PNB Housing Finance Ltd (PNBHOUSING) Q2 FY23 Earnings Concall Transcript

PNB Housing Finance Ltd (NSE:PNBHOUSING) Q2 FY23 Earnings Concall dated Oct. 27, 2022

Corporate Participants:

Deepika Gupta Padhi — Head of Internal Relations

Girish Kousgi — Managing Director, Chief Executive Officer

Analysts:

Ravi Naredi — Naredi Investment- — Analyst

Simran — Omkara Capital — Analyst

Dipti Kothari — Kothari Securities — Analyst

Himanshu Taluja — Aditya Birla Mutual Fund — Analyst

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

Nidhesh Jain — Investec Bank plc, Research Division — Analyst

Sukriti Jiwarajka — Laburnum Capital — Analyst

Ameya Gawande — Metaverse Equity Fund — Analyst

Franklin Moraes — Equentis Wealth Advisory — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY 2023 Conference Call of PNB Housing Finance Limited. [Operator Instructions] I now hand the conference over to Ms. Deepika Gupta Padhi, Head, Investor Relations and Treasury.

Deepika Gupta Padhi — Head of Internal Relations

Thank you, Mike. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q2 and H1 FY 2022, 2023 results. You must have seen our business and financial numbers in the presentation and press release shared with the Indian Stock Exchanges and is also available on our website. With me, we have our management team across verticals, led by Mr. Girish Kousgi, our Managing Director and CEO. Mr. Girish joins us as MD and CEO effective 21 October, 2022. He is a seasoned banker with vast experience across a variety of loan products, including housing loans, business loans, LAP, personal loans, among others. Prior to joining to PNB Housing Finance, he was the MD and CEO of Can Fin Homes Limited. We are also joined by Mr. Vinay Gupta, who joins us as CFO effective 26 October, 2022. He has extensive experience of over 20 years in financial management, financial planning, accounting, treasury operations and MIS. He was previously associated with SBI Cards and Payment Services Limited. We will begin this call with the performance update by MD and CEO, followed by an interactive Q&A session. Please note, this call may contain certain forward-looking statements, which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances. A detailed disclaimer is on Slide 25 of the investor presentation. With that, I will now hand over the call to Mr. Girish Kousgi.

Girish Kousgi — Managing Director, Chief Executive Officer

Good evening to all the investors. Welcome to quarter two and H1 earnings call of PNB Housing. I’ll give you a context with respect to market and outlook. So housing industry is really doing very well. The entire industry is in sweet spot and so is PNB Housing. Demand is quite robust. Demand had startled after COVID FY 2021, 2022 quarter three onwards. To be specific, October onwards, demand has been quite robust. In spite of [Indecipherable] disruptions by a quarter or two because of COVID second wave and third wave, I think demand has been quite robust. Real estate as this pace has revived, which is more than one and a half years. And this cycle would last for the next four to five years. Interest rates, even though the rates have gone up in last a little over a year’s time, still the affordability is pretty high. And demand is quite robust across all geographies, across all segments. And if you look at the industry, I think the industry will be able to post a growth of about 12% to 13% this year over last year. This is about the industry and the outlook.

Coming to PNB Housing, let me give you numbers — some data points on three parameters. One is quarter two Y-o-Y. And number 2 H1 this year compared to H1 of last year. And of course, quarter-over-quarter with the sequential. I think we need to very clearly segregate retail and corporate. To start with, I’ll give you consolidated numbers and then I’ll get into retail and corporate separately. If you look at quarter two performance on a Y-o-Y basis, there has been a growth of disbursement by 21%. The book on a consol basis has degrown by 4%. But if you look at retail, there is a growth of 4%. In terms of revenue, the growth is about 6%. PAT is close to 12%. Yield, of course, is not comparable on a Y-o-Y, of course, you have to compare yield on a sequential basis. Yield for quarter two at a book level is 10.7%. Cost was 7.32%, spread of 3.38%, NIM of 4.14%, GNPA, 6.06% and net NPA of 3.59%, CAR at 24% and leverage of 5 times. Now talking about retail quarter Y-o-Y, disbursement growth of 24.5%, book has grown by 4%. And if I have to talk about retail, GNPA, it is 3.39%, down from 3.53%. For corporate, the book has — I think disbursement growth is negative 48% because we are degrowing corporate book. Book has degrown by 44%. It was INR10,250 crores. Now it is INR5,708 crores. GNPA, I’ve given you for the overall numbers. So if you look at GNPA numbers, nothing much changed in terms of the amount. Of course, the NPA stands at about INR1,734 crores, which [Indecipherable] about 30%. Talking about H1, disbursement growth is 49%. Book has of course degrown by 4%. Revenue is a negative 5.6%. PAT growth by 5%. Yield is at 9.96%.

I think some of these numbers are comment for both, so I’ll not get into that. In terms of strategy, going forward, we would focus on retail. I think the story is going to be around retail. And within retail, we have two segments. One is affordable and one is non-affordable. I think there’s going to be a very good focus on non-affordable and we’re going to be very aggressive on affordable. So for H2, we plan to open more than 25 branches, largely in affordable space. Today, if you look at retail book, which is about INR52,000 crores, affordable is about INR3,000 crores. So we want to grow that book very aggressively because we’ve seen that market is conducive and we’ll be able to build book at a higher yield and with very low delinquency. We’ve seen that many companies in the industry, they’re doing very well in affordable. We were primarily focusing on the non-affordable segment within the entire housing industry. Going forward, our focus will also be on affordable. In terms of mix, going forward, we would want to maintain non-affordable 75% and affordable 25%. This is more on the incremental. Over the next two to three years’ time, I think the portfolio, we think will start building the non-affordable — sorry, the affordable book. In terms of HL and non-HL, we want to reach to a stage where our HL is 75% and non-HL is 25%. Today, if you look at — at a portfolio level, our non-HL is about 28%-odd. We are trying to change our entire IT infrastructure, which might take about 15 to 18 months’ time. So this will help us in better delivery to our customers in terms of PAT, in terms of trying to integrate various KPIs so that we can fast-track our addition process. We had a challenge of book depletion. So we have a very strong retention team.

If we have to compare quarter two vis-a-vis quarter one of this year, we were able to arrest BT-out. In quarter one, BT-out was about INR1,350 crores. And in quarter two, this number is about INR1,100 crores. So going forward, this number is likely to come down. In terms of total closure, quarter one was about INR3,450 and quarter two is about INR3,150. And this is on a growing book. This being my first earnings call, I thought I should give more time for all of you to ask questions because you’ll have lot of questions to ask. Before I open the forum for Q&A, there’s one thing which I want to clarify on the provisioning, because there has been a significant increase in provisioning compared to quarter one, quarter one was INR49 crores and quarter two is INR243 crores. So this INR243 crores has three parts. One is the ARC sale. Second is written off. And the third is, we have provided INR60 crores additional. And this apart, I think there has been slight increase in the ECL provisioning. So this INR243 crores actually has four components. So you should read from INR49 crores, the number in quarter two has gone up to INR80 crores. And the rest is write-off, ARC sale and additional provisioning. In terms of credit cost, for quarter two, it is slightly on the higher side, it’s 1.54%, H1 is 0.94% and for the whole year, we are expecting credit cost to be around 1%. So I would request to open the floor for Q&A.

Questions and Answers:

Operator

[Operator Instructions] We have the first question from the line of Ravi Naredi from Naredi Investment.

Ravi Naredi — Naredi Investment- — Analyst

Mr. Girishji, welcome to this new company, it is bigger than five times Can Fin Home. Sir, what will be your priority to run this company — top priority to run this company, to raise the fund, to raise the AUM or to bring down the NPA level? And second, company AUM is INR66,000 crores, market cap INR7,000 crores. Sir, with due regards to all of you PSU employees, I say, if this company was in private sector, its market cap may be INR50,000 crores to INR70,000 crores. So where we have challenges and how you overcome from them? These are my questions.

Girish Kousgi — Managing Director, Chief Executive Officer

See, we are pretty aggressive on growth. And you will see in next few quarters, we’ll be growing by a healthy percentage, which will be much above the industry growth rate, both on disbursement and book. So first, the growth will start on disbursement and then it will catch up with the book growth. Now why we say that we want to grow. So we want to grow in non-affordable space and also in affordable. So we are now getting into affordable in a big way. That’s going to be the — that’s going to aid our growth story along with non-affordable segment, A. B, we will definitely bring down our NPA, GNPA and NPA. So going forward, A, we’ll work on growth at both disbursement and book. B, we will bring down our delinquencies, our GNPA will come down, net NPA will come down. And number three, we will also ensure that while we do these two things, we are profitable. So in terms of margins, in terms of — we will ensure that we have a base threshold, which we will maintain. And I’m sure if you can get back to basics and grow with profitability with lower delinquency, I’m sure I think market will reward. I think that’s the expectation.

Ravi Naredi — Naredi Investment- — Analyst

But will you bring the new people to the company as per your convenience or you will run with existing employees?

Girish Kousgi — Managing Director, Chief Executive Officer

See, I’ll tell you, we have a very good team. PNB Housing team is excellent. While I say that, we will always be open to hire talent from market. So whenever there is a need and when there is an opportunity, we will also try to hire talent from market. So largely, I think the existing team is going to deliver.

Operator

We have the next question from the line of Simran from Omkara Capital.

Simran — Omkara Capital — Analyst

First of all, congratulations for the good set of numbers you have posted, and all the best for your new journey in the PNB Housing Finance. Sir, I have three questions. First is, was the company focused on the gross NPAs going forward? Second — and second question is, on the loan growth front, because we are seeing very flattish sort of loan growth over the quarters. And third, where do you see the cost of borrowings of the PNB Housing Finance is going to be on the peak in the upcoming quarters? Yes, three questions, sir.

Girish Kousgi — Managing Director, Chief Executive Officer

So in terms of growth, I mentioned that if you look at H1, I think we’ve grown by about 49% is the growth. I’m talking about disbursements. So book will catch up. So probably this year, we will see growth in book by about really close to 10%. One year from now or maybe five quarters from now, we should be able to see growth in book of over 15%. On a steady state, in the long run, our disbursement growth, at least for the next few years, is going to be 25% and book growth will be 18%. We are working on to bring down our GNPA. As I told you, the story is going to be on retail because corporate book, we are degrowing the book. And obviously, on a depleting book, the NPAs would look on a higher side. We have a plan for resolution on the corporate book. But having said that, our focus would be to try and bring down GNPA on the retail book. So you will see that, progressively, going forward from this quarter onwards, there will be improvement in GNPA. So it might take some time, but definitely, you will see the GNPA coming down quarter-on-quarter from this quarter.

Simran — Omkara Capital — Analyst

And sir, my third question was that where you see the cost of borrowing is going to be peak for the PNB Housing Finance in the upcoming quarters?

Girish Kousgi — Managing Director, Chief Executive Officer

See, we are part of the system. And therefore, we’d have to operate with the system. But today, given the context of where our company stands, definitely, our cost is going to be slightly high. Today, we are talking about cost of 7.32%. But when we get our growth story on, when we see that the delinquencies are coming down, I’m talking about GNPA, we are high on liquidity. And once we improve our quality from now onwards, we will also get the cost advantage. As of now, the cost of borrowing is 7.32%. I expect in next two to three quarters’ time, there could be increase in cost in the industry by about 0.5% to 0.6%. And to that extent, we will also try to pass on that to customers. And as I mentioned earlier, we will definitely maintain profitability.

To that extent, for me the starting point is profitability, margins, because we have very less control on cost. And therefore, we would get fixated on the margins, and then accordingly, try to adjust the yield. And we are focusing largely on affordable from now onwards. There we have a higher yield opportunity. And even we’ll be able to grow the book because we see less competition in Tier two, three and four cities vis-a-vis compared to large cities and Tier one cities. So we have an opportunity of building book at a higher yield. Therefore, we’ll be able to maintain margins. I think all these things will happen parallelly, it’s not sequentially. So on the cost trend, it might grow by another 50 or 60 bps in the next two to three quarters’ time, and we are ready to absorb that and still grow at a healthy rate.

Simran — Omkara Capital — Analyst

And your focus is primarily driven on the affordable going forward, if I’m right?

Girish Kousgi — Managing Director, Chief Executive Officer

No, no. Today, our focus is retail. If you look at the retail book, it is INR52,000 crores. Out of INR52,000 crores, INR3,000 crores is affordable. We see opportunity in both affordable and non-affordable. But today, if you see, our concentration is on non-affordable, which is about INR49,000 crores out of INR52,000 crores. So we want to grow non-affordable space, at the same time, we want to get aggressive on the affordable space as well, because we don’t see too much of a difference in the portfolio of quality between affordable and non-affordable, and therefore, we want to get into affordable, I’m talking about the industry. So we will get very aggressive on affordable and we will continue to be aggressive or non-affordable. So our focus is going to be on retail; two segments, affordable and non-affordable.

Operator

[Operator Instructions] We have the next question from the line of Dipti Kothari from Kothari Securities.

Dipti Kothari — Kothari Securities — Analyst

So sir, my question was on that — do we have any significant update on corporate resolution?

Girish Kousgi — Managing Director, Chief Executive Officer

We have an update, but at this point in time, let me be honest with you, our corporate book is depleting. Every quarter, there is a run-off. And this book is now INR5,782 crores. If you look at the overall book, I think it’s less than 10%. And going forward, we are going to grow very aggressively on the retail side. On the corporate side, we are working on some of the accounts. So only thing is since considering the nature of these accounts, the resolution may take slightly longer time. So I won’t be in a position to give you a definitive timeframe as to what would be the resolution, let’s say, in next two quarters, three quarters, four quarters. But we are working on resolution. So we will see that coming through in the next three to four quarters’ time. In next quarter or two, I will be able to commit on that because we are still working on some of the accounts.

Dipti Kothari — Kothari Securities — Analyst

And have we taken any write-off in this quarter?

Girish Kousgi — Managing Director, Chief Executive Officer

So I mentioned that out of total provision of INR243 crores, INR80 crores is ECL and the balance has three components; one is write-off, one is ERCC, and we have provided INR60 crores additional.

Operator

Do you have further questions? Ms. Dipti, can you hear us?

Deepika Gupta Padhi — Head of Internal Relations

Mike, we can move to the next question.

Operator

We have the next question from the line of Himanshu Taluja from Aditya Birla Mutual Fund.

Himanshu Taluja — Aditya Birla Mutual Fund — Analyst

My just one question is, I just missed your initial commentary, but as I have heard that your endeavor is to bring down the gross NPAs on the asset quality improvement on a quarter-on-quarter. So what sort of the credit cost we should expect over the next few quarters? And when you think our normalized credit cost will likely to be visible?

Girish Kousgi — Managing Director, Chief Executive Officer

So this year, credit cost will be around 1%. And from next year onwards, we can say that we’ll reach a level where we can talk about normalized credit cost, and this is for retail.

Himanshu Taluja — Aditya Birla Mutual Fund — Analyst

This is on the retail. And would you like to also build-up, like on the corporate portfolio, would you like to build any contingent buffer, provision buffer?

Girish Kousgi — Managing Director, Chief Executive Officer

So I think internally we are working on that. The only thing is, on resolution, I won’t be able to give you a definitive timeline. While we are working on the corporate book, of course, now the pool has come down drastically. So on the retail side, definitely, we can expect normalized credit costs from coming financial year onwards.

Operator

We have the next question from the line of Ashwini Agarwal from Demeter Advisors.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

So two questions kind of along the lines asked by previous participants. So the first question is on spreads. If I look at your Q2 spread, excluding securitization income, that’s at about 2.6%, which is kind of a little bit on the higher side compared to the previous few quarters. And given that now deposit rate with banks and prime borrowers like HDFC, etc, are rising very rapidly, do you think this number of 2.6% as a spread is sustainable?

Girish Kousgi — Managing Director, Chief Executive Officer

Yeah, spread of 2.2% is sustainable.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

Spread of 2.2% excluding securitization is sustainable in your view?

Girish Kousgi — Managing Director, Chief Executive Officer

2.2$ is sustainable, yes.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

The second thing is that on your corporate book, while you’ve made some additional provisions during Q2, you still have a fairly large NPA pool on your corporate book and you’re talking about some resolution. So there’s INR1,730 crores worth of corporate GNPAs. I just wanted to ask what is the provisioning level on the corporate GNPA? And as this book is resolved, how much more write-off or pain do you need to take on this?

Girish Kousgi — Managing Director, Chief Executive Officer

So on the corporate book, the book is about INR5,700 crores. GNPA is about INR1,734 crores. So I would say that on the — the coverage is close to almost about 50%-odd on the corporate NPA.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

And what’s your estimate? How much more do you need to kind of wash through the P&L over the next couple of quarters?

Girish Kousgi — Managing Director, Chief Executive Officer

It will be — this is what I told you. It will be very difficult for me to give an estimate for next couple of quarters, because knowing the nature of these accounts, sometimes it will take a longer time, sometimes we see resolution coming through. And therefore, I can only say that we are adequately covered. And we are constantly working on resolution, because number of cases obviously in corporate would be less. And this year it’s close to 50%, as I mentioned. So we will — we constantly — we’ll constantly look to ensure that we are adequately covered at any given point in time and we expiate resolution.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

Sir, earlier in your conversation you said that for the full year the credit cost should be in the vicinity of 1%. And next year, we should..

Girish Kousgi — Managing Director, Chief Executive Officer

This is both retail and corporate put together.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

Yes, I get that. And you had also said that fiscal 2024, which is the next financial year, we should expect to see normalized credit costs.

Girish Kousgi — Managing Director, Chief Executive Officer

On the retail book.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

On the retail book. So what would be your estimate of normalized credit cost on the retail book?

Girish Kousgi — Managing Director, Chief Executive Officer

See, given the fact that what you have seen credit cost on the retail for last few quarters, it should be in the range of 40 to 50 bps on retail

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

40 to 50 bps on retail. So if you work with a 2.2% spread, and I’m assuming your leverage will remain around five times because your rating sort of needs to be maintained or improved, and your cost to income ratios remain under control and 40 to 50 bps of credit costs. So what kind of normalized ROA and ROE do you think you could expect, say, three or four quarters down the line?

Girish Kousgi — Managing Director, Chief Executive Officer

See, I mentioned 2.2% spread as a threshold. It could be higher. So 2.2% is something which we will maintain at any given point in time. This is a threshold. And let me also talk about the NIM, NIM was 3.2%. So spread of 2.2% and NIM of 3.2% is something which we will always maintain. This is a threshold. Now having said that, even today, if you look at our spread, it is much higher than 2.2%. So going forward, our spread will be upwards of 2.2%. Threshold is 2.2%. So you will see that every quarter now there will be definitely improvement on all the metrics which I mentioned in the last few minutes. And today — we are talking about today’s situation. So next three to four quarters down the line, you will see most of the parameters improving and even the return ratios will improve.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

And sir, last question is that, let’s talk about the retail NPAs. You’re saying that your retail GNPA ratio will also decline, and it has been declining. The absolute GNPA on the retail side reached at about whatever INR2,600 crores and it’s now down to INR1,759 crores, so it’s been coming off. So what are you doing to — or can you help me understand what’s driving this? Is it just the economic situation where people are feeling more positive and are paying up and some of your restructured loans are coming back or is there a change in the way you are pursuing retail GNPA?

Girish Kousgi — Managing Director, Chief Executive Officer

The resolution in retail on the GNPA would be much faster vis-a-vis compared to corporate. number one. And within retail, we work on pre-delinquency management and post-delinquency. So pre-delinquency, we use business intelligence to identify customers who would get into stress and we cure them before they could become delinquent, A. B, all the delinquent accounts, we start from X bucket. So we have a call center strategy where we use self-cure, telecall then field. So for each bucket, whether it is 0 to 30, one to 30, 31 to 60 or 61 to 90 or 90 plus, which is basically NPA or recovery. So for each of these categories, we have a strategy. Largely, for SMA-2, if it slips to GNPA, our strategy is to first try and collect. Now after November 12th RBI circular, once the account flows into NPA, now we have to collect the entire overdue, not just to EMIs whether it was prior to November of last year. So that’s the strategy. Now suppose if the account slips into NPA, it gets into slightly deeper bucket, then we take the legal route. So largely, the recourse for us is through [Indecipherable]. And we use OTS as a very effective tool to try and collect. So we have different strategy for different buckets, whether it is in NPA or early bucket. So in retail, we have a very clear strategy on collection starting from X bucket right up to recovery, which is basically the collection.

Ashwini Agarwal — Ashmore Equities Investment Management (US) LLC — Analyst

And sir, last question from me. I mean, what do you think will be your corporate loan strategy once you’ve cleaned up the current stress that you’re dealing with? I mean, would you be a pure retail lender or would you say that 15% to 20% corporate book is an overall part of the book would still be desirable from a NIM and spread management perspective?

Girish Kousgi — Managing Director, Chief Executive Officer

See, there are two things here. Talking about corporate, now we are very keen to, A, run down the book; B, resolve sticky accounts. And once we reach a comfortable level of GNPA, then relay, restart, but on a very small scale. And the proportion of corporate may not be substantial or it will be very less. So we will be pick-and-choosy in terms of doing corporate loans, A. B, within retail, especially on the affordable space, we see a lot of the lift in the yield. So we see very good opportunity. And therefore, we will focus on retail primarily, both affordable and non affordable. Affordable is basically — which will — the growth in book could be much lower compared to non-affordable given the ticket size. But there, we have an opportunity of growing the book at a higher yield, so we get better margins. On the non-affordable, we can grow the book faster, but the margins would be slightly lower compared to affordable. So it’s a fine balance between affordable and non-affordable. And we also have a good proportion of non-home, which can get us better yields basically focusing on LAP, NRP and LRD, I’m talking all about retail. So all I’m saying is that without focusing on growing our corporate book from the time where we feel comfortable start doing corporate business, in spite of focusing only on retail, we have the wherewithal to maintain spread, grow the book faster and be relevant in the market space.

Operator

We have the next question is from the line of Nidhesh from Investec.

Nidhesh Jain — Investec Bank plc, Research Division — Analyst

Just two questions. Firstly, any update on the capital raise that we have been planning to do?

Girish Kousgi — Managing Director, Chief Executive Officer

So we are planning for rights issue. We will file before the calendar year.

Nidhesh Jain — Investec Bank plc, Research Division — Analyst

And the quantum of the right issue will be around INR2,500 crores?

Girish Kousgi — Managing Director, Chief Executive Officer

Yes.

Nidhesh Jain — Investec Bank plc, Research Division — Analyst

Secondly, if I look at one of the shortcomings that PNB Housing had for cost of funds. Our cost of funds is almost 100 to 150 basis points higher than the peers who are operating in the same segment. So how do you plan to bridge that gap over a period of time? What are the steps that you think are required to bridge this gap of cost of funds differential?

Girish Kousgi — Managing Director, Chief Executive Officer

See, basically, it’s a journey. According to me, in mortgage business, the starting point is portfolio quality. So I think once we get our GNPA on track and when we show growth with decent profitability, I think everything will fall in its place. So cost of funds, which today for PNB Housing is slightly on the higher side, I think over a period of time, it will come down. And maybe a few quarters down the line, we’ll be able to raise from the market at a much better rate. So it’s a journey. So we need to take this course. We need to go through the journey and ensure that we get all our pieces right. A few quarters from now, we won’t be talking about high cost of funds for PNB Housing.

Nidhesh Jain — Investec Bank plc, Research Division — Analyst

So focusing on asset quality. And if asset quality improves, we will automatically see..

Girish Kousgi — Managing Director, Chief Executive Officer

Our focus is very clear. Our focus is on growth, asset quality and profitability with high liquidity. This is our mantra. So these are not sequential, everything is parallel.

Operator

We have the next question from the line of Sukriti Jiwarajka from Laburnum Capital.

Sukriti Jiwarajka — Laburnum Capital — Analyst

Some of my questions around the fund raise have already been asked. So just one follow-up on tying in the fund raise and the cost of funds. So of course, the asset quality and the growth will help. But I think one of the outcomes of the rights issue could be a rating upgrade..

Girish Kousgi — Managing Director, Chief Executive Officer

Sorry, your voice is breaking.

Sukriti Jiwarajka — Laburnum Capital — Analyst

I was saying one of the outcomes of the rights issue could probably be a rating upgrade, which would automatically give us a cost of fund advantage. And that could come much sooner than, let’s say, GNPA going down and a lot of other long-term structural issues. Do you think that will be enough to negate this 50, 60 bps increase that you are anticipating this year to sort of get a net-net zero increase in cost of fund?

Girish Kousgi — Managing Director, Chief Executive Officer

Yeah, you are partly right, but I think we need to work on all the pieces, because recently, we got a rating upgrade. So — outlook upgrade. So all these things, I think according to me, would have to run parallelly. Yes, definitely, raising capital is a big plus for the company. It will definitely help us to raise funds at a much lower rate than what it is currently. But yes, if we can work on growth, profitability and asset quality, I think the cost would be much lower. And we will be able to compete with some of the best HFCs in the country in terms of cost leadership.

Sukriti Jiwarajka — Laburnum Capital — Analyst

And second question is, when you talk about affordable, you mean the kind of loans that PNB was already doing, right? You don’t mean the sub-INR10 lakh loans that, let’s say, in Awas or housing in-force you would be doing?

Girish Kousgi — Managing Director, Chief Executive Officer

See, affordable means up to INR35 lakhs. That is — that will be a focus in the affordable space.

Sukriti Jiwarajka — Laburnum Capital — Analyst

Can you narrow that down? Is this — because it’s a very wide range. I mean, at some point, you need to building different verticals and capabilities, because you don’t have — we don’t have too many examples of one HFC doing a INR6 lakh loan well and a INR40 lakh well?

Girish Kousgi — Managing Director, Chief Executive Officer

No, no, I think we have quite a few HFCs who are focusing on both affordable and non-affordable space. I think as far as PNB is concerned, we are building capability, it’s already on course. We will have a separate team to manage affordable business. While we are already there in the non-affordable space, we see a lot of opportunities. So we’ll build a team to manage affordable. So in terms of the difference between affordable and non-affordable, one in terms of ticket size, I think more than ticket size in terms of profile. Probably, I’ll give just one example. Affordable would be basically focusing on Tier two, Tier three, Tier four and urban outskirts pocket, A, in terms of geography; B, in terms of profile, CAT-B corporates and CAT-C corporates. In terms of builder, CAT-B and CAT-C developer. When we talk about non-affordable, it will be focusing on CAT-A corporates, CAT-A builders and focusing on top cities and metro. I think these are the three, four differences. Of course, there are many more, I just thought let me give you a flavor of affordable and non-affordable. So we see opportunity in both. And we don’t see too much of a difference in the book quality at an industry level.

So for PNB Housing, it’s a journey for us. We need to definitely bring down our GNPA. We are working on that. But the book we are going to build henceforth would definitely be at a far lower delinquency.

Operator

We have the next question from the line of Ameya Gawande from Metaverse Equity Fund.

Ameya Gawande — Metaverse Equity Fund — Analyst

First of all, congratulations, sir, and best wishes for the future endeavors. So I just have a couple of questions. So first is with respect to Unnati segment. What were the disbursement numbers? And were there any run-offs for the quarter?

Girish Kousgi — Managing Director, Chief Executive Officer

See, I think at this point in time, talking about Unnati, see because we are just starting that now, we just started, so we want to scale it up. So today, if you look at the numbers, it will be very less. If we look at our total disbursement, I think Unnati would be close to about 11%, 12% of the total loan disbursement. But going forward, incrementally, we want to scale affordable or Unnati to up to 25% incrementally.

Ameya Gawande — Metaverse Equity Fund — Analyst

And sir, about the run-offs?

Girish Kousgi — Managing Director, Chief Executive Officer

We don’t see too much of a difference between affordable and non-affordable at this point in time.

Ameya Gawande — Metaverse Equity Fund — Analyst

And sir, second question is with respect to the growth you will be chasing for the next three years. If you could just give some numbers?

Girish Kousgi — Managing Director, Chief Executive Officer

So I think in my opening remarks, I mentioned about this. We’ll be focusing — this year, the growth on disbursement would be about 40%-odd and growth in book would be about close to 10%. Now from next year onwards, industry would grow at about 12%, 13%. On book, we would grow at about 18% and disbursement 25%.

Operator

[Operator Instructions] We have the next question from the line of Franklin Moraes from Equentis Wealth Advisory.

Franklin Moraes — Equentis Wealth Advisory — Analyst

Sir, in terms of the assets sold to ARC, what would have been the gross book value and the net book value on the sale?

Girish Kousgi — Managing Director, Chief Executive Officer

I will have to come back to you on that. I think specific — no data. I’ll come back to you on that.

Franklin Moraes — Equentis Wealth Advisory — Analyst

Sir, would we have like — would some provisions would have been reversed because of the sale?

Girish Kousgi — Managing Director, Chief Executive Officer

Not in the ARC.

Franklin Moraes — Equentis Wealth Advisory — Analyst

And I also wanted to understand, if we add the ARC sales and the write-offs, would — if we adjust for both of these things in absolute levels, would the gross NPA level — would it have been the same or would it have still reduced?

Girish Kousgi — Managing Director, Chief Executive Officer

I think it will be on the lower side, but slightly. This a marginal improvement net of write-off and ARC sales.

Franklin Moraes — Equentis Wealth Advisory — Analyst

And we have been doing a lot of ARC sales also recently. So just wanted to understand the pipeline in terms of the quantum. What is the quantum of ARC sales that we are likely to do maybe in the next two or three quarters?

Girish Kousgi — Managing Director, Chief Executive Officer

The company has not done too many ARC deals. It is a second deal. The first was done on the infrastructure, which was a one large corporate account. And this is the second one in retail portfolio, which is on a cash basis. So as such, as of now, there is no new confirmed pipeline.

Franklin Moraes — Equentis Wealth Advisory — Analyst

And on the credit cost, you had mentioned the normalized credit cost just on the retail aspect. So is there some concern still on the corporate book, because of which we are a little bit hesitant to give corporate cost guidance?

Girish Kousgi — Managing Director, Chief Executive Officer

No, for this year, I’ve given the numbers. So credit cost is going to be around 1%. There is no concern on the corporate book. I think the only challenge in the corporate book is that given the nature of the accounts, the resolution — we can’t predict the resolution timeline. See, in retail, I can say, suppose if the account gets into NPA, within five months, six months, I can — either I can get into OTS with the customer or I can get it to surface legal, more surfaces sell the asset unrealized. So I have a definite timeline. I can say, within six to seven months, I will be able to crack. But in corporate, we’ll not be able to give that kind of timeline, that’s all. I think therefore giving the timeline, there is no other concern. Yeah, of course, the concern is that we have quite a large NPA pool. But in terms of resolution, there is no concern. There is — only thing we’re not able to give you the exact timeline, that’s all.

Franklin Moraes — Equentis Wealth Advisory — Analyst

And lastly, on the capital raise, you had mentioned that you’ll be filing the rights issue proposal by this calendar year. So would it be safe to assume that at the end of this financial year at least we would have the rights issue in place in terms of getting the money?

Girish Kousgi — Managing Director, Chief Executive Officer

It depends. So it might get concluded before the financial year or it may slip to quarter one of next financial year.

Franklin Moraes — Equentis Wealth Advisory — Analyst

Q1 is kind of the outer deadline, at least in terms of..

Girish Kousgi — Managing Director, Chief Executive Officer

I would say, I think before close of Q1 probably it would get to about concluded.

Operator

That was the last question. I would now like to hand over the call to the management for closing comments.

Deepika Gupta Padhi — Head of Internal Relations

Thank you everyone for joining us on the call. If you have any questions unanswered, please feel free to get in touch with Investor Relations. The transcript and the audio of this call will be uploaded on our website. Thank you.

Girish Kousgi — Managing Director, Chief Executive Officer

Thank you very much.

Operator

[Operator Closing Remarks]