did not have as much IPO activity so we would not have had that much profit from IPO funding in any case. Number would any way would have been lower.

So there is a big loss in our Asset Management Company specifically because the investment in people, technology, processes, systems have been even higher there. The mutual fund and asset management business is running a loss of almost INR14 crores. So that itself, you know is a big number. So even if those investments were not made-for example, this INR8 crore numbers that you see here — INR15 crore number that you see here would have been INR30 crores.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Fine. Fine. And so coming back to the base investment bank side which is running at a run-rate of almost INR100 crores now of course markets and mandates and everything good but what is your sense on investment banking from INR350 crore to INR400 crore range? Can we potentially go to INR700 crores to INR800 crores over next five to seven years? Is that the kind of possibility and some thoughts on that area please? Thank you. That is my last question.

Vishal Kampani — Non Executive Vice Chairman

Again, a good question. And let me just — I must tell you that last quarter we only did one IPO and there was only one M&A assignment. So it was one of the worst quarters from an investment banking perspective because, we had FI [Phonetic] outflows right through May, June, July, August and we also had a lot of interest-rate going up so ECM activity part of DCM activity, M&A activity private-equity or think kind of goes on a hold. And despite that, we’ve been able to report, pretty good numbers because we did do some syndication stuff on the debt side where we made money. Our bespoke book grew nicely which basically made us money. Our [Indecipherable] book grew nicely, which basically made-up money. So despite dramatic slowdown in the core sort of Investment Banking division business we’ve kind of still maintained our PBT at INR122 crores, which was at INR134 crores for quarter one so. I think this last six-weeks we have closed five IPOs. We’ve you signed two M&A transactions which should get close to fully by 31st December.

So if you had the financing business and you have the non-interest income, fee business growing then, we can easily hit that INR700 crore to INR800 crore number in the next couple of years. And the idea is to give more stability to the Investment Bank business. We want to grow-out the portfolio of lending and we want to make sure that any point in time between 45% to 55% of revenue as well as sort of profitability comes from, a very steady lending base and as I updated all of you my March earnings call that we are even demerging our private wealth management business, our absolutely high-end private wealth management business and bringing it in the Investment Bank. There are phenomenal synergies between what we’re going to do in that business and the broader investment bank which also will add to a deeper penetration of promoters and the businesses that we run both from advisory, AUM, and the lending sort of angles.

So, I’m actually very excited about this business. It isa very profitable business, make 6% sort of ROA. Good 15% to 17% ROE barely any leverage we are not even like that two times leverage in this business. The NBFC here at [Phonetic] JM Financial Products has a extremely well-diversified book. It is going to get even more diversified, even when Manish mentioned about is HFC book, the HFC book actually is not INR1,000 crores it is almost INR1,400 crores via [Phonetic] INR350 and INR400 crores of loans that we have bought and securitized as certain final weights, to keep AUM with us and they’re going to securitize those loans repackage them after six months and sell them in the — in the mutual fund space. So the whole idea is to, build a lot of — lot of traction with institutional customers, wealth customers, corporate customers and be sort of the leading player. And this is really our — this is really our edge we know this business extremely well so yes.

In short, we will be targeting the number INR700 to INR800 crores, in the next couple of years in terms of profitability in this segment. Also see broadly when you just look at we look at our franchise and what we are doing lot of investments in investment banking and the mortgage-lending business are already made. I mean these were anyway to largely built-out businesses for us and we’ll keep — we’ll keep adding people here. That’s most important, to get good talent is sometimes a challenge, you know considering market circumstances but I think with our brand we’re able to attract good-quality talent and here we are completely in a growth phase.

In our platform AWS business we are completely in investment phase, both physical, digital infrastructure and they’re going to aggressively keep building out. And in the alternative credit space which is basically our ARC, we are basically in recovery phase, growth has already restarted we’ve added almost INR600 crores of assets in the last six months. I must say that the asset pools available to be purchased at lower which also reflects that generally asset quality currently in India is in top shape, at least on the wholesale side, but we are seeing some retail portfolios. We bid for a few. We won a few, we lost a few. But having said that ARC is still in recovery phase. Our goal is that over the next 18 months we want to collect INR1,000 crores such that our net-debt our net-debt to equity is almost down to 0.5 level and by then again the asset addition would have started and post 2023 and ’24, we are again in a growth phase for the distress and alternative credit. So that’s the broad plan.

Investment bank, mortgage-lending, already in growth phase. Investments made, platform AWS in-full form investment phase building our infrastructure physical as well as digital and alternative credit in recovery phase and growth will restart in ’23-’24.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Can I squeeze in a couple of queries more or should I come back? Yeah, so basically when you say ARC because I remember there was something connected to that banks cannot buy in equities in the sold projects by the banks kind of a thing and which was the bottleneck for ARC like us, is that solved? I mean because I hear you that you are looking to grow again there was certain works [Speech Overlap]

Vishal Kampani — Non Executive Vice Chairman

What we are doing is banks — so we basically had no bank lending because. As per the Reserve Bank, I mean, banks have to, be very careful when they are lending to ERC [Phonetic] so — the ARC [Phonetic] especially who bought assets from them and then ARC [Phonetic] of our size where we have INR11,000 crores of assets, we have a relationship and we have bought something from every single bank in the country. So that’s okay what we’re doing is we are partnering. So we are partnering with lots of international funds and we are partnering with lot of Indian corporates. We are showing this to our wealth customers. So we’ll use the partnership model our contribution again will be restricted to between 15% and 20% and will use syndication efforts through our investment again syndicate the balance and make fees on the same. So yes our model will drift over the next three-four years to a more heavy, heavier fee-based model, compared to an investment net model which we’ve had over the last 10 to 12 years, but from a risk-adjusted basis having seen what I’ve seen in the last five years, I think we’ll be in a much better shape having almost a 50% fee led model and a 50% investment-led model as compared to, a 100% investment like model.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Sure and again on ARC [Phonetic] suppose if we have to understand because there was a lull period of two years so just theoretically if all the past assets gets cleared over the next two to three years. From a cash-flow perspective will it all lead to only INR1000 crores or INR1,000 crores is out of [Speech Overlap]

Vishal Kampani — Non Executive Vice Chairman

No, no, INR1,000 crores is just the target for the next 18 months. We have INR11,000 crores book in which we have already invested INR3,000 crores. So it is roughly — it is INR1,000 crores will be less than one-fourth or one-fifth of what we finally have to collect over the next three to four years. [Speech Overlap] Our total debt on the ARC currently is around INR2,500 crores. Our net-worth is roughly 80 grid [Phonetic]. So we want INR1,000 to come from collections so that we bring debt-equity under one. We don’t want to increase the ARC debt-equity more than 1 to 1.2 times and we want to correct this debt-equity by bringing cash flows. We also want to demonstrate to all our lenders that cash-flow is coming in and cash-flow has paid you down and that not that we are constantly refinancing our assets — our loans.

Dhruvesh Sanghvi — Prospero Tree — Analyst

So the kind of cash-flow that we are going to have, I don’t think will require any capital, even if our mortgage loan book or any type of loan book goes two to three times from here, is that understanding correct?

Vishal Kampani — Non Executive Vice Chairman

No. We are not interested in any form or dilution at least for the next four to five years.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Okay, is there any possibility of a buyback [Speech Overlap].

Vishal Kampani — Non Executive Vice Chairman

We don’t want to dilute. We have enough capital. We are well-capitalized. Our gross debt-equity is only 1.2 times. Our limits are allowed to more than three times. And last we are accreting net-worth of almost INR750 crores to INR800 crores last year, same number hopefully we do this year, maybe even more and definitely a larger number next year because there is a loan book growth. So simply if you look at our total network which is INR10,900 crores and we add even INR2000 crores of profit over the next say two years to two and half years we are talking about INR13,000 crores of net-worth. So INR13,000 crores of net-worth three times debt which we can take INR39,000 crores. So I don’t think we’re going to be at INR60,000 crores book in the next four years. So there is absolutely no need for equity.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Why don’t we look for some sort of a buyback?

Vishal Kampani — Non Executive Vice Chairman

Yeah, we can but I think we’ll pay more dividends, we’ve already announced the much higher interim dividend. The reason we are not doing a buyback is because, see many of our businesses may not require external capital, but we have a good decent amount of cushion of cash sitting in a holding company. This allows us to basically borrow at very-very fine rates in our NBFC because all the lenders, I’m very comfortable looking at our cash balance in the holding company, the rating agencies are very comfortable and I am very paranoid about my rating being double AA, in fact my goal is that over the next three to four years by rating has to go to AA plus. So I don’t want to reduce capital. I want to use the capital to grow and also improve my rating. So that is my clear focus and therefore we will pay higher dividends from profits. I don’t want to commit that we will do a buyback.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Sure thank you, I’ll get back in the queue.

Vishal Kampani — Non Executive Vice Chairman

As a promoter family, we accrete. I mean we’ve taken our holding in the last 18 months from almost 54.4% to 56% so whenever we get a chance we are accreting. So that’s another way of increasing our holding we don’t want to resort to things like buyback to do it. I mean that should be done only if it’s in the interest of all shareholders and not one shareholder.

Dhruvesh Sanghvi — Prospero Tree — Analyst

Sure, thanks. Thanks, thanks a lot and best regards.

Vishal Kampani — Non Executive Vice Chairman

Thank you.

Operator

Thank you. We have our next question from the line of Rajat Sethia from Idot [Phonetic]. Please go ahead.

Rajat Sethia — Idot — Analyst

Hi, thanks for the opportunity. Sir with regard to asset quality, on this DCCO book, under what categorization do we, are we holding these assets at the moment? Are these standardized or restructured?

Vishal Kampani — Non Executive Vice Chairman

No these are all restructured as DCCO but DCCO it is, not a typical COVID restructuring because it is already permitted under RBI rules that if there is a project which has faced delay outside of normal delay in terms of approvals or any material adverse event then you can provide a principal restructuring on the same. So to give you a clear perspective that before March 31st, 2020 JM Financial across its entire portfolio had 0 DCCO. Literally 0 DCCO. So our entire 19% of last year which is 13% today is because of COVID. And as I said that of that 13% I think almost 10% is on-track and we are very carefully watching around 3% and we’ll keep you keep watching it very carefully.

Rajat Sethia — Idot — Analyst

So sir, this is remaining in restructured category or there can be some regulatory overhang in terms of [Speech Overlap]

Vishal Kampani — Non Executive Vice Chairman

If this 3% were to slip. It slips into NPA. If it slips — it slips into NPA because it’s — the principal is due and the account has to service the principles. If it is not being able to service the principles there have no choice for it to qualify them as NPA. So either they get the active refinance because there’s enough of collateral and maybe it needs a six months-to one year for the maturity but we will not be able to provide it. So yes we either arrange the money from the market or he has to sell the to a competitor or somebody else or he has to do pre-sales for example if we I say 80 or 90 units, you should get an investor and just sell 30, 40 units off and pay us down. So there are multiple options available to developers in various accounts and it depends on what is more suitable to them, they will choose that option.

Rajat Sethia — Idot — Analyst

Sir what has been our LGD since that time we started lending?

Vishal Kampani — Non Executive Vice Chairman

So, I think overall LGDs have been low but there have been two or three fraud accounts where I think LGDs have been high. High would be anywhere between 30% to 40% and there have been there has been one account with the LGD was almost more than 50% where there was a big issue in the approval. This was earlier on almost, two years ago we already made provisions for it. It is also written-off from our books now and after that one incident, actually made a strengthened our entire assessment of approval. We thought were very good at doing this that, after these incidents to scan what we do in terms of approval assessment and how we make it stronger in terms of our assessments. And we’ve already gone through that process and I think we are in even better shape than they used to be on that account.

Rajat Sethia — Idot — Analyst

So if we have to look at the LGDs over a period of time, what has been — you have mentioned how it has been in some, other cases, how high it has been but on an average on [Indecipherable] history so-far…

Vishal Kampani — Non Executive Vice Chairman

On the good cases LGDs 0 literally 0 because. It’s just about getting time to find a buyer and once you find the buyer than I think most of the loan is fully recovered.

Rajat Sethia — Idot — Analyst

Okay understood and when it comes to provision coverage, our provisions have been coming down from probably 6.5% a year-earlier to start with…

Vishal Kampani — Non Executive Vice Chairman

Basically, our [Indecipherable] book has come down from 19 to 13, six has been refinanced. Right, so we obviously had created some more provisions on those books, so those provisions obviously has come off and incrementally when we see the new loans that we’ve added in the last year you were at the half. I think they are performing very well. Sales have been strong. There no real need to create further provisions. I think we’re at a healthy 4% and I think that’s good.

Rajat Sethia — Idot — Analyst

Okay, understood. Thank you sir, — just sorry just one more thing what has been our — what is our aspiration to grow our overall loan book in the next two-three years?

Vishal Kampani — Non Executive Vice Chairman

Yes so. I think we’ve given that target out core, our retail home loans FY ’24 being 3,000 wholesale being around 12,000. And on the investment bank side, I think we are giving more of an earnings growth target than our ROE target but I think we can safely assume that the book there will not slip below 4,000 in terms of bespoke lending where it is today and I think on the FI [Phonetic] side, we are currently at close to INR1,000 crores. I think we should be growing at least 4x, 3x to 4x in the next, three years.

Rajat Sethia — Idot — Analyst

For 4,000 and then 3,000 here and then another 4,000 bespoke and wholesale…

Vishal Kampani — Non Executive Vice Chairman

[Speech Overlap] 15 plus 6 another plus another 4,000 so INR25,000 crores will be our target by FY ’25.

Rajat Sethia — Idot — Analyst

Okay all right thank you so much.

Vishal Kampani — Non Executive Vice Chairman

Thank you.

Operator

Thank you. We have our next question from the line of Anuj Sharma from M3 Investment. Please go ahead.

Anuj Sharma — M3 Investments — Analyst

Yeah thank you for this opportunity. Just a question on based on our portfolio, what is the pricing assumptions we are making the wholesale portfolio in terms of primary realization movement over the next two to three years?

Vishal Kampani — Non Executive Vice Chairman

Sorry, pricing in terms of — we will generate.

Anuj Sharma — M3 Investments — Analyst

No-no the end End-User realization change. So let’s suppose from the wholesalers…

Vishal Kampani — Non Executive Vice Chairman

We don’t assume any increase in pricing when we model our portfolios. As you have noticed prices to be flat over a 3-year period.

Anuj Sharma — M3 Investments — Analyst

Alright. But what is the expectation so I understand we’re not building into the model but what is the expectation…

Vishal Kampani — Non Executive Vice Chairman

Right now, right now frankly expectation also is flat because. I don’t think people have realized what the impact on EMI’s is going to be with the increase in-home loan rates today. So I think it’s difficult to imagine a scenario where next year real-estate prices will be higher than this year, but next year the interest-rate scenario may be very-very different so. I think we’ll have more clarity over the next six months-to a year.

Anuj Sharma — M3 Investments — Analyst

Alright, alright, my second question is based on the pipeline could you just give some color on the top two or three cities based on the outlook in real-estate?

Vishal Kampani — Non Executive Vice Chairman

Yeah. I think Bangalore will be number-one. Hyderabad will see a significant pick-up over the next one-one and a half years. Chennai will be flattish. Mumbai will be flattish and we’ll see some more pickup in NCLs [Phonetic].

Anuj Sharma — M3 Investments — Analyst

Alright that’s helpful. Thank you so much.

Vishal Kampani — Non Executive Vice Chairman

Thank you.

Operator

Thank you. We have our next question from the line of [Indecipherable]. Please go ahead. Mr. Vivek Kumar, we’ve lost his connection. We’ll take the next question from the line of [Indecipherable] from Gladstone Investments. Please go ahead.

Unidentified Participant — — Analyst

Now can you hear me?

Operator

Yes.

Unidentified Participant — — Analyst

Yeah, just two questions on JM Credit Solutions, so what we see is there is unsecured loan book of 4.1%. Can you explain the nature of these loans as it wasn’t there in Q1 ’23 — Q1 FY ’23.

Vishal Kampani — Non Executive Vice Chairman

Yeah, so this is extremely high-quality borrower. And it’s not strictly unsecured but from a regulatory perspective it is classified as unsecured because the primary collateral here is unlisted shares of the company but it’s a very-very high-quality borrower, I cannot share the name, unfortunately. Many of our borrowers have requested us now to stop sharing names and giving data on, how much money we have given to whom.

Unidentified Participant — — Analyst

Alright, and despite strong growth in JM Credit Solution, the GNPA has moved up. So how consolidated are these nonperforming assets and what is the outlook or resolution plan here?

Vishal Kampani — Non Executive Vice Chairman

Yeah, this is all the slippages from SMA 2 to gross NPA. In fact had highlighted the same in by March call that we would be expecting some amount of movement as our DCCO book matures. And we are very well aware of all the gaps. We already are resolution team fully focused on making sure that we can address many of these increases coming from our SMA book. So the earlier — earlier stress that I’ve said the 19%, 6% of that stress is already out of our books and the team has done a great job in making sure that we were refinanced, sales were strong that’s because we paid. So as I explained that the balance 13%, 10% is under control and 3% is sort of under watch-list.

Unidentified Participant — — Analyst

That is helpful. Thank you that is it from my side.

Vishal Kampani — Non Executive Vice Chairman

Thank you.

Operator

Thank you. We have a next question from the line of Manoj Dua from Geometric Securities and advisory. Please go ahead.

Manoj Dua — Geometric Securities & advisory — Analyst

Good evening sir. As you said the borrower and wholesale have become better-quality and that’s why the yield is down. Now as a process because the borrower is strong can we go more higher debt-equity in this on a longer period not in particular one or two what if can you give some color on that?

Vishal Kampani — Non Executive Vice Chairman

Yeah, know you’re absolutely right and that is the intention. I think the debt-equity level that you’re seeing — that you have seen in the last two years which have been around 1x, I think is history. I think now almost every quarter, you will be seeing an upward movement in debt-equity ratios because, they’re growing the book. We don’t need equity capital. We are very well sort of capitalized. So I think almost every quarter every six months you will see an increase in debt-equity.

Manoj Dua — Geometric Securities & advisory — Analyst

And what is the opportunity size for it — it looks huge. Are you excited seeing that bespoke on investment banking in this wholesale mortgage?

Vishal Kampani — Non Executive Vice Chairman

No, no absolutely in fact. The — I’m actually excited about each and every business that we have. I think we build absolutely franchise businesses we have great team, great people. And particularly in the mortgage-lending both wholesale-retail, Platform AWS as well as the investment bank. I think the opportunity over the next year year and a half-two years is just superb but even the longer-term opportunity is fantastic, but having said that you know lending is always a tricky business. One has to consider risk first. There will be a quarter or two in the next say 10 quarters that we don’t grow or we don’t like the risk and we want to basically go slower that’s the nature and sort of philosophy at JM. But from a longer-term horizon we are very-very excited. Even on our ERP business we want to make sure that we recover another INR1,000 crores over the next 18 months and once we do that hopefully we’ll be able to, even bring that business back on the growth track.

Manoj Dua — Geometric Securities & advisory — Analyst

Okay, my last question. So, who knows equity market better than you. I’m a shareholder for last six-seven years. So INR800 crores profit can be seen investment banking, debt-equity is low in wholesale which can grow up, AWS excited, why is market is asking something. I know market can be inefficient for some period but that much disparity and that from a much longer time what do you seen it? And anyway we have ruled the buyback because — with rightly so because of rating. What do you — what the market is telling which we are not able to understand? You might be able to [Indecipherable] and give some color into it.

Vishal Kampani — Non Executive Vice Chairman

I think — I think the common the common feedback we do get is that our structure is a bit complicated because we have two businesses where we have large minority shareholders. So I do get questions from institutional investors and what is your plans, how are you going to deal with these minorities, are you going to list these companies, is there going to be a further holding company discount.

Second when we talk to a couple of analysts we have two or three very smart analysts who understand the business and I thank them for taking the pain to have gone through the complexity of our businesses and to understand them but because of the nature of four diverse businesses under one roof, it’s also becoming a little bit of a pain to get analyst to write and appreciate and understand the business so. We have thought about it it’s been discussed informally at management or at a board level that should we do a demerger at some point in time between some of our lending businesses and our fee-based businesses, should we segregate out the mortgage-lending into a separate unit. And we are very conscious and aware of this. It’s just that the timing to do it today is not right. Right now the whole organization is focused on growth. Let’s get to that, INR20,000 crore, INR25,000 crore number, let’s get to a INR1,500 crores profit before-tax. And once you see larger sizes in each of these units, I think we definitely can, think about whether we do a demerger or not to simplify the business and I think that will be very highly rewarding for shareholders.

Manoj Dua — Geometric Securities & advisory — Analyst

So I would be very naive to suggest something because you know leasing better. I think if we can have some are able to create predictability of the growth of some way, these analyst will like to understand the complexing also. They do so much complexity which you won’t believe you also know that. So can you create some element of predictability of growth if our capital market business in India growing capital market because business you can show that it might not be there as volatile as you think as a mortgage was the reason somewhere can we have a predictability creation so that market, [Speech Overlap] I am sorry if I have done that wrong way.

Vishal Kampani — Non Executive Vice Chairman

No, no not at all. I think if you see — if you see for example Page 18 on our presentation deck right, it will tell you that most people always told me couple of years back that your investment banking and never have a predictable business. If you see we literally are if a profit before-tax last four quarters is between INR120 crores and INR130 crores right. This is our ROA and ROE right. I mean, — I mean of course quarter two FY ’22 was exceptional but generally we’ve maintained 5% to 6% ROA is 16% to 17% ROE right, and this is the way we mix the business the way we put it together is not because of earning. We’ve actually put these businesses together to be able to serve the institutional high-net worth and corporate customer in the best way possible, but we are seeing the reward also in the numbers, right. Again if you look at our mortgage-lending business right for almost 2007 – 2008 to when we started it all the way till ILFS for almost 11 years, we seen secular growth. It’s just the events of ILFS and rapidly followed by COVID were like — for India, they were ILFS was once in a 30-year timeline the last time NBFCs blew up was ’96 and ’97 right, so literally it happened after 30 years — 20 years and COVID is a once in a 100-year history. So I think if we look at our mortgage-lending business is going to be back on-track. You’re going to see secular growth of almost 15% to 20% for a significant period of time in that.

Platform AWS we are we are investing it’s not that — I mean if you don’t invest it will still grow at 10% to 15%. The reason we are investing is, we want to grow at 30%, 35%. We see the opportunity being so big and we want to make sure that JM Financials brand-name and franchise gets its view in the next six to eight years in that business, so it’s really a longer-term horizon from where we are investing. And our ARC business, I mean this is a business of distressed credit. If you put it through ILFS and COVID it is bound to get hurt, right. I mean the value of a distressed asset in stress times goes down even further and therefore rightly so as management, we decided we want to focus on recovery for this year. We want to make sure that we’re not just adding assets and forgetting about where we have to collect. So let’s focus on collection and a time will come back to regrow. So barring that the other three are already in flat for growth.

I mean, revenue growth in platform AWS, will be very-very visible in the next three to four years even if you don’t see profitability growing because we are investing.

Manoj Dua — Geometric Securities & advisory — Analyst

Great. Maybe one-year out-of-the policy hereafter things are still not where we should ask question how we can do things differently maybe in some way or another, in terms of creating buyback or something have some respectable multiple [Phonetic]. Thank you and best of luck.

Vishal Kampani — Non Executive Vice Chairman

I agree.

Operator

Thank you. Ladies and gentlemen due to time constraints that was the last question for today. I would now like to hand the conference over to Mr. Vishal Kampani for closing comments. Over to you sir.

Vishal Kampani — Non Executive Vice Chairman

Thank you very much all of you for taking the time regarding our quarterly and half-yearly results call for FY ’23. If you have any further questions please reach-out to our IR and Finance team. We will be very happy to answer those questions. Thank you again.

Operator

[Operator Closing Remarks]

Duration: ?? minutes