Piramal Enterprises Ltd (NSE: PEL) Q2 2025 Earnings Call dated Oct. 23, 2024
Corporate Participants:
Ravi Singh — Head, Investor Relations and Sustainability
Ajay Piramal — Chairman, Piramal Group
Jairam Sridharan — CEO, Retail Lending and MD, Piramal Capital and Housing Finance Limited (PCHFL)
Yesh Nadkarni — Chief Executive Officer, Wholesale Lending
Upma Goel — Chief Financial Officer
Analysts:
Abhijit Tibrewal — Analyst
Avinash Singh — Analyst
Shreya Shivani — Analyst
Parag Thakkar — Analyst
Sameer Bhise — Analyst
Nischint Chawathe — Analyst
Vivek Ramakrishnan — Analyst
Prit Nagersheth — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Piramal Enterprises Limited Q2 FY ’25 Earnings Conference Call. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Ravi Singh, Head of Investor Relations, Strategy and Sustainability from Piramal Enterprises Limited. Thank you. And over to you, sir.
Ravi Singh — Head, Investor Relations and Sustainability
Thanks, Nisha. And hello, everyone. Welcome to our earnings conference call for Q2 FY ’25.
Our results material has been uploaded on our website, and you may like to refer to them during our discussion. The discussion today may include some forward-looking statements based on management’s expectations that are subject to uncertainties and changes, and must be viewed in conjunction with the risks that our businesses face.
On the call today, we have with us our Chairman, Mr. Ajay Piramal; Mr. Anand Piramal, Director, Piramal Enterprises; Mr. Rupen Jhaveri, Group President, Piramal Enterprises; Mr. Jairam Sridharan, CEO of Retail Lending and MD of PCHFL; Mr. Yesh Nadkarni, CEO of Wholesale Lending; and Ms. Upma Goel, CFO, Piramal Enterprises.
With that, I would like to hand over the call to Mr. Piramal for his remarks on the Q2 performance. Thank you. And over to you, sir.
Ajay Piramal — Chairman, Piramal Group
Good evening, and thank you all for joining us today. First of all, I would like to take this opportunity to wish everyone a very happy Diwali and a prosperous new year.
Our financial performance in the second quarter of FY ’25 track the objectives we have been speaking about as part of our transformation in the last few years. In the second quarter, our Growth business continued to scale up steadily. Risk was well-controlled and operating leverage further improved. At the same time, we continue with the focused rundown of our discontinued legacy business.
Let me summarize the key trends in this quarter. Driven by the rising share of the faster-growing Growth business, our total AUM growth has been recovering well. In this quarter, the total AUM was up 12% year-on-year to INR74,692 crores. The growth of AUM was up 45% year-on-year and now accounts for 84% of our total AUM. This is up from 34% of the total AUM is in March 2022.
Within the Growth business, retail AUM grew 8% quarter-on-quarter and 42% year-on-year and now forms 73% of the total AUM. Wholesale 2.0 AUM rose by 12% quarter-on-quarter and 75% year-on-year to INR7,889 crore. Our legacy discontinued AUM now stands at INR12,000 crore, which is 16% of the total AUM. We reiterate bringing this book down to less than 10% of the total AUM by March 2025. We have a fair line of sight on the expected reduction in the second half of FY ’25 from loan, SRs and AIF assets through a combination of organic cash flows, refinancing, asset sales and accelerated repayment.
In this quarter, we have reported a consolidated net profit of INR163 crores. Within this, the Growth business accounted for a net profit of INR130 crores. Increasing share of the Growth business, which has a higher NIM, has driven the overall NIM improving to 5.1% versus 4.9% in the first quarter of FY ’25. In the second quarter of FY ’25, our operating profit to AUM for the Growth business was stable at 2.8%.
Opex to AUM was down 10 basis points quarter-on-quarter and 80 basis points year-on-year to 4.5%. The further reduction in this ratio would drive future expansion of operating profit in the Growth business. Our gross credit cost was at 1.8% versus 1.6% in Q1 of this year. With normalizing recoveries from the DHFL book, the reported net credit cost was 1.6% versus 1.3% in the first quarter of FY ’25. Thus, the PBT to AUM for the Growth business stands at 1.2% in this quarter.
On the merger between PEL and PCHFL, we have filed a scheme with the stock exchanges. The next steps include approvals from the exchanges, SEBI and RBI, followed by the NCLT process. We continue to diversify our borrowing base with securitization now at 14% of total borrowings, up from 4% in the same quarter of FY ’24. We currently have 27 DA and two co-lending live programs with Axis Bank and the Central Bank of India, who now are our co-lending partners.
Following our $100 million social impact loan and our debut $300 million sustainability bond in July 2024, we successfully completed a tap issuance in October 2024, raising an additional $150 million from international capital markets. The tap issuance was oversubscribed 3.5 times, reflecting strong investor confidence.
I’ll now hand over to Jairam, Yesh, and Upma to discuss our business and financial performance.
Jairam Sridharan — CEO, Retail Lending and MD, Piramal Capital and Housing Finance Limited (PCHFL)
Thank you so much, Chairman, sir. I’m going to start with a discussion on the retail lending business and it will be followed by Yesh speaking about the wholesale side of our business.
In the second quarter FY ’25, our retail AUM grew by 42% year-on-year and is now at an AUM of INR54,737 crores. Our disbursement stood at a little over INR8,000 crore, reflecting a 29% year-on-year increase. Disbursement yields remained stable at 14.1%. In our flagship mortgage business, which comprises housing loans in affordable housing and loan-agreed property, the business grew by 37% year-on-year to an AUM of INR37,005 crores and now it accounts for 68% of the retail AUM. Our mortgage book has exhibited robust asset quality in the last two years. Currently, the 90-day past due delinquency ratio is 0.5% in our housing business and 0.3% in loan against properties.
Our retail products also demonstrated robust AUM growth with used car loans up 145% year-on-year, salaried personal loans up 148% year-on-year, and business loans up 55% year-on-year. However, our disbursements in the digital loans business remained constrained and we were at INR562 crores of disbursements in the quarter versus INR836 crores in the first quarter and an average of about INR1,300 crore run rate that we had through FY ’24. From peak, this business has reduced by more than two-thirds on a quarterly disbursement run rate basis.
While we have been controlling digital loan origination, the use of digital channels in our overall business has seen quite a transformative change over the last year. We have shared a new slide in this presentation, slide number 10, where we have highlighted some metrics on the adoption of our mobile app and of our use of WhatsApp in customer engagement, customer service, and collection.
Our mobile app received a significant upgrade, introducing features such as last-mile PL disbursal, advanced EMI payments, and third-party products like health insurance. Monthly active users, or MAU, on our Piramal Finance app have more than doubled in the last one year. Today, 53% of all the service requests that we get in the Company are fulfilled digitally.
We also launched the WhatsApp service bot in April that supports eight languages and uses conversational AI, enhancing the user experience beyond traditional menu-driven interaction. This service has seen a sharp uptake in MAU and has concluded service requests and is playing a big part in overdue collections. During the quarter, we also received formal approval from RBI to launch our prepaid payment instrument, Piramal Pay. This happened in October 2024. We aim to provide seamless secure platforms for prepaid transactions, enhancing accessibility of payments for individuals and businesses in our customer segment.
Moving on to asset quality. The overall retail asset quality remains healthy. Slippage ratios and 30-plus and 90-plus days past due delinquencies are all running flat compared to the second quarter of FY ’24, though slightly up from the first quarter of FY ’25. We believe our diversified multi-product portfolio provides the stability even as various products undergo their own cycles.
Slides number 15 and 16 in our presentation outline the 90-day past due delinquency chart and the vintage risk trends across various product segments. You will see here that digital loans have remained elevated from a risk standpoint. These represent 6% of retail AUM. Within all the unsecured areas, the area where you see the most steady increase in risk is business loans, which in our classification also includes a small microfinance population.
The 90-day delinquency trend here, as you will see, have been trending up. The portfolio is also seasoning, so that has got something to do with this, apart from what’s going on in the macro environment as well. Within those unsecured business loans, and all loans in general, the sub-INR50,000 category is where we are seeing the steepest risk deterioration. In our retail business, our total exposure to less than INR50,000 loan is less than INR750 crores. The rest of the products continue to witness benign delinquency trends, but we remain vigilant.
Moving on to customer franchise and cross-sell. If you look at slide number 11, our franchise grew by 27% year-on-year to 4.2 million. We have been able to capture a significant portion of our customer origination for future cross-sell opportunities. In our unsecured business, we have slowly increased cross-sell penetration to a point where 17% of our unsecured disbursements today happen through cross-sell. We expect to see continued improvement on this metric in the quarters to come.
On our network side, we have a network today of 508 full-service branches, apart from 236 microfinance branches. Through these, we serve 608 districts in 26 states. As we have mentioned in the past, our aim is to expand our reach to about 600 full-service branches in the medium-term. However, the pace of our branch opening has moderated to about 10 to 15 branches a quarter, down from 20 to 30 branches a quarter, which was our pace in prior years. Our focus now has shifted to raising the productivity of our existing network, even as we slowly move towards the 600 mark that we have guided before.
Slide number 12 talks about these very productivity metrics and how they have been improving. As you can see here, we have seen steady gain in productivity amongst our branches and all our employee base, as our branch vintage mix continues to improve. So on a disbursement per branch basis, AUM per branch basis, or disbursement per employee basis, you will see productivity metrics steadily improving.
In addition to scaling our operations and managing risk, we are equally focused on enhancing profitability. If you look at slide number 17, over the last multiple quarters, we have consistently reduced our opex to AUM ratio in the retail business. This now stands at 4.7% in the second quarter of FY ’25, down from 4.9% in the previous quarter, and 6.5% in the last year — in fourth quarter of FY ’23. We aim to continue this trend of steady reduction in this metric in line with our medium-term guidance of 3.5% to 4% per annum.
With retail AUM now at almost INR55,000 crores overall, we expect to continue to scale our multi-product franchise to — and for this to continue to grow at a healthy pace, even as we keep portfolio quality and some of the emerging asset quality issues as key areas of focus. As we do that, we will continue to improve operating leverage to drive profitability expansion.
With that, I hand over the call to Yesh to walk us through the wholesale lending business and our progress there.
Yesh Nadkarni — Chief Executive Officer, Wholesale Lending
Thanks, Jairam, and good afternoon to everyone.
On the wholesale side, during this quarter, we disbursed INR1,837 crore in our new wholesale business, that is Wholesale 2.0. This was a Q-o-Q increase of 17%. We also saw faster-than-expected repayments in this portfolio, due to which AUM grew 12% Q-o-Q to INR7,889 crore. Prepayments occurred across both CMML and real estate lending businesses, however, were more pronounced in the CMML segment. This only indicates better-than-expected performance of the book, which continues to benefit from economic tailwinds across corporate and real estate [Technical Issues].
Since our inception of the new wholesale lending business, or 2.0 version of wholesale, we have not experienced any delinquency in the portfolio. The portfolio has an average ticket size of INR75 crore and an effective interest rate of 14.3%, featuring a well-balanced asset duration and diversification. Encouraged by this performance and the market tailwinds, we will continue to build, in a calibrated manner, a granular, high-quality, and profitable Wholesale 2.0 business.
Our legacy discontinued wholesale AUM reduced by 49% year-on-year to INR12,066 crore. This portfolio is now down 72% since March 2022 and stands at about 16% of total AUM of the firm. In the first half of FY ’25, we have achieved a reduction of INR2,506 crore in this book. We continue to work on paring down the portfolio through a combination of organic cash flows, refinancings, asset sales, and accelerated repayments. Given the amount of work in progress towards this, we feel confident to meet our target of bringing the legacy AUM to less than 10% of total AUM by March 2025.
With this, I will hand over to Upma for her to cover finance — part of her.
Upma Goel — Chief Financial Officer
Thank you, Yesh.
Moving to our financial performance. In Q2 FY ’25, we reported a consolidated net profit of INR163 crore, led by Growth business reporting a profit after tax of INR130 crore. The Growth business reported a net interest income growth of 29% year-on-year to INR940 crores, led by AUM expansion. Opex to AUM for the Growth business declined by 80 basis points year-on-year to 4.5%, supporting a 23% year-on-year increase in operating profit to INR397 crores.
Net credit cost after POCI and other recoveries was at 1.6% in quarter two FY ’25 versus 0.9% in quarter two of last year. The Growth business thus reported a profit before tax of INR173 crore. This represents a PBT ROA of 1.2% in quarter two of FY ’25. The tax rate at PCHFL was nil due to assessed carry forward losses, while at the Piramal Enterprise level, we continued to accrue the applicable tax rates.
Our GNPA and NNPA ratios were 3.1% and 1.5%, respectively. Our net worth stood at INR26,930 crore with a capital adequacy at 23.3% on consolidated balance sheet basis. Our cost of borrowing stood at 9.1%. We are actively diversifying our borrowing mix, including securitization and international borrowings. Our fixed to floating rate debt mix has improved to 54% fixed and 46% floating and is expected to enhance further in the coming quarters.
With these remarks, I now — I would now like to open the floor for questions. Thank you.
Questions and Answers:
Operator
Thank you very much, ma’am. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good evening, everyone. Thank you for taking my question. So first thing is on the legacy AUM. We plan to bring it down by another INR4,500 crores to INR5,000 crores in the second half of this fiscal year. I’m just trying to understand. This quarter, we have reported that we brought down the legacy AUM without any P&L impact. So how are we thinking about the additional INR5,000 crores in the second half? Will it kind of coincide with the recoveries that we have talked about in the past, whether from AIF or some of the other monetization tools that we have spoken about?
Yesh Nadkarni
Yes, I think that’s a fair description of what it is likely to be. We don’t think, on an incremental basis, we will see any further hits beyond, on a net basis, the recoveries that we look at.
Jairam Sridharan
You might see, Abhijit, credit cost line items come up, but correspondingly, some of the AIF recoveries and some of the other items that we have pointed to in the past will also come in. So we are reiterating both the points that we have made in the past. One, that the reduction through the course of the year will be INR7,000 crores or a little bit more than that, the reduction in the legacy book. And two, that reduction would be on a net worth neutral manner. And both of those we continue to believe to be true.
Abhijit Tibrewal
Okay. Thank you. The other thing is, I mean, we’ve reported total credit costs of INR317 crores in this quarter. Just trying to understand what is the split between our Growth and legacy business in this INR317 crores?
Jairam Sridharan
Yeah. Sorry. Growth and legacy business [Indecipherable], right? Yeah. So one sec. We’ll just show it to you. Yeah. So Growth credit cost is INR223 crores. You will see on page 26 in the presentation. The Growth is INR223 on a gross basis. And on the legacy, which is on a net basis, you will see the balance.
Upma Goel
But it will obviously include the INR77 crore of AIF gains. If we add that, then [Speech Overlap]
Jairam Sridharan
Yeah, AIF gain sort of shows up in the extraordinary line, not on the credit cost line.
Abhijit Tibrewal
Yeah, so that is separate. That we have shown separately, the AIF gains. So gross credit costs were INR317 crores. And when we include the AIF gains, that INR317 crores will come down [Speech Overlap] INR77 crores. Yes, got it.
And then, I mean, the last question that I had was for Jairam. Jairam, I mean, in the past, you have articulated that this seemingly looks like a difficult year in terms of asset quality, whether we want to call it normalization, whether we talk about the broad-based stress that we are seeing in the environment. Yesterday also, a large NBFC talked about basically broad-based stress across retail and SME segments.
So two things I want to understand, while you’ve already explained, I mean, business loan also includes MFI for us. And that is where maybe it is also inching up and also basically portfolio seasoning is what you spoke about. But I mean, how are you thinking about this environment in terms of asset quality?
And the related question is, we’ve been going upwards of 40% in retail. Now, you would have seen RBI on multiple occasions, right, I mean, highlighting its discomfort, right, without naming anyone with NBFCs who are growing at a very high rate, right? So I mean, will we at some point in time after this legacy AUM has rundown, right, think about moderating our retail loan growth?
Jairam Sridharan
Yeah, no, really good question. So there are two or three aspects to your question. Let me start with the last one first, which is growth outlook. See, on an overall basis, our AUM as a company has grown 12%. So fairly modest as growth rates go. You’re rightly saying this has been driven by kind of a tale of two cities, one part which is growing fast, one part which is de-growing fast and that is — that what has resulted in a modest overall growth. As the de-growth runs its course, and as we finish the recalibration of our portfolio, we do expect to see more modest growth rates across the pool. If you look at our three-year growth rate that we have guided, we have guided around 25%, 26% CAGR from FY ’24 levels, that is — that implies that by the time the wholesale rundown happen, we would have moderated the retail growth rate as well. Needless to say, when we are a INR55,000 crore, INR60,000 crore book, you can’t — you can no longer grow at 40-plus-percent. Like, it’s just physically, it just gets harder and harder. So it’s not something that we intend to do too much. So we will see as the year go, but that’s — our medium-term guidance hasn’t really changed in that regard.
Now, on your question on risk and how we are reading the risk environment. See, the risk environment is not exactly as we had expected it to. The first two years of — first two quarters of this year have been challenging, and our numbers have been modestly impacted by this delta in the environment. But it is something that we are very much prepared for, and we have been making underwriting cuts in our business for more than kind of a year, almost a year and a half. And we have shown a specific slide this time, slide 16 in our presentation, which shows the impact of all the underwriting cuts that we have been making over the last year and a half, two years. And what that shows is that with continued tightening of our underwriting criteria, our new origination quality has quite drastically improved in this period. As we have mentioned in the past, when cycles start on the credit risk side, it is too late to start doing underwriting changes. At that point, your investments should focus on collections. The time for underwriting interventions was before, not now. And that’s exactly our belief, that people who haven’t made underwriting changes in the last year, year and a half, it’s probably a bit late for them to start doing it now.
Now, the other element of your question is, kind of where do we see the credit risk cycle going from here? We have no strong guidance to offer in this matter. We do think that the retail business has had an extraordinarily benign risk environment for almost 10 years. And it’s a small blip in the microfinance business during COVID, really nothing really bad has happened in the sector for a long, long time. And if that cycle is starting now, and it is now two quarters old, our guess would be that it will probably continue for a little bit more. So we would hesitate to call a top here of the credit risk cycle. It still seems early days.
Abhijit Tibrewal
So this is useful, Jairam. Just a follow up on that. Given how environment is shaping up, and I’m glad you acknowledged that if it started in the last two quarters, it might continue for some more time, rather than topping out in this quarter. So I mean, then will it also — I mean, over the course of the next few quarters, mean that retail credit costs could inch up?
Jairam Sridharan
Yes, it could. I think we have seen that in this quarter, and if you look at our Growth business, and we’ve got a page on this, actually page number, what is that? Eight? Where are we on that? Six, seven. Okay. So look at page six. Page six, that shows what has happened in our Growth business in terms of credit cost. And let’s just look at the growth — the chart on the bottom middle. Let’s just look at the Growth numbers. The net numbers are a bit misleading. But at the Growth level, we were at credit cost of 1.6% last quarter. We are up at 1.8% this quarter. Roughly the same as what we were at same time last year. Now — so we’ve seen a 20-bps delta from Q1 going to Q2. My estimation would be that you would see a little bit more of an increase in this metric for the Growth business in Q2 and Q3 as well. We are not guiding any specific number here. We don’t know, honestly. But it’s hard to imagine that this is the peak.
Abhijit Tibrewal
Got it. This is very, very useful, Jairam. Thank you very much, and wish you and your team the very best.
Jairam Sridharan
Thank you, Abhijit.
Operator
Thank you. We’ll take the next question from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh
Yeah. Thanks for the opportunity. So two questions. First one is on that AIF recovery. So if I recall, I mean, when this kind of a one-time big provision hit was taken due to regulatory changes. It was kind of indicated that the typical run rate will be kind of closer to INR200 crores ballpark number a quarter leading to kind of INR800 crore a year. But I mean, the last quarter it has come lower. This quarter, it is further lower. And again, in a broader context, if I understand, the real estate sector continues to do well. I mean, of course, might have moderated, but you see the — for the longer time, it is still doing perfectly fine. So what sort of a thing is going on there and what kind of a further recovery expectation we can have with this? That’s one.
And second, for Jairam, I mean, again, continuing on the same thing. So about a year back or so, of course, you had your kind of a — you had your eyes set on to just find targets in the area of like microfinance, gold, and all. Today, I mean, microfinance, unsecured PL, even gold has its own set of challenges. So I mean, that kind of an inorganic opportunity seems to be off the table. And on top of that, I mean, Growth also, because as you also said that, okay, you do not believe that this is going to sort of — the credit thing is going to top, so the pain will last for some more quarter. In that context, your growth will also get affected on the retail side due to all this for a few more quarters. Do you still stand by kind of your — the long-term guidance like FY ’27, ’28 guidance that you have given? Because, I mean, this is going to affect it for the next few quarters. Your organic growth is going to get impacted. Inorganic currently is, I mean, likely off the table. So how do you see sort of a growth panning out? Which segment will drive growth? Because, I mean, over the last few days or so, the numbers coming out from your peers, one or the other, almost every segment seems to have some kind of a trouble. There is no right now, I would say, that segment does not see some kind of an inch up in — at credit cost. These are my two questions. Thank you.
Jairam Sridharan
Sure.
Yesh Nadkarni
See, I will address the AIF question first. The AIF constitutes, let’s say, four assets mainly, right, which is the focus of our recovery. We have been working on resolution of these assets for the last two quarters. A lot of work has gone into it, and this is which we continue to believe that we will be able to see the results of all the efforts that have gone into this in terms of the actual recoveries happening in the next two quarters. To that effect, we stick to our guidance that we had given in the March quarter of making about INR1,200 crore or so of gain on P&L. And we do feel that the progress has been made — significant progress has been made towards this objective. And if it changes along the way next quarter, then we clearly will report back. But we do think that we are on track to achieving this performance.
The only thing I’ll highlight here is that the market obviously has been quite supportive. The physical market performance has been quite supportive of our recoveries. And so is the interest that we are seeing from different capital pools, particularly the funds market, where we have seen historically a lot of takeoffs in our portfolio have happened through the funds taking us out. And that continues. It’s not changed at all. But at the same time, we appreciate the fact that these are complex recoveries. They have many moving parts, and it can’t just be a straight line in terms of quarter-on-quarter performance. So that kind of explains the delay in terms of where we are at on the quarterly run rate. But we do feel positive and confident about being on track with our targets.
Avinash Singh
So you are still suggesting — I mean, again, with the uncertainty, of course, implied uncertainty, but you are still kind of hopeful of H2 contributing nearly INR800 crore to INR1,000 crore of recoveries in this AIF?
Yesh Nadkarni
Yes.
Jairam Sridharan
Yes.
Yesh Nadkarni
We — absolutely we do. And our hope comes from the fact that there’s a lot of work that’s gone on, on these assets [Speech Overlap]
Jairam Sridharan
See, many of these deals are large deals, and a lot of background work has been completed in the first half of the year tends to be a bit slow from a deal-making perspective. But all the groundwork has been laid out by Yesh and his team. And we feel good about reiterating what we said at the beginning of the year. So nothing much has changed there. Yes, on a full year, when the year is done, you will see a full year average, not different from what you mentioned. But every single quarter, it’s — you might not see the same number, but we feel pretty good about where we are.
The second part of your question on kind of the opportunities in retail, there again, same answer as what he had said. We reiterate all the guidance that we have offered in the past, the Growth final number, the trajectory, nothing much has changed there. See, we are a multi-product business. At every point in time, we expect some part of the — some portfolio or the other, some business or the other to be going through some challenges, either on the risk front or on the growth front, etc. But that’s the benefit of having a multi-product platform. As you’ve seen in these last two quarters, while we have slowed down, let us say, digital lending growth, our overall growth has not come down because we’ve been able to accelerate on affordable housing this quarter, lap in the previous quarter, etc.
So there’s always something, there is some part of the business where there is an opportunity. So we don’t feel like anything needs to change on that front. We will continue to find these opportunities. There is more than enough in the Bharat market to keep stuff going. And as far as — now, that’s it. As you increase in scale in absolute number, the percentage growth will fall. Of course, we’re not going to continue to have 40% to 45% year-on-year growth that we have had over these last two to three years. That’s unreasonable to expect and that will certainly moderate out. As I mentioned to a previous caller, our medium-term guidance is more a 25%, 26% growth over a four-year, five-year period, of which the first year or so has been a little over 40%. So we feel pretty confident on the growth side.
You spoke also a little bit about inorganic opportunities kind of drying up and certain businesses, gold and microfinance, etc., being out of flavor, etc. That is absolutely true. The markets are going to be bearish on some of these businesses for a little while. But we are perpetual owners of businesses. We don’t get into businesses because we want to time markets or we want to make — we are looking for an investment opportunity. If we get into any of these businesses, it will be for perpetual ownership, which essentially means that down-cycles are an opportunity, not a threat for us. So we will — if we like a certain business, the fact that that business becomes cheaper in the market is a good thing for us and we wouldn’t run away from it if we like the underlying long-term economics.
Avinash Singh
Very clear. If I maybe allowed one more. Any progress on some of the investment that is therefore exit particularly the stake in insurance venture of Shriram [Phonetic] Group because, I guess, there was an indicated timeline of kind of — or a targeted timeline for the same. So is there any progress on kind of [Speech Overlap]
Jairam Sridharan
There is not much a change. There is some development internally on that. We are not talking publicly about it. Let me just say that there is development operationally. The deal is a lot more feasible now than it was, let’s say, a couple of quarters ago. When we want to do the deal, who we want to do the deal with, whether we are already in conversations or not, it would not be in our economic interest to be very open about that at this point. Let me just say that our sort of — what we have guided in the past still stays.
Avinash Singh
Okay, very clear. Thank you.
Jairam Sridharan
Thank you.
Operator
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Shreya Shivani
Thank you for the opportunity. Apologies if my question on the legacy book is a little preliminary, but I wanted to understand that if there is a movement [Technical Issues]
Operator
I’m sorry, sir, the participant has left the queue. We’ll take the next question, which is from the line of Parag Thakkar from Fort Capital. Please go ahead, sir.
Parag Thakkar
Yeah. Can you hear me?
Jairam Sridharan
Yes.
Parag Thakkar
Yeah. Yeah, thanks a lot. Thanks a lot for the opportunity. So Jairam, just wanted to — that our Growth business has reported a ROA of 130 bps, 1.3% on PBT basis, right?
Jairam Sridharan
Correct.
Parag Thakkar
Okay. So Growth business includes retail of INR55,000 crore and around INR7,500 crore of Wholesale 2.0. And there is no tax, right? There is no tax here, right?
Jairam Sridharan
[Speech Overlap] tax rate — our effective tax rate at the company, at the consol level, is about 14%. There is no tax at the PCHFL level, but there is taxation at the PEL level.
Parag Thakkar
Correct.
Jairam Sridharan
So you will see our effective tax rate at 14-odd-percent.
Parag Thakkar
Okay. So basically, what is our target for the ROA in next, say, 18 to 24 months from now when you are saying that credit costs might increase and opex might decrease by 1%, right?
Jairam Sridharan
Right. So if you see our long-term goal that we have stated, we have talked about an ROA of a little over 3% by FY ’28. That is our — that has been our medium-term target that we have articulated a little over a year and a half, maybe a little over a year ago. Nothing much has changed there. So 3% ROA continues to be our goal.
Parag Thakkar
So while calculating, we can calculate that current growth book, which is INR64,000 crores, can grow at 25% and can achieve ROA of 3% by FY ’28.
Jairam Sridharan
Yes.
Parag Thakkar
That is a fair assumption in spite of your view on credit cost.
Jairam Sridharan
So credit cost is a cyclical view. Like, you can’t talk — think about cycles when you are doing medium-term target assignments.
Parag Thakkar
Sure, sure, sure.
Jairam Sridharan
I mean, you have to think about through-the-cycle averages. Like, [Foreign Speech]
Parag Thakkar
Correct, correct, correct. No, no, what I’m trying to say is that your opex lever, still you are at 4.6%, right, and you are saying that you can go to 3.5%. So you have an opex lever target of around 1% in the ROA, right?
Jairam Sridharan
Correct. We have opex lever. We need to increase fees from where we are right now. So you should expect to see 60, 70 basis points coming from the fee side. Hopefully — even if we keep our yields the same in the medium-term, hopefully, we’ll be able to get a ratings upgrade. So there is a little bit of margin expansion that you should expect to see as well. And all of these will net off against any credit cost increase that happen.
Parag Thakkar
Super. Excellent.
Jairam Sridharan
Yeah, which is a good high margin business. We’ll continue to expand as well and we’ll replace a negative margin Wholesale 2.0 business. And that was it. By the way, I hope you noticed and we have put up a slide specifically to talk about this, this time, that — I think it’s on page number five, that because of this mix shift between Growth and legacy, even in this quarter at a consol level, we saw an NIM expansion. Contrary to what you are seeing in most NBFCs, we saw NIM expansion in this quarter because of the shift from the Wholesale 1.0, the negative margin business has been reducing and has been replaced by Wholesale 2.0 and retail. Just that mix shift is driving margin expansion.
Parag Thakkar
Correct. I really appreciate your answer. And just one thing. If I heard correctly, what you have always said is that this INR12,000 crore legacy book when you are running down — running it down, because of the recoveries and AIF and all those things, it will be offset not on a quarterly basis, but at least on an annual basis. So on an annual basis, this INR12,000 crore rundown will not cause any losses, right?
Jairam Sridharan
Yeah, it will be net worth neutral or better.
Parag Thakkar
Okay. Great, great, great. Really appreciate. Thanks a lot.
Jairam Sridharan
Thank you.
Operator
Thank you. We’ll take the next question from Ms. Shreya Shivani from CLSA. Please go ahead, ma’am.
Shreya Shivani
Yeah. Hi. Am I audible now? Hello?
Jairam Sridharan
Yes, Shreya. We can hear you now.
Operator
Yes, ma’am.
Shreya Shivani
Yeah. Okay. Thank you. Thank you for the opportunity. So I wanted to understand when you say that your rundown in your legacy book, like just now you were saying will be net worth neutral or no impact on P&L, etc. If I simply look at your — the legacy book movement of the different stages, etc., or through the lands and receivables, your Stage 1 has declined Q-o-Q this quarter, some INR863 crores or so. Your Stage 3 has increased. So I — how do I read this? Do I read this as some loans in the Stage 1 were refinanced or some cash flows came through, etc., and that is why there is reduction there? But there was some slippage into Stage 3 and possibly that could get written off at some point. Is that way of reading it correct and then how does it [Speech Overlap]
Jairam Sridharan
Yeah, mechanically, what you are saying is absolutely correct. All that stuff will happen. But that has been happening every quarter and will continue to happen every quarter. So business as usual, collections, stage movements, etc., will keep happening in the legacy book. Even as we do one-time transactions to actually keep reducing the book size in the times to come. This quarter, you’ve seen the book come down by little over INR900 crores. Some of it is through repayments and regular action of the customer and some of it is through special activities that the team has taken on. Both of those you should expect to see in every quarter.
Shreya Shivani
Correct, correct. And the Stage 3 movements that — I mean, it’s actually your Stage 3 for quite some time was at around the INR740 crore to INR800 crore level in the legacy book. This one has inched up. So that bit can possibly, at some point, pass through in form of write-off or something like that later. That option is still there, right?
Jairam Sridharan
That’s why it is absolutely correct. But do remember that we have 66% provision made in Stage 3 [Speech Overlap]
Shreya Shivani
Okay.
Jairam Sridharan
Against that book. So it’s not naked exposure.
Shreya Shivani
Absolutely correct. And last quarter you had mentioned that your lands and receivables, you’ve written off something. Is there — has more action been taken on that side because that’s also come out [Phonetic] in this quarter?
Yesh Nadkarni
See, we continue to actually work on those assets. We have strategic MOUs which are being explored with some development partners. There’s no real progress to report that we can talk of here in terms of monetization potential from this side. As we progress from here, we very much do expect to see some development and we’ll keep you updated as we go.
Jairam Sridharan
And Shreya, our guidance in general in this whole legacy book has been — there are a handful of assets here. It’s not productive to have an asset-to-asset conversation on exactly what the resolution path on each of these is. We believe that, at an overall level, we’ve been able to bring that book down from INR43,000 crores to INR12,000 crores over the course of the last two and a half years.
Shreya Shivani
Yeah.
Jairam Sridharan
We have guided that this INR12,000 crores will become INR7,000 crores in the next two quarters. Exactly where that reduction will come from, etc., we also don’t know with that precision. It depends on 10 different deals that are in the pipeline and which one gets resolved first versus not. So it’s not super productive to do a deal-by-deal conversation on that one.
Shreya Shivani
Yeah.
Jairam Sridharan
However, at a macro level, the overall book will come down and it will come down in a way that is net worth neutral or better. That’s our continued guidance on the matter.
Shreya Shivani
Got it. And my last question is on the yield for the overall book, right? So, that sequentially, at least the calculated yield for us looks higher. Now, the share of the non-interest paying bit in your legacy book as a percentage of mix is higher this time. So clearly, there is some yield expansion that has come through from the retail side. Is it purely because of the — some change in mix over there or have you — have we raised any lending rates in any segment or any action that has been taken on that side?
Jairam Sridharan
[Indecipherable] Shreya, we have answered that specific question of why NIMs have expanded. And we have shown the last five, six quarter trends and it should be self-evident once you read the slides [Phonetic].
Shreya Shivani
Okay, sure, sure. Okay. Thank you so much. Yeah.
Jairam Sridharan
Thank you.
Operator
Thank you. The next question is from Sameer Bhise from JM Financial. Please go ahead.
Sameer Bhise
Hi, thanks for the opportunity. I just wanted to ask on write-offs, what was the write-off amount for the quarter?
Jairam Sridharan
One second, Sameer.
Sameer Bhise
What was the write-off amount for the quarter?
Jairam Sridharan
[Indecipherable] questions. [Foreign Speech] INR110 crores.
Sameer Bhise
Okay. And I presume it is entirely from the legacy book?
Jairam Sridharan
Yes, yes, of course.
Sameer Bhise
Okay. Yeah. And secondly, just on fee bit, there’s an element called as others, which is — looks kind of lumpy. So how does one read it on a run rate basis ongoing?
Jairam Sridharan
[Foreign Speech]
Sameer Bhise
If I’m looking at slide 26.
Jairam Sridharan
Slide 26. What is it? [Phonetic]
Sameer Bhise
[Indecipherable]
Jairam Sridharan
25. One second, yes. Okay, got it. So which part do you think is lumpy?
Sameer Bhise
So fee and commission of INR102 crores, dividend of INR32 crore and others is INR123 crores.
Jairam Sridharan
That INR123 crore is mostly DA income [Phonetic].
Sameer Bhise
Okay, okay.
Jairam Sridharan
[Foreign Speech] Sorry, sorry, sorry. No, no, no, no, no. Sorry, sorry, sorry. There is one property sale that happened during the course of the quarter, which forms a small part. How much is coming from there? 40-odd-crores is coming from a one-time sale of a property.
Sameer Bhise
Okay. Fair enough. This is helpful. Thank you, and all the best.
Jairam Sridharan
Thank you, Sameer.
Operator
Thank you. We’ll take the next question from Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Nischint Chawathe
Hi, thanks for taking my question. I was just looking at the Growth assets and Stage 3 loans out here. I was just curious, there was a sequential rise this quarter. But more importantly, what is the coverage that we are comfortable on Stage 3 loans? I know on the legacy assets, we have gone to like 65%, but [Speech Overlap]
Jairam Sridharan
Yeah. So see, in the Growth business, our — we use ECL models to come up with Stage 3 cover and that depends on a product-to-product basis. So for example, if it’s a housing business, if it’s a housing business case, then your LGD expectation might be 25%. But if it’s a personal loan case, your LGD expectation might be 70%, right? So depending on that, depending on the mix of what comes in, you will see this ratio change. It’s different for each product. At one extreme is a very safe product like housing, where the cover will be somewhere in the 20% to 25% kind of range. And the other extreme will be unsecured products where it will be in the 70%, 75% kind of range. So this is equal to LGD basically of the product, which is the way ECL models work.
Nischint Chawathe
Yeah, but the fact is that, you’re not really seeing a business cycle, right, for a very effective kind of a data-driven ECL model to be [Speech Overlap]
Jairam Sridharan
No, no, but we have all the industry’s data, no? We don’t need to see a business cycle ourselves.
Nischint Chawathe
Okay.
Jairam Sridharan
We can use all the industry’s data and it’s all available quite readily, which is what we have done is that we have done a thorough analysis of the last 25 years of credit experience of the industry on the Bureau. And that’s what we have used to come up with PD-LGD models, which for any player that’s starting business, it’s always going to — and has Ind AS, you have to have models. That’s the Ind AS requirement. You cannot do subjectively. You have to have ECL models, which means you need to have PD estimates and you need to have LGD and EAD estimates, which we have chosen to do using a bunch of industry data. Of course, as our business is maturing, now we are four years old, we have four years’ worth of data. So we keep weighting our internal data a little bit more in the sample every year as the years go on. And over time, hopefully at some point in time, we’ll become all internal data. But right now, we are heavily weighted by industry data.
Nischint Chawathe
Got it. And sorry, I joined the call late. But have you called out specific reasons for sequential increase in Stage 3 loans?
Jairam Sridharan
So if you look at our risk trajectory and we have shown on page 15, 1-5, you will see the risk performance of all the different products in retail. And you can see here how businesses like business loans, etc. And a little bit in used cars, you can see that trajectory increase. And so that’s the kind of higher risk environment that we are seeing. And that was flowing through to Stage 3 in the Growth business right now.
Nischint Chawathe
And these probably will need higher coverage sooner than later, right? I mean, you probably have a 180- or 360-day fully write-off policy or something of that sort of.
Jairam Sridharan
No, no. Actually, in unsecured lending businesses like business loans, we — when the account reaches 90 days, we make a 70% provision. When the account reaches 120 days, we make a 100% provision.
Nischint Chawathe
Got it. Got it. Thank you very much and all the best.
Jairam Sridharan
Thank you.
Operator
Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Vivek Ramakrishnan
Thank you. Jairam, you had called out the deterioration about a year ago in the meet, and so good call that. If I go back to slide 16, we see a dramatic improvement in 30 DPD for the later-originated loans. So is that part of the — and we’re not seeing a concomitant decrease in yield on your loans. So is it part of the learning curve, and is this a new normal for Parimal where your credit standards will be tighter? Is this early stage of the modeling which has resulted in that?
And linked to that, in terms of write-offs and so on, if I leave out LAP and housing loans, I think most of your loans will be two to three years tenor. So if you’ve already seen a couple of quarters, and if you take it back a couple of years, then, like you said, the pain will be there for maybe another two, three quarters before the new book kind of — even the macro environment is deteriorating, the new book dominates the mix, right?
Jairam Sridharan
That is a fantastic question, and I’m glad you noticed that. I think this is a — those are really, really good points. Your point is absolutely right. Our new origination quality has been dramatically different than where we were before, and we have been able to do that without yield reduction by just kind of getting a little bit — and of course, our approval rates have suffered. Our approval rates are fairly low now. In unsecured lending, our approval rates are in the 15% to 17% range, which is meaningfully lower than where some players in the market are. So obviously, it’s not been free, so it comes at the cost of opex, but at least we’ve been able to protect yield and we’ve been able to protect risk. Now, the newer originations — today, if I look at all my unsecured lending businesses, these new — those older originations, when I add those challenging times, they are about 12% of the AUM today, right? And as that 12% keeps reducing and that goes to single-digits, etc., all the benefits of the chart that you saw on page 16, all that will start showing.
Vivek Ramakrishnan
Thank you very much. Good luck, and season’s greetings to the team.
Jairam Sridharan
Thanks, man [Phonetic].
Operator
Thank you. The next question is from the line of Prit Nagersheth from Wealth Finvisor. Please go ahead.
Prit Nagersheth
I think most of my questions have already been answered. The only thing I would add is that if it’s possible, could we limit the kind of time it takes for the team to share all the updates? It’s kind of taken 30-odd-minutes to kind of mostly say what’s already there in the slides. So it’s just a request. I mean, the earnings season is busy, so if we could save some time, it would allow more questions to come in.
Jairam Sridharan
We hear you.
Prit Nagersheth
Thank you.
Operator
Thank you. Ladies and gentlemen, we will take that as the last question for today. I would now like to hand the conference over to Mr. Ravi Singh for closing comments. Over to you, sir.
Ravi Singh
[Technical Issues] if you have any further questions. Have a good day. Thank you.
Operator
[Operator Closing Remarks]