Repco Home Finance Limited (NSE: REPCOHOME) Q3 2025 Earnings Call dated Feb. 13, 2025
Analysts:
Rajiv Mehta — Analyst
K. Swaminathan — Managing Director and Chief Executive Officer
Rishikesh Oza — Analyst
Kaustav Bubna — Analyst
Anand Mundra — Analyst
Saurabh Dhole — Analyst
Rudransh Kalra — Analyst
Unidentified Participant
Presentation:
Operator
Thank you ladies and gentlemen, good day and welcome to the Repco Homes Finance Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Rajiv Mehta from YES Securities. Thank you, and over to you, sir.
Rajiv Mehta — Analyst
Thank you. Yeah, good evening, everyone. Welcome to the Q3 FY ’25 earnings call of Repco Home Finance. We thank the management for giving us the opportunity to host them once again. From the company, we are joined by Mr K., MD and CEO; Mr T. Karanakaran, Chief Operating Officer; Mr., Chief Development Officer; Mr M. Raja, Chief Business Officer; Ms Shanti, Chief Financial Officer. I would request Mr to give us an overview on the company’s performance, post which we’ll open for Q&A. Over to you, sir.
K. Swaminathan — Managing Director and Chief Executive Officer
Thanks, Rajiv. Hope I am audible. Good evening, everybody. We welcome you all to the earnings call of Home Finance Limited for the quarter ended December 31 December 2024. Thank you once again for joining on this call. We are happy to announce that we have been able to maintain the growth trend seen in the last few quarters in Q3 ’25 as well. The company is progressing satisfactorily on its business parameters. The structural changes that have been in-process across the organization, like delegation of ours, implementation of new software, etc., are yielding results. We were able to achieve disbursements of INR761 crores against INR759 crores in Q3 FY ’24. Our sanctions stood at INR806 crores as compared to INR77 crores in Q3 FY ’24, registering growth of 4% Y-o-Y. Our AUM stands at INR14,155 crores, an increase of 7.35% Y-o-Y. We acknowledge that the disbursement numbers could have been better Y-o-Y, but — but for our preference towards more housing loans than on housing loans.
The changes in regulations in Karnataka led to a drop-in our business in that region. We also did some process changes in our underwriting, which had some disruptions. With the likely settling of the pending issues and with the additional sales force taking initiations, we are confident of improved performance in coming quarters. Capital adequacy ratio of the company remains strong with 32.5%. The ratio of exposure between non-sallid and salaried segment stood at 52.1% and 47.9% respectively. The share of non-hosting loans, that is home equity stood about 26.5% of loan book and housing loans contributed to about 73.5% of the book. Book quality. We were able to reduce the GNPA from INR552 crores in Q2 to INR546 crores in Q3, which is 3.9% of our AUM and net NPA stood at INR209 crores at 1.5%. GNPA numbers have come down by INR72 crores Y-o-Y organically. We have a total provision of INR489 crores with a provision coverage ratio of 61.8% for Stage 3 assets. Our systematic and relentless action on NPA accounts would continue. As of December 31, 2024, we hold INR468 crores of restructured portfolio outstanding, of which approximately INR149 crores are in Stage 3 and the remaining are in Stage 1 and 2.
Our Stage 2 numbers overall is at 11%, which would be brought down below 10% by March ’25. Borrowings. The cost of funds for the company is 8.7% and is in-line with the similar rate of HF faced. The borrowing mix remained at 82% from banks and 9% each from NHB and Bank. We have got a sanction from NHB this year-after a gap of three years, which would be availed next quarter. And our NIM for Q3 FY ’25 is at 5.5%, up from 5.3% in Q3 FY ’24. The company has been able to maintain a split of 3.7% for the quarter by raising yields to 12.76% despite facing stiff competition at our pricing levels. The dip in the profitability Q-o-Q is due to the benefits we had in the last quarter like dividend income and a reversal of provisions. The net profit grew 7% Y-o-Y, amounted to INR107 crores for Q3 as against INR99 crores for Q3 FY ’24 and INR113 crores for Q2 FY ’25. Our ROA and ROE stood at 3.1% and 14.6%, respectively for Q3 FY ’25 as against respective figures of 3.3% and 16%. Cost-to-income ratio for the quarter reduced marginally to 36% as against 26.4% of the previous quarter.
The credit cost till December 2024 is minus 0.04%. New software. Phase-1 of the projects comprising LLMS and EGL is stabilized. Phase-2 of the project comprising of software relating to support functions are in various stages of implementation and testing. A total of approximately INR28.8 crores have been spent so-far on software. As of December 31, 2024, we have 230 touch points across 12 states and one unit entity, comprising of 186 branches and 44 satellite centers with the two additional asset quality branches. We are expanding our branch presence in Karnataka, Andhra Pradesh, Telangana, Maharashtra and fewer regions of Kamilade. We will be touching 235 outlets by March 2025. I will summarize the key financial highlights for the quarter before opening the floor. The loan book stood at INR40,55 crores, registering 7.35% Y-o-Y growth. PAT for the quarter was INR407 crores. ROEA and ROE are at 3.1% and 14.6% respectively. The core profitability has remained strong with a solid spread and margin of 3.7% and 5.5% respectively.
The gross NPE has shrunk to 3.9% with a provision coverage ratio of 61.8% and a net NPE of 1.5%. Way forward, the company is on-track on its profitability figures. In the last quarter, that is the March quarter, our focus would be on improving the growth numbers substantially and a reduction in NPA numbers. Owing by the current trend, we are likely to surpass INR3,300 crores organically on the disbursement front and an AUM of approximately INR14,600 crores by March 2025. Our GNPA numbers are likely to be at around INR520 crores. We thank each and every one of you for interest in our company’s growth story. On a personal front, my tenure as MD and CEO of this company will be over next week and I thank all of you for the continued interest you showed on this company. Now I open the call for any clarifications that may come from all of you. Thank you very much and thanks, Raji.
Questions and Answers:
Operator
Thank you. Thank you very much, sir. Sir. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star in two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles we . We take the first question from the line of Rishikesh from RoboCapital. Please go-ahead.
Rishikesh Oza
Yeah. Hi, thank you for the opportunity. Sir, what is our disbursement and loan book target for FY ’26
K. Swaminathan
FY ’26 still not yet finalized. There’ll be a special Board meeting next month where all these numbers will be finalized. It is still on discussion stage.
Rishikesh Oza
Okay. Any internal targets we have that we currently are disbursing INR800 per quarter, if I’m not wrong earlier, we had a target of incrementally disbursing INR500 crores more every quarter. So could you throw light on this number, please?
K. Swaminathan
MR. Rishikesh, unless we are sure with the numbers I will not be able to repeat. But definitely, we will be targeting a far better number than what we have normally.
Rishikesh Oza
Okay. And from our current disbursement number, what is the split between branches and DSAs?
K. Swaminathan
Okay. So last quarter, DSA performance was at 42%. They contributed 42%. DST 2%. Our sales force who have joined, they have contributed 25% and the branch direct disbursement is 31%
Rishikesh Oza
And any credit cost guidance that you have for FY ’25 and FY ’26?
K. Swaminathan
FY ’25, there will not be any additional credit cards. That’s what I think we should be able to manage. There will not be any problem as far as FY ’25. FY ’26 going by the current trend, I think we should be — that should not be a big hit on credit costs.
Rishikesh Oza
Okay. Thank you.
K. Swaminathan
Thank you.
Operator
Thank you. The next question is from the line of Kostav Pupna from BMSPL Capital. Please go-ahead.
Kaustav Bubna
Yeah, hi, sir. Just wanted to understand because over the last few calls you stated that your stock target for disbursements at the end of this year was around INR3,700 crores. So if I just go by the numbers that we’ve been posting, you’d be missing your estimate by around 15% and disbursements would be close to flat versus last year. So what did we get wrong in our estimates? Why were we so confident of growing handsomely over FY ’24 and we are only going to-end flat? What was — and moving ahead, you know I — when I’ve spoken to you, you said that so this is the second part of the question, then my questions that answered. That’s the first one.
My second part is, when we had met in the past and spoke in, you spoke about how you should be cautious when giving loans because you don’t want to have the possibility of another NPA cycle because of irresponsible lending. But now you’re leaving and someone else is coming in-charge. So what is his — we would love to hear from him, is he as cautious as you? Will he be more growth-oriented? So just wanted to understand these points.
K. Swaminathan
So OE growth is flattish for this current year. Of course, there were some exchange factors like this Karnataka thing that I have been telling you. But more importantly, we felt that we should grow more on the home loan front, not on the non-home loan front. So consciously, we took a call that we will reduce our disbursements under non-home loan. Maybe because had we loosened that particular swing, maybe we could have done another INR100 crore to INR200 crores like last year. So that was one of the reasons why it is more or less flat and that is the main reason. In fact, from NHP side also, we are getting information that we should grow more on home loan funds being a housing finance company.
Even though we are still below the 40% benchmark that the regulator has given, but still we have been told not to increase our non-home loan portfolio. So consciously, we are concentrating on more-and-more of home loan numbers. In fact, the last two quarters, our home loan was 64%, disbursement of home loan was 64% as against 60% year-on-year or given the previous quarter. So consciously, this stress on home loans is importance being given to home loan compared to non-home loan is one of the reasons why our numbers are not going. And of course, there were some reasons which I already explained in my initial remarks.
The second one, I do not want to say we are cautious. We want to be careful that the cycle should not get repeated. That is the only thing. I think we have also given a slide in this particular thing, what is the number as far as Stage 3 and Stage 1 and 2 of the recent book vis-a-vis the old book. You would have seen the new book that is right from April 2022, it is performing highly satisfactorily. We want to maintain so that this company is on a firmer, stronger path going-forward. So whether I am there or the new person is there, the structurals are in-place. I’m quite confident that whoever takes up this particular assignment with the team already moved towards cautious growth, I will not even say cautious growth, stronger growth. Definitely the company will be going better and going stronger.
Kaustav Bubna
Okay, thank you.
Operator
Thank you. Thank you, sir. The next question is from the line of Anand Mundra from Sorwealth. Please go-ahead.
Anand Mundra
Good afternoon, sir. Sir, I wanted to check how much loan is sanctioned by the National Housing Bank sir
K. Swaminathan
150 crores, sir
Anand Mundra
150 crores and, sir how much disbursement was impacted because of Karnataka issues in absolute amount?
K. Swaminathan
I’m unable to quantify, it can be anywhere around INR50 crores at least.
Anand Mundra
And has that resolved now or sir, this will continue in March quarter also? That is beyond my capacity.
K. Swaminathan
I’m unable to tell you. But hopefully
Anand Mundra
In the month of January, the impact continues, sir.
K. Swaminathan
Yeah, yeah. It is still there. It will take some time because they want to convert everything electronically, the entire database into an electronic form. You can imagine a city like Bangalore, including its areas around Bangalore City, if all the land are to be converted in the electronic mode, I think it will take quite some time.
Anand Mundra
Okay, understood. Sir, one more reason, there is a — in Gujarat also, the year-on-year growth is very less 2%, Kerala also 2%. Kangataka, 5%, that’s okay because some problems. So what is the reason for lower-growth in Gujarat and Kerala,?
K. Swaminathan
Kerala consciously, we are not giving big-ticket homes and all that, Kerala. But Gujarat should not be a problem. Gujarat will continue to grow because there were some — earlier there were problems in Gujarat — in our company, but now there is no issue. Gujarat will grow. We have put a state yet also there. So we are now recruiting. So Gujarat will not be a problem.
Anand Mundra
And sir, as earlier participants were saying, we missed — we are missing our guidance big-time. Until last quarter, we were very confident that we would be able to meet INR3,700 crore disbursement target. Suddenly things have changed so much that we are reporting flat numbers in next quarter also, I’m not sure what — what guidance you want to give for next quarter, sir or current quarter sir?
K. Swaminathan
Anand, see, I am leaving this office in Mumbik, so it should not be — it will not be right on my part to give some guidance numbers, but going by the percent trend and based on the discussions we have with our business verticals, we are confident of reaching anywhere between INR950 crore to INR1,000 crores.
Anand Mundra
But sir, our new CEO is also there on the conference call. He can give some guidance, sir because he has to — he and Mr is also there.
K. Swaminathan
Yeah, current, current quarters. See, he is in-line with me. So anywhere between INR950 crore to INR1,000 crores of disbursement, we can expect this quarter. So we are seeing some positive trends. Let us hope in some many unforeseen circumstances, I think we should be in a position.
Anand Mundra
Okay. Sir, our cost of debt is very healthy, 8% to 17% average cost. So it’s very difficult to — because our NIMs are very good, our cost is very-high. What are the actions we are taking to reduce the cost sir
K. Swaminathan
See, for the percent W minus rating, I don’t think we should be — we will be in a position to reduce further. Only thing is because of the decent RBE rate cut, yes, we will also be benefited that will help us in reducing our costs. Otherwise,
Anand Mundra
Thank you, sir.
K. Swaminathan
With the of bank borrowing and this NHP borrowing may help us a bit. So all these put together, there may be a reduction the repo rate cut and the NSP will Help us in rate cut. But for this, I think at the rate that we are borrowing, I think it’s quite competitive for a WA minus NBFC.
Anand Mundra
Okay. Thank you, sir. Thanks a lot.
Operator
Thank you. Thank you, sir. Before we take the next question, a reminder to all the participants, if you wish to ask a question, you may press star and one on your touchstone telephone. Ladies and gentlemen, if you wish to ask a question, you may press star in one on your touchstone telephone. The next question is from the line of Saurabh from True Beacon Investment Advisors. Please go-ahead.
Saurabh Dhole
Yeah, sir. Thank you so much for this opportunity. I just have one question. I mean, Mr, it’s in your tenure. So in the last 1.5 years, we’ve kind of upped the headcount by almost 50%. We’ve added quite a few number of branches compared to what the trend was in the past. So I’m just curious as to how will this or at what point in time will this start reflecting in loan book growth as well because it’s been a while since the expansion the company came into this expansion mode. So — and we’ve not seen any uptake, any material uptick in the loan book size, right? So how do you see that you know, going-forward?
K. Swaminathan
Okay. See, I can give you as far as the new prices are concerned, especially the branches in have started contributing, okay. Maybe branches outside Tamili, it is taking time to increase their numbers. The loan book growth not in tandem with the branch expansion is not only because of this, but also because of the BT out that is happening, bulk repayments that are happening, these are also — these are all factors which is affecting our book growth.
Saurabh Dhole
Right. And just a follow-up now parallelly what we are seeing at least in some of the other players who are obviously not there in-housing, but let’s say microfinance, they’re seeing a very rapid attrition. So what is the risk that individuals who were part of microfinance players or microfinance companies, what is it risk that they might have joined at a housing finance company like yours and who might not have any knowledge about the home finance business. So are we — I mean, how selective have we been in recruiting because the expansion has been pretty rapid, right? So how are we protecting against that and what kind of people are we recruiting?
K. Swaminathan
Okay. Mostly we are recruiting, especially the sales as well as the collection spend. We are recruiting people who have got experience in-housing finance. So microfinance is a different ball game. So whenever we report in our core areas, we recruit people only with experience in-housing. So this microfinancing issue will not have an impact in the recruitment.
Saurabh Dhole
Sure, sir. Got it. Thank you.
K. Swaminathan
Thanks.
Operator
Thank you. Reminder to the participants, if you wish to ask a question, you may press star in one on your touchstone phone. The next question is from the line of Rudransh from MD Investments. Please go-ahead.
Rudransh Kalra
Hi, good evening. Hello.,
K. Swaminathan
Good evening. Good evening,.
Rudransh Kalra
Yeah, my question is about the recent repo rate. So how does that — what part of our book is the repo rate linked and the other — the fixed interest-rate? And how does — and my second question is embedded in the first question that how — what is better for us for the company and for the clients and for the customers that the rate further gets cut or is it — it should be — be — it should be — it should be more along the lines of the fixed-rate interest.
K. Swaminathan
See, as far as the liability side is concerned, 90% of our loans are NCLR links. Only around 10% is repo linked or EBLR, external benchmark link rate, okay. So only when the banks change their MCLR, they will have — the rate cuts will be passed on to us on the liability side. On the asset side, almost our entire book is floating. So as and when this MCLR reduction is passed on to us by the bankers, he will be taking a view, we will be passing on. We will try to maintain the present spread of around 3.3%. So we do not have much of a fixed fixer lending.
Rudransh Kalra
All right. Thank you so much.
K. Swaminathan
Thank.
Operator
Thank you. The next question is from the line of Mehul, an independent investor. Please go-ahead.
Unidentified Participant
Sir, can you hear me?
K. Swaminathan
Yeah, yeah. Yeah, I’m.
Unidentified Participant
Yeah. Sir, I have two questions to ask you. First is, sir, the loan to asset value for all your lending is 50%. So I have a fundamental question. Historically, you know, if you go last 10, 15 years, eventually, what is the write-off because if 50% is the margin of safety you have on your loans. Whatever you look as NPAs should not worry an investor. Would you not be recovering 100%?
K. Swaminathan
I could not get you. Your point is, what should be — what will be the write-off eventually? Is it right?
Unidentified Participant
Yeah. Yeah. My point is that if loan to asset value, if loan to asset value is 50%. And if you are retaining that policy of loan to asset value of 50%, then what is the eventual historical write-off we should assume for the company
K. Swaminathan
Okay. See, this loan to asset value of 50% that you are mentioning is an average one. So our new book, we are having loans as per norms. See, it’s 30 — less than 30 lakhs means 90% or 80% whatever is the regulated norms as far as home loan is concerned. Of course, non-home loans may be maintain a higher-margin. So this 50% that you are talking is our average one. As far as actual write-up is concerned, this company so-far not have written-off more than INR10 crores INR15 crores. Very, very small number only has been actual write-up of principal. Maybe we would have sacrificed some of our interest. But as far as principle is concerned, we are very, very conservative. In all our NPA things, we do not write-off much of principal.
Unidentified Participant
Sir, what should we assume historical value-based on your experience, what will be the eventual write-off after recovering and all the efforts,
K. Swaminathan
Sir, maybe it should be 545 crores is our percent NPA. Even by the scenario, I think we will have a hat of maybe 10% to 15%. Unless the future we take some aggressive stand-up cleaning entire book by selling to some ARC and all that. If we go by the same way that we are now trading, especially by going for auction or entering into some sort of an OTS agreement with the borrower. In all these agreements, as far as in all the auction sales, our principle is kept intact. So if the same trend continues in the future also, the company may not have a big hit on the principle.
Unidentified Participant
Okay. Okay, fine, understood, sir. Sir, my second question,
K. Swaminathan
Maybe INR40 50 crores of book write-off.
Unidentified Participant
Okay. Okay. So that is roughly around 8% is what you are telling of GNPA
K. Swaminathan
Yeah, of NPA and if you take the AUM, it will be negligible, not even 1%.
Unidentified Participant
Okay, fine. Sir, my second question is that the net-worth of the company in 2018 was INR1,325 crores. Today it is March ’24, it is around INR3,000 crores. Now 2018, we the total debt of the company was INR8,000 crores. Today, it is INR2,000 crores. So what has happened is that while the net — by retaining dividends, the shareholder funds have gone up close to INR2,1600 crores. But the debt in your book has not gone up. It has gone up from INR8,000 crore to INR10,000 crores, 10,700 crores. So why are we so conservative? Isn’t there scope to sort of borrow more and be more aggressive and lend more borrow more,
K. Swaminathan
Yes, we can keep on borrowing provided our lending or the AUM also goes up, we do not mind borrowing. But you should also understand that is a rating agency. If we keep on borrowing more, they will not like to have such a scenario, especially from AA minus, especially based on our past track records. So the rating agencies are also seeing us what should we have on that? Of course, today our leverage is maybe around five or six the rating agencies may be comfortable. If you borrow too much, I think there has been issued from the rating agen. This is one-side.
Second side on our equity is getting voted up because I think once our disbursements start improving or galloping, which we expect anytime soon. I think This particular thing will get resolved. Whether the equity can come down, whether we can be more liberal of rewarding the investor — rewarding the shareholders and all is a call to be taken by the Board.
Unidentified Participant
Yeah. Yes, sir. But my observation is that you are down from the — you were 6.5 times levered in 2018. Today you are levered just 3.5 times. So business growth, therefore, if you look at-the-money that you are retaining is significantly lower.
K. Swaminathan
Maybe you are right, but situation has also changed post 2018 after COVID and all that. Even lenders are a little more conservative, okay, especially for NBFC. They’re also having — Reserve Bank has increased the risk weightage for an NBFC and HFC and all that. So all these reasons also play.
Unidentified Participant
Okay, fine, sir. Thank you.
K. Swaminathan
Thank you.
Operator
Thank you. Thank you. A reminder to all the participants, if you wish to join the question queue, you may press star in one. The next question is from the line of Bhupna. Thank you. The next question is from the line of Patik, an Individual Investor. Please go-ahead.
Unidentified Participant
Hi, am I audible?
Operator
Yes, sir, please go-ahead.
Unidentified Participant
Yeah, thank you. Thank you for the opportunity. So while you mentioned that your loan growth is constrained. Can you throw some light on your core asset quality? How are you planning to manage your GNPAs and NNPAs going ahead? And my second question is in terms of your point of contact additions, would that also get moderated going ahead until we see loan — this loan growth happening?
K. Swaminathan
Okay. See, GNPA numbers, I can give an assurance, at least it will keep coming down. You would have also seen slow — steadily the numbers are coming down and the new book is holding well. So if the same trend continues, definitely when the overdue numbers of, let’s say, pre-COVID NPAs are eventually paid or eventually settled and all that, there’ll be a steep reduction in our GNPA numbers. So to that extent, I am confident. The second point is on point of contract. Yes, we will keep on growing, especially in non-terminal areas, we will keep growing. Places like Andhra, Telangana or the West, we will keep growing. It is a strategy and the book will increase based on our number growth. Based on our point of contact increase in the point of points of contact.
Unidentified Participant
Okay, sir, I have a follow-up to go-ahead, sorry hello.
K. Swaminathan
Yeah.
Unidentified Participant
Okay, sure. Sorry, should I?
Operator
Yes, sir, able to hear you, sir. Please go-ahead.
Unidentified Participant
Okay, yeah. So doesn’t, does it not make sense to slow-down your point of contact until you see loan growth happening? Because then you keep incurring cost, but then there is no income to it.
K. Swaminathan
Could I get you? I think you want us to reduce the numbers of point of contact is it? Because
Unidentified Participant
I’m not I’m not saying reduce it, I’m saying slowing it down because until you see loan growth happening, you still can manage cost.
K. Swaminathan
Oh, it’s like chicken and egg. See, unless I open more-and-more branches, I cannot have the numbers increasing, especially in areas where there is potential, definitely at least for some more years — for one or two more years, I think our points of contact will keep increasing.
Unidentified Participant
Okay, got it. And one last question I had in terms of the new loan that you disbursed, can you throw some light on what kind of yields are you getting currently?
K. Swaminathan
Sir, we are now around 12%. Yield is — average is 12% with a spread of around 3.4%.
Unidentified Participant
Okay.
K. Swaminathan
Moving forward, the yield may remain same, but spread may — there may be slight contraction in spreads.
Unidentified Participant
Okay. And why would that be? Contraction in spreads?
K. Swaminathan
Hello?
Unidentified Participant
Yeah, why would we see a contraction in spread?
K. Swaminathan
Yeah, because we make stress more on the quality of our book. So definitely there will be a pressure on our yield. So to that extent that may be a contraction.
Unidentified Participant
Okay. Got it.
K. Swaminathan
We are doing more-and-more of housing loans. We will be going more-and-more of housing loans. That too in the salaried or documentary segment. And sorry, I cannot increase the price beyond a point.
Unidentified Participant
Okay. Got it. Fair enough. All right. Thank you.
K. Swaminathan
Thank you.
Operator
Thank you thank you. The next question is from the line of Anand from SolarWealth. Please go-ahead.
Anand Mundra
Sir, thank you for the opportunity again. Sir, when are we going ahead? When are we applying for improving our credit rating, sir?
K. Swaminathan
No, see, it is not like applying, sir. They do a review periodically. So there’ll be a shorter review every six months and a review — annual review every one year. So they did review some three months back, definitely after something that will be a review. So they — based on the numbers, they will take a call.
Anand Mundra
Okay. And sir, what was what is the reason for increase in NIM for this quarter, sir to 5.5%
K. Swaminathan
It’s a small thing, I don’t think — from 5.1 to 5.21 you were saying.
Anand Mundra
Okay. Yeah. Or otherwise spread, spread is — will not have any leverage benefit. So what is the reason for this?
K. Swaminathan
Yeah, yeah. I could understand. See, we released our MLR sometime in November, okay, the effect of the increase has happened. November and December, the effect of the 10 bps similar revision has happened. There is a reason for our NIM going up.
Operator
MR. The line — the line for the current question is got disconnected. We will take the next question from the line of from BMSPL Capital. Please go-ahead.
Kaustav Bubna
Yeah. What’s your guidance on NIMs given that if we assume that the RBI will reduce rates further into the year.
K. Swaminathan
The guidance for what Mr?
Kaustav Bubna
Guiding for guidance for NIMs, NIMs. Net NIMs, net interest margins give it — no factoring in let’s factoring in, let’s say, 75 bps rate cut in this year. If you were to assume that.
K. Swaminathan
See, our borrowing also will — yeah, yeah, but still our borrowing also will come down now,
Kaustav Bubna
If you could give us a detailed description of floating versus fixed book and those things.
K. Swaminathan
So as far as our company is concerned, see both sides are — is more floating. On the liability side, 90% is floating. On the asset side, almost 100% is floating. So any reduction, it will also get passed on. So, there may not be much of an impact.
Kaustav Bubna
Okay, cool. Thank you.
K. Swaminathan
And there will be a lag in our. See, today I get a MCLR reduction. By the time we refix our lending grade, it may take some time. So it will be actually beneficial to us.
Kaustav Bubna
Okay. Okay, understood. Understood. Cool. Thanks. Yeah.
K. Swaminathan
Thank you.
Operator
Thank you. The next question is from the line of Rajeev Mehta from YES Securities. Please go-ahead.
Rajiv Mehta
Yes, sir. I have a few questions. Sir, did you say that the impact from Karnataka issue in Q3 was around INR100 odd crore? Isn’t that large in the context of the contribution in the book.
K. Swaminathan
No, I did say that I do not have the numbers, it should be around INR50 crores. Crores.
Rajiv Mehta
Okay, okay, okay. And sir, this rough guidance that you’re giving that due to disbursements of INR950,000 crore in 4Q. Now while we are also playing around with the tweaking the mix of home loan and lab and to really replace a lab, we need more home loans from a volume perspective. So can you give us more confidence that you would have already done a certain number as we speak. Yeah, can you give out some numbers of January, maybe even February so-far, what kind of disbursements are already achieved, which will provide us confidence that Despite Karnataka being an issue and you navigating from lab to home loan, your overall volumes are going strong.
K. Swaminathan
Rajiv, I do not know whether I am right in giving those numbers. I do not know about the price sensitivity and all that. But at least, year-on-year, I’m seeing improvement compared to the last quarter as well as last year. So that is the only confidence that I can give as of now. Hopefully, March — for example, last year, March, we did INR400 crores plus. I think by the momentum that we are seeing, it should be better. Is also better and almost all the festivals are all off, so not many holidays. So these are all the things which gives us confidence that we should be around INR90 crores INR200 crores, INR1,000 crores.
Rajiv Mehta
Okay. Okay. And sir, you also gave out the disbursement mix. You said that DAC is 42% and then you said that the sales force vertical — your own sales force is 25% and then branch directly sources 31%. So the sales force vertical is something that we had set-up in the last one, one and a half years, right? And that is giving you almost fresh and additional volume of 25%. And if I were to remove that volume and if I were to even say remove the DSA volume, then the branch direct sourcing has actually not grown in the last five, six quarters, would that be right to — is that right? And why is that the case that the branch productivity, right, is not improving despite all the efforts that we are putting in terms of direct sourcing by branches?
K. Swaminathan
Okay. See, what was being told as a branch disbursements in the previous quarter — previous years when this vertical of sales vertical was not available. The same is now being bifurcated between the branch and the sales force. See, earlier there was nobody called us a BSM. The branch sales manager put a position was not at all there earlier. Now there is a branch sales manager position. In addition, the branch manager is also doing. Branch head is also doing. Earlier, these — both things were done not only by the branch market, but all the other staff who were in — who are now in other verticals. Now there is a specific vertical, brand self manager, so we are able to find out what is his contribution, his or her contribution. So earlier, this 25 plus 31 used to be 50, now it is around 56 percentage terms. Going-forward, I think this sales vertical should that much more. So maybe percentage terms this direct branch may come down and the BSM verticals think on positive itselves may go up.
Rajiv Mehta
Okay. And sir,
K. Swaminathan
Been able to answer.
Rajiv Mehta
No, no, I get that. So there is some reclassification. And when you look at it in aggregate terms, then aggregate terms there is an improvement, including the sales — the new sales force. I get the point.
K. Swaminathan
Yeah.
Rajiv Mehta
Yeah, yeah. And this NPL recovery is, you know, the NPL target, the number you spoke was INR520 crore by March?
K. Swaminathan
Yeah.
Rajiv Mehta
Okay. Sir, any difficulties here because I mean, you know that the macro is very tight. So when you are pursuing recoveries, so for example, Q3, we had a lesser recovery, it seems and which is why the NPL reduction was only INR6 crores. In Q4, anything — what is the kind of effort that we have lined-up so that we’re able to reduce the NPA by INR30 crore INR40 crore despite this very tight macro-environment for the borrowers.
K. Swaminathan
I agree with you compared to last year, yes, the loan is a bit tight and we are not able to reduce our NPA numbers as fast as we could do last year. But two or three-plus points that we are having — we are envisaging for current quarter. See, we are planning to do two mega auctions this month and in fact tomorrow there is one under February 28, there is one more where we will be doing something like 300 properties on auction. So we are pressurizing the borrowers. If not success in the auction, it is coming to us for negotiation on all these account. This is one point. Second one, in the first and second-quarter — sorry, second and third quarters, we had sanctioned a large number of OTS proposals. So these money — these sanctions have not actually mitigated. We have already given the sanctions and all that. So people are mobilizing, especially some bulk big OTS proposals have been sanctioned.
So we are confident that we will get around INR30 crores to INR40 crores to this particular thing. With all this, I’m taking into account smaller slippages in the 4th-quarter. Normally in the 4th-quarter, the slippages will be very minimal compared to the second and third quarters. So taking all these into account, our recovery section is saying that there’ll be a net reduction of INR30 crores.
Rajiv Mehta
Okay. Okay. Just one clarification. When you talk about OTS proposals of INR30 crore INR40 crore, generally, when I look at your PCR and ECL coverage on, you’re holding 62% cover. So what is the kind of waiver, principal waiver or haircut that we are offering for — to the borrower to come and settle. To what extent do we offer a haircut?
K. Swaminathan
I think I answered a similar thing in the previous question also. See, principal waiver will be very, very minimal. A principal is a rarity, except in exceptional circumstances like a death of a borrower or some calamity in the family and all that. Principal waiver is a very rare thing, maybe accounts of more than days old and all that, we give a nominal haircut of maybe 5% or something. Interest me, yes, there are three components, principal interest under the penal income. Penal income and interest we give, but not in interest — not in principal.
Rajiv Mehta
Understood. Understood. So then this INR30 crore INR40 crore of settlements will give back provision releases, right, significant provision this.
K. Swaminathan
Yeah, yeah. You can do your backup envelope calculations.
Rajiv Mehta
Thank you. I’ll try and come back for more questions.
K. Swaminathan
Thank you.
Operator
Thank you. Thank you. Thank you. Thank you. Before we take the next question, a reminder to the participants, if you have questions, please press star and one on your telephone. The next question is from the line of Sanjina from Nuvama. Please go-ahead.
Unidentified Participant
Yeah, hi, good evening, sir. Just a question on BT out. What is the current rate we are seeing and what would be the strategy to control these BT out? Also, when we had met Mr T. Karanagar and I think in somewhere in the month of December, he had given a rough guidance of around a disbursements target of around INR1,500 crores for FY ’26. So are we going to — are we planning to stick to that level or it would be probably lesser looking at the current scenario and the issues which are happening in Karnataka? Yeah. So this is it from my side.
K. Swaminathan
And as far as BT outs are concerned, I will add BTOs as well as bulk repayments or prepayments. It is nowadays around INR100 crores per month. Okay. So we cannot do — beyond a point, I don’t think it is possible for us to contain unless the environment changes in the corporate lending. See, most of our BTOs are to banks. Yeah. There because of their CASA and all that, they are able to offer quite a good rate to our customers. So at 8.7 or 8 points even less than that 8.6. So it makes sense for a customer to switch-over to your bank from around 10.5 or 11 that we are charging. And we are — despite giving some top-up loans, despite offering some interest concessions and all that, still it is difficult for us to contain the BTLs or the bulk prepayments beyond the point.
So what is to be done as far as this company is concerned is to match that with an improved or galloping disbursements. That is how we can match this BTFs. Similarly, we can also do similar aggressive BT yields that is happening. In fact, we are matching BTLs with the BTNs. BTNs are also happening around INR100 crores per month.
Coming to your second question, we hope this Karnataka issue will get resolved either by this quarter or at the maximum by first-quarter of next year. So Karnataka will bounce-back. We will get the actual numbers and we have also opened new centers in Karnataka is especially on the outskirts of Bangalore. All these centers are likely to contribute in 2026.
Unidentified Participant
Okay, okay. Thank you so much.
Operator
Thank you. We have a follow-up question from the line of Rajiv Mehta from ES Securities. Please go-ahead.
Rajiv Mehta
Yes, sir. Just last two things from my side. Sir, when I look at the employee cost quarterly run-rate in the last two years, it has gone up by 30%, the quarterly employee cost run-rate. But when I look at the employee base, it has gone up by 50%. So what explains this that a lot of new addition has happened at the junior level with lower salaries Or is there any other angle to read into here?
K. Swaminathan
You’re perfectly right. Most of the indations have happened only at the junior level, at the level or at the asset manager level or at the executive level. So the junior level is also be happening. Maybe in the sales or collection front where we have taken some experts from people with some experience from the market, yes, there is a cost increase, but that is getting offset by people who are gaining. So people with more than five years, if they are going out, it is a saving for the company. So net-to-net, there is not much of an increase in the establishment cars. Even this quarter you would have seen there is a small dip in the establishment costs even though the numbers have gone up.
Rajiv Mehta
Correct, correct, correct. And just last thing on this push from the NHB to us to do more incrementally more home loans and less of lap. So how far you will have to go in terms of altering the mix? So — and can you also call-out the individual blending — individual blended incremental lending rates for home loan and lab and how far the mix needs to be tweaked to satisfy NHP?
K. Swaminathan
Okay. See, NHP has not given us any specific numbers at all. In a general term, like I said, housing finance companies, the annual year-on-year growth should be more on home loans than on non-home loans. They say that you cannot keep on increasing with AUM only through non-home loan growth that is not acceptable. So indirectly they have indicated not only that, it’s also right being a housing finance company, we are here, we are borrowing from NSP and all that. So they expect us to give more-and-more housing — housing loans. Housing stock should go up, that is the purpose for which NSP has been set-up.
So it is right there also saying that you increased more of your own loans. Now how we can take the thing, yes, it’s I think if you are going to do more-and-more of home loans, maybe I can reduce the home loan interest-rate and increase the non-home loan rate so that the yield remains more or less same. If that has to be of growth I think the new management will take a call on that.
Rajiv Mehta
Okay and sir, incremental lending rates for blended for home loan and lab.
K. Swaminathan
So today at 10.1% is the minimum and for some exceptionally good, we even lended at 9.5% as far as home loans are concerned. Okay. But pure LAP is now around 14%. So pure. But see, so it is called a CRE RH and all that. It comes in-between, say, it is around 12.5 and odd.
Rajiv Mehta
Okay. Okay. Okay. Okay, sir. Thank you. Thank you for answering that question.
Operator
Thank you. Thank you. Ladies and gentlemen, we take that as the last question for today. I would now like to hand the conference over to the management for closing comments.
K. Swaminathan
Thank you. Thanks,. Thanks, Rajeev and thanks for all the participants who took interest in this company and asked all the questions. I’m confident that this company will grow based on the strength — structures that we have created in the last two or three years. But possibly in ’26 and ’27, this company will reach new heights. I once again thank all the participants as well as the organizers who are in this analyst call. Thank you.
Operator
Thank you. Thank you, members of the management. On behalf of YES Securities, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you