Piramal Enterprises Ltd (PEL) Q1 FY23 Earnings Concall Transcript

Piramal Enterprises Ltd (NSE:PEL) Q1 FY23 Earnings Concall dated Jul. 29, 2022

Corporate Participants:

Hitesh Dhaddha — Chief Investor Relations Officer

Ajay Piramal — Chairman

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd

Vivek Valsaraj — President & Chief Financial Officer

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

 

Analysts:

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Prakash Agarwal — Axis Capital Limited — Analyst

Prasheel Shah — CapGrow Capital Advisors LLP — Analyst

Vivek Agarwal — Citigroup Inc. — Analyst

Abhijit Tibrewal — Motilal Oswal Financial Services Limited — Analyst

Kunal Shah — ICICI Securities — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Piran Engineer — CLSA Ltd. — Analyst

Deepak Gupta — SBI Pension Funds — Analyst

Abhiram Iyer — Deutsche Bank — Analyst

Nischint Chawathe — Kotak Securities — Analyst

Aditya Jain — Citigroup — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Piramal Enterprises Limited Q1 and FY ’23 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded.

I’ll now hand the conference over to Mr. Hitesh Dhaddha, Chief Investor Relations Officer from Piramal Enterprises Limited. Thank you, and over to you, sir.

Hitesh Dhaddha — Chief Investor Relations Officer

Thank you, everyone. Good evening. Hope you’re safe and in best of your health. I’m pleased to welcome you all to this conference call to discuss Q1 FY ’23 results. Results materials have been uploaded on our website and you may like to download and refer them during our discussion. The discussion today may include some forward-looking statements and these must be viewed in conjunction with the risks that our businesses face.

On the call today with us, we have our Chairman, Mr. Ajay Piramal; Ms. Nandini Piramal, Executive Director, Piramal Enterprises, and Chairperson, Piramal Pharma; Khushru Jijina, Executive Director, Financial Services, PEL; Sir Jairam Sridharan, MD, Piramal Capital and Housing Finance; and Mr. Vivek Valsaraj, CFO of our company.

With that, I would like to hand it over to our Chairman, and I would request him to share his initial thoughts. Thank you.

Ajay Piramal — Chairman

Good day. I really appreciate that all of you have joined us today. I know that today seems to be the busiest day for all meetings and there are several meetings going on simultaneously, so what I’m going to do is to make a very, very brief statement and I will leave much more time for you all to ask questions and for us to respond to them. However, if there’s any more that you want, please don’t hesitate to ask that.

For our performance for the first quarter, revenues have grown by 22% over the previous year in the same quarter and now stand at INR3,548 crores. In this financial services grew by 33% year-on-year and pharma revenues have grown by 9%. Our net profit stands at INR486 crores for this quarter.

The main thing this quarter is that over the last few quarters, we’ve taken several measures to prepare both our pharma and financial services businesses to emerge as two separate listed entities. In the first quarter of the current year, we made further progress towards achieving this goal. We have received consent from RBI, SEBI, and the stock exchanges earlier in the year. In July, we received clearance from our shareholders and creditors, and earlier this week, we also received the RBI approval for the NBFC license for PEL. We are now on track and the new merger and listing of Piramal Pharma is expected to get completed by the third quarter of this year subject to of course the few remaining approvals.

Also, as we are moving towards two separate listed entities, we have been enhancing our disclosure both in financial services and pharma businesses over the last few quarters. In financial services, you might recall that we had categorized the transformation journey of our business into three phases. This completed Phase I and II of this transformation journey. We stated during the last quarter that this journey has achieved a major portfolio transition as well as significant growth through the acquisition of DHFL. Our AUM grew 37% year-on-year to INR64,590 crores with retail AUM growing 4.3 times year-on-year to a high of INR22,267 crores. Our — the share of retail loans has also increased to 37% from 12% as of June 2021.

As part of our transformation journey, we’ve also hired key top-quality senior talent to ensure that we have a best-in-class team to help us build a large diversified financial services company. We have Mr. Jairam Sridharan, Mr. Rupen Jhaveri, Kalpesh Kikani, Yesh Nadkarni, Upma Goel, all with rich experience in the areas of specialization joining us. Mr. Khushru Jijina has retired from our company but will continue as a senior advisor to our group.

The Phase III of our transformation journey now begins. We have put in place all the appropriate levers to improve improved performance in the future, and this has started reflecting in the operating performance of our business during the quarter. I am not going to speak a lot about the businesses whether retail or wholesale and we’ll be happy to answer any questions that you have. I would like to just cover the pharma business.

The pharma business grew 9% delivering revenues of INR14,085 crores, while India Consumer Healthcare and Complex Hospital Generics businesses grew 17% and 9 — and 10% year-on-year, the CDMO business delivered a moderate growth of 6% — of 8% year-on-year due to some execution-related challenges and changes in order delivery schedule. This was broadly delivered in line with EBITDA margin at 11% during the first quarter versus 12% in the same quarter last year despite moderate growth in our CDMO business and increase in the raw materials, packaging materials, and operating costs. As we have mentioned earlier, the nature of our pharma business is such that we generate significant part of our profit in the second half of the financial year. Last year, the second half contributed to nearly 70% of our profitability.

With this, I am going to now leave the floor open to your questions, and we’ll address them, and any other issue that you have. But, in conclusion, I would like to just say that with a strong balance sheet, the uniqueness of business models, and focus of our teams on delivering towards our strategic priorities, I believe that both the emerging listed financial services and pharma companies are well-positioned to create long-term value for our shareholders. Thank you.

Questions and Answers:

 

Operator

Thank you very much, sir. [Operator Instructions] The first question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Thanks for the opportunity, sir. Firstly, on the overall pharma, typically, I mean could you share the overall revenue guidance for next two years. If you could share the similar number for FY ’23, ’24?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Tushar, considering the current volatility and [Technical Issues]

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Hello?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Sorry. Tushar?

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Yeah.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So, Tushar, considering the overall volatility in the situation, and as we have mentioned that there are certain execution issues also which we need to fix, we are in the process of revisiting this, and at this point in time, we would not like to give a guidance for FY ’23.

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Okay. Secondly, again, on the CDMO side, with the inauguration of API plan or upgradation of oral solid — am I audible?

Operator

I’m so sorry to interrupt, but your voice is a little muffled, sir. If you can take…

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Is it better now?

Operator

Yes, yes.

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

So considering the new API plant in Canada, where the initial production run has already started, and upgrading of oral solid dosage capabilities, what kind of asset run and what can be expected from these facilities?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So the investment that we have done in our CDMO facility at Canada has given us about 35% additional capacity, whereas we’ve got about 1.8 billion tablet capacity at our facility in Pithampur. So both of them have been augmented keeping in mind the kind of requirements that the customer has, and we expect that over the next couple of years, we should be able to adequately utilize these capacities.

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Understood. And just lastly, there has been good number of projects in the Phase III, particularly in the CDMO, so is there any kind of outlook by the customers to build out product for the commercial part while typically in the development phase, the capacity required is very small, but as the product advances on the commercial side, so is there any kind of orders will give the confidence of extending the development work to commercial manufacturing?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So — it’s an ongoing process and the kind of capacity expansion that we are doing now as well as what we proposed to do in FY ’24 is keeping in mind what could be some of these requirements that come up. So as you are aware that we are doing investments at most of our facilities, which offer these kind of niche capabilities and that’s kind of keeping in mind the customer’s requirement. So, yes, while it’s difficult to put a number to it, we have kind of augmented capacities to be able to serve it as and when required.

Tushar Manudhane — Motilal Oswal Financial Services Limited — Analyst

Sure, sir. Thank you. Thank you, that helps.

Operator

Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.

Prakash Agarwal — Axis Capital Limited — Analyst

Yeah. Hi. On the pharma side, again. I understand last time you gave some revenue guidance of mid-teens-to-high teens but margin guidance, given volatility, you had avoided. Would that be correct or are you thinking about it?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So, as I mentioned, the situation is a bit volatile, and given the tough start that we have had to our CDMO business, we are reassessing. There are few things that we need to fix, and therefore, at this point in time, we’re not really giving a guidance for FY ’23. But having said that, our long-term guidance still remains as we have maintained, and there is no change from a long-term guidance standpoint. For the short-term guidance, we will be sure to come back later.

Prakash Agarwal — Axis Capital Limited — Analyst

Understand. But if you could give more color like what are the issues you’re facing at CDMO, is it supply chain, is it renegotiating contracts, suppliers, or buyers? I mean just some color would have helped.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So there are a few issues but I’ll highlight the ones which are more pertinent. As you are aware, during the pandemic, we had significant attrition at our overseas sites. Being able to get the talent, fill up these vacancies, and train those employees and get them productive takes some time. And these are like, mind you, critical positions which are required for day-to-day operations, so we are in the process of staffing and training our people.

And second is some of our customers also changed the phasing. So what was supposed to be delivered in quarter one, they requested that to be pushed out into the subsequent quarters within the financial year. So both of these have been the most pertinent reasons for us to kind of have some challenges in executing versus our plan.

Prakash Agarwal — Axis Capital Limited — Analyst

Understood. [Technical Issues] With attrition, there was one more product, which was due for U.S. FDA approval. Where are we in that?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Are you referring to Desflurane?

Prakash Agarwal — Axis Capital Limited — Analyst

Yes.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So, no. As of now, the status remains the same. We don’t have an approval yet. While we have launched in the other markets, the situation is the same as far as U.S. is concerned.

Prakash Agarwal — Axis Capital Limited — Analyst

But we were expecting in calendar ’22 or ’23?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

No, it’s difficult to say that actually.

Prakash Agarwal — Axis Capital Limited — Analyst

Okay. No worries. Thank you. I’ll join the queue.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

It wouldn’t be coming in this year at least. I don’t think it will be coming this year.

Operator

Thank you. [Operator Instructions] The next question is from the line of Prasheel Shah from CapGrow Capital. Please go ahead.

Prasheel Shah — CapGrow Capital Advisors LLP — Analyst

Hi. So in the previous quarter, we had moved some non-real estate exposures to Stage-2 about INR2,300 crores, and in this quarter, there were some slippages from Stage-2 to Stage-3. So are we talking about the same account or there is still some stress left in that Stage-2 which was moved, sorry, ones which have moved a stage during the recent quarter.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

There is only one account that has moved to Stage-3 during the course of this quarter. There were a few accounts that moved to Stage-2 in the last quarter and one of them happens to be this.

Prasheel Shah — CapGrow Capital Advisors LLP — Analyst

So it’s left for Stage-3 this time or?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yes.

Prasheel Shah — CapGrow Capital Advisors LLP — Analyst

Okay. Fine. And on the retail business that we have disclosed this time about INR2,500 crores. So what would be our focus amongst these four to five business segments? What would be our focus three years down the line? What products are we mainly banking on to grow in three years? What would be our NIMs and what people are you guys targeting?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Okay. A few different questions there. See, our core business in retail is the — or the anchor products are going to be housing and MSME lending, particularly, secured MSME lending. So those are going to be our two anchor products. So you should expect, from a book composition perspective, housing to be maybe a little under 40% at the overall FS level, and MSME to be a little under a quarter of the book. So that — those are going to be the big anchor product. Then there is there going to be a category of products, which are unsecured in nature, right? And there’ll be three or four different form factors there. It could be digital unsecured, embedded finance type stuff, it could be personal loans, which is branch distributed, it could be micro-finance, it could be a few other form factors, but unsecured lending. We should expect that to be a little over 20% of the book in the in the India and state.

Operator

We request all the participants to please stay connected while we reconnect the management. Ladies and gentlemen, the line for the management is reconnected. Over to you, sir.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Hi. Apologies for that technical glitch. So I hope you heard the answer that I was talking about. Portfolio composition, 45-ish percent, housing, 20% to 25% MSME, about 20-ish percent unsecured, and whatever is left will be the other secured lending product. So that’s the composition that we are targeting. Overall at an FS level, we believe the kind of business that we are building, two-third retail, one-third wholesale, a multi-product retail with the composition that we just spoke about, etc., this type of business we believe should be able to deliver a high 2s low 3s kind of ROA. So that’s where I’ll leave it instead of going into individual line items or the key problem.

Prasheel Shah — CapGrow Capital Advisors LLP — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Vivek Agarwal from Citigroup. Please go ahead.

Vivek Agarwal — Citigroup Inc. — Analyst

Yeah. Thank you for the opportunity. Although you don’t give any revenue guidance, but is it possible for you to share any color on the investment plans, especially in the CDMO and injectable space over the couple of years?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Sorry. The question was regarding the CapEx investments in the business?

Vivek Agarwal — Citigroup Inc. — Analyst

Yeah. Yes, yes.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah.

Vivek Agarwal — Citigroup Inc. — Analyst

So what is the overall CapEx that you’re planning over the next couple of years and in which areas actually if you can clarify? Thank you.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So our investment plan for FY ’23 and FY ’24 is about $200 million per annum. So in the mid-term, we are stepping up our investments to create capacity. This includes expansion of our high potent API capacities at Grangemouth — sorry, our antibody-drug candidate capacities at Grangemouth, high potent API capacities at Riverview, and we are also looking at increasing capacities for our API facilities in India, and for our potent injectables at Lexington.

Vivek Agarwal — Citigroup Inc. — Analyst

Okay. And this is overall $400 million you’re planning over the next couple of years.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Correct.

Vivek Agarwal — Citigroup Inc. — Analyst

Okay. Thank you. And, sir, on the Desflurane, is widely talked about product, but would you like to share the number of new product introduction in the injectable space for the next year, for next — for FY ’22 and FY ’24.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah. We have indicated a pipeline of about 40 products. It’s there on the presentation in terms of the various stages at which they are. You can — please refer to Page number 45, the details are there.

Vivek Agarwal — Citigroup Inc. — Analyst

Okay. Perfect. So that I will do. And finally, sir, one thing I just want to understand. Why the revenues in CDMO space are relatively more skewed towards second half, if you can clarify? Thank you.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So it’s slightly difficult to put a finger as to exactly why they’re skewed towards second half. There are multiple reasons. It depends upon the overall phasing of the customers’ requirements, which has been over a period of time, and also the kind of time period required to kind of being able to from the time you receive the order to be able to deliver, it gets skewed towards the second half. So it’s just the way the orders have been historically.

Vivek Agarwal — Citigroup Inc. — Analyst

Thank you, and best of luck.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal Financial Services Limited — Analyst

Yes. Thank you for taking my questions. So just wanted to understand, I mean I think in this quarter, we have kind of reported that we have launched the MFI business to the BC model. Not sure if you had kind of in the past suggested that we’re looking to enter the MFI segment, so just trying to understand what are the newer product lines that you’re kind of looking to enter because I’m not sure but kind of somewhere I kind of heard from someone that we have also entered into gold financing now through a partnership a gold lending fintech. So what are other product lines that you’re looking to enter?

And other related question here is, I mean, are we not kind of trying to spread ourselves too thin too fast into newer product lines for I mean over 20% of the book that we’ve talked about, digital embedded finance, personal loans, MFI, and some of the other unsecured lending products? So that is my first question.

Then second question is more on this wholesale account, which you’ve suggested had moved from Stage-2 to Stage-3. If you kind of just give some color what was the quantum, what was the nature of the account, and what kind of led to the slippage from Stage-2 to Stage-3? And, lastly, on this wholesale lending 2.0 strategy, I mean I don’t know, I mean in our wholesale lending 1.0 strategy, I mean we kind of clearly acknowledge that perhaps, I mean it was not in the best interest of the company and which is why we kind of decided to run it down and decided to make the book a whole lot more granular. Now that we are again kind of building on a wholesale piece, understandably in mid-market, residential products, much lower ticket sizes, do we have the confidence that this time around the wholesale lending will be much, much better than what we did in the wholesale lending 1.0? So those are the three questions. Thank you so much.

Vivek Agarwal — Citigroup Inc. — Analyst

All right. Thank you, Abhijit, for your questions. Your first one was around product strategy in retail. The intent, Abhijit, very much is to build a diversified portfolio in retail. Our belief is that through the cycle for you to build a resilient book which can perform well across various risk cycles, it is important to have adequate developed diversification. Portfolios that are dominated by a single product, we believe are going to be more fragile through the economic cycle, and hence we have been quite clear that we will continue to build a diversified book.

Now, we are still at a stage where we will experiment with a lot of different products. You mentioned gold, for example, is at a very low key-experimental level. I won’t actually talk very much about it. We’ve barely done INR1 crore of business in that partnership. So it’s — we will try a bunch of different things, see which has adequate traction in the market, and just scale on those things. Micro-finance we felt good about the pillars that we were getting in the market and how our early experiment panned out. So we are scaling that, and hence, we’ve made that announcement during the course of this quarter that we are committing to that business now and are moving forward.

In terms of what next. The other big business, which we have chosen to commit to, we haven’t actually started the business yet, so you should expect to hear about it next quarter is the branch-led personal loan business, so unsecured salaried segment lending done out of our branches. That’s the other business that you should expect to see.

Apart from that, we don’t have any major plans through the rest of the year. There are a few different experiments. You spoke about gold. Yes, that is something that we are experimenting with. We will experiment a little bit with loan against securities, etc., but those will be very, very low scale, just for us to learn something so that we know whether they are worth building out in the coming year. So that’s to your first question.

Your other sort of question one B, which was around execution risk of trying to do a lot of different products at the same time. And this is a very good point, Abhijit, and it’s a really good risk to keep in mind, and we are super aware of the fact that execution on multiple product lines is not easy. It requires specialized skills, etc. Thankfully, we have a fairly strong team with a very broad set of experiences and once something clears our experimental hurdle, then we are willing to commit to it by getting industry experts in and hiring the right people who will be able to lead some of these businesses.

And as you’ve seen over the last year and a half, as we started MSME lending first and then used car financing and now micro-finance, etc., while it seems like a lot is going on but essentially, we are launching one major product every six months or thereabouts. So I think that pace is the pace that we can take from an execution-risk standpoint and we feel pretty comfortable with growing that out.

Your set — the next set of questions you had was about the account that moved from Stage-2 to Stage-3 on the wholesale book. You might recall that there were some challenges that we have been facing in the non-real estate wholesale portfolio. It was 13% of our portfolio last quarter. It is now at about 12% of our portfolio but one of the accounts in there was this quarter kind of migrated down to Stage-3. The ticket size of the account was low INR100 kind of crores, so that was the size of the account that moved. Not much more to say. Like it’s — non-real estate account has been facing payment challenges. The account continue to age at first stage, then into Stage-2, and then it aged further into Stage-3 as it went past 90 days.

There was one other question, last question.

Abhijit Tibrewal — Motilal Oswal Financial Services Limited — Analyst

One on the wholesale lending 2.0.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah, wholesale 2.0. See, the — again, good question on execution ability and confidence on executing it well. As you have seen so far, under wholesale 2.0, there are two parts to it. The real estate part where we have not yet done disbursements. We are at the stage where we’re evaluating about INR600-odd crores of — worth of deals. We will see when we make our first disbursements, etc., then there is this mid-market stuff which is very low ticket size, like INR50-odd crores kind of ticket size business where we have over the last six, nine months disbursed total of about INR650 crores.

So as you can see, we have been very slow and deliberate about the way we are building this. We are not going to rush into this. You’re not going to see disbursed thousands of crores all in a hurry. We are — we recognize that the business that we are attempting is different in nature than what we have built in the past and hence requires different muscle. Internally, from an organization structure perspective as well, we have built a different op-structure where we have moved to a more traditional lending-type architecture where we have separation of coverage team and credit team and we an oversight from our own team on top. So the so-called three pairs of eyes type of architecture for underwriting as opposed to the two pairs of eyes architecture that we have had in the past, right? So that op-structure also need some time to get adjusted and settle in. So we recognize that all this takes time and we are no hurry, so we will be very careful and very deliberate and we will keep looking at signals from the market in terms of how the strategy is panning out before we hit on the accelerator too hard.

Abhijit Tibrewal — Motilal Oswal Financial Services Limited — Analyst

Thank you, Jairam. This is very, very useful. And if I could squeeze in just one last question. Are we in a position to kind of now answer whether all these unsecured loan portfolio that we are building, will it be housed in the listed NBFC values? Will you see any…

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah. You will see a significant part of it being housed in the listed NBFC, not all of it. Remember that regulatorily, the housing finance company, which is the subsidiary, has to predominantly house assets which are related to residential housing. So we will stick to the commitments that we have made to the regulator in terms of portfolio composition in NBFC versus HFC.

Abhijit Tibrewal — Motilal Oswal Financial Services Limited — Analyst

Thank you so much. This is very, very useful, Jairam, and wish you the very best for the coming quarter. Thank you so much.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Thank you. Abhijit.

Operator

Thank you. [Operator Instructions] The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Kunal Shah — ICICI Securities — Analyst

Yeah. Hi, sir. So, firstly, with respect to this provisioning. So again on Stage-2 assets, there is some provisioning, which is done of almost INR300-odd crores and I think maybe from the slippage as far as CapEx is concerned, maybe there we had done 40 — 54-odd percent, 55-odd percent provisioning of the new slippage. So last time, I think you highlighted that at least this 5.7% seems to be quite comfortable and there might not be too much of a need, but in fact, now we are still seeing almost INR260-odd crore, INR270-odd crores incremental stage or ECL provisioning, which is being there. So just wanted to understand what goes into this and what is the kind of further risk, which we are seeing wherein there could be a more provisioning which will flow through.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Right. So, Kunal, this is not coming out of any significant portfolio review or anything like that. The way to think about this now, Kunal, is that the big kind of revaluation, one kind of relook at the portfolio in a post-COVID context was what we did last quarter. You saw the impact of that, and after that, as now a lot of the clients are — have all sort of come out of either restructuring or whatever ECLGS they might have had with other lenders, etc., and now the situation is becoming a lot clearer in terms of what the different clients’ financial position is, and based on that, if we see some natural aging, you will see that getting reflected. You will see that getting reflected in Stage-2 and further kind of if the aging doesn’t stop, you will see the reflected into LPSO. So think of that as sort of a flow of stress if I may. On the pool, this is not a one-off revaluation type exercise.

You might have noticed, Kunal, that this quarter in terms of our disclosures, if you look at our presentation on Page 34, we have made — we have disclosed a new kind of — a way of looking at our provisions numbers. You’ll see that we have shown our trailing 12-month credit cost as a metric and how it has trended over the last eight, nine quarters, and if you — 10 quarters, and if you look at that, you will see that in the calendar year ’21, our credit costs kind of were slightly south of INR0, right?

And what you’ve started seeing these last two quarters is that it’s sort of like a trailing 12-month credit cost, which is in that sort of 1.5% to 2% kind of range, not nearly at the level that it wasn’t in calendar year ’20 but not the sort of negative number that it was in ’21. We will see how this goes and we’ll see the financial health of our clients every quarter in terms of their ability to pay. You might have also noticed hopefully that we have given a lot of granularity in terms of disclosures of our wholesale portfolio. And if you have not, I’d encourage you to take a look at Slides 22 and 23 on our presentation, where we have disclosed a lot of information about what the original portfolio looks like.

Our intent here, Kunal, is to show all the information to the investing public and allow you to make your own judgment calls about what the implied health of the portfolio might look like. We are not offering any specific forward guidance on credit cost, etc., but through some of these new disclosures that we have added, hopefully, that will give you a good sense of where — how the portfolio positioned.

Kunal Shah — ICICI Securities — Analyst

Sure. Yeah. So it was just on debt plan and wanted to ask a follow-up question on that. In terms of when we look at this early stage projects, almost like 24-odd percent exposure, and even mid-stage, another 18-odd percent, and when we look at it in terms of the bullet payment maturity almost like 16-odd percent, what are the risks, which are there with this project, okay?

So last time also, we said like okay, we have re-evaluated, and then there was some further provisioning. Again, this time it is there. So are we done with the exercise, or maybe this is going to continue and we should see some flow-through in terms of the further provisioning? I understand in terms of the steady state credit cost and that chart which you have shown, that it will not — definitely not be a negative or low but overall behavior of the wholesale, are there risk coming out eventually?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So we had said this, Kunal, is that the residential housing market has — went through some challenges around COVID. Now, some of those challenges are over but some of the projects in which one might have exposure, power projects that are launched pre-COVID, and you know how consumer mindset works nowadays. Right now, sales are not happening at the consumer end in early stages at all. Sales are happening when the project is kind of well on its way to completion and the consumer can actually see the property. So the consumer behavior has changed and we’re also watching our sort of developer portfolio as well as all our other portfolios very closely to see what impact it has in terms of their repayment to us.

You rightly pointed out the 24% early stage, the 16% kind of — if you look at it differently, 16%, and bullet payments, etc., those are all pockets that are pockets of vulnerability and we are watching it just as closely in terms of what might come in. So we will let you know as and when things develop. There is no one-off revaluation exercise that we are planning on taking up if that’s something that you’re thinking about. And I’m inviting Mr. Jijina to add to this as well.

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd.

Yeah, a couple of points here. I think in early stage itself, let us define early stage. Out of that, the 24% and 16% is actually under construction, but they are early stage, but they are under construction, that’s number one.

The second thing about your question was on the provisioning, which I would like to answer it a little differently. What is happening is that in real estate and business — well, let me attempt, I had done it before also for the same question. While we have already done the entire eval last year, last quarter, what will happen in real estate is that there is value at the end when you complete the project, but in between, like you look at the additional provisions this time in Stage-2. Why do we do that? Because sometimes, if you have to enforce or if you have to take some action to get the project off and away from the developer, we may have to take it to Stage-2 or even to Stage-3 to ensure that we take over the asset and complete the project.

So let’s differentiate between what will happen quarter on quarter. Yes, there could be a case again in future while on an overall health of the portfolio, we can confirm that after we have done the re-eval, and especially for the non-real estate, which happened in March, there shouldn’t be any surprises in future. But if we have to ensure that we recover our money in the real estate project, and if you have to enforce, even if you have to take into Stage-3 temporary before we get our money back, we will do so.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

One comment if I may add on that on a sort of taking a slightly different angle, Kunal, is that while these provisions come and these sort of more steady credit cost structure plays out, there is adequate level of other revenue streams, which are creating the ability for the financial services business to still deliver a 2% plus ROA, right? Like you saw this quarter, the POCI book and the recoveries from there are giving you the ability to actually take that and use for some of these provision requirements, and hence, even though these provision requirements that come, you’re still seeing a 2% plus ROA during the quarter, and hopefully, we’ll be able to continue to generate the — some of that cushion through POCI in some of those other means in the future quarters as well.

Kunal Shah — ICICI Securities — Analyst

Sure. And one last question on DHFL again. So the recoveries, any lumpy recoveries from the wholesale portfolio this quarter from DHFL Erstwhile book?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

No lumpy recovery. There was a minor sort of or small portfolio sale of a couple of deals, but nothing — no big lumpy recovery. All the big lumpy stuff is going to go through a big long process of litigation, etc., so you will — keep watching the space. We will do small ARP-type transactions every now and then but nothing huge yet.

Kunal Shah — ICICI Securities — Analyst

Okay, and support of these recoveries is somewhere around 1%, 1.5%. Do we expect that to continue?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

For the next few quarters. Absolutely.

Kunal Shah — ICICI Securities — Analyst

Okay. Got it. Yeah. Thanks a lot, and all the best.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Thank you, Kunal.

Operator

Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Hi. I have a couple of questions on the finance and a question on the pharma business as well. In the financial services business, given the fact that you are experimenting with micro-finance and also with gold finance, is acquisition a real possibility of some other company because these are all very physical touchpoint-oriented businesses typically and the branch network will be complementary to yours? So that’s question number one.

In the pharma business, is there — I understand you’re making CapEx and have not given any guidance, but could you also broadly give in terms of the indebtedness caps that you might have within the group, let’s say high-level debt-to-EBITDA number or any financial covenant that you would have? Thanks.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

I’ll start with FS segment and I’m sure Vivek will jump in and offer you guidance on the — or offer you some thoughts on the pharma side. See, firstly, one quick clarification. The micro-finance business, we have now committed to. It’s no longer in experimental mode. We — what we see — you are going to see us make further investments there. The gold one is absolutely in experimental mode. We might or might not go ahead with it. So we will see how that plays out.

To your question of are we open to M&A in these spaces. Yes, we are. As you all know, we are an extremely well-capitalized company with a lot of spare capital available, and as a group, we have had a rich tradition of successful M&A. So it is — and these businesses that you absolutely rightly point out are businesses which are very M&A friendly. So we will continue to watch the space for potential M&A opportunities, but I want to caution that as a group, we are generally kind of value-oriented M&A player and some of these spaces are extremely rich from a valuation standpoint right now, so it might not work out right now on that dimension. But if we find something which is a good product fit and it checks the box on values the valuation, I think we’d be quite open to it.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Thank you.

Vivek Valsaraj — President & Chief Financial Officer

Yeah, and, Vivek, while we have not given a specific guidance for pharma, let me reaffirm that the demand remains strong. In fact, we are seeing the highest inflow of RFPs ever than we’ve seen before. It’s just that decision-making is taking a little bit more time at the customer’s end. And with respect to your question on debt, well, the guidance we have given is that we will cap it at about 4 times the EBITDA of the business.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Okay. Great. Thank you so much. That was very useful. Thanks a lot.

Operator

Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer — CLSA Ltd. — Analyst

Yeah. Hi. Thanks for taking my question. Just a couple of clarifications on the POCI book. Firstly, how much of it is retail versus wholesale and just so that I understand this correctly, the INR3,300 crores of book, so whatever you elected essentially your profit in this asset?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So the POCI book is all retail, Piran. There is no wholesale in there. And the way to think about the POCI book is there is a face value. We have disclosed this on the slide if you see. There is a face value of this asset, which is, let’s say, about INR9,500 crores. It has been marked down by 65-odd percent to about INR3,500 crores or thereabouts, that’s what we see.

If recoveries are greater than the mark, then you get P&L flow. If it’s less than the mark, then you get a P&L hit, right? That’s the way to kind of think about it.

Piran Engineer — CLSA Ltd. — Analyst

Okay. So this fair value is essentially part of your network then, and then plus or minus of the fair you becomes a debit or credit to the network?

Vivek Valsaraj — President & Chief Financial Officer

Yes. Yeah. Yes, I mean the INR3,500 crore is part of the balance sheet if that’s what you mean. Yes.

Piran Engineer — CLSA Ltd. — Analyst

Yeah, it’s part of the balance sheet.

Vivek Valsaraj — President & Chief Financial Officer

Yes.

Piran Engineer — CLSA Ltd. — Analyst

Okay. Got it. And then the next question is about who will lead the wholesale business now that Mr. Jijina has retired.

Vivek Valsaraj — President & Chief Financial Officer

Yeah.

Ajay Piramal — Chairman

Let me. So, Mr. Jijina, though he is retired, he continues as advisor and we have got now wholesale 2.0 where we’ve appointed Mr. Yesh Nadkarni. Yesh was early on with KKR and he is also going to be involved.

Piran Engineer — CLSA Ltd. — Analyst

Okay. Got it.

Ajay Piramal — Chairman

So the teams remains the same, and yeah.

Piran Engineer — CLSA Ltd. — Analyst

Okay. Understood. That’s all from me. Thank you.

Operator

Thank you. The next question is from the line of Deepak Gupta from SBI Pension Funds. Please go ahead.

Deepak Gupta — SBI Pension Funds — Analyst

Hi, good evening. Thank you for taking my question. My first question is on the retail disbursements. The one-off from Dewan Housing book has been quite elevated in the last three quarters, running at the run rate of about INR1,600 crore to INR1,700 crores per quarter. How do you see this going, going forward?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So, Deepak, the run-offs are run-offs here, not just the Deewan book. Please remember that we are doing about INR150 crore to INR200 crore of disbursement of embedded finance. These are very short-term product and run off, there are pretty high too. So even in our organic business, the 23% of the organic business that you’ll see on Slide 13 which is digital embedded finance, those are all very short-term businesses and hence the scheduled repayment all would it be quite high in there. So essentially, a lot of the run-off off that you see here the mix is shifting more from attrition towards scheduled repayments as we continue to press the pedal on some of these digital pieces.

So the attrition pressure has actually come down. In the last quarter, attrition pressure has been meaningfully lower. Of course, Q4 is always very high pressure on attrition, so both seasonally as well as more structurally, attrition pressures are lower in Q1 than they were in Q4.

Deepak Gupta — SBI Pension Funds — Analyst

Sure. I hear you. The second question is on incremental yields on the book versus incremental cost of funds. Somewhere in the presentation I saw incremental disbursement yield is 12.6%, but in the next slide it is also showing as 13.1%. So I was a bit confused on that.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah. Sorry. So maybe we were not super clear. So, see, in the 12.6% that is on Page 13, we have excluded the digital embedded finance, the 23% of disbursement. The reason we’ve done that is that we don’t want investors to be modeling in disbursement yield into a longer-term book because the embedded finance book will churn out very quickly. So 12.6% is all disbursements ex of embedded finance. When you include embedded finance into it, the yield increases to 13.1%. So from a modeling perspective, if you’re trying to model the full book, I would encourage you to keep 12.6% as the number rather than 13.1%.

Deepak Gupta — SBI Pension Funds — Analyst

Sure. And what would be the incremental cost of borrowings right now?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

7.9% right now.

Deepak Gupta — SBI Pension Funds — Analyst

Okay, understand. And the next question is on asset quality. If you could give a breakup of the GNPA between retail and non-retail. And secondly, I know this question has been answered before but just some more clarity on the increase in Stage 2 loans. Because I thought last quarter you had mentioned that you had done a review of the entire book and whatever had to slip has been slipped, but again, we’ve seen about INR400 crores of slippages at least moving from Stage 1 to Stage 2. How should we read this? Do you think Stage 2 — what exactly is going on here? If you could give some more clarity on that. Thank you.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah. So, Deepak, I don’t think we said last quarter and we are not saying it this quarter either that whatever needs to slip has already slipped or come into Stage 2 etc. The way to think about it is that over time the big reval exercises that the one reval exercise that happened two years ago in March 2020 and another one that happened last quarter etc. through up some specific accounts where you feel like you are underprovided and you need to do some work. That process is not going to happen every quarter. It’s — it will happen occasionally maybe once a year or there, right?

But from a flow perspective, if there are specific client situations where the client actually go through some trouble and some flow happens like this quarter, we have seen like a total slippage of roughly 1% annualized. So some level of slippage, some level of Stage 2 creation, some rate of that, you should just — you should expect to see. These are idiosyncratic situations are not sort of any broad brush stroke or a portfolio effects that are there. Mr. Jijina.

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd.

Yeah. Okay. To give color to this Stage 2, let me divide into few parts. Some of them were small loans where we actually did a one-time settlement and maybe there was some INR5 crore, INR10 crore difference and that’s what we provided extra actually those loans are getting settled. The — actually the two large ones, and again, here there is an embedded value here. However, one was a real estate company in the South, where the developer had some trouble, in fact, there was an ED inquiry so we decided to take the loan to Stage 2. So noq that he has reported — but actually the account is standard, but we decided as a caution to take it to Stage 2, I think good you ask this question again so that we clarify.

The other one actually is again a hotel, which has now started doing well but since there has been some mismatch of cash flows, we decided to take it to Stage 2. Again, if you ask me the value of the hotel, it’s far more than the value of the loan. So if that clarifies too.

Deepak Gupta — SBI Pension Funds — Analyst

Sure. And if you could just share the breakup of GNPL between the retail and non-retail. Thank you.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

We have not put it in the — I mean, we did it last quarter. I don’t intend to do it every quarter, to be honest, yeah, like we’ll do it once a year. We are not doing segment, full segmental reporting yet, so let these businesses settle down, we’ll start doing full segment reporting at that of point.

Deepak Gupta — SBI Pension Funds — Analyst

Sure. Okay. Thank you so much.

Operator

Thank you. The next question is from the line of Abhiram Iyer from Deutsche Bank. Please go ahead.

Abhiram Iyer — Deutsche Bank — Analyst

Yes, sir. Hello. Thanks for your — thanks for taking my question. I had two questions. One is, could you just highlight your methodology in which you bought down the interest expenses from 8% to 7.1%? And the other question is, could you also highlight how capital adequacy ratio has gone from 21% to 25% over the last quarter?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

See, on the, on the first one, which is the cost of borrowing, there are a few different factors mostly related to the point that back in 2019 and early 2020, when liquidity environment was quite challenging, there was a lot of higher rate borrowings that the company had to take up and now we are — now that the liquidity situation in the company is completely different. So we have –and all of those borrowings have gone past their prepayment penalty days. We are prepaying more and more of them and we are able to borrow in the market now incrementally at much cheaper prices and that is slowly reducing the cost of borrowings. So even though the market is seeing an increased or elevated interest rate environment, our cost of borrowing continues to come down.

Ajay Piramal — Chairman

The other point is, I think he misunderstood. He didn’t hear. It was not 7.1%. I think…

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

7.9% is the incremental borrowing, it’s just in the last quarter. The portfolio level, the average cost of borrowing is 8.88%.

Abhiram Iyer — Deutsche Bank — Analyst

Yes, yes.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Now your second question was on capital adequacy. Capital adequacy is at 25%, just over 25%. Two things have changed. One is of course the addition of profit in the numerator and in the denominator, there is some risk weightage on a weighted average basis, risk weights of have come down a little bit and that has that nothing very dramatic, but that’s what has resulted in the move that you see.

Abhiram Iyer — Deutsche Bank — Analyst

Sir, could you just clarify on the risk rate coming down? Is this because of the mix of loans or is there any other…

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

See, with post the DHFL acquisition…

Abhiram Iyer — Deutsche Bank — Analyst

Yeah.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So, post the DHFL acquisition and with the improving mix on the retail, you can see the mix of retail has gone up from 12% to 37%. So this is what is resulting in change in the risk weightage where the risk weightages have kind of improved towards the retail side and the capital adequacy ratio.

Abhiram Iyer — Deutsche Bank — Analyst

Agreed, sir, but that should have been sort of reflected in the previous results as well, right? So I mean net-net from a book perspective, the composition hasn’t significantly shifted over the last quarter.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah. So, last quarter were provisional, these are audited numbers right now.

Abhiram Iyer — Deutsche Bank — Analyst

Got it, got it. So, provisionally, we lowered capital adequacy. Got it, sir. Thank you.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yeah, we were…

Vivek Valsaraj — President & Chief Financial Officer

I just wanted to add on the cost of borrowing quickly. The other important thing which people should note that while the interest rates are going up, our spreads as a AA has been consistently going wrong because of the performance of the company and especially with retail coming in, etc. So that’s the other point to note.

Abhiram Iyer — Deutsche Bank — Analyst

Noted, sir. Thank you.

Operator

Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.

Nischint Chawathe — Kotak Securities — Analyst

Yeah. Am I audible?

Vivek Valsaraj — President & Chief Financial Officer

Yeah, Nischint.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Yes.

Nischint Chawathe — Kotak Securities — Analyst

Hi. Thanks. I just want to understand the ROA target that you’re putting up at around 2 odd percent. This includes the benefit of recoveries from the Erstwhile DHFL upgrade book or should we kind of expect as in kind of further I think to these numbers?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

So two things. Firstly, the guidance or not guidance, but the aspirations or the goals that you spoke about was high 2s, low 3s, so 2% would be a bit on the low side, I don’t think that’s what we’re putting out there now and that’s kind of, let’s say, between now and five years out, we should get there. The whole recovery story on the POCI book, and all the DHFL book has data would mostly be a trade out by then. So in the interim, all the recoveries, etc. will keep giving us the ROA boost, but the sustainable business should be giving that kind of ROA, four, five years out, right, without having to depend on recovery, because then we know what book to recover five years out.

Nischint Chawathe — Kotak Securities — Analyst

Sure, okay, so benefit — so basically, what we’re trying to say is that this is a benefit that we’ll probably get in the interim period.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Right.

Nischint Chawathe — Kotak Securities — Analyst

When we have evaluated the real estate and the wholesale book you have kind of and we are saying that, look, it has now adequately provided. Are we taking any credit from this or is this something where you have provided independently and just kind of maybe just provide further to buffer on that.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

I’m not sure I fully understood your question actually let’s there’s one consolidated balance sheet. I mean it’s whatever comes in the provisions line whether it comes in one part of the business or another, it goes to the same line, so we are not thinking of it separately. It is all one integrated company and one integrated set of numbers.

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd.

Nischint, Maybe you want to clarify the question what you were trying to ask?

Nischint Chawathe — Kotak Securities — Analyst

Yeah, so I think what I’m trying to say is that when you have evaluated the — the wholesale book and probably going project by project and kind of played adequate provisions against it. Are you taking any credit from the from this particular pool of recoveries or are you kind of trying to say that look this pool of recoveries, it’s something which might in a quarter like this help you to offset the hint we saw in this quarter or probably it will not, we don’t want to take any credit of that. So when you’re kind of trying to kind — I mean I’m sure internally you have some number in terms of what recovery —

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Like there is one team that will continue to focus on getting recoveries from the code book that is spread, hopefully, we’ll be able to create through that team a steady flow of recoveries and a steady sort of P&L stream for the next few quarters independently client behavior or slippages, etc., might result in provision requirement. We don’t want to color our judgment on one depending on the other, but as it happens, there will be situations like in the quarter where there is adequate money coming from one to pay for the other, but it is not something that we are sort of, there is no master design that we’re trying to do behind it, we will do whatever is prudent in any given quarter.

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd.

Also, Nischint, from a disclosure perspective if you see if clearly disclose separate line items for credit cost and separate line item for recoveries from POCI books. So, I think that should clarify your doubts on that front.

Nischint Chawathe — Kotak Securities — Analyst

Yeah, that’s definitely helpful. Thank you very much.

Operator

Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead.

Aditya Jain — Citigroup — Analyst

Thank you. Could you talk about how large is the pool purchase, just to get a sense of how much is the organic growth in retail and how much is being driven by pool purchase and also what are the, what are the loans which are being bought?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Pool purchase is about 5% — of about 5.2% of the retail book right now, Aditya. And it will always remain in that broad range, I don’t think it’s going to — it’s going to ever be a whole lot. That direct the kind of product you’re doing a pool purchase. So far we first started with micro-finance because we are very keen on actually getting into the micro-finance business ourselves so we wanted to actually get a sense of how the book is performing with a lot of lenders. So we did some pools in micro-finance and that’s what gave us the confidence and also gave us a little bit of a sense of which geographies are working well as said here. We’re doing a little bit of small business and we’re doing a little bit of housing.

Aditya Jain — Citigroup — Analyst

Got it.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

What we’re not doing is cars or trucks etc., we have not done — We have not done anything, anything meaningful there.

Aditya Jain — Citigroup — Analyst

Understood, so it was 5.2% of the retail book in the last quarter as well.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Say that again?

Aditya Jain — Citigroup — Analyst

So, this was the share of 5.2% of the retail book of the pool purchase?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Of the pool purchase.

Aditya Jain — Citigroup — Analyst

The amount in the last quarter as well.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Stock. Of the stock.

Aditya Jain — Citigroup — Analyst

Of the stock. Yeah.

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

Of the stock, correct.

Aditya Jain — Citigroup — Analyst

Got it. And then the opex decline quarter-over-quarter. In financial services. I mean the material decline. So, in terms of thinking about it going forward, do we think of it as a bulk of getting full activation in DHFL has done so cost should be stable to a large extent in this year or is it more seasonality or some other element?

Jairam Sridharan — MD, Piramal Capital & Housing Finance Limited

In general, you will see a little bit of seasonality, Aditya. Like you will see Q1 being a bit lower than, like for example, we have not started our campaigns, etc.,, yet it will probably start later in the — later in the year. Some of the staff that were, that are still being hired for the completion of this year. All that cost will start coming in a little bit later. So I would say that, just keep in mind that a little bit of seasonality with Q1 more in a Q4. high, right, But, but otherwise your point that our stabilization cost of DHFL etc., fully baked in and federal. I think the answer is, yes. Now, you should think about it purely as kind of organically to fund growth.

Aditya Jain — Citigroup — Analyst

And then just lastly the equity breakup that we have is on March. Is it possible to tell the equity in financial services as on June end?

Khushru Jijina — Executive Director, Financial Services, Piramal Enterprises Ltd.

So, typically we would be keen to disclose on six month period when the numbers balance sheet gets audited.

Aditya Jain — Citigroup — Analyst

Got it, okay. All right, thank you.

Operator

Thank you, ladies and gentlemen. Due to time constraints, that was the last question. I now hand the conference over to Mr. Hitesh Dhaddha for closing comments. Over to you, sir.

Hitesh Dhaddha — Chief Investor Relations Officer

Thank you, everyone. If you have further questions, please reach out to the IR team. Thank you.

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