PNB Housing Finance Ltd (PNBHOUSING) Q4 FY23 Earnings Concall Transcript

PNB Housing Finance Ltd (NSE:PNBHOUSING) Q4 FY23 Earnings Concall dated May. 18, 2023.

Corporate Participants:

Deepika Gupta Padhi — Head, Investor Relations & Treasury

Girish Kousgi — Managing Director and Chief Executive Officer

Vinay Gupta — Chief Financial Officer

Sanjay Jain — Company Secretary & Compliance Head

Analysts:

Samip Bhansali — Tata Mutual fund — Analyst

Onkar Ghugardare — Shree investments — Analyst

Renish Bhuva — ICICI — Analyst

Rajesh — K Securities — Analyst

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Ashwini Agarwal — Demeter Advisors — Analyst

Nidhesh Jain — Investec — Analyst

Abhijit Tibrewal — Motilal Oswal. — Analyst

Subramanian Iyer — Morgan Stanley. — Analyst

Venkatesh Ramakrishnan — ICICI Bank. — Analyst

Nischint Chawathe — Kotak Institutional Equities — Analyst

Bhuvnesh Garg — Investec Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q4 and FY ’22, ’23 Earnings Conference Call of PNB Housing Finance Limited. [Operator Instructions] Please note that this conference is being recorded.

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

Deepika Gupta Padhi — Head, Investor Relations & Treasury

Thank you, Pravin. Good evening and welcome, everyone. We are here to discuss PNB Housing Finance Q4 and FY ’22, ’23 results. You must have seen our business and financial numbers in the presentation and the press release shared with the Indian stock exchanges and is also available on our website. With me we have our entire management team across verticals, led by Mr. Girish Kousgi, our Managing Director and CEO. We will begin this call with the performance update by Managing Director and CEO, followed by an — along with the financial performance by our CFO, Mr. Vinay Gupta, followed by an interactive Q&A session.

Please note this call may contain forward-looking statements which exemplify our judgment and future expectations confirming 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 29 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 and Chief Executive Officer

Good evening to all the investors. Happy to share we had a eventful quarter four and [Indecipherable] pretty good compared to last year. Broadly, I’ll be covering on the growth especially on brand, then asset quality and the retail side, corporate book and performance, both on — in terms of resolution and also in terms of GNPA and net NPA, capital raise and affordable business, which we have started recently.

In terms of growth, very clearly there is a growth in retail side on both disbursements. And look, if we look at disbursements over last year, we have grown by 36% on the retail side and book growth was 10%. So quarter four disbursement was all-time high in last 14 quarters. On the GNPA side, if we were to look at last quarter, the GNPA on retail was 2.86% and as of quarter four, it is 2.57%. Net NPA was 1.96% last quarter and quarter four was 1.74%. So very clearly, we can see that growth is back. Disbursements, sequentially, there was a growth of about 33% that is quarter four over quarter three and sequential book growth is 4.4% in the retail. Very clearly growth is back both on disbursements and book. And also in terms of asset quality, both GNPA and net NPA has come down.

We had one of the best quarters for delinquency in last 14 quarters. So, it was all-time best in last 14 quarters for both business as well as market value. If you have to look at the corporate side, as I had indicated earlier, we are degrowing the book. We are working on resolutions. There has been a significant resolution workload in the last few quarters. And if you look at the book as of quarter four end, it is INR3,800 in this growth. The same number last year was INR7,375 crores. So the book has degrown by 48.5%. In terms of frequency, the book has degrown by 23% and that was as per our plan.

In terms of NPA, last year, GNPA was INR2,738 crores and this year INR846 crores. So there has been a 69% drop in GNPA and compared to quarter three, GNPA was INR1,307 crores and now it is INR846 crores. In terms of percentage, [Indecipherable] is high which is at 22.5% GNPA and net NPA 18.24% where this INR846 crores only two accounts. And out of INR846 crores, one account which accounts to 92% of the GNPA, this account is backed by one of the leading developer. So to that extent, more or less we have started. We are still working on resolution.

If you look at the overall book, disbursements had grown by 33% in both corporate and retail put together. In terms of book, disbursement was 33%, book growth was 2.4%. As you are aware, we have been talking about moving to prime segment. Earlier, we were focusing on the brands, but now we have shifted. We have changed the segment. So therefore, there will lift in it, which will improve profitability and our focus has been to have a ideal mix of more skewed towards salaried and self-employed. The ideal mix is 70/30. So we see there has been lot of traction in terms of moving towards sourcing more salary.

In terms of product, our focus is going to be more on home because we compare to non-home. But incrementally, we are trying to get this business what it takes some time. Eventually, we would go to get this where our focus on home is moving. The mix will be skewed more towards home as compared to non-home. In terms of profile, more of salaried compared to self-employed and self-employed non-professional. We started affordable business in quarter four. We did about INR137 crores of disbursement. It was just a start. So I think it will gain traction from this quarter onwards. We have 82 branches which are now completely operational and these are dedicated affordable branches. And so this will see good contribution coming from affordable and overall retail segment. As you are aware, we were able to capital rate capital recently to the tune of INR2,494 crores. Now this capital will be used for growth. Basically, this growth capital. I’m sure you would have seen the numbers.

I would request Vinay to take you to the financial performance and then we can look into the Q&A.

Vinay Gupta — Chief Financial Officer

Sure. Good evening all. I will cover the financial performance for the quarter and full year ended FY ’22, ’23. First of all, with respect to Q4 FY ’23, overall, PAT that we have delivered is INR279 crores, which is a growth of 65% year-on-year and 4% on a quarter-on-quarter basis. Net interest income improved 57% year-on-year though there is a decline 19% quarter-on-quarter. However, there was a one-off in Q3 under the securitization income due to margin accrual on account of increasing yield. Excluding that, PAT declined by 6% quarter-on-quarter.

Pre-provision operating profit improved 32% year-on-year and operating expenditure increased 23% year-on-year. Spread on loans as of Q4 is 2.65%. Again, there is decline on a sequential basis. However, again, there was a one-off under the securitization. Excluding that, the — it is more or less comparable what we have seen in the Q3. The company has also increased its lending rate by 30 basis points at the end of March. The impact of that will come in the first quarter of next financial year, which will help us in offsetting some of this decline.

NIM stood at 3.74% and gross margin stood at 3.83% for the quarter. Similarly, on a full year basis, we have delivered a PAT of INR1,046 crores versus INR836 crores in the same period last year. The figure contains 12% growth year-on-year. On a full year basis, spread on loans was 2.8%, NIM is 3.7%, gross margin is 4.1% and ROE was 1.6%. The leverage that we have closed as of March is 4.9% and ROE is 9.98% as compared to 8.9% in FY ’23.

This is the brief on the financial performance. Now we open it up for the Q&A.

Questions and Answers:

Operator

[Operator Instructions] The first question is from the line of Samip Bhansali from Tata Mutual Fund. Please go ahead.

Samip Bhansali — Tata Mutual fund — Analyst

Hello. Can you hear me?

Operator

Sir, please use the handset mode. The audio is unclear.

Samip Bhansali — Tata Mutual fund — Analyst

Okay. Hello.

Operator

Yes, please go ahead with your question.

Samip Bhansali — Tata Mutual fund — Analyst

Yeah. I would like to know what is the status on the restructured book as on March ’23 and how much is the provision that we are holding against the restructured book?

Girish Kousgi — Managing Director and Chief Executive Officer

So as on 31 March, 2023, we are having a restructured book of INR1,870 crores.

Samip Bhansali — Tata Mutual fund — Analyst

Okay.

Girish Kousgi — Managing Director and Chief Executive Officer

And we are carrying the provision of around 12% to 13% in our book.

Samip Bhansali — Tata Mutual fund — Analyst

Okay. And these are primarily like your wholesale assets, right?

Girish Kousgi — Managing Director and Chief Executive Officer

No. They’re COVID restructured accounts and many of those accounts have already started making the payments. They have gone back to the paying stream.

Samip Bhansali — Tata Mutual fund — Analyst

Okay. Okay. Thank you.

Girish Kousgi — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of on Onkar Ghugardare from Shree investments. Please go ahead.

Onkar Ghugardare — Shree investments — Analyst

Yeah. As the capital raise just finished, where are the growth opportunities you are seeing and how we will be deploying that capital?

Operator

Mr. Ghugardare, please use the handset mode. Sir, there’s some disturbance coming from your line.

Onkar Ghugardare — Shree investments — Analyst

Hello. So — hello, is it clear?

Girish Kousgi — Managing Director and Chief Executive Officer

Yeah. So basically capital what you we raised is for growth. We see lot of opportunity both for the prime and affordable. Prime is business what we’ve been doing for a long time and in prime what we have done to because of two, three reasons we want to move segment. One is super prime to prime that is because we used to have a lot of stress in terms of customer attrition. And therefore, we are now in the process of moving from super prime to prime. And in prime, we see lot of opportunity, not just in terms of growth, also in terms of building book at a higher yield, number one.

Number two, we have just started affordable housing. So there we see lot of opportunity, which will help us to build — curtail much higher yield than planned. So the yield what we are looking at affordable is about 12%& plus. On Prime, the average yield is 10% plus. So there is a very clear difference of about 2% between now prime and affordable. We see opportunity in both. In terms of geography, we see very good opportunity in South, both for prime and affordable and certain markets in North and whole of West.

So in terms of geography, in terms of segments, in terms of product, I think we see a great opportunity. And today, if you see I think probably PNB Housing is the only company in Norway, which has two different verticals, one for prime and one for affordable. So we have dedicated branches from these two, prime and affordable, dedicated team and the customer segmentation is different. So we see a lot of opportunity. And this capital is being used for growing the business.

Onkar Ghugardare — Shree investments — Analyst

What kind of sustainable digital disbursement growth…

Operator

Sorry to interrupt you, Mr. Ghugardare. Please repeat your question. There were some audio loss.

Onkar Ghugardare — Shree investments — Analyst

Hello.

Operator

Yes, sir.

Onkar Ghugardare — Shree investments — Analyst

Yeah. I was asking about what kind of disbursement growth you are looking for say next two, three years since you have recently ventured into affordable as well? And another thing is on ROE and ROA front, what’s your target on this front? Thank you.

Vinay Gupta — Chief Financial Officer

So in terms of growth, disbursement growth, we are looking at about 22% plus which is at a consolidated basis, both prime and affordable put together. On affordable, the growth will be higher because it’s a smaller base. But I think overall on retail, we will be able to grow about 22% plus on dividends for next two to three years time. And on book, we will be able to grow at about 17% odd.

Girish Kousgi — Managing Director and Chief Executive Officer

And on the ROE front, as you can see, we have improved returns from 1.2% last year to 1.7% in Q4 annualized. So we are working on improving it further. And we are hopeful with the mix of affordable coming in, we should be comparable to any other good affordable housing finance company.

Onkar Ghugardare — Shree investments — Analyst

And we can expect the gearing to remain here, right?

Vinay Gupta — Chief Financial Officer

Yeah, year end total is 1.6% on an average.

Girish Kousgi — Managing Director and Chief Executive Officer

Gearing.

Vinay Gupta — Chief Financial Officer

Sorry, gearing currently is at 4.9%. But with capital coming in, there would be some pressure on gearing. Obviously, it will improve with the capital coming in, but we have plans for a better utilization over the next two to three years.

Girish Kousgi — Managing Director and Chief Executive Officer

So typically if you look at any housing finance company, be it on prime or on affordable side, I think the acceptable leverage is around 8 — 7.5 to 8. But for us, it has been really pretty comfortable around 6. So post capital raise, we will be at 4, but we would have the low cost. So we are comfortable around 6.

Onkar Ghugardare — Shree investments — Analyst

And on a consolidated basis, the disbursement growth you mentioned is around 17%, right?

Girish Kousgi — Managing Director and Chief Executive Officer

Disbursement will be 22% plus. Book growth will be 17%.

Onkar Ghugardare — Shree investments — Analyst

Okay. All right. Thank you very much.

Operator

Thank you. The next question is from the line of Renish from ICICI. Please go ahead.

Renish Bhuva — ICICI — Analyst

Yeah. Hi, sir. Thanks for the opportunity. Just two questions from my side. So one, on the yields. So even if you look at the yields adjusted for one-off securitization in Q3, it has actually fallen by almost 20 basis points sequentially. So I was just wondering when we look at the industry trend, it is generally improving and prospects of pricing for us if [Indecipherable]. So what is happening on the yield side, sir, in Q4?

Girish Kousgi — Managing Director and Chief Executive Officer

So if you look at yield, we have passed on the higher rates to the customers end of quarter four and also beginning of quarter one this year. So this year, of course, in terms of increase in interest rate, but as I mentioned, we are a changing segment. And then we will see an upside of yield which will be 8.8% higher than the super prime, so which means that to maintain yield on prime side at around 10% plus and affordable in 12%. So if you compare with quarter three, of course, there has been slight drop in yield, but I think that is something, which will get corrected from this quarter onwards.

Renish Bhuva — ICICI — Analyst

No, so basically I just wanted to understand what is linked to this 20 basis point of reduction. I mean, it was the book mix in Q4, which doesn’t look like because retail has gone up, right? So I was just wondering if that’s because of the book mix change is leading to this reduction or is there any write-off in terms of reversal or something else to that?

Vinay Gupta — Chief Financial Officer

Yes. Some part is related to book mix because the composition of retail is going up as compared to corporate. So that is adjusting to some extent of yield. There was also securitization true up which can which is on account of repricing that happens. So the future cash flows got adjusted. So there is marginal impact on the securitization also, but our core interest income is almost flat or quarter-on-quarter.

Renish Bhuva — ICICI — Analyst

Okay. Got it.

Sanjay Jain — Company Secretary & Compliance Head

And even if you look at the cost of borrowing, it went up compared to quarter three, which was 7.55%. It went up to 7.76%. So the impact is that we have passed on the benefit end of quarter four and beginning of quarter one of this year. And given the cost of borrowing went up and the mix within the overall book also changed, then it is more of retail and less of corporate and therefore that had an impact on the yield. But now today, if you look on the entire composition, 94% of the book is retail and this benefit of the interest rate increase price in last few weeks will give us that upside from this quarter onwards.

Renish Bhuva — ICICI — Analyst

Got it. That’s it from my side, sir. Thank you.

Operator

Thank you. The next question is from the line of Rajesh from K Securities. Please go ahead.

Rajesh — K Securities — Analyst

Yeah. Hi, am I audible?

Girish Kousgi — Managing Director and Chief Executive Officer

Yes, sir, you’re audible.

Rajesh — K Securities — Analyst

Yeah. Sir, I wanted to understand in the presentation — investor presentation Slide 10, you have mentioned that there is a INR1,500 crore that is write-off for resolution. What is the actual write-off here and what is the resolution over here?

Vinay Gupta — Chief Financial Officer

That bit we have not shared. It has been a mix of both resolution and write-off that we have done during the year. This is what we have shared on the full year results.

Rajesh — K Securities — Analyst

Okay. So going forward, how much will the disbursement be? Corporate, will we be not growing the corporate book at all or we will be growing a little bit over there? What would be an ideal retail versus wholesale going forward?

Girish Kousgi — Managing Director and Chief Executive Officer

Well, I think to degrow corporate book was addition which we had taken because we wanted to resolve GNPA, bring it down to comfortable levels before we could restart.. So this was by depend and this year we will see corporate book going down since last few quarters. If you look at last year and this year, corporate growth was [Indecipherable] 48%, 49%. Now the is GNBPA has come down and still we have about eight quarters of growth in terms of absolute number, right?

I think probably this year — sometime this year, we may restart our corporate business, but we didn’t restart any small bid focused on certain locations, specific builders, specific projects, a smaller ticket size. The idea of starting corporate is key ensure that we are in this business, which has also helped us in terms of retail penetration. So we would not be standalone corporate business. So whatever business we do that will be linked to retail penetration. And in terms of mix, our corporate book at the median point in time would not exceed 10% of overall book.

Rajesh — K Securities — Analyst

Okay. So one last question from my side is like if we look at the NPA on the retail side, we are still not as good as most of the competition. So are we — how are we going to address it? Number one. What is an ideal NPA ratios for the retail book going forward?

Vinay Gupta — Chief Financial Officer

So if you look a now couple of challenges what we had couple of — few quarters back was also on the retail asset quality. So now we’ve got a good fix on that. So now if you see for last two quarters, our recoveries are more than flow. So This trend will continue and GNPA will keep coming down, probably let us say four to six quarters from now, we would be compared with some of the best housing finance companies in the industry in terms of retail NPA. And what I was mentioning that quarter three was very good for us in terms of asset quality on the retail side and quarter four was one of the best in last 14 quarters.

Rajesh — K Securities — Analyst

What’s the comfortable NPA ratio that we will be maintaining? I mean, can you guide in terms of what kind of an NPA we will be comfortable and how will we achieve that in the next two to four quarters?

Girish Kousgi — Managing Director and Chief Executive Officer

So I think any enterprise given the mix of corporate, affordable and prime, I think anywhere between 1.25% to 1.35% should be the ideal GNPA level.

Rajesh — K Securities — Analyst

Okay. Thank you.

Operator

Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Sir, good evening. I just wanted to know strategically between the prime and super prime segment what is the customer difference that you see? That’s question number one. And then in terms of what kind of credit card cost differences would you see between the two segments because they’re getting 80 bps higher yield? And then to grow your businesses, would you — especially because you have clustered now affordable housing, is this taking off? Would you need more opex going forward? Those are my questions, sir.

Girish Kousgi — Managing Director and Chief Executive Officer

So if we look at the super prime and prime, we look to get our [Indecipherable] which will focus on cap development project for retail, funding and corporate for funding to their employees that is basically super prime. So in prime what we focus is cat B and cat C developers for retail funding and cat B and cat C employer, employees for funding it. So basically here, we have an upside in terms of yield which is 75 to 80 bps. This also would include large chunk from the government sector, be it central or state government.

In terms of GNPA, the difference between super prime and prime is not significant. It’s only about 10 to 15 bps is the difference is what we’ve seen in the industry till now. And therefore, not much of different in the portfolio quality. The idea of getting into prime is that we would be able to grow faster. We will be able to build because of higher. See customers would stay for a longer time. So customers, so loan on book is going to be for a longer time and that could beneficial in terms of customer retention and growth of book.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Sir, the other question on operating expenses also, sir. What do you see the opex to cost ratio — I mean, opex to income ratio?

Vinay Gupta — Chief Financial Officer

Opex to ATA right now is around 0.8. It has been consistently at around 0.7, 0.8. Most of the investment related to affordable segment has been done in the current financial year. So infra, people, all that investment is done. So this seems to be sustainable while there would be some investments that we need for IT and ramp-up of [Indecipherable] affordable after few quarters.

Girish Kousgi — Managing Director and Chief Executive Officer

And just to add on the difference between super prime and prime, in prime, the ticket size would be lower. And therefore, these customers are not that rate sensitive and therefore they tend to stay on book for a longer time.

Vivek Ramakrishnan — DSP Mutual Fund — Analyst

Okay, sir. Thank you very much and wish you good luck.

Girish Kousgi — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Ashwini Agarwal from Demeter Advisors. Please go-ahead.

Ashwini Agarwal — Demeter Advisors — Analyst

Good evening. A couple of questions from my side. One is this additional capacity, what does that do to your credit rating and potentially for your borrowing costs? And the other thing is that if you look at the high end equity and therefore lower gearing, what do you think would be the fiscal ’24 delivered ROA and SUV ROE given higher equity? So there are any questions.

Girish Kousgi — Managing Director and Chief Executive Officer

So if you look at last couple of quarter performance, I think very clearly it is resident that clearly there is a significant improvement in growth, significant improvement on the asset quality. And this is also true in terms of corporate book in terms of GNPA. If capital raise, it will definitely help us and we have been engaging with the rating agencies and also bankers which will have multiple positive impact on this, A, because of performing on business, on asset quality in capital raise. So we are engaging with ratings agencies. So this should positively have relook in terms of possible upgrade.

So we are engaging with agencies on this front. Not just this, we would also have access for cheaper funds from [Indecipherable] since our GNPA and net NPA has come down drastically over last one year. Number three, in terms of borrowing from bank, because of all these things, we will be able to raise funds at a been much lower rate. All put together, our cost of funds will come down. In terms of ROA in the mid-term, we are very sure that we’ll be able to cross too.

Ashwini Agarwal — Demeter Advisors — Analyst

Thank you, sir. And on equity, sir?

Vinay Gupta — Chief Financial Officer

So similarly, so there would be some pressure on the ROA with the new capital coming in, but with the improvement in ROA, we are sure that we’ll be able to sustain the current ROE.

Ashwini Agarwal — Demeter Advisors — Analyst

Okay. And sir, one more question. I mean, on the spread side, I’d say why these spreads should have contracted because your book is — mix is more or less the same between Q3 and Q4. It was 92 and now retail is 94. So it’s not much of a difference and the decline in the corporate book appears to be from non-performing accounts. So there you couldn’t have been improving income anyways. So I’m not quite sure as to why your net — your spreads have declined in Q4 over Q3. Is there something that we are missing?

Vinay Gupta — Chief Financial Officer

So on the spreads, I mean, that is — there is some impact. Yes, you have rightly said, the impact is not very material with respect to mix change. The other impact is primarily on account of securitized book. So there is some repricing and there is some run-off which happens on the securitized book and that is slightly uneven. This quarter, there was a higher impact of repricing. So on the future cash flows that repricing has to be considered, has to be upfront. So that led to some impact of 10 to 15 bps over bid. So this is the overall impact of around 20 bps.

Ashwini Agarwal — Demeter Advisors — Analyst

So the securitized book also gets mark-to-market, right?

Vinay Gupta — Chief Financial Officer

Securitized book because it’s mark-to-market, but you have to take into account the impact of repricing and any prepayments that happens on our securitized book. So that has to be trued up every quarter. So there is some minor impact or volatility in that particular part which happens on a quarter-on-quarter basis. But on a core yield, we are able to sustain the similar kind of yield subject to this minor mix impact that has come on account of retail and corporate.

Ashwini Agarwal — Demeter Advisors — Analyst

Okay. All right. Okay. Thank you so much.

Operator

Thank you. The next question is from the line of from Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Good evening, sir. Couple of questions. Firstly, can you share the quantum of disbursement in the affordable housing segment and what are the yields — average yields that we are having on in that book?

Girish Kousgi — Managing Director and Chief Executive Officer

So actually, we just started affordable business in quarter four. So we just started, so we will start seeing meaningful numbers from this quarter onwards, but just to quote a number we did INR137 crores in quarter four and from this quarter onwards we would see good scale up on affordable.

Nidhesh Jain — Investec — Analyst

And what are the aims that we are charging in the segment?

Girish Kousgi — Managing Director and Chief Executive Officer

11 to 11.6.

Nidhesh Jain — Investec — Analyst

Sure. Secondly, can you also quantify the improvement in cost of funds that we’re likely to see after this capital raise and bidding improving and availability of funding as we mentioned that from NHD and other sources also would improve. So can you quantify what sort of improvement we can see in cost of funds in FY ’24?

Girish Kousgi — Managing Director and Chief Executive Officer

See today, if you look at cost of funds of our company which has got all the advantages which has been selected PNB Housing in terms of cost, the difference is close to about less than 90 to 100 bps. We will be able to cover close to 40, 50 bps out of that. So we see every sort of time with performance increasing — improving quarter-on-quarter, this capital raise with possible upgrade in ratings and also access to fund, people funds. We see that the cost could come down by 42%.

Nidhesh Jain — Investec — Analyst

And lastly, on the credit cost front given that we have decent write-off pool on the corporate side, corporate NPAs are slightly on the higher side and we expect resolution to play out in FY ’24. So do we envisage a situation where we may have very negligible or negative credit cost given that recoveries may pan out from these pools going into next one year?

Girish Kousgi — Managing Director and Chief Executive Officer

So on the corporate NPA, no, it has only two accounts. In NPA, we have only two, about INR846 crores is only two accounts. And out of two, one account accounts to about 92% of the overall NPA, right? And the other account we have resolution in place. And it is one account which is 92% of total NPAs. This project is back, they are leading developer. So we don’t see much of a challenge in terms of resolution. And credit cost for this year what we had guided 0.6% is largely on the retail side.

Nidhesh Jain — Investec — Analyst

But sir, do you see it as a possibility that the credit cost can be negligible? Because as we see resolution from these two accounts and some of the return of accounts also in the corporate side may see some resolution. So..

Girish Kousgi — Managing Director and Chief Executive Officer

Yes, it is possible, yeah.

Nidhesh Jain — Investec — Analyst

And any timelines you see when this resolution can play out?

Girish Kousgi — Managing Director and Chief Executive Officer

See this year, we are planning for with amount of resolution, we won’t able to confirm any percentage. But definitely yes, whatever credit costs we have compared this year is largely on retail. And whatever at the present we get from corporate that is something which we are very close [Indecipherable]. And we’ve seen some decrease happening in last couple of quarters. So this year is going to be very good in terms of resolution even in the write-off stage.

Nidhesh Jain — Investec — Analyst

Sure, sir. Thank you, sir. That’s it from my side.

Operator

Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Yeah. Thank you. Good evening, everyone. Sir, just wanted to understand, I mean, you have kind of addressed this a couple of times in this call itself that we will be utilizing on the capital for growth. Just wanted to reclarify now that we’ve spent maybe more than six months at PNB Housing, I mean, there is nothing really on the asset quality front in retail that won’t be utilized in this capital forward because corporate very clearly what we highlighted this two accounts there, the other things that have been written-off or sold to ARCs. So corporate what you guided was these two accounts that are there we are expecting resolutions in FY ’24.and at the same time, you have also stated there could be recoveries from written-off corporate accounts. But on the retail front, I mean, where we are? Do you think some of this capital can be utilized for cleaning up the retail asset quality?.

Girish Kousgi — Managing Director and Chief Executive Officer

If you look at retail, there has been a good story in last two quarters. And the some of the things which I mentioned last time is that we are now pretty aggressive on legal. So all those efforts will start playing out in quarter one and quarter two and which is what I even mentioned, especially on the retail side maybe in four to six quarters time, we should be comparable with some of the best companies in terms of asset quality.

The last two quarters has been a very good story. The slippages in quarter three was down by 25% and in quarter four as I mentioned this quarter is the best ever in last 14 quarters. So it’s a very good story on the retail side. And every quarter, you will see GNPA coming down because our recoveries are going to be more than pre-COVID.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Got it, sir. One last question and obviously congratulations on successfully…

Girish Kousgi — Managing Director and Chief Executive Officer

This capital is very, clearly for growth. It’s clearly for growth, which is why we have varied credit cost of 0.6 and that is only for retail and this capital is very clearly for growth because we have started affordable. And our business opportunity is quite large in the segment. And even there is lot of scope in terms of prime. If you look at the lift in disbursement in last two quarters, it is very evident that the very clearly growth is back. And just within two quarters if you see, I think the cover up on the retail side, this growth is close to about 8% and we have guided 17% growth from this year onwards. So very clearly there is a need for us to grow and market is quite large and therefore this capital is going to help us for growth.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Okay, sir. One last question, maybe just two parts for this question. One is, I mean, given that you’ve already successfully completed…

Girish Kousgi — Managing Director and Chief Executive Officer

Sir, your voice is not very clear.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Is it better now, sir? Is it better now?

Girish Kousgi — Managing Director and Chief Executive Officer

Yeah, better, yeah.

Abhijit Tibrewal — Motilal Oswal. — Analyst

I’ll maybe kind of try repeating myself. Sir, given that you now successfully completed this capital raise, one thing I wanted to understand is if there is credit rating upgrade, will that help us in start tapping the debt markets again? And the other thing is, sir, during this call itself, you highlighted that we selectively start doing the corporate book again and will be primarily done to — for retail penetration. Sir, I mean, on side, we compare ourselves or we at least aspire to be like one of the best — among the best HFCs. But if I look at, I mean, most of the HFCs to be right, I mean, none of them really have been very, very successful on the corporate side. So why not, I mean, stick to retail because there is enough and more opportunities in retail? I mean, is doing corporate really kind of mandatory for growing the retail book as well?

Girish Kousgi — Managing Director and Chief Executive Officer

So I think it’s a very good point. So our focus is on retail. And if you see today, 94% of the book is retail. So our focus will be on retail. Having said that, there is some opportunity on the corporate side as well, but we will do corporate business strategically, which can help us to increase our retail business. So which is why I told we would do cooperate, select developers in select markets which we know restart end of this year, which will help us to increase our retail penetration. And also in terms of concentration, in terms of mix, our corporate book will always be in single-digit. So we would not do corporate business as a standalone business from profitability point of view. it will be to help us to grow our retail book.

Abhijit Tibrewal — Motilal Oswal. — Analyst

[Indecipherable] the question that I asked on whether it opens up opportunities to raise money from debt markets now?

Girish Kousgi — Managing Director and Chief Executive Officer

Definitely, yes. So we would have opportunity in debt market. So we will raise debt because we are supposed to — we are to raise debt, even regulatory also. Whatever incremental borrowings present to me, 25% has to come in the way of NCD. So we will raise and this capital raise and good performance since last couple of quarters will help us in terms of raising debt at a much lower rate.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Got it, sir. This was very, very useful. Thank you so much and all the best to you.

Girish Kousgi — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead.

Subramanian Iyer — Morgan Stanley. — Analyst

Yeah. Thanks for the opportunity. I have data based question. Could you please share the split of the restructured book into stage 1, 2 and 3?

Girish Kousgi — Managing Director and Chief Executive Officer

So as I told, on the retail side, we have about INR1,870 crores odd in the restructure or retail. Out of that around INR300 crores is into the 90 plus [Indecipherable].

Subramanian Iyer — Morgan Stanley. — Analyst

Okay. And would the performance of this be? Would this be predominantly below equity or if you can just share some color on the performance/.

Girish Kousgi — Managing Director and Chief Executive Officer

Already COVID has gone by and now it’s been more than two years and many of the accounts have come back to repayment scheme. And all the assets are backed by a wonderful security coverage is also good. So there is no additional stress, which we are envisaging in this book. And I think it has been reached to a stage where we can say that. All the risks which was built on during COVID has been settled and normalized. So from the DPD1 or moving DPD, we don’t see any significant risk arising from that.

Vinay Gupta — Chief Financial Officer

So after COVID and restructuring whatever the impact of COVID is already seen in our GNPA. So the impact has already happened and this is not now, I think over a year back. And now what you’re seeing is more and more of resolution and which is why we’ve seen very good resolution coming in last two quarters and this would continue. So absolutely there is no stress what see. In fact, now the entire pool is the same for us. So whether it is a normal flow from standard to stage 3 or restructure pool flow to stage 3, we don’t see any difference at all because whatever had to happen has already happened. And now what we see is the resolution from the NPA pool.

Subramanian Iyer — Morgan Stanley. — Analyst

Thanks. That’s very helpful. And if you could also give the split of — the potential split of the retail disbursements in FY ’24 into prime, super-prime and affordable? I probably missed a number when you gave it.

Girish Kousgi — Managing Director and Chief Executive Officer

No. I think super was not that significant. So now over the last two quarters, we have moved the needle. And now we are focusing more on prime. So in terms of percentage now super is very, very less.

Subramanian Iyer — Morgan Stanley. — Analyst

Okay. And in FY ’24?

Vinay Gupta — Chief Financial Officer

Affordable last quarter, we disbursed INR137 crores.

Subramanian Iyer — Morgan Stanley. — Analyst

Okay. So in the coming year, can we expect maybe something like an 80/20 between prime and affordable or how would these numbers look like?

Girish Kousgi — Managing Director and Chief Executive Officer

Incrementally, if you look at affordables, eventually, we want affordable to contribute 25% of incremental disbursement, but this year, we will be able to reach about 10% to 11%.

Subramanian Iyer — Morgan Stanley. — Analyst

Okay. Thanks a lot and wish you all the best.

Girish Kousgi — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Venkatesh Ramakrishnan from ICICI Bank. Please go ahead.

Venkatesh Ramakrishnan — ICICI Bank. — Analyst

Good evening, gentlemen. This is Venkatesh from ICICI Bank. I just wanted a input on your opex ratio is about 0.8%. Generally, we are seeing that the housing finance and other companies peer group generally it’s 2.8% to 4% or 5%. We see that your opex is relatively low. Just that is there any specific reason how you are able to manage large book at a low opex? Thanks.

Girish Kousgi — Managing Director and Chief Executive Officer

Thank you very much for the feedback. Actually, we want to further bring down opex. So I think we’ll see. But yes, we are working on cost optimization. We want to bring down opex from this level to the extent possible. We take your feedback, but yes, our endeavor is to bring down opex from the current level as well.

Venkatesh Ramakrishnan — ICICI Bank. — Analyst

Thank you.

Operator

Thank you. The next question is from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Sorry, I joined late. So I don’t know if you’ve shared this. What was the incremental cost of funding for the quarter?

Vinay Gupta — Chief Financial Officer

Incremental, see quarter average is 7.75% and outstanding debt borrowing cost is around 8.05.

Nischint Chawathe — Kotak Institutional Equities — Analyst

No, sorry, the incremental that you have done or the repricing that would have happened would be at what rate? Did you say that of 8 because I’m just saying the incremental that you did.

Vinay Gupta — Chief Financial Officer

8, 8.1.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Got it. Thank you. Thanks a lot.

Operator

Thank you. The next question is from the line of Renish from ICICI. Please go ahead.

Renish Bhuva — ICICI — Analyst

Yeah. Hi, sir. Thanks for the opportunity once again. So on the coverage side this quarter we saw the drop in coverage. So in a steady state basis, where do you see the coverage ratio settling?

Vinay Gupta — Chief Financial Officer

Coverage as Mr. Girish explained, it was primarily on account of corporate. So there we are only left with two accounts where also resolution just in retail. So on retail, our coverage is around 32% and it has been consistently at that level and we would like to maintain it at that particular level.

Renish Bhuva — ICICI — Analyst

At 325, I mean, around 32%, 35%.

Vinay Gupta — Chief Financial Officer

32%, 35%, yeah.

Renish Bhuva — ICICI — Analyst

Got it. And sir, once again, circling back to be the yield question. So you did highlighted that the repricing on the securitization book has led to 15, 20 basis point out maybe 10, 15 basis point of yield compression this quarter. But generally in rising view your securitized pool will get repriced at a higher rate. So how does it impact negatively on the yield side?

Vinay Gupta — Chief Financial Officer

No. So actually in this quarter, you would have seen the MCLR increase was quite high as compared to the previous quarter. So most of the bank has increased MCLR during Jan, Feb, March month. So the increase in MCLR was significantly higher than the increase that we see on that rate reset that we do. So the net increase was — net impact was negative.

Renish Bhuva — ICICI — Analyst

Got it. So it is basically the cost of borrowing for your securitization pool has gone up, which has led to the yield compression on our book. Is that the correct understanding?

Deepika Gupta Padhi — Head, Investor Relations & Treasury

It’s basically, Renish, the spread which we generate on the securitized pool has come down because we have not increased the rate aspect in this quarter, whereas the MCLR rates have gone up substantially and hence the spread on which we resume has come down resulting into the…

Renish Bhuva — ICICI — Analyst

Got it. So should we consider this as a one-off or…

Vinay Gupta — Chief Financial Officer

There are two reasons. One is obviously the compression or decrease in the spread. So that has already called out as a one-off in our entire presentation. The second impact is repricing.

Renish Bhuva — ICICI — Analyst

Repricing should we consider as one-off in this Q4?

Vinay Gupta — Chief Financial Officer

Repricing is not one-off. Repricing will continue and that is something which will keep happening and that’s why we have carved it out as a one-off. You will see that impact every quarter, but it is slightly volatile. Sometimes the impact is lower. Sometimes it’s higher. So there could be a 10 to 15 bps impact on account of that.

Renish Bhuva — ICICI — Analyst

Got it. That’s it from my side. Yeah, thank you.

Operator

Thank you. The next question is from the line of Ashwini Agarwal from Demeter Advisors. Please go ahead.

Ashwini Agarwal — Demeter Advisors — Analyst

Sir, just one follow-up question. Thank you for giving me another opportunity. You mentioned that the proceeds of your [Indecipherable] to fund strategic growth plan. Do you have anything else in mind other than…

Operator

The handset mode, sir. The audio is not clear from your line.

Ashwini Agarwal — Demeter Advisors — Analyst

Is it better now?

Operator

Yeah, please go ahead.

Ashwini Agarwal — Demeter Advisors — Analyst

Yeah. So you mentioned strategic growth plans. Do you have anything else in mind other than affordable housing when you mentioned the word strategic?

Girish Kousgi — Managing Director and Chief Executive Officer

No. I mentioned that we’ll be growing both in prime and affordable business. So this capital will help us to grow at a much faster pace because market offers that kind of opportunity today. So we’ll be growing pretty aggressively keeping, of course, asset quality in mind on both prime and affordable. I mentioned on the corporate business, we will do strategically just to help us in terms of retail growth.

Ashwini Agarwal — Demeter Advisors — Analyst

Okay. No, no, I was referring to Slide 3 where you say that proceeds will be utilized to fund strategic growth plan and I was wondering are you hinting at some inorganic…

Girish Kousgi — Managing Director and Chief Executive Officer

Same growth in retail, both prime and affordable.

Ashwini Agarwal — Demeter Advisors — Analyst

Okay. That’s all I wanted to confirm. Thank you so much. All the best.

Operator

Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Yeah. Good evening. Thank you for allowing me again. Just to kind of reconfirm, so restructured number that you have shared retail INR1,870 crores, there is no wholesale accounts which has been restructured, right? I mean, at least money which is under restructuring now in the corporate account which is under the restructuring. So that’s one thing I kind of wanted to confirm. The second thing, again, on the restructured book for the benefit of everyone, is there any retail account that is still under moratorium or everyone has this retail moratorium and resilience? And thirdly, a couple of days back or rather yesterday when we had one of the larger HFCs reporting which they said that they have classified the entire restructured pool in stage 2. So while you have given out a number of INR300 crores is 90 plus out of this INR1,870 crores. Just wanted to understand the rest of it, I mean, all of it is parked in stage two or they are based on the actuarial B2B some of it could be in stage 1 and the rest in stage 2? Thank you.

Vinay Gupta — Chief Financial Officer

First of all, because the retail restructured numbers under the COVID listing, in corporate, we have only INR108 crores and there is a delinquency, nothing we see there. It is performing absolutely fine, perfect. In this INR1,800 crores odd number, we have told already that INR300 crores odd is coming from the — which is NPA. And as we already discussed earlier, I think whether probably you have missed out, it has been made a part of normal kind of a business scenario what we have. It’s all been many, many months since normalization has come back. The allocation of this portfolio in stage 2 or stage 1 is actually depending on the performance. So it is rendered as of now and that’s all.

Abhijit Tibrewal — Motilal Oswal. — Analyst

Got it. This was useful. Thank you so much.

Operator

Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.

Bhuvnesh Garg — Investec Capital — Analyst

Sure. Yeah. Thank you for the opportunity. Sir, just a few clarifications regarding the yield for Q4. So firstly, I want to understand that where do you book this income or reversal from securitization? Because if I see your Slide number 19, so you have — there you have some difference in your reported yield versus yield ex securitization. But I don’t see any line item in your Slide number 21, which is P&L, which shows some income from the line — income on the recognized book.

So just want to understand where do you book this income from securitization?

Vinay Gupta — Chief Financial Officer

So it is interest income only. We have not shown it separately under the P&L line, but it’s a separate line, which is fair.

Bhuvnesh Garg — Investec Capital — Analyst

Okay. So it is in interest income you book it on.

Vinay Gupta — Chief Financial Officer

Yeah.

Bhuvnesh Garg — Investec Capital — Analyst

Fine. And secondly, sir, in Slide number 19 only, so if I look at your yield excluding securitization, it seems to have dropped by 20 bps Q-o-Q, so excluding securitization. So just want to understand what led to this drop.

Vinay Gupta — Chief Financial Officer

So again, this is not excluding securitization. It is excluding one-off in securitization, which has a spread movement, which we have explained MCLR versus our exchange movement. So that is what we are calling as one-off. Apart from that, there are few other movements which happened in securitization on account of repricing of that securitized book. So that sometimes cause minor volatility. Sometimes it’s positive. Sometimes it’s negative. So that impact is around 10 to 15 basis points.

Bhuvnesh Garg — Investec Capital — Analyst

Okay. Got it. And sir, what’s your guidance for spread in FY ’24 and next few years?

Girish Kousgi — Managing Director and Chief Executive Officer

On a steady state, spreads should be 2.5% and NIM 3.5%.

Bhuvnesh Garg — Investec Capital — Analyst

Okay. Got it. Thank you. That’s it from my side.

Operator

[Operator Instructions] As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Deepika Gupta Padhi — Head, Investor Relations & 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 and audio of this call will be uploaded on our website that is www.pnbhousing.com. Thank you.

Operator

[Operator Closing Remarks]