PNB Housing Finance Ltd (PNBHOUSING) Q3 FY23 Earnings Concall Transcript

PNB Housing Finance Ltd (NSE:PNBHOUSING) Q3 FY23 Earnings Concall dated Jan. 24, 2023.

Corporate Participants:

Deepika Gupta Padhi — Head of Investor Relations and Treasury

Girish Kousgi — Managing Director & Chief Executive Officer

Vinay Gupta — Chief Financial Officer

Analysts:

Abhijit Tibrewal — Motilal Oswal — Analyst

Sharaj Singh — Laburnum Capital — Analyst

Anand Venugopal — BMSPL Capital — Analyst

Ashwini Agarwal — Demeter Advisors LLP — Analyst

Vikram Damani — Damani Securities — Analyst

Aditya Doshi — Chanakya Capital — Analyst

Abhay Modi — Helios Capital — Analyst

Sanket Chheda — DAM Capital — Analyst

Sanket Chheda — DAS Capital — Analyst

Pratik Chheda — Guardian Capital Partners — Analyst

Nidhesh Jain — Investec — Analyst

Nischint Chawathe — Kotak — Analyst

Akash Sethia — Elin — Analyst

Sandeep Joshi — Unifi Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q3 and Nine Months FY ’22-’23 Earnings Conference Call. [Operator Instructions]

I now hand the conference over to Ms. Deepika Gupta Padhi, Head of Investor Relations and Treasury. Thank you, and over to you.

Deepika Gupta Padhi — Head of Investor Relations and Treasury

Thank you, Yashashri. Good evening, and welcome, everyone. We are here to discuss PNB Housing Finance Q3 and nine months FY ’22-’23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the stock exchanges and also available on our website.

With me we have our entire management team across verticals, led by Mr. Girish Kousgi, Managing Director and CEO of PNB Housing Finance. We will begin this call with the performance update by the MD and CEO, followed by an interactive Q&A session.

Please note, this call may contain 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 developments 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 26 of the investor presentation.

With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.

Girish Kousgi — Managing Director & Chief Executive Officer

Good evening, and welcome to the earnings call. I think we had a very good quarter. I think there were lot of positives to take back and work further on it. So, if we basically talk about the numbers, on a Y-o-Y, disbursements has grown by 21%, nine months has grown by 39%. So, book, last quarter, it was negative, it was minus 4%. I think now we are 0.3% if you look at retail, because our focus is going to be on retail going forward. I think it is 2% growth.

And if you — if I look at Y-o-Y retail, we are at 7%. So, on the nine month, we are at 7%.

Corporate book as I had mentioned earlier also, we are de-growing. So, we — on a Y-o-Y, it is minus 39%.

In terms of revenue, 20% quarter-on-quarter and it’s 2.5% nine months.

PAT is at 43% quarter-on-quarter, and 15% nine months.

Yield is at 11.38%. Last quarter was 10.7%.

The cost of funds, it has slightly gone up. It was 7.32% last quarter and now it is 7.55%.

We have improved spread from 3.38% to 3.83%.

NIM from 4.14% last quarter to 4.68% this quarter.

I think the big story is around attraction business, both on disbursement and book and also on asset quality. So, if you look at asset quality, GNPA is now at 4.87%. If we compare this number last quarter, it was 6.06% and the net NPA is now at 3.22%. If we talk about retail specifically, retail GNPA is 2.86% and net NPA is 1.96%.

So, corporate as I mentioned, it’s de-growing. So, if you look at CRAR, it has improved. Now it is 24.6% and gear is at 4.89 times.

Largely, the focus was on retail. We focused on few things. One is on the disbursement. I can say that last two months, there is very good traction and this would continue in future.

In terms of book, we have done a great job in terms of retention. So, that has also helped us to grow our book. So, we have, to a large extent, controlled on the foreclosures, part closures and also BT out.

And now, we have tweaked our policy — trade policy to a certain extent and also process to ensure that the book what we are going to build in future is of pristine quality. And we have done some design-level changes in terms of ticket size, in terms of product mix. We are focusing now more on home vis-a-vis compared to non-home.

In terms of profile, we are now focusing more on salaried vis-a-vis compared to SENP. And within salaried, the focus is now also on government employees which is a very small portion in our portfolio, because this segment will give us the least delinquency. We have seen this in the industry and therefore, we want to do that shift within salaried.

So, we have now changed our strategy in terms of focusing on retail granular business, to that extent, high-ticket loans, I think it has come down drastically — directionally and going forward as well we can see this in the book what we are going to build in future.

Today, retail disbursement accounts to 92% of the book.

In terms of affordable, we have now set up the entire team. We have a dedicated team starting from sales, credit, operations, collections, the entire architecture is different. The policies are different and set of branches, channel partners, segments, I think everything is different. Starting from pricing to segment, employees are from affordable backgrounds and the entire architecture is different for affordable. We have started this in last week of December. So probably this quarter, we’ll be able to see some traction there and it will carry on going for the past.

Last quarter I mentioned that incrementally going forward, affordable will contribute about 25% of business, which might — which is, let’s say 12 months from now, it will start contributing about close to 20%, 25% of incremental business. So, that’s our focus on affordability. It has started very well.

And of course, the book growth would have been slightly higher, but of course, we had a certain subsidy amount to adjust to see is on PMAY, right, and therefore the book growth what we see is little less. Otherwise the book growth would have been a very — it could have been far better than what you see now.

We have done few changes in the sales structure. We are now much closer to market and we have added more, if I can say, more zones, more regions, so that we are much closer in terms of tracking, monitoring and business development.

On the credit side, we are working on automation and digitization. We have launched STP — we’ve just launched now STP, Straight Through Process. This is for salaried segment. So, this would give us faster TATs and efficiency in credit underwriting and standardization. So, this will pick traction in next couple of quarters.

In terms of the policy, as I mentioned, we have done some tweaking just to ensure that the book what we are able to build in the future will be of very good quality. And we have tweaked certain processes. We have tried to cut down on some of our inventories and improve efficiency.

In terms of collection, our collection strategy is very, very clear. We have now four different verticals under collections. One is completely focusing on bounce and X bucket. There we have seen significant improvement in the collection efficiency. And then for the entire SMA pool, that is SMA-0, SMA-1, and SMA-2, we have a different set of team managing this to ensure that their KPIs are the lowest.

In fact, quarter three saw a significant reduction in the slippages. The slippages was down to the extent of 25%. And 90 plus, which is basically NPA, 90 plus to 360 will again have a different dedicated team and 360-plus, will have recovery. So, we will have X bucket SMA, NPA, and recovery. So, this — we have done this — tactically we have done this bifurcation within the collection architecture.

We’ve had highest NPA recovery and the slippages have come down by 25%. And we have fast-tracked the entire legal process in terms of SARFAESI, in terms of settlements in time, so — in terms of sale of assets. I think all these things have resulted in asset quality improving, especially on retail front.

I would now — so, what we have done is, as I mentioned, we have now slowly trying to change the profile mix, product mix and also in terms of ticket size now we are trying to get more granular and we want to focus on retail business. So, we have seen some improvement in terms of the — in terms of the mix what we want. It’s hardly of course one quarter. So it will take some more time to see this impact coming in.

So, our salaried share has increased incrementally. Our profile, in the product mix we have seen that HL is gaining more traction vis-a-vis compared to non-HL and in the ticket size, we are seeing that up to INR1 crore, the share of — percentage of cases which have been booked are on the increasing side.

I would now open the forum for Q&A.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal — Analyst

Yes. Good evening, everyone. Thank you for taking my question. Congratulations on a good quarter. Sir, just two or three questions. Firstly, on the corporate book, have there been any NPA resolutions that you have seen in this quarter, among those four or five large accounts?

Secondly, during this quarter, I think you — in your discussion, you’ve talked about some impairments or provisions that you’ve taken on assets held for sale. So I mean, if you could just kind of throw some more color on what is the quantum of these assets held for sale and what have you actually classified under assets held for sale?

And sir, then on margins, just wanted to understand, last quarter it seems like there is a one-off in the margins and probably something that should kind of normalize in this quarter. But seeing margin expansion in this quarter as well in a rising rate environment, I mean, very, very counter intuitive. So, if you could kind of just explain what has happened there? I mean, how is it that we are looking at margins expanding and how long kind of you won’t — you would kind of suggest that this — I mean, maybe this one-off from this assignment loans can continue?

And lastly, sir, on the opex side, I think on the affordable bit, you have said that you’ve added about 80-odd branches during this quarter, if I kind of heard you right. So wanted to understand that how should we look at opex and there are so many branches which are getting added, so many — I mean this entire affordable team that we have built-up, I mean why is it not reflecting in the opex numbers that we’ve reported? Thank you.

Girish Kousgi — Managing Director & Chief Executive Officer

[Technical Issues] less and therefore, it’s not really — you see resolution both in NPA and non-NPA pool in the corporate.

In terms of margins, I had mentioned that for a profile like PNB Housing, we should look at NIM of 3.2% and spread of 2.2%. Currently NIM is at 4.68% and spread is at 3.83%, but the guidance is 3.2% and 2.2%.

In terms of assignment, one-off basically, this is a lag effect. So, sometimes it is plus, some times it is minus. And the only thing is, it will just even — it evens out in a year’s time and therefore, I think that is something part of business and we should continue with that.

In terms of opex, I think whatever opex we are seeing now, that is I think most of the opex of affordable vertical is already built-in. So, what you are seeing now is, most of it is part of what is already built-in. Because now all the branches are operational and most of the spends are already done.

In terms of asset held for sale, I think we had a small pool where we had to — so that is — we have just marked it down to the value — to realizable value and that is the impact what you can see in P&L. So, there is a bit of charge to P&L. That is what you can see in the P&L.

Abhijit Tibrewal — Motilal Oswal — Analyst

Sir, what is the quantum of, I mean, these assets which are held for sale?

Vinay Gupta — Chief Financial Officer

It was roughly INR100 crores, but it has now completely marked down to the realizable value. So it is a one-off, since — you can say and these were some legacy assets.

Abhijit Tibrewal — Motilal Oswal — Analyst

And these are not your NPA accounts? This INR100 crore what you said, these are not the NPA accounts?

Vinay Gupta — Chief Financial Officer

Yeah. They were not NPA accounts. Those were current assets held for sale.

Abhijit Tibrewal — Motilal Oswal — Analyst

Current assets held for sale. Sir, I mean on that corporate NPA resolutions that I asked, I mean, I kind of missed you, there were no resolutions during the quarter, this is what you are saying?

Girish Kousgi — Managing Director & Chief Executive Officer

No, no, there was some resolution, so which was both in NPA and non-NPA pool, but the amount was quite less and therefore it’s not — I think the quantum is not huge.

Having said that, on the corporate side, we are working on the — on resolution. So, as I mentioned earlier, it will take about four to six quarters for us to completely come out of the entire corporate NPA pool. So, we are working on account by account on resolution and we see lot of positive feelers what we are getting in terms of resolution. So, that would start happening in the next four to six quarters, unless and until if there is some kind of one-offs, which probably we might look at. We are open to all. We are open to all the options.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. And sir, just a follow-up question on the margins. I mean, so — I mean, I understand, I mean, your guard — the guidance was more around I think, margins of 3.2%, but I mean, finding it a little difficult to understand that until I think the first quarter of this fiscal year, margins were around about 2.36%, is what I’m seeing in front of me. And they are about 4.68% now.

So, other than, I would say this onetime gain that we are getting from the assigned pool, there is — I mean, other than that, no one-offs and it’s just expanded from 2.36% to 4.68% now?

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah. That’s right. That is right. So see, I’m talking on a steady — long-term steady state. So, I’m not talking about next two, three quarters. If you have to look at both spread and NIM in next two, three quarters, I don’t think, so you would not see much of a change what you are seeing now.

But if I have to talk about the long-term guidance on a steady state business, I think normalized NIM once that would be in the range what I mentioned.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it, sir. I’ll come back in the question queue. Thank you very much for patiently answering my questions.

Operator

Thank you. We have our next question from the line of Sharaj Singh from Laburnum Capital. Please go ahead.

Sharaj Singh — Laburnum Capital — Analyst

Hi, sir, thank you for the opportunity and congratulations on the good numbers. The first question is from a disbursement. It’s actually fallen Q-o-Q despite the expansion we’ve taken and the guidance you’ve given, we require around INR5,000 crores of disbursements quarterly rate. So, how do we look at that?

Girish Kousgi — Managing Director & Chief Executive Officer

See, I can only say that in last two months we have seen very good traction on disbursements and also on the closures. And if you — though I had mentioned last quarter that we are looking at a book growth of about close to 10%, especially on the retails, I think we will be able to hit that number, because now we are at about 7%, I think with quarter four, we’ll be close to about 10%.

And guidance from next year onwards, I had mentioned that disbursement will be 22% to 25% and book would be about 17%.

Sharaj Singh — Laburnum Capital — Analyst

The 22% to 25% of the loan book?

Girish Kousgi — Managing Director & Chief Executive Officer

On a Y-o-Y, yeah, correct, on the loan book.

Sharaj Singh — Laburnum Capital — Analyst

Okay. And second question is on the yields, we’ve seen a 90 bps expansion on the yields excluding securitization. So how much of this is for the NPA reversal and how much is the rate path?

Girish Kousgi — Managing Director & Chief Executive Officer

Sorry, I didn’t get your question. You were talking about the…

Sharaj Singh — Laburnum Capital — Analyst

Yields. The loan book yields excluding securitization. They’ve expanded by around 90 bps?

Girish Kousgi — Managing Director & Chief Executive Officer

Correct. It will be less than 100 bps, that’s the gap. Sometimes it is 70 bps, sometime it is 80 bps, yeah.

Sharaj Singh — Laburnum Capital — Analyst

How much of this is attributable to NPA reversal, then how much of this is through pass-through of the rates?

Vinay Gupta — Chief Financial Officer

NPA..

Girish Kousgi — Managing Director & Chief Executive Officer

No, I didn’t get your — I didn’t get your point. What is NPA reversal?

Sharaj Singh — Laburnum Capital — Analyst

NPAs have gone down from 6% to 4%, right, — sorry 4 point, some percent, on the entire book, right, 4.9% — 4.87% from 6.07% Q-o-Q?

Girish Kousgi — Managing Director & Chief Executive Officer

Correct. I think that is because of two — that is because of few things. One is, the slippages have been controlled and there is a NPA recovery and there are certain one-offs in both retail and corporate.

Sharaj Singh — Laburnum Capital — Analyst

Actually, no, what I’m trying to understand is, if I look at the yield which have gone up by 90 basis points, some of this would have come from the NPA reversal which have taken place, right? So, what is this portion which could be attributable to these reversals, the expansion needs?

Vinay Gupta — Chief Financial Officer

See, there is no correlation between NPA reversal and the yield per se. Whatever recoveries we have done, I mean in proportion, this is a portfolio yield we’re talking about, that you don’t understand. Yeah.

Sharaj Singh — Laburnum Capital — Analyst

Okay. Okay. Okay. And sir, one question on the cost of fund side. How much of the rate hike which — I understand that 65% of our borrowings are floating rate. On this floating portion of the borrowings, how much of the rate hike is yet to pass-through — play-through or all the floating rate borrowings has been completely….

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah, yeah. It has been fully passed on to our customers.

Sharaj Singh — Laburnum Capital — Analyst

On the cost of funds, the borrowings have been reset completely or there are some borrowings which would reset in the upcoming quarters? I’m talking about service floating plot.

Girish Kousgi — Managing Director & Chief Executive Officer

So, most of it is done and we have quite a bit of pool which will happen in next few quarters — few weeks.

Sharaj Singh — Laburnum Capital — Analyst

Q4 in time, that will cost of fund, is what you say?

Operator

Mr. Sharaj, you are not clearly audible. Can you use the handset?

Girish Kousgi — Managing Director & Chief Executive Officer

We are not able to hear you properly.

Sharaj Singh — Laburnum Capital — Analyst

Sorry. Is it better now? Hello?

Operator

Yes. Please go ahead.

Sharaj Singh — Laburnum Capital — Analyst

Yeah. Right. And one question on the provision. The total provisions have come down Q-o-Q from INR2100 crores to INR1760 crores. So have we taken any write-offs during the quarter?

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah. We have taken write-off a small pool in retail and a small pool in corporate as well.

Sharaj Singh — Laburnum Capital — Analyst

Okay. Okay. And one last question on the AFS, SIP markdown. What is the nature of these assets? Are these treasury assets or like, what is the nature of these assets?

Vinay Gupta — Chief Financial Officer

These are certain current assets, basically repossessed assets which we were holding for sale and these were some legacy assets, very old, which are now getting — we are planning to dispose them off.

Sharaj Singh — Laburnum Capital — Analyst

Okay. Okay. Thank you, sir. I’ll come back in the queue.

Operator

Thank you. We have our next question from the line of Anand Venugopal from BMSPL Capital.

Anand Venugopal — BMSPL Capital — Analyst

Yeah, thanks for the opportunity. My question is with regards to our provisions still remain high and hence, we are not able to achieve good ROEs. How do we get to a 15% ROE from here?

Girish Kousgi — Managing Director & Chief Executive Officer

So, basically if you look at that provision, if you — leaving the right — leaving the one-off, it is quite less. So in the last quarter I had mentioned that for this year credit cost will be about 1%, right. And this is maybe from coming year onwards and just for a minute leaving the corporate book aside, I’m talking about retail, I think it will start normalizing, because we have seen lot of traction on the retail NPA. Corporate NPA also, we are seeing good visibility, only thing is that timeframe is little longer, given the nature of those accounts and the size of the loans, right.

So, basically, when we talk about credit cost, we should ideally look at the slippages and the stage movement, right. I think these two are something which [Indecipherable] worry about and if it is a one-off and because of that if the trade cost is going up, even in that case, now we are talking about overall nine months of credit cost 1.13%. Now for the whole year, we’ll be able to maintain 1% unless there is a one-off.

So, in terms of our focus now being on retail and within retail, not just prime, even the affordable and there is a clear guidance given on in terms of disbursement growth and book growth and also in terms of margins. I think next few quarters we’ll see good traction on all the parameters of what I mentioned now, be it growth in disbursements or growth in book or profitability, I think in all these things there will be good traction.

So, I think, I will leave that for you to work out on the ROE. But yes, I’ve given you the guidance and outlook for next few years.

Anand Venugopal — BMSPL Capital — Analyst

Got it. All good. Thanks.

Girish Kousgi — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. We have our next question from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead.

Ashwini Agarwal — Demeter Advisors LLP — Analyst

Good afternoon, team. Congratulations on an excellent set of numbers. And I was intrigued on — about your opening comments and how your renewed focus is going to be on salaried and within salaried on government employees. So, two questions here.

I mean, this is more or less the space where the PSU banks and the large commercial banks are very active in. And therefore, from a strategy perspective, if you go back into the market which is already very keenly competed for, what is the edge that PNB Housing brings, because as a standalone housing finance company, your cost of funds are not as competitive as they are for the bank, so why go there? Why not focus on the self-employed category, which obviously is more difficult to manage, but at least has a profile where the competition is somewhat discrete? Could you help me understand the reason behind the change in strategy?

Girish Kousgi — Managing Director & Chief Executive Officer

Very good question, sir. I think we have seen for last many decades in this industry, self-employed as a profile compared to salaried is highly delinquent, A. B, also the book attrition is higher in the self-employed segment.

Now, when we talk about retail, we are looking at salaried as a profile to increase salaried profile. Now in salaried there are two things. One is, if we focus on slightly higher ticket size, which is very safe, for example, INR1 crore, INR2 crore, there we will have book depletion pressure, right. And therefore, let’s say, we focus on INR30 lakhs, INR40 lakhs ticket size, which is basically from salaried, now this is the space, this is a segment where we see that this segment is not that price sensitive, and therefore our strategy, very well — our pricing strategy very well fits in, A. B, there won’t be depletion pressure.

Number three, today if you look at all the housing finance companies, all the small banks, I think their focus is on this. Our USP would be, A, in terms of our digital strategy, where we can direct customers to us, A. B, we have door step service. Number three, our advisory to customers, especially on the legal and technical sense and our TATs, we always ensure that our TATs are far — is very competitive in the market.

And therefore, I think looking at all these things, we have an advantage, A, in terms of being present there through doorstep service, we can increase our book at a higher yield, with less book depletion and also we are able to see this particular segment on the asset quality side behaving very well.

Ashwini Agarwal — Demeter Advisors LLP — Analyst

Okay. Maybe I misheard, I thought you said that your focus is going to be INR1 crore loans in your opening remarks?

Girish Kousgi — Managing Director & Chief Executive Officer

No, no, no, no. What I said was, our focus is — see, our focus is going to be on both salaried and self-employed. But within the entire profile mix, we would be slightly skewed towards salaried, which means we will be increasing our share in salaried. Within salaried, we will focus on all the segments. But yes, we would also focus on INR30 lakh, INR40 lakh of ticket size.

Now this is a vast segment where on the private side CAT B, CAT C, employer — employees would cater to. And on the government side, this is a typical segment where the book is very good. The book depletion pressure is quite low and this set of customers are not that rate sensitive and therefore it fits into your pricing strategy. So, we would focus on all.

We would ideally keep the ticket size around INR26 lakh, INR27 lakh. So, this chunk would be major portion for us within salaried.

Ashwini Agarwal — Demeter Advisors LLP — Analyst

Okay. And sir, could you also explain the focus on the affordable side, what kind of customers we are looking at? What’s the average ticket size that you’re looking at? And who is the real competition there and how do you differentiate yourself?

Girish Kousgi — Managing Director & Chief Executive Officer

Sure. So, on the affordable side, basically in terms of geography, there is opportunity in metros, big cities and Tier 2 and Tier 3 towns. Now for example, if it’s a metro, we are talking about the entire periphery, the outskirts, so there we have very good opportunity.

In terms of segments, basically focusing on — let’s say, if we talk about developer, CAT C — good CAT C and good CAT D developers. In terms of profile, it will be, let’s say, both private and government employees whose income is in the range of, let’s say INR40,000 to INR50,000, INR55,000. So, in terms of affordable, our ticket size is going to be INR16 lakh to INR17 lakh.

On the prime, it will be INR26 lakh, INR27 lakh. On affordable, INR16 lakh to INR17 lakh. And in terms of affordable, I think we would benchmark with some of the listed affordable companies whose ticket size is in the range of about INR20 lakh, INR22 lakh. I think 80% — 70% to 80% of that would be our affordable segment.

Ashwini Agarwal — Demeter Advisors LLP — Analyst

And which is the reason why you are kind of signaling to a lower sustainable NIM in the long run? But that hopefully will be offset by lower opex to total assets as the asset growth takes place and lower credit costs, thereby driving up the ROE. Is that how I should see it?

Girish Kousgi — Managing Director & Chief Executive Officer

Actually, if you see the margins in last few quarters, it is really varying. It is fluctuating. And therefore, with respect to guidance, what I said was, this is the minimum what we are going to protect. This is the minimum what we are going to protect. And if everything goes well, obviously, we’ll be able to maintain this and then probably it will be much higher than what I mentioned.

Ashwini Agarwal — Demeter Advisors LLP — Analyst

Okay. Thank you, sir, and all the best.

Girish Kousgi — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. We have our next question from the line of Vikram Damani from Damani Securities. Please go ahead.

Vikram Damani — Damani Securities — Analyst

Good evening. Can you hear me?

Operator

Yes. Please go ahead.

Vikram Damani — Damani Securities — Analyst

A question regards to the Rights Issue. You said in your press release that the draft letter was filed back in November. Any updates on when we can expect further clarity and what are we planning in terms of quantum and pricing, et cetera?

Girish Kousgi — Managing Director & Chief Executive Officer

We are awaiting the confirmation from SEBI to take this forward.

Vikram Damani — Damani Securities — Analyst

And any idea, sir, as to how long that might take? Any internal timing, anything you can throw light on?

Girish Kousgi — Managing Director & Chief Executive Officer

I think there were some queries which were resolved and our overall timeframe is by end of March or so, or it might just lead to, let’s say, first week or second week of April. And at this point in time, we are awaiting SEBI’s approval.

Vikram Damani — Damani Securities — Analyst

Got it, sir. And one last question, sir. I did not come across a specific cost to income number. Do you all disclose that? Do you all share that?

Girish Kousgi — Managing Director & Chief Executive Officer

Okay. So, I think we — probably that was missed out. So, let me give you the [Speech Overlap]. So for nine months, it is 18% and [Speech Overlap] six month, it’s 15% and the quarter it is — you know it’s updating 14.8%. So, we can take it as 17% to 18% as the normalized credit cost.

Vikram Damani — Damani Securities — Analyst

And sir…

Girish Kousgi — Managing Director & Chief Executive Officer

Oh, sorry, cost to income, yeah.

Vikram Damani — Damani Securities — Analyst

17% to 18% you said.

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah, 17% to 18%.

Vikram Damani — Damani Securities — Analyst

Thank you and all the very best.

Girish Kousgi — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. We have our next question from the line of Aditya Doshi from Chanakya Capital. Please go ahead. Mr. Doshi, we are unable to hear you. We are not able to hear you, sir.

Aditya Doshi — Chanakya Capital — Analyst

Hello. How is this?

Operator

It is not clear.

Girish Kousgi — Managing Director & Chief Executive Officer

We are not able to hear you, sir.

Aditya Doshi — Chanakya Capital — Analyst

Is it better now?

Girish Kousgi — Managing Director & Chief Executive Officer

Yes, it’s better.

Aditya Doshi — Chanakya Capital — Analyst

Yeah. Congratulations on the good set of numbers. My question was regarding two things. If we see our disbursement on a steady-state last [Technical Issues]

Operator

I’m sorry.

Girish Kousgi — Managing Director & Chief Executive Officer

We’re not able to hear you.

Aditya Doshi — Chanakya Capital — Analyst

Hello?

Operator

I ask you to move to a place with good network.

Aditya Doshi — Chanakya Capital — Analyst

Hello. Is it better now?

Operator

Yes.

Girish Kousgi — Managing Director & Chief Executive Officer

Yes, better.

Aditya Doshi — Chanakya Capital — Analyst

Yeah, hi. See, my question was related to fee income. If we see fee income as a percentage to disbursements, so last two quarters we have been disbursing around INR3500 crores. But if we see that as a percentage of disbursements, it has reduced from 3% from Q1 of this year to now 2%. So, can you throw some light on why that fee income has reduced for last two quarters?

Vinay Gupta — Chief Financial Officer

So, actually the fee income related to disbursements is actually deferred. So, it is accounted in the interest income line itself. So, it is accounted at a ED [Phonetic] level. The fee income that you see there is more like a P&L income and some other charges which are recovered.

Aditya Doshi — Chanakya Capital — Analyst

Thank you, and all the best.

Operator

Thank you. We have our next question from the line of Abhay Modi from Helios Capital. Please go ahead.

Abhay Modi — Helios Capital — Analyst

Yes, hi, good evening. I was going through the Draft Letter of Offer. In there, it’s mentioned that the retail loans, about 21.7% is under moratorium. I mean, can you tell how much is it as of end of December and when do you think it will end?

Girish Kousgi — Managing Director & Chief Executive Officer

Actually morat and restructuring, I think it’s almost, I think, for the entire industry it has almost come to an end, or be it in the final stages. So today what NPA pool we are seeing, I think most of it is already taken into account. Because this NPA — this moratorium started in the year 2020 from March 24th, it was basically for quarter one and quarter two of ’21-’22 if I’m not wrong, right.

So, then of course, we had a slightly higher moratorium rate. So now, all those things are budgeted and all the things are taken into account and now what we see is, the NPA pool is, whatever had to flow from morat pool or the restructured pool has already flown. So, what you see now is consolidation of all those things.

Abhay Modi — Helios Capital — Analyst

No, but is the morat — are the loans under moratorium or is it over? Because it’s mentioned, it is still under moratorium as of 30th of September ’22.

Girish Kousgi — Managing Director & Chief Executive Officer

No, no, it’s over. See, because this was in 2021, the first and the second — the second thing got over in October, I think. I think it’s the April to June and — September. So basically, quarter one and quarter two. So that’s over, sir.

Abhay Modi — Helios Capital — Analyst

So, as of December ’22, there are no loans under moratorium?

Girish Kousgi — Managing Director & Chief Executive Officer

Under morat, no.

Abhay Modi — Helios Capital — Analyst

No. So, because — so, and in September of ’21, so all of these loans have come out of moratorium in the current quarter?

Girish Kousgi — Managing Director & Chief Executive Officer

Basically, the morat was for three plus three, six months. After that, there was restructuring resolution under Resolution 1 and Resolution 2. So we may have some accounts under restructured pool. But even in the restructured pool, it was for a period of two years. So, we would have structured it in a different way.

For example, certain set of cases would have three months morat. Certain cases would have a six month morat. And then the step-up EMI or the full EMI. So, if you are talking about morat, I think none of the accounts are today in morat. Would we have few cases which are part of restructuring, yes, the answer is yes.

In all those accounts, the EMI would have started, because two years morat is something which is not given and whatever you have given, whether it is three months, six months and then, that is over, both on the entire pool, be it retail or corporate.

Abhay Modi — Helios Capital — Analyst

No, I understand that. And that is exactly why I’m asking this question, because this is mentioned in the letter of offer. That is why I’m asking this question, that it says very categorically that 21.7% of our retail loan book as on 30th of September 2022 is under moratorium. That is what I am asking you.

Girish Kousgi — Managing Director & Chief Executive Officer

Let’s have a look at that, because there is nothing which is now under moratorium.

Abhay Modi — Helios Capital — Analyst

Okay. Nothing. Okay. There are no loans under moratorium as of now. Everything is either re-structured or is in NPA. Okay. Fine. Thank you.

Operator

Thank you. We have our next question from the line of Sanket Chheda from DAM Capital. Please go ahead.

Sanket Chheda — DAM Capital — Analyst

Yeah. Hi, sir. Congrats on a decent set of numbers. My question…

Girish Kousgi — Managing Director & Chief Executive Officer

Thank you.

Sanket Chheda — DAM Capital — Analyst

First question was that, credit cost run rate since last couple of quarters, though it has not instep, but it’s quite high at about 170, 180 bps. So, while on margin we’ve mentioned that currently it’s 4.7%, but steady state we would like to see at 3.2%, 3.3% and maybe that’s a conservative guidance and maybe we would be around 3.7%, 3.8%, but that’s a big drop. So on — and we are making out of way of say 150, 160 bps as of now. So, unless we say compensate in credit cost somewhere when it normalizes over ’24, ’25, what are the kind of our price that we are seeing and are we seeing credit cost normalizing to say 50, 70 bps in FY ’24 or FY ’25?

Girish Kousgi — Managing Director & Chief Executive Officer

Okay. So if you look at H1 trade costs, it was 0.94%, nine months is 1.13% and if I remove one-off, it is 0.72%. So, this year, leaving one-off, the credit cost will be 1%, right?

Now on the retail side, very clearly, we can see credit cost normalizing at about 0.6%. So that I’m very, very sure about that.

On the corporate side, I’m very sure about resolution, but if there is one-off, credit cost — obviously credit cost is going to be slightly more. So, I think the way I would want to see credit cost is that, with one-off, without one-off. So, definitely if not coming year, next year, we can see credit cost at of about 0.62%, 0.65%, 100%, that’s for sure.

Now on the retail side, coming year we can se about 0.6%.

Now if you take both retail and corporate together and if there is one-off, then the credit cost could be slightly higher than what I mentioned.

Sanket Chheda — DAM Capital — Analyst

Okay. Okay. And this really [Technical Issues] some impairment on asset held for sale, which is like INR52 crores. What’s there? How [Speech Overlap]

Girish Kousgi — Managing Director & Chief Executive Officer

Actually — actually we had clarified that, sir. Basic pool, I think small pool of assets which was held is a very old book legacy pool. So that we already clarified. We have marked it down and now that is, yeah.

Sanket Chheda — DAM Capital — Analyst

Okay. So, that — either we should see as a part of credit cost only, right?

Girish Kousgi — Managing Director & Chief Executive Officer

Exac — no, that is not part of credit cost, anyway it’s onetime. So this is the legacy pool. So if you see, of course, we have charged the P&L, but that is not part of credit cost.

Sanket Chheda — DAS Capital — Analyst

Okay. Sure. And when we talk about disbursements, maybe we will close this year with a lower single-digit growth Y-o-Y. And on that, even if we grow 20%, 25% the next year growth that we are guiding, we won’t be able to do that unless the disbursement growth is much higher, maybe for at least FY ’24 and then from FY ’25, it can normalize to the number you are guiding. But is that a right way to look at?

Girish Kousgi — Managing Director & Chief Executive Officer

Okay. If you look at quarter three, the disbursement growth is 21%. If you look at nine months Y-o-Y, we are at 39%. So what we have guided is about 22% to 25% of disbursement growth and around 17% growth on the book. So this is very much possible because it’s not just a disbursement even on the book retention piece. So we’re working on both. And therefore, we say that this is quite possible.

Sanket Chheda — DAS Capital — Analyst

My question was, sir, that this year you have been doing and 20%, 22% is possible on disbursement. I’m not denying that. I’m saying that, that has not resulted in any of this year. So you’re guiding for 15% plus even for the next disbursement growth has to be much higher.

Girish Kousgi — Managing Director & Chief Executive Officer

No, this I was talking about 12 months from now coming year. So I told — so this year, we had guided book growth of close to 10%.

Sanket Chheda — DAS Capital — Analyst

Okay. And lastly, sir, and out of overall restructure, how much is in stage two or there is some part which will be in stage one or stage three?

Girish Kousgi — Managing Director & Chief Executive Officer

So talking about retail, no. What is in NPA is about close to 15%. And what is in Stage two is 3.9 months.

Sanket Chheda — DAS Capital — Analyst

Okay. So it is either in a stage three or stage two, there is nothing in stage one out of restructuring.

Girish Kousgi — Managing Director & Chief Executive Officer

Right. [Technical Issues]

Operator

Please go ahead, sir.

Girish Kousgi — Managing Director & Chief Executive Officer

Hello?

Operator

Yes, sir, please go ahead.

Girish Kousgi — Managing Director & Chief Executive Officer

See, for the restructuring book, we have got a 15% NPA and that number is 30, there is no additional incremental in the last two, three quarters. So whatever the steps we are looking into restructuring that is getting settling now.

Sanket Chheda — DAS Capital — Analyst

No, I’m asking that of the restructured book, is there anything in stage one or the entire restructuring is either in stage two or stage three?

Girish Kousgi — Managing Director & Chief Executive Officer

No, no. Not the entire in Stage one. So it isn’t as per the SICR logic which we have already discussed in the earlier investor call, as per that only we are doing.

Sanket Chheda — DAS Capital — Analyst

Again I just wanted to know how much is in Stage one, not entirely that you agree, but how much is in Stage 1 of the restructure if we have that number?

Girish Kousgi — Managing Director & Chief Executive Officer

We can come back to you on that. So as I mentioned earlier, because now morat and restructured pool is restructuring is behind us, whatever we are seeing is the result of both moratorium and restructuring. So whatever NPA pool we see in either retailer is post moratorium and restructuring. So we can get back to you on the specific numbers.

Sanket Chheda — DAS Capital — Analyst

Sure, sir. Those were the questions for me. Thanks a lot.

Operator

Thank you. We have our next question from the line of Pratik Chheda from Guardian Capital Partners. Please go ahead.

Pratik Chheda — Guardian Capital Partners — Analyst

Yeah, thanks for taking my question. So in your opening comments, you mentioned that there has been a control on the [Indecipherable] pre-closure and foreclosures. So what has been the staging strategy here? I mean, what has been the key difference that has led to these lower [Indecipherable]?

And in terms of — if you can also quantify what is the BTL [Phonetic] percentage maybe a year back, what does it [Indecipherable]

Girish Kousgi — Managing Director & Chief Executive Officer

So what I was saying was I think our overall runoff in the month was close to about INR1,000 crores, right? Now that INR1,000 crores, we are able to control it to less than INR800 crores. So that we were effectively able to manage, which means this is largely coming out of BT out and also foreclosure and part closure, this also includes normal runoffs.

Pratik Chheda — Guardian Capital Partners — Analyst

Okay. So in terms of percentage, if you just have to strip out the BT out and foreclosures, not the normal runoffs, how much would that be? [Indecipherable]

Girish Kousgi — Managing Director & Chief Executive Officer

It has come down drastically. Of course, even though these are early days, but we have seen very good traction in the last couple of months and we hope that this trend will continue. And there is scope for another INR50-odd crores to come down.

Pratik Chheda — Guardian Capital Partners — Analyst

Okay. So my second question is on the margin. I would like to know what is our yield rate on the affordable piece. And when we say that we are going to get incremental business of around 25% from the affordable segment. That is I’m assuming it would be a slightly better yield or even much more better yields. And then on the other hand, say there is good 50 bps, 60 bps compression coming in the margin. So this is slightly counter-intuitive, what is going to contribute a majority — which is the majority [Indecipherable] contribute to the sort of normalization of margins. Is it the mix change? Is it agressive growth plan which we might offer in terms of trying to grow maybe a little bit faster?

Girish Kousgi — Managing Director & Chief Executive Officer

See, affordable book would definitely would be able to generate a higher yield really compared to prime. So in that thing is definitely you are right. All I’m saying is that we have seen some fluctuations in the past, and it may continue for next few quarters. And therefore, it’s in the long — if you talk about the next three to four quarters, I think there won’t be too much a variance from what we are seeing is now. I’m talking about long-term steady state. So obviously, affordable is going to come at a higher yield compared to prime.

Pratik Chheda — Guardian Capital Partners — Analyst

Okay. I’ll come back in the queue.

Operator

Thank you. We have our next question from the line of Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Thanks for the opportunity, sir. Firstly, what are the incremental yields on affordable housing and prime income segment that we are getting?

Girish Kousgi — Managing Director & Chief Executive Officer

Sorry, please repeat the question, sir?

Nidhesh Jain — Investec — Analyst

What are the incremental leads on affordable housing segment and the prime home loan segment that we are getting in — which we have got in Q3 or we are getting in the month of January on incremental basis.

Girish Kousgi — Managing Director & Chief Executive Officer

Basically, what we are seeing now is largely from prime and affordable is going to be at least about 125 bps to 150 bps higher.

Nidhesh Jain — Investec — Analyst

And sir, what are the prime yields? If you can share that level, what is yield in absolute percentage?

Girish Kousgi — Managing Director & Chief Executive Officer

So ETB prime is about 9.11%. So affordability will be in the range of 9.6% to 9.7%.

Nidhesh Jain — Investec — Analyst

Sure. And secondly, is this one-off that we are getting from our income. So I understand it is because of MCLR rate changes, which led to the spinoff. So as interest rate stabilizes, then this one-off will not recur next year probably. Is that the right understanding?

Girish Kousgi — Managing Director & Chief Executive Officer

Yes. Absolutely, you’re right. Because now we are seeing that interest rate has almost peaked out. And before this one-off, whether on the negative side or positive side I think it won’t probably happen in the next few quarters to come.

Nidhesh Jain — Investec — Analyst

And it is linked to our base rate — RPLR or is it a function of we changing our interest rate to the customer or it is a function of banks changing their MCLR, which drive this one off?

Girish Kousgi — Managing Director & Chief Executive Officer

It is linked to the bank’s base rate.

Nidhesh Jain — Investec — Analyst

Okay. Okay. And lastly, on the operating expenses, we have seen — you have added almost 81 branches on affordable segment. But if you look at employee expense or nonemployee expense, they have not grown, employee expense has declined sequentially. So is there any one-off in the employee expense? Or what should be the quarterly opex that we should build in going forward?

Girish Kousgi — Managing Director & Chief Executive Officer

On the affordable piece, I think most of the opex is already built in because all this spend during the financial year, right? So in terms of opex, I think there is no major one-offs. And therefore, going forward, we will see only a marginal increase in the opex, not significant increase.

Nidhesh Jain — Investec — Analyst

Okay, sure. Thank you, sir. That’s it from our side.

Girish Kousgi — Managing Director & Chief Executive Officer

Thank you.

Operator

Thank you. We have our next question from the line of Nischint Chawathe from Kotak. Please go ahead.

Nischint Chawathe — Kotak — Analyst

Hi. Thanks for taking my question. Sorry, I joined late, so maybe this was discussed. But still trying to understand a little bit on the arrangement that you have on the assignment side with bank. So is the rate fully passed through whatever the changes that bank will make? Or is it something that your cost your cost of assignment from the bank will be linked into their MCLR, but what you’re charging to the customers into your rates.

Deepika Gupta Padhi — Head of Investor Relations and Treasury

So in most of our places, the rate is [Indecipherable]

Operator

Ma’am, I’m sorry, can you speak louder, please?

Deepika Gupta Padhi — Head of Investor Relations and Treasury

Yeah. So in most of the cases, it is linked with the MCLR of the respective financial institution. So whenever there is a change in the MCLR of those financial institutions accordingly it is passed on. So if I have changed, let’s say, the rate by 50 basis points, however, the MCLR changes by 20 basis points [Indecipherable] will be 20 basis points.

Nischint Chawathe — Kotak — Analyst

So you will end up kind of having a positive or a negative impact to the extent of 30 basis points.

Deepika Gupta Padhi — Head of Investor Relations and Treasury

Yeah. And that’s how this assignment income, which comes in our P&L.

Nischint Chawathe — Kotak — Analyst

Just again, when I’m looking at the yield on loans, and that has sort of — so that has kind of gone up by almost around 200 basis points over the last two quarters. I’m sorry, around more than 200 basis points actually over the last two quarters. So is it something that it is just to do with the fact that you have a raised the benchmark rates? Or is there kind of a higher increase in the incremental loans or anything of that sort?

Deepika Gupta Padhi — Head of Investor Relations and Treasury

It’s a function of both. So if we see our yield excluding the securitization in Q3 FY ’23, it’s 10.83. There’s an increase of 90 basis points and as MD had mentioned earlier, this is primarily on account of increase in the yield — increase in the rates by the company.

Nischint Chawathe — Kotak — Analyst

And so will be the case between 1Q and 2Q?

Deepika Gupta Padhi — Head of Investor Relations and Treasury

Yes.

Nischint Chawathe — Kotak — Analyst

And this is basically the entire benchmark going up, right?

Girish Kousgi — Managing Director & Chief Executive Officer

Yes.

Nischint Chawathe — Kotak — Analyst

Sure. And just one last question. I know we touched upon it. But to understand the entire COVID restructured loans of INR2,037 crores, these would be in Stage two or one, depending on [Indecipherable] is right, right?

Girish Kousgi — Managing Director & Chief Executive Officer

Yes.

Nischint Chawathe — Kotak — Analyst

Okay. And you’ll probably share the breakup offline in terms of how much is in stage one and stage two.

Girish Kousgi — Managing Director & Chief Executive Officer

Sure.

Nischint Chawathe — Kotak — Analyst

Okay. Thanks. Those were my questions.

Operator

Thank you. We have our next question from the line of Akash Sethia from Elin. Please go ahead.

Akash Sethia — Elin — Analyst

So my questions have already been answered by earlier. So I’m just going to step back into the queue.

Operator

Thank you. We have our next question from the line of Sandeep Joshi from Unifi Capital. Please go ahead.

Sandeep Joshi — Unifi Capital — Analyst

Yeah, hi, thanks for the opportunity. My question is to Mr. Girish Kousgi. Hello, sir. Sir, the question is actually related to corporate book. Sir, since you’ve completed about three months in the organization, you’d have actually spent a good amount of time to go through all lumpy exposures. Sir can you give a sense on the performance of corporate books in terms of do you expect any lumpy slippages in near term? Or do you believe all stresses at are already recognized and you do not expect any incremental slippages in the book?

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah. Thank you very much. So I have seen the entire portfolio at a close detail. So I think we are adequately provided. All the accounts which are in Stage 1 very closely have seen and I don’t expect any slippages in the next few quarters from these. As of now, we don’t see any slippages, right?

And we’re also looking at some resolution, only thing is the timeline for resolution might take some time. And if you look at the entire NPA pool as well, so there are close to 50% of the NPA pool, we see very good traction on the resolution. And therefore, I don’t see any slippages happening in the next two quarters.

Sandeep Joshi — Unifi Capital — Analyst

Okay. And so how the Stage 2 is performing? I mean, are there any sticking lumpy exposure over there or the book is churning?

Girish Kousgi — Managing Director & Chief Executive Officer

Stage 2 is zero. We don’t have any case in Stage 2.

Sandeep Joshi — Unifi Capital — Analyst

So it is all retail in Stage 2?

Girish Kousgi — Managing Director & Chief Executive Officer

Yeah, exactly. Yeah.

Sandeep Joshi — Unifi Capital — Analyst

Okay. Okay. The second question is on the income on your assigned loans. So I mean, you just answered to the early participants that how the [Indecipherable] work. So I just want to check. So from next quarter onwards, there will be no such income? Or do you think some part of it is going to be passed on by the other financial intuitions and that effect will come in next quarter?

Girish Kousgi — Managing Director & Chief Executive Officer

Basically, we get record of with no change in repo. So if there is no change in the repo or if the interest market condition if there is no change, I think there won’t be any impact.

Sandeep Joshi — Unifi Capital — Analyst

Okay. But for whatever repo rate hikes have already been happened and that — and the rate which got — and the rate which was increased by the financial institution, that has been passed completely till now or some part is pending?

Girish Kousgi — Managing Director & Chief Executive Officer

It is passed on completely.

Sandeep Joshi — Unifi Capital — Analyst

Okay. So if there is no repo rate hike, there will be zero income in next quarter?

Girish Kousgi — Managing Director & Chief Executive Officer

There won’t be any fluctuation. Because this — I think the trigger is change in repo.

Sandeep Joshi — Unifi Capital — Analyst

Okay. Understood. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to management for closing comments.

Deepika Gupta Padhi — Head of Investor Relations and Treasury

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 of this call as well as the audio will be uploaded on our website, which is www.pnbhousing.com. Thank you very much.

Operator

[Operator Closing Remarks]