Piramal Enterprises Ltd (NSE : PEL) Q3 FY22 Earnings Concall dated Feb. 10, 2022,
Corporate Participants:
Hitesh Dhaddha — Chief Investor Relations Officer
Ajay Piramal — Chairman, Piramal Group
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Khushru Jijina — Executive Director, Financial Services
Analysts:
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst
Kunal Shah — ICICI Securities — Analyst
Prakash Agarwal — Axis Capital Limited — Analyst
Aditya Jain — Citi — Analyst
Abhishek Sharma — Jefferies — Analyst
Bhaskar Basu — Jefferies — Analyst
Nischint Chawathe — Kotak Securities — Analyst
Vivek Ramakrishnan — DSP Mutual Fund — Analyst
Prateek Poddar — Nippon India Mutual Fund — Analyst
Vinod Jain — WF Advisors — Analyst
Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Piramal Enterprises Limited Q3 and 9 Months FY22 Results Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Hitesh Dhaddha, Chief Investor Relations Officer from Piramal Enterprises Limited. Thank you, and over to you, sir.
Hitesh Dhaddha — Chief Investor Relations Officer
Hi, good evening, everyone. Hope you are safe and in best of your health. I’m pleased to welcome you all to this conference call to discuss Q3 and 9 months FY22 results. Our results materials have been uploaded on our website. And you may like to download and refer them during our discussion. The discussion today may include some forward-looking statements and these must be viewed in conjunction with the risks that our businesses face.
On the call today, we have with us our Chairman, Mr. Ajay Piramal; Nandini Piramal, Executive Director, Piramal Enterprises and Chairperson, Piramal Pharma Limited; Mr. Khushru Jijina, Executive Director Financial Services, Piramal Enterprises; Mr. Jairam Sridharan, Managing Director, Piramal Capital and Housing Finance; and Mr. Vivek Valsaraj; CFO of our company.
With that, I would like to hand it over to our Chairman and would request him to share his initial thoughts. Over to you, sir.
Ajay Piramal — Chairman, Piramal Group
Good day. I hope you are all safe and in good health. This quarter we have developed — we have delivered a strong performance. The revenues grew by 20% year-on-year to INR3,816 crores, driven by solid performance across both businesses. Financial Services gross income has grown 25% and Pharma revenues were up 15%. Despite the ongoing transformation within financial services, the Q3 normalized net profit grew by 14% to INR888 crores.
I just would like to give you an update on the demerger announcement that we had done last quarter. This was approved by the Board as you are aware in October last year. This demerger is expected to simplify the corporate structure with two separate pure play entities enabling better understanding by the investor and analyst community, resulting in the right value discovery for both businesses. We expect to complete this demerger in Q3 of FY 23 subject to various required approvals. Another significant development in the last quarter has been the approval of the merger of DHFL and our Financial Services business. And this has been a very value accretive acquisition for us and it has enabled us to achieve significant growth. It has materially given us a further impetus to our business ambitions and targets.
The overall loan book grew by 31% year-on-year to INR60,600 crores and our retail AUM grew 4 times year-on-year to AUM of INR21,500 crores. The share of the retail AUM has also increased. The retail share has gone up to 36% from 12% as of March 2021. Besides that we’ve got now scaled significantly. We have increased our presence with 1 million life to-date customers and 301 branches across 24 states and union territories. Also this acquisition creates granularity of one of the leading housing finance companies in India, which is focused on affordable financing with an average ticket size of INR16 lakhs. This merger and acquisition has been value accretive from day 1 of the acquisition itself.
If you look at it, the yield of, on the DHFL book, is over 11% and the cost of borrowing is nearly 7%, 300 basis points lower than the average cost of our borrowing prior to this acquisition, creating a healthy spread of nearly 40%. Since the loans have already been sourced, all operating costs have been incurred in — to build this book. The potential upside is from recoveries. And additionally, we have got an off-balance sheet securitized pool of INR20,000 crores, generating a fee of 1.6% per annum. All this growth has been achieved. Without infusing any additional equity.
During the last quarter, we had started the integration process and have made significant process — significant progress. We have retained the 3,000 plus employees, which were there in DHFL. We have now added, in the last four months, another 2,000 employees. The new loan originations have now restarted at most of the DHFL branches and customer facing digital assets are fully integrated and large scale IT assets upgrade program is underway.
In retail lending. We have now adopted a two engine strategy which would drive scale and grow. The first engine is digital. Secured lending with a dominant position in affordable housing, mass affluent housing and MSME loans, which contribute over 90% of the retail AUM. The second engine is of embedded finance that will include small ticket and short duration loans such as personal loans purchase finance Merchant BNPL et cetera, originated through digital channels and partnerships., which act as a customer acquisition engine adding over 90% of the new customers. So whereas the first engine does the growth in AUM, the second will be a significant growth in new customers. In line with our new strategy, we continue to scale our partnerships with FinTech and consumer tech firms to acquire customers at scale at a low acquisition costs. We are today live with 10 partnerships in several segments.
Disbursements through the activation of multiple branches and customer acquisition. Under the twin-engine strategy our disbursement grew 5x year-to-year to INR739 crores, and improving mix of disbursements towards both secured and digital loan enabled us to improve our disbursement yields to 12% in quarter 3 versus 11.3% in quarter 1. We are significantly investing for future growth. And this you will see in the next few years. We continue to focus on capacity building and investing for the future.
We have assembled a best-in-class leadership team over the last few quarters across various businesses. We target to have a presence across a 1,000 locations, roll out 2,000 plus job offers post DHFL acquisition in September 2021. We have made significant investments in technology and analytics and hired nearly 200 people in the technology and analytics team, and have set up a digital center for excellence in Bangalore. All these initiatives should enable us to significantly increase the disbursements in the next 12 to 15 months.
I will now come to wholesale lending the real estate sector is picking up well and credit offtake by corporate seems to be improving with the capex push from the government. Significant consolidation has happened across NBFCs and wholesale lending and developer financing business. We are among one of the few NBFCs that have continued to remain strong, even after prolonged crisis environment. We aim to cater to large addressable market. We will soon start executing new deals in our wholesale business. Our new approach to wholesale lending we’ll be more calibrated as we will give smaller loans and make the loan book more granular and diversified. In future, we will focus on cash flow bank lending and high yield loans will be done under the fund structure.
Overall, the FS business’s asset quality has stood the test of time. GNPA stood at 3.3%, marginally up Q-on-Q due to some impact of the RBI’s circular and NPA classification and slippage of one account from Stage 2 to Stage 3 in our wholesale book. Our provisioning remains conservative at 4% of AUM at INR2,655 crores. We believe this provision should be adequate to meet any future contingencies.
In summary, as far as financial services is concerned, I’d like to point out to you that as a company, we have grown organically as well as inorganically. And we have done this throughout our history. We have done more than 50 acquisitions so far, and almost all were successful. We will continue to look for M&A to boost our growth post the DHFL integration. With a debt equity of the Financial Services business at 2.5 times and near term monetizable investments in Shriram, et cetera, the company has significant firepower to continue to carry out value accretive acquisitions as well as organic growth in the future without needing to raise any additional equity. As I said before, we plan to increase the share of retail loans to 2/3 in the medium to long term. We remain committed to create a scalable financial services business to deliver sustainable growth and profitability for the long term.
Coming to our pharma business. Our pharma business delivered an 18% revenue growth delivering revenues of INR4,500 crores during the 9 months. The business delivered a 16% EBITDA margin for 9 months and 22% for the quarter 3. Our Q4 performance is likely to partly offset margins in H1. We witnessed some execution related challenges related to logistics, rising input prices and availability of raw materials and manpower. The CDMO business revenues grew by 10% during the 9-month period. Apart from the execution and supply chain related challenges there were a few orders by customers to the last quarter of this year impacted the growth during this quarter. We have over 500 clients, of which we have guided 175 new customers since FY20. This has enabled us to witness a healthy order book for development services business growing 32% year-on-year.
Our commercial CMO and generic API, which contributes to nearly 64% of CDMO revenues is sticky in nature. We continue to witness growth in commercial products on patent and Phase III molecules. Business has started integrated offering since FY18 and now has a track record of delivering 125 integrated projects. There has been an 8% increase in integrated projects since FY17 with 40% of the order book now from integrated projects. In addition, we are strategically shifting our CDMO business models towards our top clients in developed market with focus on niche capabilities. This gets reflected from the fact that 75% of our revenues are coming from regulated markets. Revenues from the top 20 clients have grown at a CAGR of 26% over the last two years. Our niche capabilities now contribute 22% of our CDMO revenue. This shift will enable us to improve our CDMO topline and bottom line performance in the medium to long term.
I want to talk a bit about investments. During the quarter, we acquired minority stake of 28% in Yapan Bio broadening our services in the biologics space. To meet increasing demand we are carrying out capacity expansion worth $130 million across multiple sites. The complex hospital generics business, which is the second business in our Pharma grew by 25% during the first 9 months. Revenues during this quarter grew by 23%. We witnessed strong sales of Sevoflurane in U.S. with continued growth in the Sevoflurane market share. However, volatility due to COVID remains across significant — remains across different regions. We maintain U.S. market share for intrathecal portfolio and continue to expand Gablofen in Europe. We are witnessing some supply chain related constraints due to longer lead times, rising input prices and higher logistics costs. We have a strong new product pipeline, consisting of 30 plus SKUs at various stages of development and approval.
Now coming to the India domestic consumer healthcare market. This continues to deliver robust performance with 9 months revenues growing by 35%, which is driven by strong growth in key brands. We’ve launched 41 new products. Since April 2020, and new products now contribute to 10% of our sales. We also launched Piramal’s own direct-to-customer e-commerce website Wellify.in, and we are now able to sell our products across 22 e-commerce platforms, which contribute 14% of revenue. We are continuously investing in brand and marketing reflecting in the strong performance of our key brands. We’re investing in media and trade spend for future growth, resulting in business operating at breakeven.
Overall in the pharma post the Carlyle fund raise, we have been investing organically and inorganically across all our businesses. Each of our pharma businesses have a compelling plan for growth. We expect near 20% growth in FY22 for the overall pharma business. In the medium to the long term, we expect about 15% revenue growth across the businesses, and we expect the EBITDA margins to reach anywhere between 25% to 28% in the next 3 to 5 year time frame.
To conclude, I would say that with the balance sheet strength and the uniqueness of our business model, both the businesses are well positioned to tap organic and inorganic growth opportunities and create long-term value for our shareholders in the years to come. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] Ladies and gentlemen, we will wait for a moment, while the question queue assembles. [Operator Instructions] The First question is from the line of Abhijit Tibrewal, from Motilal Oswal. Please go ahead.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Yes, thanks. Am I audible?
Operator
Yes, sir.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Yeah. Good evening, sir. Three questions here. Firstly, on your reporting and classification of NPAs based on the RBI circular, are there any loans in Stage 3 which are less than 90 DPD? So basically what I’m kind of trying to understand is while on one slide, we talk about the impact of the RBI circular leading to this increase in GNPA, on two slides we also say that Stage 3 is loans, which are 90 plus. So that’s my first question.
The second question that I had is, I mean if you could kind of share what is the quantum of exposure to the wholesale account, which slipped from Stage 2 to Stage 3? And also if you can give some qualitative color around that account.
And lastly, just trying to get some texture of your disbursements. So will it be fair to say that, I mean, of the disbursements that we have reported, broadly around INR390 to INR400 crores, will be in your housing and MSME secured and the remaining INR330 crores to INR340 crores will be in your embedded finance?
And sir, lastly if you could just help me with a few data points, what was the consolidated net worth and the consolidated net debt? And I see that we have not given what is the provisions on the wholesale books right now. That will be all from my side. Thank you so much.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
All right, let’s start with questions 1 and 3, and then Khushru ji will talk about question 2, and then we’ll come back to number 4. Okay. Your first question of how we have shown the RBI’s November 1st circular. Firstly, we have completely implemented the circular, both in terms of reporting it to RBI as NPA as well as complete Stage 2, Stage 3. Right. So what you see a Stage 3 has — does have days past due. So if somewhere in the deck it says something different that must be a typo there, but the amounts are not very large. They’re about INR25 crores of value, which is sitting in Stage 3, which is not 90 days past due as of the end of the quarter. So the Stage 3 is what is NPA as far as our numbers are concerned, there is no separate FDA reporting from our side. So that’s point number 1.
Your third question was on disbursement split between, let’s call it our engine 1 business versus engine 2 businesses. You’re broadly right. About 23% of — by value of disbursements in the quarter was in engine 2, which is the embedded finance business, and about 77% was in engine 1. So that’s number — on question 3.
For question number 2, Khushru ji will jump in, yeah.
Khushru Jijina — Executive Director, Financial Services
So to your question on the wholesale book, the one which moved from Stage 2 to Stage 3. Let me give you a qualitative color. The amount was INR147 crores. It was the packaging company. And the reason we moved into Stage 3, because it was a part of our resolution of the packaging company and we needed to restructure it to safeguard the loan. So it is not that it’s moved to Stage 3 and the money is going to be lost. In fact, we will recover the entire money, but since we had to do some restructuring, we moved it to Stage 3.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
And on your last question about provisioning, of the total provisioning which we have disclosed, I think about INR2,600 crores or thereabouts, roughly 10% of it fits in retail and about 90% of it fits in both there. Please remember also that the entire fair value adjustments that we have done as part of the DHFL transaction is not shown as part of provisioning. So that is extra that fits over and above this INR2,600 crores odd of provisioning that we have shown.
Unidentified Speaker —
And regarding the net worth of Investec, so as of December, we have not reported that balance sheet. For now you may, please refer to the September figures net worth of about INR34,000 crores and net debt, about INR48,000.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Sure sir. And if I can squeeze just one last question for Jairam. If I look at Slide 18, you’re talking about disbursement yields of around 15.4% in used car, 19.5% in MSME unsecured and 14.9% in digital unsecured, how does this tie-in with 14.5% disbursement schemes on Slide 21?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
What you see on Slide 21 is — it is basically on all sanctioned cases, what is the — sorry on disbursed cases during the course of the quarter, what is the average yield. So you are seeing that 12-odd percent. So it’s a weighted average of all the individual businesses that we have done weighted by the disbursement amount.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Sure. Yeah, thank you so much and wish you and the team very best.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Sorry, one last one. The 14.5%, and I hope you saw the annotation there. All the embedded finance business, 14.% is not included in the 12.5%. We have kept that out.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Yes. So, I mean the thing is these three products that we’re doing,right, I mean, used car, MSME and unsecured, digital unsecured, they all have, I mean, yields well in excess of 14.5% reported on Slide 21.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Correct. The last one of that is digital unsecured, is not included in the weighted average of 12% And the reason we have not included it is that it’s very short tenure. The tenures there are like three months or thereabout. So it doesn’t add much to the overall value. So if you see on the product Slide that you spoke about, Slide 18, the piece that is a very large, the one that said digital unsecured that one we have not included at all in Slide 21.
Abhijit Tibrewal — Motilal Oswal Financial Services Ltd. — Analyst
Got it, got it. Yeah. Thank you. Thank you so much. This is useful. That’s all from my side.
Operator
Thank you. The next question is from the line of Tushar Manudhane from Motilal Oswal Financial Services. Please go ahead.
Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst
Yes, thanks for the opportunity. Sir, just on the Pharma side and particularly on the CDMO side, while this COVID where would have led to some deferment in terms of the patient flow, and so just would like to have your insight in terms of offtake by the innovators in this scenario. Is it improving or is it still yet to show some signs of improvement? That is on the CDMO piece, and likewise with the COVID cases reducing, are you seeing better traction on the complex hospital generics side?
Okay. So as far as the CDMO business is concerned, the COVID has not actually impacted demand. In fact, demand for our CDMO services continues to remain high, and excluding the generic KPIs in all other spheres, we’ve seen good and consistent increase in demand. So that has not — COVID has not specifically created impact as far as the demand is concerned. The challenge that we’ve had, is on the execution side, as Chairman alluded to, whether it’s in terms of availability of raw materials or availability of people or the additional costs or availability carriers for logistics and distribution. That’s impacted the CDMO business.
As far hospital generics business is concerned, we did see improvement in the U.S. market, but in the ex-U.S. market, the condition has been volatile. In fact depending upon the country that you speak about and the way that is there, the demand has been very volatile. So — and of course the subsequent waves also, we’ve seen the situation to be very volatile in different markets, whether it’s Europe or whether it is the other ROW market. So, the U.S. market. It’s largely on track, but ex-U.S. markets, the situation is still very fluid
I think in addition what is important to note is that the order book remains quite healthy for us. And I think there is 30% increase in the order book. If you look at the new customer addition the numbers that we’ve reported, I think that also shows that there is a significant set of new customers that have got added in last one year. I think that will translate into new — I mean, better performance of the business as we continue to go forward once these logistics challenges gets reduced post the COVID impact that’s adding to it.
Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst
Sure, sure. And secondly on this, on the biologics related CDMO other than adding — I mean other than the investment in Yapan Bio, If you could just give further color in terms of how do we, how are we building this capability either in the form of capex or any further acquisitions on the biologics CDMO side.
So the acquisition — the strategic investment that we have done in Yapan with the minority stake is our first foray into biologics. So far we have not done anything concrete in terms of doing any acquisition or investment. So this is the first foray, and the reason for testing it out is that with minimal capital outflow we will be able to get access to technical talent. This will help us develop some synergies with our existing sites, whether it’s at Lexington or whether it is at Grangemouth. We will be able to utilize the Yapan’s capabilities there. So it’s just a beginning for us, it’s a foray and we will see how this entire thing pans out for us to be able to take further decisions with respect to Yapan.
Also, it adds an additional capability at this point in time, because this could be complementary for our CDMO business while this capability can be offered to our existing customers. So that’s how we have begun this space, and we will of course be monitoring how we perform before we take further decisions on further investments in this space.
Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst
Got it. And just lastly on the overall guidance of a 20% growth for FY22 which implies that Q4 is expected to be much stronger. I mean any which case 4Q is stronger for us, but it’s going to be, I mean, year-on-year growth also looks quite interesting on the 4Q level. So kind of like INR2,400 crores, kind of a top line compared to say the three quarters where we did INR15 crores. Is that the right understanding?
Khushru Jijina — Executive Director, Financial Services
So first let me just clarify, that it will be near 20% and not necessarily 20%. And yes, that’ll will be a big quarter especially in the CDMO business. We do have a lot of deliveries lined up, and of course that is subject to the overall situation across the world in terms of how the COVID pans out. But yes, it is going to be a big quarter for us, and if execution and delivery, all of them happen consistently, then you will see a significant topline.
Tushar Manudhane — Motilal Oswal Financial Services Ltd. — Analyst
Thank you. That answers my question.
Operator
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Kunal Shah — ICICI Securities — Analyst
Yeah, good evening. So firstly in terms of the performance of DHFL pool, if you can highlight in terms of the recoveries run down which is happening in that. I agree you would primarily look at the retail as the overall pie rather than splitting it between the DHFL and the PEL’s early business but still if we can get some sense, both on the retail as well as wholesale, how is the collection efficiency out there?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
So Kunal, we are going to resist talking separately about DHFL and the erstwhile DHFL or PEL organizations. So you’re unlikely to see us give separate disclosures on on these two book. That said, there is a more sort of simple version of your question, which I will attempt to answer, which is A, there is some sort of distressed book that you guys took on your balance sheet, or repurchase but it is not showing up on the balance sheet. From that distressed book where you guys able to recover anything, during the course of the quarter. If I interpret your question that way, I’d say the answer is yes, we were able to do a little bit on both sides of the business. The numbers are at this stage more, let’s call it very low three digit but I wouldn’t want to go into a lot more detail on that one.
On your — if I interpret your question, I’d say how are overall collection efficiency for the full sort of combined retail business been in the quarter. It has been extremely good. It has been in the very high 90s. So depending on the market has been between 97% and 99%. So very high collection efficiency otherwise on all balance sheet book.
Kunal Shah — ICICI Securities — Analyst
Sure. And overall, in terms of ROA, if I have to broadly look at between the wholesale and retail now, so is retail — is it like we have got into breakeven and out of this 2.5%, 2.6% ROA, which we report for the financial services? If you can help in terms of how much is still flowing in from the wholesale and where do we see the normalized levels, okay, once we see the scale up on the retail side, no doubt, lot of investments have been done, so ROAs would be very low, or in fact negative as well. So just broadly, if you can start sharing that number, so it will be better for us to track in terms of the entire scale up even on the profitability side.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah, Kunal that’s a good point. We are considering doing segmental profitability reporting. But we don’t at this point of time, as you know, do segmental profitability reporting. We are considering that. So just watch that space in the quarters to come. You had a sort of more pointed version of the question, which I would be able to answer, which is that given the movement and given the addition of DHFL, has retail has gotten to a point where it is breakeven? The answer is yes.
Kunal Shah — ICICI Securities — Analyst
So this quarter, there would be a profit in retail as well.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah.
Kunal Shah — ICICI Securities — Analyst
Okay, got that. And lastly, in terms of the scale up. So 3,000-odd employees are retained plus we have added 2,000. So that takes almost 5,000 on the overall branch network, which is there. Plus, I think we are looking to add almost 100-odd branches, so just wanted to get a sense maybe is the intensity so high even at the branch level wherein if I were to look at it, maybe this would be largely the field staff and the ground level stuff, so 5,000 for almost 300 or 400-odd branches. So that’s how it seems to be at this point in time. So is it like some kind of an attrition which we are still building in, and that’s why 2,000-odd people we would have further added on to it? Or this is for altogether, the newer products, which we are adding?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
No, no, I think there’s a third reason, which is the most important reason, Kunal. When we took over DHFL, the core employee base of the DHFL organizations had already fallen almost 60%, 65% from its peak. Not that necessarily you need to go anywhere near the peak of the staffing there, but I want to simply give you a sense that a lot of attrition has happened on the DHFL side before the merger. So normally a merger is just catching up on the lost people in the pre-merger era to make sure that the branches are all functional, that they have a basic level of functional staff. So a lot of it is that. An important distinction, I’d like to make is that all the employees that we spoke about are not on our roles, so on the rope of the parent company. We have a separate manpower entity in the company called PMO Sales and Service Limited and about 60% of the staff, actually is from that entity. So a core employee base, the on roles employee base is about 40% of the numbers that you mentioned. The other 50% is the manpower entity, which is the field for that you rightly mentioned where you expect to see a much higher rate of attrition.
Kunal Shah — ICICI Securities — Analyst
Okay. No, I was just looking at 300 branches 3,000 already retained, so maybe 10 per branch is already there and we are still adding on. So just wanted to gauge that, yeah.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
But yeah, you’re right. By the time we get to March for these 300 branches we should by and large be done from a staffing standpoint, even including the new product. However, of course, we will continue to increase our vast network as we have mentioned in the past. We expect to add 100 branches in the country. But you will start some addition — start seeing some additions in Q4 itself.
Kunal Shah — ICICI Securities — Analyst
Okay. Thanks, and all the best.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Thank you, Kunal.
Operator
Thank you. The next question is from the line of Prakash Agarwal from Axis Capital. Please go ahead.
Prakash Agarwal — Axis Capital Limited — Analyst
Yeah, hi, good evening. Thanks for the opportunity. Just trying to understand the EBITDA margin seasonality. So last time quarter 2, there was again, some delay in booking and all and we said it’s pushed to H2. And we are flat Q-on-Q, margins were 12.5% last quarter and it’s moved up significantly to 22%. So I mean, what is the change here in terms of margin. I mean the delta I see is not much in the — I mean there is actually the revenue decline. But what is the higher margin business here? My understanding was CDMO is the — and complex generic hospital business the highest margin business, and these two are flat here. So can you explain the seasonality of the margins, please?
So basically, the mix of the projects, which have got booked in the first half versus what is getting booked. If you have been part of the earlier investor call. You may recall that we had mentioned that we had an adverse product mix in the first half where projects, which have relatively lower margins were the ones which got invoiced and the ones which have relatively higher margins are the ones which are going to get invoiced in H2. And that’s what is playing out, which is resulting in the overall improvement in gross margin, and therefore the EBITDA margin.
In fact, you will see a similar trend playing out in quarter 4 as well, where you will see a significant part of the margin improvement happening with more high margin projects getting built during the period.
Prakash Agarwal — Axis Capital Limited — Analyst
So this seasonality is here to stay or we are in process having a more — what do you call, smoother EBITDA margin across the quarters?
So if you’ve looked at the trend for the last few years, it’s true that we’ve had a skew more in terms of higher sales in H2 and — compared to H1. While we are definitely trying to make this more even kind of sales and try to improve the overall skew, it’s obviously going to take time. This year because of various COVID related issues and the delays that happened in execution front, it got even a bit more skewed than it has historically been. But yes, our attempt is definitely try and improve this but remember, a lot of this also depends upon customers because the kind of orders that we get and the kind of project deliveries and customer commitments and timelines all determines how the skew eventually pans out. But yes, it’s a valid point and we are looking at how we can improve it.
Prakash Agarwal — Axis Capital Limited — Analyst
Perfect. And obviously customers drive business. My other question was also the understanding like you mentioned CDMO business which has been delayed and some of the orders been delayed from Q2 and now Q3. So there is a lot of visibility given that 40 days of the quarter already done that the business will trickle down to Q4, and that visibility is with high margin order book closure. Is that correct understanding?
No. So as far as order book is concerned there is clear visibility of what needs to be delivered. The challenge is primarily on execution. In fact, in the month of January when the COVID wave did impact several sites, especially our overseas sites, we did have a lot of absenteeism of people and therefore lost some production days. So it’s very important for us to ensure that the execution happens properly in the month of February and March, to be able to meet the target. So to answer your question, from an order book standpoint there is visibility. What we need now is impeccable execution.
Prakash Agarwal — Axis Capital Limited — Analyst
Yeah. So closure is also — I mean this is subject to execution during the quarter.
Correct.
Prakash Agarwal — Axis Capital Limited — Analyst
Okay. And one question for Mr. Piramal on thought process of bringing some business to India. I mean obviously being near to the client has its own advantages, but is there a thought process of bringing in large-scale business to India and have lower cost of operations?
Ajay Piramal — Chairman, Piramal Group
So it is a similar thing that we do — investment, we are doing significant investment actually in the current — in the next year as far as the Digwal facility is concerned, which anyway in terms of the sheer numbers is the largest manufacturing facility that we have in — across the world. So we are increasing capacity and the customers, depending on what the customers want, but we always are conscious of margins.
Prakash Agarwal — Axis Capital Limited — Analyst
Sure, sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Aditya Jain from Citi Group. Please go ahead.
Aditya Jain — Citi — Analyst
Thank you. Just wanted to understand the yield a little bit. So DHFL yield mentioned about 11%, cost of borrowing 7%, so a spread of 4%. As I understand, the cost of borrowing we’d finance it for that low 6%, and 3 quarters coupon bonds. The yield of 11%, so the denominator here — so I assume the gross yield on the original loan was probably lower because of housing kind nature, so this yield is based on a lower denominator, based on write-down of the book, is that right understanding.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
No, no, no, Aditya. It’s on the gross book. It’s on the gross book, Aditya.
Aditya Jain — Citi — Analyst
It’s on the gross book, okay. So, what flows into our financials then should be a much higher yield, that in this side?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
What flows into the financials should be higher yield, yes.
Aditya Jain — Citi — Analyst
Okay, got it. And then when we get these kind of recoveries, so will — the small amount of recoveries that are there in the quarter probably become larger with time. So they are part of the financial services yield on loans, is it, or…
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
That is right. As per — India is not, as you know, these will show up as part of the…
Khushru Jijina — Executive Director, Financial Services
Part of the revenues but not part of the yield.
Aditya Jain — Citi — Analyst
Got it. So, are in the revenues but not in the yields.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah.
Aditya Jain — Citi — Analyst
These are essentially no loans which are not on book at all. So, I guess it makes sense not to have them in the yield.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah.
Aditya Jain — Citi — Analyst
So, they’re sort non-interest income. Understood. And then just lastly, in terms of monthly disbursements, so clearly, I mean the hiring and the branch expansion shows plans to really scale things up. Just broadly what level of monthly disbursements would you target for the new products and for the housing or even in collectively if not broken up by the type of product?
Khushru Jijina — Executive Director, Financial Services
Sure. So Aditya, we’ll will reiterate what we said on the previous call that our pre-DHFL retail disbursements were about INR500 crore per quarter and we had said last quarter that in the first 12 to 15 month of acquisition, we expect that disbursement number to grow 5 to 7x. And that continues to stand, given what we have seen in the first three months.
Aditya Jain — Citi — Analyst
Sorry, 5 to 7x in what time period?
Khushru Jijina — Executive Director, Financial Services
We expect also routine work, so assume Q3 of the coming year.
Aditya Jain — Citi — Analyst
Understood. Got it. Thank you.
Operator
Thank you. The next question is from the line of Abhishek Sharma from Jefferies. Please go ahead.
Abhishek Sharma — Jefferies — Analyst
Hi, good evening, everyone. Am I audible?
Operator
Yes, sir.
Abhishek Sharma — Jefferies — Analyst
Alright, thank you. Yeah, my question is on the pharma side. Just trying to get some better color on the CDMO business here. Your investor presentation says that there was a deferral of few orders to Q4, whereas the commentary is — was more about supply chain constraints. So just wanted to understand what is the relative weightage of each of these in the CDMO flatness this quarter? And also, in terms of what kind of decision do clients have in terms of deferring their orders to future quarters, and do you think that that can sort of play some disturbance with your demand planning in the future?
Got it. So in terms of the overall deferral of orders which has happened that’s — the CDMO side, primary reason for not being able to achieve plan has been challenges with respect to execution at our overseas facilities. And these are the ones which are going to get pushed. So, in fact, most of the shortfall that we’ve had is primarily attributable to execution in various forms, so whether it could be because of non-availability of people or it could be because of non-availability of material or the customers themselves asking for a change of schedule and therefore us having to push out the orders to quarter 4. As you are aware in the CDMO space, most of these are products are customized products made as per customers’ requirements. So obviously the customers source from us and they obviously cannot go elsewhere as far as CDMO is concerned. All of these — what we have done is to sensitize the customers with respect to what the reasons are and the customers are fully aware of the various reasons in the current scenario, which is an extraordinary scenario where if you look at, not just us, but in general, there have been challenges with respect to logistics and distribution and there have been challenges with respect to availability of manpower. This has been a global problem, and what we do is timely sensitization of the customers so that they are fully aware of when these orders will be executed, and when they can expect to get their product.
Abhishek Sharma — Jefferies — Analyst
So the primary reason was on our side of execution, not customer deferral, per se.
It’s a mix of both. There have been cases of customer deferrals as well, but it’s more predominant towards execution at our end.
Abhishek Sharma — Jefferies — Analyst
And given the fact that you said that January, there were still some problems, you are now back to normalcy as far as our execution is concerned?
Not fully, but to a great extent, yes, most of the sites now, with the COVID wave receding, seem to have people coming back on track. So yes, fingers crossed for February and March to be able to meet the planned numbers.
I mean what is encouraging to also see is that at the beginning of the year, we had guided you that we will deliver 20% revenue growth for Pharma as a whole. And I think we are continuing to maintain that kind of similar guidance and we are standing in Q4 right now. Right. So I think that itself should be a comforting thing despite the fact that the year had its own challenges in the form of COVID and logistics issue.
Abhishek Sharma — Jefferies — Analyst
Specifically on CDMO, given the fact that we are already halfway through this quarter, you think you’ll be able to meet the CDMO, the targets that you have…
You have to look at the Pharma revenue as a whole and not get into specific guidance on individual businesses. I think we intend to deliver 20% revenue growth, or nearly 20% revenue growth for Pharma as a whole. And I think we’re sticking to that kind of target as we are talking right now.
Abhishek Sharma — Jefferies — Analyst
Sure. Thanks.
Operator
Thank you. The next question is from the line of Bhaskar Basu from Jefferies. Please go ahead.
Bhaskar Basu — Jefferies — Analyst
Yeah, good evening, everyone, and thanks for this. I had two questions. Firstly, just wanted to get some understanding of the securitized pool on which you get a fee income. If you can kind of explain this. What does this pertain to? That’s number one.
Secondly, the total cost on a consolidated basis has actually remained flat even though you’ve consolidated DHFL during this quarter. So just wanted to understand what is — where does — I mean despite the fact that you’ve added head count there hasn’t been much cost increase at a consolidated level. Obviously, we do not have color on the lending side, specifically. So if you can explain that disconnect?
And finally, on the provision coverage, so while NPAs have gone up, you kind of chose to reverse provision and bring down the coverage. What kind of coverage levels are you comfortable with, and as you kind of ramp up your retail business, what kind of credit cost do you expect from the lending side as such? Thank you.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
All right. There is a lot of questions in there. We’ll try and unpack each one of them. On the first question, which is the off-balance sheet, the securitized assets. At a very simplistic level, during the times when DHFL was facing liquidity issues they sold a lot of their book to other investors, mostly banks, so think of large public sector banks essentially as the buyers of those securitized pool. So those bank own the — most of the economic interest in those assets. However, those assets continue to get managed by the erstwhile DHFL team, now Piramal team. That book is about INR20,000 crores, which is not shown on our balance sheet, obviously, but on that book we earned a fees of 1.6% annualized, give or take, roughly that amount. And that’s what we have disclosed. We didn’t talk about the previous quarter. We thought it might be useful for us to actually point that out this quarter. So we have specifically actually mentioned both the amount and the fees we make on that. The cost base of this is relatively limited and is incremental to what we have in core retail business. So we are not particularly — so that’s not a particularly large cost line item. That is number 1.
You had another point on the cost line, which, let me take as well. And you had noted and commented appropriately that the costs have increased, opex has increased a little bit at overall PEL level, but not by a whole lot, and you had wondered why, and your point is absolutely right. There are a bunch of moving pieces here. So I’ll not try and unpack everything. I’ll just say a couple of things, then we can talk more offline. One is of course that this is at the overall PEL level. So individual entities that have slightly different deltas. The second thing is that we chose also to move some of the manpower to this separate manpower company, which changes the structure a little bit in terms of what — how some of those cost line items work out. And the final point that I’ll also give for your reference, is in the last published results of the DHFL entity, you will notice that the total cost base was very small to begin with. The total cost base of DHFL in the first quarter of the financial year was only INR90 crores for the quarter, and full year, about INR55-odd crores for manpower. So the cost base wasn’t very large to begin with, so consolidation wasn’t expected to materially move the overall opex line item for us. So that’s as far as that piece is concerned.
Then you had a question on provisions. What is the level of provisions that we are comfortable with. Well, see, currently we have, from a gross NPAs perspective, we have a provision of just about 50% or thereabouts on an overall basis, I think 48%. Now in a book which is entirely secured and has sort of residential housing assets underneath it, we think 50% is by and large okay. Especially considering that on top of this we have got other buffer provisions as well, which made for an overall provisioning of 4% of AUM, which we think is a fairly strong situation. As you’ve seen in the past two quarters, we have resisted releasing any provisions. Even though the overall real estate market was improving for the last two quarters, we didn’t release anything and we got, if you might recall, there was a good question in the last quarter, essentially saying that hey, the market environment is decreasing, do you still need to hold on to all the provisions? This quarter we have chosen to release just a little, but don’t read too much into it. This is not a big trend or anything. This is a quarterly thing based on individual assets.
Bhaskar Basu — Jefferies — Analyst
Okay. Thanks. I’ll come back to that for any questions.
Operator
Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead.
Nischint Chawathe — Kotak Securities — Analyst
Thanks. Just a couple of questions. If you look at Slide 32, just trying to get a sense of the difference between AUMs and loan book. What part of it is AIF and what part of it is investments? I think the number was around INR5,000-odd crores this quarter.
Khushru Jijina — Executive Director, Financial Services
Can you just repeat your question?
Nischint Chawathe — Kotak Securities — Analyst
Yeah. So I’m looking at Slide 32. You have AUMs of around INR65,000 crore, and loan book of around INR60,000 crore. The difference between the two, essentially is AIF and investments. If you could give some breakup between how much was the AIF and how much was investments?
Khushru Jijina — Executive Director, Financial Services
I think the major is AIFs, except for a large investment which PEL did in — when we took over the Andheri East land from Omkar, if you recollect, almost a few months ago, or few quarters ago, which is INR1,300-odd crores. Balance everything, you can assume, that they are an AIF.
Nischint Chawathe — Kotak Securities — Analyst
Okay. So all of this pertains essentially to the lending or the wholesale lending business. This does not include any liquid investments and all. I just wanted to…
Khushru Jijina — Executive Director, Financial Services
Yes, yes. Yes, absolutely right.
Nischint Chawathe — Kotak Securities — Analyst
Sure. The other thing is, if I look at Slide 33, and even you have yields and margins, just wondering where does this 1.6% spread get reflected? Is it getting reflected in the yields or margins, or which line item should I see this?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah, so the 1.6% is not part of the yields. I think is a footnote here which talks about that, on the page, if I’m not mistaken. Yeah. Footnote number 3, on the slides talks about that. So the yield comes from securitized assets has been excluded from the yield calculation that we’ve shown on this slide.
Nischint Chawathe — Kotak Securities — Analyst
So is it reflected in the ROA? I mean, can I kind of connect it backwards?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Of course.
ROA is reflected in that.
Nischint Chawathe — Kotak Securities — Analyst
Sure. Just on the cost of funds, finally, this 9.1% cost, if you could sort of spread between the 6.75% DHFL NCDs and what would be the cost if I exclude the 6.75% DHFL NCD?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah. This is not something we want to do. I mentioned in the early part of the call. We don’t want to get into the practice of trying to separate out the DHFL transaction from the rest of the book. You — I mean if you’re really desperate to calculate it, I’m sure you can calculate it, you know what the NCD amount is and what the rates are. And you can go back and calculate it. We do not intend to separate that out.
I’ll go back to what we have been saying before the transaction happened, which is that we believe one of the major advantages of the transaction is that it will lower our cost of borrowings, and it will lower cost of borrowing for us purely mathematically because the transaction has got a lower cost of borrowing itself and so purely mathematically to some extent you will see cost of borrowing, and apart from that there’ll be some organic reduction in cost of borrowing as well. What we have seen very clearly demonstrated in this quarter, is that the mathematical part of the reduction in cost of borrowing. We will — the rest of the — the delta will also come over time, but it is not our intent to make that artificial distinction and separately show. I’m sure smart folks out there like you will back calculate it and figure it out anyway.
Nischint Chawathe — Kotak Securities — Analyst
Perfect. Just one last point, if you could share the incremental cost of funding for the quarter, unless you’ve mentioned somewhere on the call.
Around 8.5%.
Nischint Chawathe — Kotak Securities — Analyst
Perfect, thank you very much. That answers all my questions.
Operator
Thank you. The next question is from the line of Shalini Vasanta from DSP Mutual Fund. Please go ahead.
Vivek Ramakrishnan — DSP Mutual Fund — Analyst
Hi, this is Vivek Ramakrishnan. My question is primarily for Mr. Jairam Sridharan because he has already been there, done that. So when we look at various NBFC presentations, it’s almost always says the same set of things digital and participation of FinTechs. What do you feel is the secret sauce that is going to propel DHFL forward, is one of the questions that I have.
And then just diving down into the housing finance business, you can see that the yield’s depending on which company goes all the way or a bank goes all the way to 7% to 14% you’ve chosen 11%? Is that the secret — is that a sweet spot for you in terms of the customer segment that you will target, which you feel will give you the best risk adjusted returns, and also link it to cost to income.
And the last question is more on the liability side. One of the keys to the housing finance business is to have low cost funding of course and which is dependent on the ratings. Is there a glide path to ratings that you’re working out with various agencies and are there a others few triggers that we should watch out for that’ll help us in terms of knowing how the ratings have moved? Thank you.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Thank you, Vivek. Thanks for the questions. Firstly, to your strategy point, say, has started to feel for with a lot of NBFC sort of communication that there are these sort of two broad — different types of businesses that people are trying to do, and how do we differentiate? In general, my feeling on this, Vivek, is that in the retail business, nobody is going to win because they have a better strategy. People are going to win because they have better execution. So I don’t think kind of comparing strategies head to heads of any use at all. What we got to figure out is, who is able to execute both the really high touch, get your sort of under your fingernails, go at the ground level customer to customer and do high touch underwriting for affordable housing, and is also able to figure out how to setup a new gen tech stack, how to build the right API libraries, how to connect in the most seamless way with digital partners, how to create the most scalable back-end loan management systems, et cetera. People who are able to execute on both of those things very well are the folks that are going to win.
Needless to say, that our belief that we have put together the right team to be able to do both of that. On the one hand we have people who have done hands-on digital lending and affordable housing business for 20 plus years, who are leading our business on that side, and on the other side, we have a team led by a CTO who has joined us from Amazon, who will put together an engineering team of 200 people that is trying to build our own software out of our Center of Excellence in Bangalore. We have put together a talent set which we believe adequately addresses both of the things that we need and hopefully that will lead to good execution, but time will tell on whether that execution is going to pan out or not.
Your second question was on affordable housing or the housing space in general, and the fact that we have chosen to be in that 11.3%, I think is our average yield on housing, and the fact that we’ve chosen to be there. I would say that this is — it’s not a — there is no perfect sweet spot here, Vivek. There are multiple spots, and you’ve got to operate on all of them and you’ve got to let the market decide what’s the most appropriate sort of product market fit is like all sort of people who are evaluating new markets, and to use the startup terminology, we are constantly looking for the right product market fit. We have currently got two major offerings in the housing space. One of the mass affluent space where we have found that the right product market fit for us is around the 10.5%, 10.75% kind of range, and we’ve got affordable housing product where we have found that the right fit is around the 12% range. Weighted average these two things are leading us to about 11.75% in terms of yields yields on housing. We are also considering a product in the even smaller ticket size, the budget space where yields might be even higher. So these are the faces, it is their own sort of sweet spot that we will buy, and we will let the market tell us where the big opportunities are. And based on that the weighted average will come out. It’s not like we’re particularly targeting a specific weighted average or anything.
So is there anything else, Vivek, that I have not answered?
Vivek Ramakrishnan — DSP Mutual Fund — Analyst
No. Thank you. That answered the question on the asset side. On the liability side, please, in terms of the ratings and the glide path for that — I mean any specific triggers that we should look forward to?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Yeah. I mean great ratings are like happiness, right? You can’t chase them. You will get it when you stop chasing it. So we don’t have a great sort of big project which is trying to get our ratings up to a particular level. We are doing all the right things, we have — we achieved the 10-year profile of our liabilities, we have reduced leverage, we have significantly increased granularity on the asset side of the book, we have increased provision level, the capital adequacy is upwards of 25%. We’re doing all the right things. Hopefully the credit agencies will notice and give us our due in the goodness of time, but we’re not going to be knocking that door on this.
Vivek Ramakrishnan — DSP Mutual Fund — Analyst
Extremely well put. Thank you. Just one other question, if I can sneak in. Given the fact that on the liability side you have loans which are sub 7% for a long period of time, essentially, you can your churn you housing book twice over with that liability profile, right?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Thanks for noticing that Vivek, yes, we can.
Vivek Ramakrishnan — DSP Mutual Fund — Analyst
Okay, great. Thank you so much, and wishing you very good luck.
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
Thanks, Vivek.
Operator
Thank you. The next question is from the line of Prateek Poddar from Nippon India Mutual Fund. Please go ahead.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Sir, just one small clarification. On slide number 38, you talk about three products on the oncology side, which will hit $5 billion of sales. These are your sales or the innovators’?
Unidentified Speaker —
These are the innovator’s sales.
Prateek Poddar — Nippon India Mutual Fund — Analyst
And what is your share of business, sir, in this, or your share of revenue, if I may ask?
See, we continue to have many customers. These are one of those many customers, so they contribute to a portion of our sales and we don’t give customer wise sales. So — but I think what the point we’re trying to make here is, these are attractive segments and there are sizable customers with whom we can — we are continuing to do business with and we can expand our business along with them as they grow.
Prateek Poddar — Nippon India Mutual Fund — Analyst
And to clarify, these are your commercial products, right? These are commercial basket of products under CDMO, which you are supplying, right?
Correct. And what this basically indicates is the potential and stickiness of revenues in the future. So if these products really take off to the potential that is there that ensures a more stable line of business for the company — for the business.
Prateek Poddar — Nippon India Mutual Fund — Analyst
And any timeline by which you expect these to hit their peak sales?
It’s difficult to say that at this point in time.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Sure. And last question on your tax rates. You have deferred tax assets, right? So can you just talk a bit about your tax rate? Thanks.
So effectively, the tax rate is between 24% to 25% currently.
Prateek Poddar — Nippon India Mutual Fund — Analyst
Got it. Thank you.
Operator
Thank you. The next question is from the line of Vinod Jain from WF Advisors. Please go ahead.
Vinod Jain — WF Advisors — Analyst
Good evening. Sir, my first question relates to other comprehensive income. I wish to know what does the changes in fair values of equity instruments in OCI comprise?
So, primarily Shriram City Union, as you are aware, that equity accounted currently and there has been a 29% increase in the share price of Shriram City Union, if you compare April to December. That’s the primary driver for that.
Vinod Jain — WF Advisors — Analyst
Okay. So the question is whether some color can be given as to what comprises the share of net profit of associates and joint ventures in the quarterly results of INR183 crores?
So that…
Vinod Jain — WF Advisors — Analyst
What could be the going-forward view on that?
So that basically comprises of our share of profit in Shriram as well as our joint venture with Allergan. And that is what you see currently in that.
Vinod Jain — WF Advisors — Analyst
And what could be the view going forward for this head of income?
So Allergan business has been growing. They are number 1 in ophthalmology in India, the JV that we have, and profitability margin has been 30%. So we remain optimistic with the business, and I’m sure Shriram business, you would be tracking as — in a lot more detail. So you can kind of look at the estimates of the Shriram Group.
Vinod Jain — WF Advisors — Analyst
Very well. Thank you.
Operator
Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.
Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst
Hi. Thanks for the opportunity. Sir, on the financial side of the business our reported ROE is around 9.5% without factoring the inflow of the — dis-investment that we, in near future, will do. So what sort of medium term ROE are we looking and what are the strategy? How do we plan to achieve that medium-term ROE?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
See, we’ve not offered specific ROE guidance on this, but we have said in the past and I’ll reiterate that the kind of business that we are building is one which has a mix of two-thirds retail, one-third wholesale, and within wholesale about half and half between real estate, and non-real estate. This type of business we believe can yield somewhere between 2.5% and 3% ROA. Now what that converts to in terms of ROE, let us see depending on what the leverage environment in the market is. Currently we are playing extremely conservative from a leverage standpoint with with our financial services business. But you can apply your own leverage assumption of how much you think a business like that, when executed well can leverage over time and that can give you a good feel. In current market environment businesses of that nature are in the mid-teens ROE.
Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst
Okay. So I mean, currently, our leverage is, I mean, 2.5% and once we get these investment money back, so what kind of a comfortable level in current kind of a scenario will be — like to have a leverage?
Jairam Sridharan — Chief Executive Officer, Piramal Retail Finance
The only thing we can say is that we are very comfortable with where we are from a leverage standpoint. We’d be comfortable increasing it a little bit, but what is the exact limit to which we can increase it, it depends a lot on the liquidity environment and our expectations on the liquidity side going forward. So it’d be inappropriate for me to comment for where we would like to be two, three years from now. Let’s see how the market evolves.
Bharat Sheth — Quest Investment Advisor Pvt. Ltd — Analyst
Okay. Thank you, and all the best.
Operator
Thank you. Ladies and gentlemen, due to time constraint, we will take that as the last question. I now hand the conference over to Mr. Hitesh Dhaddha for closing comments. Thank you, and over to you, sir.
Hitesh Dhaddha — Chief Investor Relations Officer
Thanks, everyone. If you have more questions, please reach out to the IR team. Thank you.
Operator
[Operator Closing Remarks]