LIC Housing Finance Limited (NSE: LICHSGFIN) Q2 2025 Earnings Call dated Oct. 29, 2024
Corporate Participants:
Praveen Agarwal — Moderator
Tribhuwan Adhikari — Managing Director and Chief Executive Officer
Sudipto Sil — Chief Financial Officer
Analysts:
Avinash Singh — Analyst
Mahrukh Adajania — Analyst
Piran Engineer — Analyst
Kunal Shah — Analyst
Ankit Manocha — Analyst
Mohit Jain — Analyst
Abhijit Tibrewal — Analyst
Gaurav Kochar — Analyst
Nischint Chawathe — Analyst
Vikram Subramanian — Analyst
Shubhranshu Mishra — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the LIC Housing Finance Limited Q2 FY25 Investor Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you sir.
Praveen Agarwal — Moderator
Thank you, Neha. Good day everyone and welcome to the earnings call of LIC Housing Finance. From the management team we have Mr. Tribhuwan Adhikari, MD and CEO and Mr. Sudipto Sil, CFO to discuss the key highlights of the result. I would request Mr. Adhikari to share his initial remarks, post which will open the floor for Q&A. Over to you sir.
Tribhuwan Adhikari — Managing Director and Chief Executive Officer
Yeah. Thank you, Praveen. Very good morning to all of you and welcome to the post earnings conference call of LIC Housing Finance Limited. As you all are aware, LIC Housing Finance Limited declared its Q2 FY ’25 results yesterday. Before I start the highlights of the Q2 results I would just like to outline a few developments in the economy over the quarter. [Technical Issues]
Operator
Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnected. Thank you. Ladies and gentlemen, thank you for patiently holding. We have management line back on the call.
Tribhuwan Adhikari — Managing Director and Chief Executive Officer
Yeah, sorry for the call drop. So, as I was saying, coming to the real estate sector, in Q2 we have observed steady demand across major markets coupled with increase in prices. As we head into the peak festive season, we are confident of high levels of transaction in the residential space. With this overview, I’d like to share the key financial highlights of the quarter. The total revenue from operations was INR6,926 crores as against INR6,753 crores for the corresponding quarter of the previous year, up by 3%. Outstanding loan portfolio stood at INR2,94,588 crores as against INR277,987 crores as on 30th September ’23, reflecting a growth of 6% out of which individual home loan portfolio stood at INR250,879 crores as against INR234,509 crores, up by 7% and continues to be 85% of the total portfolio.
The total disbursements for the quarter was INR16,476 crores against INR14,665 crores in the same quarter last year, up by 12%. Out of these disbursements in the individual home loans, the disbursements were to the tune of INR13,051 crores as against INR12,516 crores, up 4% Y-o-Y. We have seen good growth in the northern and some states in the southern parts of the country. Sequentially the disbursements were up by 27% against the Q1 number of INR12,915 crores with the home loan disbursements up by 19% from INR10,932 crores to INR13,051 crores. Disbursement in project loans were INR1,397 crores in the quarter as against INR433 crores for the same period last year, up by 223%.
As you would note that this book was continuously degrowing over many quarters but has now started — the trend has reversed. It is now about 3% of the overall portfolio. We continue to be cautious and selective in our approach in this segment. Net interest income stood at INR1,974 crores as against INR2,107 crores for the same period in the previous year, and INR1,989 crores for Q1 of FY ’25. There’s a marginal decline of INR15 crores Q-o-Q. Net interest margins for Q2 FY ’25 stood at 2.71 as against 3.04 for the Q2 of FY ’23 and 2.76 for Q1 of FY ’25. Sequentially as well as year-to-year, there has been a decline in the NIMS. Profit before tax for the quarter was INR1,664.36 crores as against INR1,480.06 crores in Q2 of FY ’24, a growth of 12%. As compared to Q1 FY ’25, the PBT recorded an increase of 2.21% from INR1628.43 crores to INR1664.36 crores. This is largely on account of decrease in provisioning by INR66 crores sequentially.
Profit after tax for the quarter stood at INR1,328.89 crores as against INR1,188.05 crores for the same period previous year, a growth of 12% and against INR1,300.21 crores, an increase of 2%. In terms of asset quality, stage 3 exposure at default as on September 30, ’24 stood at 3.06% as against 4.33 as on September 30, 2023. Total provisions on 30th of September ’24 stood at INR5,458 crores reflecting a provision coverage of about 49%, as against provision coverage of 41% as on 30th of September ’23. A technical write-off of INR286 crores have been made in this quarter. These loans — all these loans were carrying 100% provisions. Also, there was a recovery from write-off loans to the tune of INR49 crores. In the coming months and quarters, we expect this trend to continue. Credit costs for the quarter and half year have also come down due to better NPA management.
On the funding side, cost of funds which stood at 7.73 as compared to 7.76 as on 30 May ’23, against 7.76 as on 30 June ’24, so there’s a decline of 3 basis points sequentially on the entire borrowing of INR2.57 lakh crores. Incremental cost of funds stood at 7.71 for Q2 of FY ’25 as against 7.73 for the corresponding period last year, and 7.82 for Q1 of FY ’25.
On the funding environment we have witnessed a reduction in borrowing rates compared to Q1. The future trajectory will be largely driven by the RBI’s commentary around inflation and the policy rate action. The past quarter was a period where we had focused on growth and also initiating some steps towards strengthening the margins. Towards that end, apart from slowly rebuilding our wholesale book, we have also launched a new product in the affordable space with the complete focus on the self-employed category. The pricing is about 250 basis points higher than the standard home loans. With the PMI scheme also — PMAY scheme also being announced, we expect good traction in both volumes and margins in the coming quarters. With this brief introduction I would like to invite you for your queries.
Questions and Answers:
Operator
Thank you very much. [Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh
Hi, good morning. Thanks for the opportunity. So broadly, three broad questions. One, if you can help, if I look at your yield, not just for quarter, for the half year, first half of this year versus last year, the yield on your asset has gone down substantially, almost like 27 odd basis points in a market environment where I mean the competition has been increasing rates even on the pure home loan because the rates were going up. And if I try to look your asset mix change, that also is not substantial. I mean just 1 percentage point move in, you know, the developer loan going lower 1 percentage. That also does not explain this kind of a move. So competitive environment also is not kind of that aggressive on the rate side. Your asset mix is largely stable, just 1 percentage point move here from housing to developer, and this yield is down 27 basis points. So, where this yield is going to sort of stabilize, particularly when the rate cut cycle start, I mean next year. So that’s question number one. Second would be, you know, now on the PCR, if I look at stage one and two, your provision coverage is dramatically down on stage one and two, I’m talking year on year. So, what is sort of changing in your ECL model that is leading you to reduce? Particularly if I look at the stage two, almost PCR is going down probably from 7 percentage last year to like 4%. So, what is kind of driving this, you know, PCR reduction in stage two? And lastly, the third question is on your disbursement in developer finance. So last year of course you have been very guarded and that is reflecting in how developer finance in your asset mix has come down. But now when, I mean, I mean there are some signals that property market probably would be kind of going to slow and all, but you have chosen to accelerate in the develop financing. So, what explains this strategy change? And if you can help us understand what kind of, you know, a risk mitigation major, your selection filter you are applying when you are kind of accelerating now in this developed finance. Thank you.
Tribhuwan Adhikari
Yeah, Avinash. Morning. I’ll take question number three first regarding your developer finance. Yes, we have been guarded as far as developer finance is concerned. This is the first time that after almost six quarters that we are showing a growth in our developer finance book. Yes, two, three things, risk mitigation measures, you have said we are still guarded, I use the word we are still guarded as far as developer finance is concerned. We are not going whole hog into it. What we have done that we have identified select developers all over the country and especially from the big cities which are, which have been traditionally contributing to our developer book, and all these while selecting them, what we’ve been looking at of course is the credibility and the sort of the image of the developer. And one major point we’ve seen is the external rating of all these developers, right. So, at the moment, as per the directives of the executive committee, we are only looking at developers having a triple B or a higher rating. So, we are talking to these developers, trying to build connect and disbursing to them only. So yes, developer finance, we are looking at it. We are not withdrawing from the market as some companies have, and now with the property markets looking up, the prices going up, we see an opportunity in this market. So, our — the focus, or guarded focus if I may use the word in this developer finance will continue. We’ve done well in this quarter. We’ve disbursed about INR1,500 crores as compared to INR500 crores in the same quarter of last year. So, it is good, and we have a good pipeline which has built up, and we expect quarter three and quarter four also to be strong in this thing. As regards yields, I would request Sudipto to take it.
Sudipto Sil
Yeah, see actually if you, I will rather take the second question, the question on the PCR first and then we’ll come to the yields. See as far as the PCR is concerned, as compared to last year you would recollect that there was a good portion of loans which were still in the OTR, one-time restructuring post the COVID which was announced, and all those loans were placed in that stage two even if they were performing loans. And that is the reason why there was a higher provisioning coverage ratio which we had kept as a matter of precaution. Though the loans were performing, we kept them in stage two, and we had provided the additional provisioning that was required. However, now that OTR matter has got completely done, so either the loans are performing or they have moved to the stage three, whatever it is. So accordingly, now if you see sequentially between Q1 and Q2, I think the PCR has been by and large stable across almost all categories of all subcategories of loans. Yes, yeah, yeah. Then your query was regarding the yield. So, actually as we mentioned that probably this quarter, part of first quarter and second quarter the focus was on getting back on the growth to build up the portfolio, we had last year which was a year of underperformance, and we had lost a lot of portfolio. So, this year probably the focus was more on generating growth in the segments, especially in the home loan segment. And we have also started rebuilding the builder loan segment as you have also observed. However, going forward, your question about the impending rate cut as and when it happens, that also we’ve more or less have a plan in place. Of course, the timing and the magnitude of the rate cut we cannot predict. But if you see almost half of our liability side is already on a floating rate side. And there are also liabilities which run off every year almost 20% of the fixed portion. So, 60% is either fixed or floating in a sense that it will get repriced within a space of a few quarters.
Apart from that, we are also looking at engaging into some kind of derivative contracts, like simple OIS structures, to ensure that by and large the liabilities remain in some kind of an alignment with the asset side to the extent that is possible without actually adding too much of risks on the balance sheet.
Avinash Singh
Okay, thank you.
Operator
Thank you. The next question is from the line of Mahrukh Adajania from Nuvama Wealth. Please go ahead.
Mahrukh Adajania
Yeah, I have two questions. Firstly, that you know when on many bank calls, basically what we understand is that now they are lending at around 8.9, 8.8 to their prime customers, and we also hear that PSU banks are lending at 8.5, 8.6 to similar profile of customers. So where would you figure? Like would you offer 8.5, 8.6 to your very prime customers, or where are you benchmarked in retail?
Tribhuwan Adhikari
Okay, Mahrukh, one question only.
Mahrukh Adajania
No, I have others as well, sir. So, my other question is, so basically that’s one. Second is that see if repo rate is cut today, right? Then when what proportion of your book, outstanding book, incremental I know, but outstanding book would reprice at the end of the month, you know, or the beginning of the next month. Because I know you would have some benchmark rates that will change with the repo. But what is the lead lag? Right, because for banks, you know, it’s almost immediate. So, I just wanted to understand that better also. And third, if you comment on growth, when will it, when do you think based on your expectations of disbursals over the next few quarters, when do you think we can see a double-digit growth, if not in overall, then at least in retail.
Tribhuwan Adhikari
Okay, so Mahrukh, I’ll take your first question and your last question, the impact of repo rate cut, I’ll ask Sudipto to take it. Well, as regards the first question, you alluded to the fact that yes, many of the PSU banks have been increasing their rates and well to the prime customers, some of them are lending at 8.5, 8.6. Yes, this is basically the segment which we are in. Traditionally we have also been focused on the prime or the super prime category of borrowers. And quite naturally in doing that, we have been competing basically with banks, right? So yes, our lending rates are in that same band of 8.5, 8.6 or rather I may use the word, we are in the band of 8.5, 8.6. Recently, about a month back, we also have revised our rates, our incremental rates up by 15 basis points, 20 basis points. So, we realize, we understand very well that yes, growing the book is important, but we also need to look at the margins we are getting through this growth book. The growth in the book that we are looking at, we’re very well aware of that situation, and we have taken steps to ensure that the margin part also plays a major role in deciding our strategies. As I said, we have increased our incremental rates of lending by about 15 basis points to 20 basis points about a month back. On the other side, our IHL book, which is basically this prime and super prime customer base giving us low margin, low yields, it constitutes 85% of our book. We are consciously looking to diversify to some extent or to whatever extent possible and go into the NHI and the NHC categories which are slightly more margin aggressive that we are doing and we are seeing traction in that. And the other part of it is the affordable segment where we were — we were there in the affordable segment but we were catering to the salaried affordable segment rather. So, we were not there in the so called traditional affordable segment of self-employed people with low or no CIBIL, people with undocumented income. So, this as the conscious call, about 20 days back we have launched a product which is exclusively aimed at this self-employed affordable segment, people with low CIBIL, no documents or undocumented documents. And the initial response, we rolled it out, the initial response from our intermediaries and DSA is very good, the response from our people in the area offices or branch offices as you may call it, is very good. But yes, it is gaining traction. But the real impact of this would be felt probably a month or so down the line. We are pretty optimistic about this. This is where we need to be, and we are aggressive on this. And looking forward, I feel this is one product or one segment which has the potential over the next two to three years to contribute to at least 15%, 20% of our book. So, this is what we are doing as far as the margins are concerned. So, the clear guidance is yes, growing the book is important but growing the book with better margins is more important.
Now coming to the — what was the third question? I’ve just forgotten — yeah, the repo impact was — Sudipto, can you take the repo impact?
Sudipto Sil
Yeah, see the repo impact, as far as our loan policy is concerned the reset is on the first of the quarter. For example, if as you said if there is a repo cut today, then whatever changes will happen that will get translated to the customers loan account from 1st of January. And as far as the borrowing is concerned, it depends. Most of the borrowing is either linked to treasury bill or to repo. And most of our borrowings on the banking side that is, are almost immediate or month end.
Mahrukh Adajania
Okay, but so if the rates are cut today, the repricing happens in January. [Speech Overlap] Yeah. Okay. And liabilities is you are saying immediate, the banking liability.
Sudipto Sil
Banking liabilities are immediate for the repo accounts and for the T-bill accounts, month end.
Mahrukh Adajania
Okay, got it. Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead.
Piran Engineer
Yeah. Hi team, congrats on the good set of numbers. Just firstly with the strong recoveries we got this quarter, what was the interest income impact of that?
Tribhuwan Adhikari
Yeah, see as far as the interest income impact is that it is around INR86 crores. So, I think last quarter if you recollect it was around INR90 crores. So by and large I would say it’s around the same level.
Piran Engineer
This INR86 crores is interest income on NPL accounts. Yeah, I know, I meant the write backs from recoveries of NPLs.
Tribhuwan Adhikari
That is then write off. Once the write off happens it gets added into the other income piece. So, if you see our published numbers this time you will find in the other income it is reporting a number of INR56 crores which was around INR7 crores or something in the previous quarter. So that actually accounts for amounts which we have received from accounts which were written off earlier. Around INR22 crores from some project loan account which is part payment, and the balance part is yet to be received, and some INR27 crores or INR26 crores from the pool of retail accounts. All of this which were written off, technical write off.
Piran Engineer
Okay, okay, understood. And secondly any one-offs in the opex number, it was quite high this quarter.
Tribhuwan Adhikari
Yeah, opex number, basically there were some, one was pertaining to the distribution cost which has increased and that had happened because sequentially if you see there has been an improvement in the disbursement by about 27%. So, one account, one is on account of that.
Piran Engineer
Okay, so there’s no real one-off, it is just a consequence of stronger disbursement curve.
Tribhuwan Adhikari
Yes [Indecipherable]
Piran Engineer
Okay, okay, understood.
Tribhuwan Adhikari
Wage revision also, little bit of impact has been taken which has been taken all the quarters. Sometimes one of the quarters is slightly more. But this is something which has been there since 2023 FY every quarter.
Piran Engineer
Sorry, what is this thing? Wage hike?
Tribhuwan Adhikari
This is for the wage revision. Wage division sometimes what happens is that we actually make some provision based upon some estimate number of employees, and whenever there is an increase in the number of employees or there is an increase in the estimates pertaining to gratuity and other linked, you can say outflows with the wage division there is an increase. So that is about say INR7 crores or INR8 crores additional this quarter.
Piran Engineer
Okay, okay, understood. And just lastly, one clarification on the previous question you mentioned that we increased [Technical Issues].
Tribhuwan Adhikari
Your voice is breaking. Can you please come closer to the mic?
Piran Engineer
Am I audible now? Yeah, yeah. So just on the previous question where we mentioned that last month, we’ve increased prime rates by 15 bps, 20 bps. This will be only on incremental disbursements, right?
Tribhuwan Adhikari
Yeah. Yes. I will explain how we have done it. Actually, there is a slight change in the pricing structure. Earlier as you would know, the pricing was linked to the CIBIL score, but it was a band of 50 points. So, a person having a CIBIL score of 701 and a person having a CIBIL score of 750 used to get the same pricing. Now what we have done is that we have created some subcategory in between that. So, 700 to 725 will be one category which will be priced about 10 basis points higher than the earlier category. So, this is the way we have actually segregated and made it a slightly more differentiated as compared to a more homogeneous pattern which we were following earlier.
Piran Engineer
But there’s no PLR hike, right?
Tribhuwan Adhikari
No PLR hike.
Piran Engineer
Yeah, that’s what I want to confirm. Okay. Okay, that’s it from mine. Thank you and wish you all the best.
Operator
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Hi, thanks for taking the question. So, the first is when we look at the decline in GS3 as well as GS2, is that the impact of the recovery? No doubt you indicated recovery from return of account. But broadly want to get the sense in terms of the decline in the GS3 and GS2 percentage, there is some amount of write off of INR286 odd crores, but still the overall quantum seems to be like almost INR500 crores in GS3, and even GS2 there is a decline out there of almost like say INR250 odd crores. So, what’s driving that?
Operator
Sorry to interrupt you, sir. We have lost the management line connection. Please stay connected while we reconnect in. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the management line back on the call.
Kunal Shah
Yeah. So, were you able to hear the question?
Tribhuwan Adhikari
Yeah, yeah Kunal, we got your question. One was about the stage three and the drop in stage three and also stage two. Yeah, yeah, yeah. Regard stage three, yes, there has been an improvement or reduction of approximately INR507 crores. Of this, INR287 crores is because of the write off because we’ve written about INR287 crores in the quarter. But apart from that also there is some reduction and that is because of the recovery efforts we’ve taken. No lumpy resolutions in the quarter. So, it’s all been the regular stuff.
Kunal Shah
So, I think last time you indicated three large accounts of INR250 crores, INR375 crores and INR400 odd crores. So, none of them have got resolved in Q2.
Tribhuwan Adhikari
No. Kunal, as you would know, these big accounts, they do take time, right? There are promises and promises are broken and then again renegotiation starts. So yes, there are four or five accounts, big accounts which we are — which we are in various stages of discussion. One big account which had alluded to last time, INR400 odd crores, this is very close to, I would say settlement. It has gone to the ARC. We have received a firm bid. We have already gone in for the Swiss challenge. So probably in the next 15, 20 days the issue would be finalized, and the firm bid ultimately if nobody challenges it should go through. So, that is one development we are expecting in this quarter, quarter three, and there are other four or five accounts where we are in various stages of discussion. With these big accounts, you never know, something sometimes suddenly clicks and more often than not it doesn’t. So, in various stages of discussion and discussions are moving forward. I think there is progress being made. The results may not be seen. Expecting definitely in Q3 one big account to be sort of addressed and then going forward probably a few more. But overall, we are not totally dependent on these big accounts. As and when they come, we would take them to be a bonus. We are more focused on the bigger pool of stage three, especially in the retail part of it, and trying to bring down that pool quarter on quarter.
Kunal Shah
Sure. So current quarters reduction is largely led by the retail or the smaller accounts.
Tribhuwan Adhikari
Yes, yes, yes. There will be a few developer loans also, but small, small ones. Nothing big. Nothing big.
Kunal Shah
Okay, got it. And secondly, last time you indicated that collection from NPA was relatively lower at INR90 odd crores. And we expect that it should normalize to INR130 crores to INR150 odd crores in coming quarters. But again, this quarter it seems to be like INR86 odd crores. And you indicated like margins should bottom out, but we are still seeing the decline because we are chasing growth as well. So, where do you finally expect margins to settle now?
Tribhuwan Adhikari
Well, margins, we had given you a guidance in the beginning of the year. We had given the market a guidance of 2.7 to 2.9. Right now, we are at 2.73. Yes, agreed, slightly elevated cost of borrowing and also slightly depressed margins in the lending have contributed to that. But I think, we have hit the bottom. We have hit the bottom. We are pretty sure of that. And in the coming quarter three and quarter four, I expect 5 basis points to 10 basis point improvement.
Sudipto Sil
Yeah. Actually, just to add to that, Kunal, some two, three different, like a little bit of improvement on the wholesale book. If you’ve seen that for the first time in almost seven or eight quarters we have seen a sequential growth in the wholesale book. So that actually is a yield accretive portion of the book. Secondly, that new product that we have launched, which we have seen some initial, I would say early green shoots there, that also is a product which is around 250 basis points higher than the general home loan that we are doing. A little bit of push will also come from the tweaking of the rate structure that we have just discussed about the change in the CIBIL score driven rate structure. These are the three things which are there.
The fourth thing is there whatever benefit you are seeing on the cost of fund side, we have seen a reduction of 3 basis points. The number might be very small, but 3 basis points on a pool of INR2.5 lakh crores that has come actually towards the end of September. So that benefit, some part of that benefit will also trickle down into the coming quarters.
Kunal Shah
Got it, Got it. Okay.
Sudipto Sil
Incremental cost of fund also, as compared to Q1, there is a drop of about 11 basis points in second quarter. We expect that assuming that the interest rate scenario remains by and large at this kind of a situation, though it has been a bit volatile in the last two to three weeks, we expect by and large that those benefits also to percolate down.
Kunal Shah
Got it. And [Indecipherable] on developer, incremental developer book would be how much?
Sudipto Sil
On the entire book, wholesale book, I would say not the developer per se, because we are also doing a fair bit of lending on the NHC, which is loans to other housing finance companies. So blended that will be an annualized rate of close to 10.5% — 10% on the card, and if you annualize it will be closer to 10.5%.
Kunal Shah
Okay. Okay, got it. Thank you.
Operator
Thank you. The next question is from the line of Ankit Manocha from Desai Ventures Family Office. Please go ahead.
Ankit Manocha
Yeah, hi, good afternoon. My first question is an extension of the repo rate cut question from one of the previous participants. So, I mean considering that you mentioned that the liability pricing transfer is immediate at the end of the current month, whilst the asset transfer happens on the first of next quarter, then does that mean that we would have tailwinds for margins for this period of a rate cut or would it be headwinds for margins for this period of the repo rate cut?
Sudipto Sil
I would say it is something which is balanced out in terms of timing. We will get some benefit on the liability side, but that will be on about 50% of the book. Whereas on the asset side it is likely that the pass on will be towards almost 90%, 95% of the book. So, timing wise there will be a little bit of cushion that we will get. More importantly is that even before the rate cut actually happens, we will see a little bit of softening which will happen on the bond yields which we have seen in the last maybe one month or so. So that also keeps on adding to the cushion.
Ankit Manocha
Right. And this timing that you speak about, say if I look at it from a more immediate timing perspective, say one or two, one quarter only, for example, then in that case, in that one particular quarter when the rate cut happens, then you would see some sort of a margin expansion and then that would kind of peter out later on. Is that the correct understanding?
Sudipto Sil
I will say the [Indecipherable] by and large stable. I will not look at, I mean depending upon the, I mean it’s not a very simple Excel sheet kind of an extension. Timing wise, what you are saying is absolutely right. But to the magnitude of it will depend upon the external rate X of the repo. Repo is only a policy announcement. The rate moves before and after the repo in a different fashion altogether.
Ankit Manocha
Okay, sure. Thank you. And my second question is with regard to the fact that I believe 54% of your liabilities is NCDs. So, in next year, even if there was a moderate repo rate cut environment, does this portion — I believe this portion would not be repriced, right? Or is my understanding incorrect?
Sudipto Sil
No, I will say that about 20%, since my average duration of NCDs is about five years. So, 20% of it any which ways will get redeemed over any period of 12 months, number one. Number two is that if you just look at the NCB incremental borrowing in the last three months, say from the period of May onwards till about September end, almost all the tenors have the pricing has moved down, and the yields have moved down by about between 15 basis points and 20 basis points even without a repo cut. So, the same tenure which we were raising up in the range of around 770 we have very recently raised at 748. Similarly, across the other tenors, three years and five years also we have witnessed a similar kind of a reduction.
Ankit Manocha
Understood. So, something like say if there is a two or three-year environment or rate cut environment…
Sudipto Sil
I will just put it this way. See, we have not seen any repo cut but without the repo cut also the incremental cost has come down by 11 basis points in a period of three months. So that is precisely what I’m trying to say is that before and after the repo also the markets move in a completely different manner which may not be directly linked to a repo.
Ankit Manocha
And that would affect the pricing of your NCD book over the long term also. I mean two or three years later then the NCD pricing should kind of be better for you, in that case. Understood. And finally, my last question is about the developer finance vertical. So, I mean what is the current portion of the book for developer finance? What do you anticipate this might be for next year and what is the anticipated NIM profile for this business?
Tribhuwan Adhikari
Yeah, Developer finance, right now it constitutes 3% of my book, right. So, as I said in the answer to one of the questions, we are guardedly optimistic about that. We are going about in a guarded manner. We are not going whole hog into it. Well, the legacy has not been very good. So, we have selected a few quality developers, and we are working with them or engaging with them. As I said, we have gone in for external ratings. The developers rated triple B and above is what we are looking to fund. So that is the way it is going to be, and I feel in the way of course, we’ve done about INR1,500 crores in this quarter which was INR500 crores in the same quarter last year. So, there is a Traction. So, we did point out almost after six or seven quarters we’ve seen a growth in the developer book. So okay. We are guardedly optimistic about this quarter. We are going to grow the developer book. We are not shying away from that. So, probably by the end of the year I’m looking something about say 4% of my book up from 3% right now. And in the coming year I would say another 2%. So, somewhere around about 5% to 6% of my book should be the developer book.
Ankit Manocha
And the NIM profile versus the legacy book.
Tribhuwan Adhikari
As far as the builder is concerned, generally the kind of builders that we are targeting now is I would say much better in terms of external credit rating. So probably here we’ll be able to price it somewhere between 11% and 12% for a construction finance, which will be around 350 [Indecipherable]. For every 1 single percentage point, there is a 4-basis point margin improvement.
Ankit Manocha
Understood, thank you. Thank you for answering my questions.
Operator
Thank you. The next question is from the line of Mohit Jain from Tara Capital Partners. Please go ahead.
Mohit Jain
Hello. Yeah, hi, good afternoon, sir. I have two questions. One is on the disbursement side. In the previous quarter we have said that we are targeting for INR75,000 crores of disbursement. In the first, in the first half year, we have done almost INR30,000 crores of disbursement. So, it seems the task for the remaining half H2 is to be pretty stiff. Do we stick to that timeline, and in that context, how has been the festive season so far in terms of disbursement? And the related question will be in terms of the AEM growth, on the media today also you said 12% to 15% is the growth we are looking forward to. So far, the AEM growth has been slightly softer. So, how do we look at it going forward? Do we stick to the guidance or do we look into this?
Tribhuwan Adhikari
Well, if you, if I, if you are referring to the media thing, in the beginning of the year we had said double digit growth, that is what we had guided into, right. And the specific question with Latha of CNBC asked me that did you factor in PMAY into it? And I had said that no, not exactly PMAY, but yes, affordable. We have been in the affordable segment. We have been doing affordable, we have been giving affordable lanes. So not fully factored in, but yes, some part of that INR75,000 crores definitely was affordable also, when we had pushed in for that thing. So, then I had said that, yeah, about from double digit initially I said it would be the lower double digits, and then I said, okay, if the PMAY comes in and we get into PMAY, which we intend to, it would be between 12% and 15%, that is what I said, and we stand by that. Yes, right now, we are at 6% up from 4.5% in the last quarter. So, marginal 1.5% increase, but traditionally, but base is bigger. You must realize one thing, LIC HFL is almost INR2.90 lakh crores of base. So, expecting us to deliver the same run rate as some of my smaller peers I think would not be justified. So, that is why slightly lower guidance as compared to what the industry is expecting. But yes, 6% right now. I’ll stick by my guidance that double digit growth is what we’re looking. Q3 and Q4 upcoming, Q3 and Q4 traditionally have been strong quarters for us and for the industry also. And right now, as we said, the festive season is going on. Very early to assess because Diwali, Dhanteras, today is Dhanteras and then Diwali the day after. So right now, it is okay. I think we are in, the growths are similar to what we experienced during the festive season. And this festive season carries on till December. Various festive offers and all, etc., are on till December. So, I expect this festive season to contribute to our already existing growth 27% in sequentially. So, we expect this to continue.
Mohit Jain
Okay, thank you. So, we stick to the disbursement and the EM guidance. Okay, thank you, sir. Thanks a lot.
Operator
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah, thank you, and good afternoon, everyone. Sir, first thing, I mean a couple of times in the call you said that while we are focused on growth, there are two things that I wanted to bring to your attention. One is where you said that while growing the book is important, but growing the book with better margin is also important. And at the same time, somewhere we also acknowledge the fact that our large balance sheet compared to a lot of our peers, and which is where we can’t be growing as fast as our peers. So, what I’m trying to understand is today if you look at our margins, they are already at decadal highs. This despite an inferior product mix, your loan mix has moved increasingly in favor of individual home loans. Then, I mean, doesn’t it merit that? I mean we focus more on bringing in loan growth even if it means kind of reducing the margins a little bit, because we are already at a higher level than where we used to operate as a business model. And in addition, you have other levers like the tweaking that you have done on your rate based on CIBIL scores. You are also bringing in self-employed customer segment, affordable segment now, self-employed affordable segment. So that is one question that I had. The second question is on the affordable segment itself. While we used to do salaried affordable loans earlier, fact that we are now venturing into self-employed affordable segments which in itself is I would say very vulnerable and riskier customer segment. And if you look at, I mean the smaller affordable HFCs that they have, it’s a very, very opaque — I mean I would say intensive, operationally intensive business. So, unless we build capabilities there, I mean I’m sure we are not setting up a whole host of branches in tier 2, tier 3 cities. So that is the other thing that I wanted to understand that what was the rationale to venture into a self-employed affordable segment in addition to the fact that it gets to higher yields, 250 basis points higher yields. And the last one is again a clarification. When we say that our back book yields get repriced on the first of every quarter, first day of every quarter, am I right in kind of saying that they are not necessarily your loans that you’ve given to your customers, are not necessarily linked to your repo rates, but instead because banks have repo linked home loans and because of competitive pressures, you actually reduce it to the same extent as the repo rate cut.
Tribhuwan Adhikari
Yeah, Abhijit. Okay, point taken. Yeah, your first point is very well taken. Yes, this is a call we need to take regarding growth versus margins. You were alluding to the fact that I think we should be growing our loan book and probably not looking at margins. But then, again, I think this is a Hobson’s choice we have. And, we do need to grow our books but at the same time we need to look at margins and all, because all along 35 years we’ve been looking at growth and not completely focused on margins. We have been competing in the prime and the super prime segment of borrowers. Our competition is mainly with banks who have an advantage of low cost of funds. So, we have been fighting this price war or this cost of lending war all these years. And yes, we have run a big book. We have got a book of INR2,94,000 crores. But then if you look at my margins, my margins are only about 2.73 or NIMs are at 2.73. So, it has to be a balanced approach, I believe. We cannot junk one for the other. I cannot be saying that I’ll be looking only at margins and completely forget about growth. And at the same time, I cannot be saying that I will look only at growth and not look at margins. It has to be a balanced approach and that is what we are aiming for. While looking for growth, we are also trying to diversify our book slightly. I would not say by a big margin, but slightly towards the higher margin segments like NHI, NHC and the affordable also.
Yes, regarding the affordable, yes, yes, I do agree that the self-employed sector which we have ventured into and for us it is risky. Yes, it is risky, definitely risky. And for us, since we are going there for the first time, we have not done it in the past, it is all the more risky. The pricing. We have priced the risk. We have priced the risk, and I fully agree that yes, we need to build the infrastructure and the capabilities. As regards offices, we have offices in tier 2 and tier 3 towns. So right now, we would be treading cautiously into this segment because we do realize that there is potential in this segment. There are margins in this segment. But we would be ensuring that whatever due diligence or whatever extra due diligence and extra efforts are required in doing this business and especially monitoring this business, these are done. So, do not expect very high growth in this affordable self-employed segment. But definitely in the next two to three years, we would like to ensure that this product or similar type of products, they form a good portion of our sales. Does that answer your question?
Sudipto Sil
I think one query is left regarding the back book. Yes, sir.
Tribhuwan Adhikari
You had a query, Abhijit.
Abhijit Tibrewal
Yes, you’re right. The question is that when you said that, I mean the back book gets repriced on the…
Tribhuwan Adhikari
Yeah, actually if you look at it, the contractual agreement is that there will be a review whether there will be a repricing or not, that is subject to external situations. So, the review parameter is once every beginning of the quarter. So, first January, first April, first July and the first October. What decision we take few weeks prior to that date is depending upon so many factors like one of them will be a reduction in the cost of fund, competitive intensity will be another. Our loans are linked to our internal PLR. They are not linked to any repo or external benchmark.
Abhijit Tibrewal
Got it, sir. This is useful. That’s all I wanted to clarify. Thank you so much and wish you the very best.
Operator
Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead.
Gaurav Kochar
Yeah. Hi, sir. Good morning. Thanks for taking my question. First of all, congrats on the quarter. I think disbursement growth has picked up in this quarter, and we hope this trend sort of continues. Just two questions from my side. Firstly, I think an extension of what Abhijit already asked regarding the book, that is the back book that repricing will happen every quarter. So, is the understanding correct that even if, let’s say the repo rate cut happens 25 bps maybe in the fourth quarter of this year, not necessary that on 1st of April which is the beginning of the quarter, you will have a similar sort of RPLR cut. And that RPLR cut would be largely linked to your cost of funds sort of movement. And if your cost of fund repricing is only by a few basis, then that would be the largely the reduction in PLR. Is that understanding correct?
Tribhuwan Adhikari
Yeah, I think that understanding is absolutely correct. All loans are not linked to any external benchmark. But we understand if there is a repo cut, there will be improvement in the cost of fund. To that extent there could be a situation open for passing on a reduction to the customers. But that is not a one-to-one kind of a correlation.
Gaurav Kochar
Got it, got it, got it. Sure. Maybe over a period of time that entire 25 bps pass on as you get the benefit on cost. So, that lead lag impact would not be very much.
Tribhuwan Adhikari
Of course, I mean to be very realistic you also need to also keep in mind what is the competitive situation. So probably it is possible that the rate action might happen on the incremental side rather than on the back book, that is also possible. But these are possibilities which will be explored only when the external situation becomes clear.
Gaurav Kochar
Got it, got it. Perfect. That’s one. Secondly, let’s say without rate cut, looking at today the yields on the portfolio and the efforts that you’re talking about to increase the yield, be it the affordable side, little more self-employed, and the little tweaks you have done on your credit score dividing the C700 to 715 to two small buckets. So, all of this effort directionally, let’s say assume there is no repo rate cut for next two quarters. Can we expect the yields to continue to improve from here? And given that cost of funds, the incremental cost of funds have started to moderate a bit. Maybe the cost of funds remains stable over the next couple of years. The amount of improvement in yield should translate into NIM sort of improvement in next two quarters. Is that a fair sort of an outcome to expect?
Tribhuwan Adhikari
Yeah, I think that’s a fairly reasonable expectation. There are three things which we have done. One thing as we have identified it is kind of tweaking the pricing structure. So, it is not only from 700 to 750 but also from 750 to 800. So, there are four subcategories with some 10 basis points, 15 basis points differential. So that will always give some kind of, though the number might be very small but that will be a positive accretion. Number two, improvement in the wholesale book in terms of its overall volume. Certainly, that will be an improvement. And the overall improvement in collection efficiency and collection efforts, that will also help. And the fourth thing about the new product launch that we have discussed, that of course is a very initial stage. But as and when it picks up, that will also be a margin accretive exercise.
Gaurav Kochar
Got it, Got it. And just lastly on asset quality, you’ve spoken about small ticket resolutions that happened in this quarter. The NPA is down to 3.1%. And incrementally if you are seeing another wholesale account of INR400 odd crore, I think sir alluded to that may get resolved in this quarter or maybe if not this quarter, then next quarter. So near term, let’s say whatever recovery is from NPL you get this quarter you indicated it’s slightly lower than last quarter. I think similar to last quarter, INR90 odd crores and INR86 crores. So, going forward in the NII line, can we expect that number? I think last quarter you said that normalized run rate was INR140 crores, INR150 crore, and that dropped down to INR90 crores, and it’s at a similar band in this quarter. Can we expect in second half that number to move up and that also adjusted for that the margin should go up.
Tribhuwan Adhikari
Yeah, that is a one off as it is because in some quarters it might come, some quarters it might not come. We are putting in efforts to also realize interest along with NPL accounts. But obviously it’s a difficult ask, but we are on the job. And as and when such resolutions actually happen, that will certainly add to the margins.
Gaurav Kochar
Sure. And what is the total write off pool of non-corporate or non-project loans? What is that write off pool where you are recovering steadily from? What would be the total quantum of that right of write off pool in the retail book?
Tribhuwan Adhikari
See, total written off on the retail side is about INR2,300 crores. This is a cumulative figure for the last 20 years. And on the project side it is about INR1,900 crores. So, total around INR4,200 crores is the amount which is written off on the book. These are all technical write offs. And over a period of last 20 years.
Gaurav Kochar
Okay. So, these are essentially the ones that are left which have not yet normalized or recovered.
Tribhuwan Adhikari
No, no, there are the write-off amount, out of which we have also recovered about INR300 crores already.
Gaurav Kochar
Okay. Cumulative. Put together, INR300 crores. Okay. Got it. Perfect. Thanks. Thanks, and all the best.
Operator
Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Nischint Chawathe
Yeah, thanks. You know, you mentioned that incremental cost of funds is around 7.71%. What is the incremental lending rate?
Tribhuwan Adhikari
Incremental lending rates [Technical Issues]
Operator
Ladies and gentlemen, we have lost the management line connection. Please stay connected while we reconnect them. Thank you. Ladies and gentlemen, thank you for patiently holding. We have the management line back on the call.
Tribhuwan Adhikari
Yeah, Nischint, are you there?
Nischint Chawathe
Yeah. Yeah.
Tribhuwan Adhikari
Please go ahead.
Nischint Chawathe
So incremental lending rate is how much?
Tribhuwan Adhikari
Around 9.4, annualized.
Nischint Chawathe
And I think on the segmented NPAs, I’m not sure if you gave the numbers. What is the individual retail GNPL number, the ratio?
Tribhuwan Adhikari
Okay, I’ll give you all the numbers. You can just note it down. All the three categories. I’ll give you. On the individual GNPA, stage three, we’ll call this stage three. It is 1.26. That is in the IHL individual home loans. 1.38 was the last quarter number. In terms of the project, it is 30.13 as against 33. And the last piece is the NHI, the non-housing individual, which was 5.39 in the previous quarter. Now it is 5.03.
Nischint Chawathe
Got it. I think this is helpful. Thank you very much.
Operator
Thank you. The next question is from the line of Vikram Subramanian from Marshall Wace. Please go ahead. Mr. Vikram, your line has been unmuted. Yes, please go ahead.
Vikram Subramanian
Hi, thanks for taking my question. I just wanted to get some clarity on some operational aspects of our core home loan product. Basically, in the prime home loan category, if a customer wants to take their home loan to a different lender through balance transfer, maybe to another bank, what are the practical frictional costs that the customer faces? Is there any cost that we charge them? What are the various costs that are, that we can charge them and which are the ones we can practically enforce?
Tribhuwan Adhikari
Well, Vikram. In fact, beginning of this year only RBI said that you cannot penalize the customer for anything, right. Earlier we did have something called the prepayment charges. But now that is gone. So, as of as on date, a customer on transferring his loan account from one institution to the other or at least HFL to anybody else, there are no costs involved.
Sudipto Sil
Only you can say in one way that there is a cost on the other side. In case that other bank charges are processing fee, that is a cost and mortgage, that is the memorandum of, I mean that mortgage creation, that document that is about 0.5% of the outstanding loan, depends upon state to state. So that is a cost of switch. So, every time a person creates a new mortgage, that document has to be executed.
Vikram Subramanian
Got it. Got it. But both of these costs that you mentioned are on the other side and not on our side.
Tribhuwan Adhikari
No, no cost. No cost. Prepayment penalties cannot be charged. Prepayment penalties cannot be charged as per the regulatory mandate, it cannot be charged for individual home loans. For commercial like, if you have given a non-housing commercial loan or a builder loan then there are prepayment penalties which can be taken, but for individual home loans it cannot be.
Vikram Subramanian
Got it. Got it. That’s clear. Just wanted to check on that. Thanks.
Operator
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Shubhranshu Mishra
Hi. Good morning. Thanks for this opportunity. Hi. So just quickly on the project finance portfolio. So, three questions within the Project Finance portfolio. First one is in the outstanding portfolio that we have, what are the total number of accounts that we have, and what would be the largest account there. Second is in the stage three numbers, what is the proportion or the number of accounts from project finance and what is the value of that? And the disbursement that we have done in project finance this quarter, how many of those accounts are refinanced, or are these absolutely fresh projects that we have lent to? Thanks.
Tribhuwan Adhikari
Okay, so, Shubhranshu, first was how many loan accounts in our project finance. We have approximately about 200, 200 loan accounts in our project finance book as of now, right. So, what was the second question?
Shubhranshu Mishra
What is the largest account among them, sir?
Tribhuwan Adhikari
About INR500 crores. Plus/minus INR25 crores or rather plus INR25 crores, INR500 crores, INR550 crores.
Shubhranshu Mishra
Right. And in stage three what is the number of project finance account and what is the value?
Tribhuwan Adhikari
Stage three Project Finance numbers. Yeah, just a minute. You want a stage three stage three project finance. Okay, I think we shared the number just few minutes back. Including NHC and project put together, it is about 30% is the stage three.
Shubhranshu Mishra
Number of accounts, if you can give?
Sudipto Sil
Numbers will be around say 35 to 40 will be approximately in stage three.
Shubhranshu Mishra
Okay. And the disbursement that we have done in project finance this quarter, what proportion is refinance and what is the proportion that is going to fresh loans as in fresh projects?
Tribhuwan Adhikari
Almost I think entirely is fresh. There is no — you’re talking of takeovers. takeovers are not there. So, it is absolutely fresh projects or fresh launches.
Shubhranshu Mishra
Yes, got it. And sir, our entire project finance loans are single lien or are there any accounts which are Pari-passu?
Tribhuwan Adhikari
No, they are all single. They’re fully charged to us.
Shubhranshu Mishra
Even in the state three?
Tribhuwan Adhikari
Even in the stage three also. Almost entirely we have the sole lenders. See actually in the project finance we are almost in all the cases, maybe barring one or two cases, we are the sole lenders. So, we have exclusive charge and security of the title.
Shubhranshu Mishra
Right? Right. Just counterintuitively, sir, why is it taking us longer in that case? If we have got single lien to resolve these accounts?
Tribhuwan Adhikari
It is not because of single lien or Pari-passu, the issue is is because you know in a situation where the project is semi-complete or half complete or in some stage of I would say progress, it depends upon the two, three different things. One thing is that if it is through the courtroom, IBC takes its time. So, you really do not have any strict control on the timelines on an IBC, because the home buyers also sometimes create a — I mean interest is created, so they also party to this entire legal matter. In case you are looking for a settlement with the borrower or on auction, these are all processes which take their own time for a better realization.
Shubhranshu Mishra
Understood. Understood. This was very helpful and best of luck for ensuring quarters, and Happy Diwali.
Operator
Thank you. Ladies and gentlemen, we’ll take this as the last question. I would now like to hand the conference over to the management for closing comments.
Tribhuwan Adhikari
Yeah, thank you. As we’ve spoken and answered the queries, the second quarter was a quarter where we had focused on consolidating on the key operating metrics, especially on the growth front. Now with the festive season amongst us and Q3 and Q4 traditionally strong quarters in front of us, we are confident of a very good Q3 and Q4 to follow. I extend heartiest festive greetings to each one of you and thank you for your continued support.
Operator
Thank you. [Operator Closing Remarks]