Satin Creditcare Network Limited (SATIN) Q1 FY23 Earnings Concall Transcript

Satin Creditcare Network Limited (NSE:SATIN) Q1 FY23 Earnings Concall dated Aug. 04, 2022

Corporate Participants:

Harvinder Pal Singh — Chairman of the Board, Managing Director

Aditi Singh — Head Strategy

Jugal Kataria — Group Controller

Analysts:

Varun Ghia — Dimensional Securities — Analyst

Abhishek Agarwal — Prithvi Finnmark — Analyst

Rajiv Mehta — YES Securities — Analyst

Unidentified Participant — — Analyst

Presentation:

Operator

Good morning, Ladies and Gentlemen. Welcome to the Satin Creditcare Network Limited Q1 FY23 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. HP Singh, Chairman cum Managing Director of Satin Creditcare Network Limited. Thank you and over to you, Sir.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Thank you. Good morning everyone. And thank you all for taking the time to join us and discuss our financial performance in Q1 FY23. I hope you and your family are safe and keeping healthy. I am hoping you have already seen our quarterly results and investor presentation. Those who have not seen them can do so via our website and stock exchange notices.

The microfinance sector in India has diverse a turbulent journey; however, we are pleased to inform you all that the company have witnessed a turnaround and we are confident that the difficult times are behind us as evident in the performance of the quarter under review. Further, we are confident of having a very good year in terms of growth and profitability.

Now let me start with the key developments that took place during the quarter. As a progressive institution, we have proactively envisaged strategies time-to-time and have demonstrated resilience in the challenging environment. Optimizing our business acumen post demonetization in 2016, we strategized to diversify out of unsecured MFI portfolio to secured product offerings through rolling out our subsidiaries. The strategy to diversify portfolio yielded results for the company and the subsidiaries have taken great shape over the years.

In order to better reflect the embedded value of the investments these three wholly owned subsidiaries, we have revalued our investment in the subsidiaries through our profit and loss and recorded an increase in fair value of INR351 crore in the standalone financial results. During COVID-19 pandemic many of our clients and their family members lost their lives while countless lost their livelihoods. This couple with lockdown affected the marginalized sector and in turn repayments.

As a measure to provide relief to the impacted clients, the company restructured 21.4% of the loans amounting to INR1,151 crores and provided moratorium wherever was necessary. Restructured book is reduced to 11.6% of on book AUM as on Q1 FY23 amounting to INR584 crores with an ECL provision of INR295 crores and collection efficiency of 72.1%. The company monitored the performance of this portfolio and realized that certain set of clients are still economically unstable and hence are unable to repay their loans. Therefore, the company decided to write off loans amounting to INR275 crores which is 5.4% of the on book AUM during the quarter under review. Post write off the GNPA of the company has reduced to 4.3% as on June 22 as compared to 8% as on March 22. Despite this write off our gross AUM remain on similar levels as of March 22 at INR6,389 crores on a standalone basis and INR7,569 crores on a consolidated basis.

Furthermore, we have created sufficient provisions to address any contingency in our portfolio, maintained on book provision of INR398 crores as on 30th June 2022 which is 7.9% of our own book AUM. The profit and loss account of the company now stands insulated from any additional stress that may come in. The profits for the quarter stood at INR60 crore. Additionally, the company is well capitalized with a healthy CRAR of 22.6%. The company has maintained sufficient liquidity of INR1,017 crores as on 30th June 2022 and has undrawn sanctions worth INR350 crores as of quarter end. However, as per the consolidation procedure set out in India, the increase in profit due to the fair valuation and investment in subsidiaries of INR351 crores has been eliminated in the consolidated financial results. Due to this the consolidated results has net loss as per the accounting standards.

The fair value has been determined on the basis of independent valuation report obtained from category one merchant banker. Also, we are related to share that all the group companies have reported profit during quarter one of this financial year. During the quarter under review with our conviction of being determined, definitive and decisive supported by our robust in house technology we were able to adapt the new RBI Regulation swiftly into our systems and started disbursing from April 2nd onwards under the new regulations. As a responsible organization we are guided by our long-standing resolve of reaching the underserved sections of the society, cater to their needs and economically uplift them and going ahead the organization aims to ensure a healthy growth with the risk adjusted cornerstone and we as one of the industry’s leading player are expected to regain our growth trajectory and advance strongly.

Now let me run you through the financial and operational highlights of our company. Starting with the consolidated operational highlights. Our AUM as on 30th June 2022 stood at 7,569 crore. We have a customer base of more than 27 lakh as of 30th June 2022. Our disbursement for the quarter stood at INR1,709 crore as compared to INR282 crore in quarter one FY22. Our assigned portfolio stood at 1,304 crores. We are seeing disbursement activity to pick up and we had one of the best first quarters in the last few years in terms of business. As of 30th June, 2022, 100% of our disbursements are made through cashless mode while cashless collections stood at about 6%. We have also adopted website payment option and UPI auto debit.

Now on the standalone operational highlights. Our standalone disbursement for the quarter stood at INR1,554 crores as compared to INR222 crores in quarter one FY22. With disbursement back on track, we expect growth to come in the coming quarters. Our average ticket size of MFI lending for the quarter stood at INR41,000. We have made adequate provisions of 398 crores including 295 crore assigned to the restructured portfolio. Our collection efficiency for the quarter stood at 97.3% excluding the restructured portfolio. The collection efficiency on restructured portfolio for Q1 FY23 stood at 72.1%. Collection efficiency for July 22 stood at 98.5% excluding restructured portfolio showing all the signs of improvement. We have a well-diversified customer base, a well-penetrated branch network across states and 76% rural exposure. On book GNPA reduced from 8% as on Q4 FY22 to 4.3% as on Q1 FY23 from 412 crore to 217 crore out of this 105 crore pertains to Assam. New PAR addition of loan disbursed from July 21 onwards was 0.6%; representing 70% of our own book AUM as of July’22 which is very encouraging.

Geographical expansion. As of 30th June 2022, our total branch network stood at 1,224 branches which is spread across 397 districts. We have a total state and UTs count of 23 which make us a well-diversified Pan India microfinance player. As of 30th June 2022, 96.5% of our districts have less than 1% of portfolio exposure. Exposure to the top four states contributes 53.6% in Q1 FY23 as 77.3% in FY17. Our well thought of diversification strategy has enabled us to sail through difficult situations and capitalized on our idea of enriching our client’s lives through financing of various products which includes loans for bicycle, solar products, home appliances, consumer durables and water and sanitation.

An update on subsidiaries. Satin Housing Finance Limited has now reached an AUM of 331 crores including DA of 27 crores having a presence across four states with 3,810 customers. SHFL has a 100% retail book comprising 66% affordable housing loans and 34% of LAP. The company has 16 active lenders including NHB refinance, CRAR of 54.7% and gearing of 2.2x total equity stands at INR101.6 crores, the quality of portfolio remains intact with GNPA of 0.09% as on June 22.

Satin Finserv Limited our MSME arm have reached an AUM of 176 crore with three consecutive profitable years. Business correspondence services under Taraashna Financial Services Limited have reached an AUM of 674 crore as of 30th June 2022. The company operates to 165 branches and has more than 3.4 lakh active loan clients and to update you on amalgamation of the two wholly owned subsidiaries Taraashna Financial Services Limited and Satin Finserv Limited the order against the first motion application was pronounced on hearing dated May 17, 2022, by the honorable NCLT. Further, both the companies have filed joint second motion application with honorable NCLT on May 25, 2022. The said joint second motion application was admitted by honorable NCLT in its hearing dated July 8, 2022, and issue necessary directions of serving notices and newspaper advertisement which are under process. With this, I would like to open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you. Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Varun Ghia from Dimensional Securities. Please go ahead.

Varun Ghia — Dimensional Securities — Analyst

Hello. I wanted to know I have two questions one is if you could tell us about the slippages this quarter?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes, yes. Can you repeat the question again?

Varun Ghia — Dimensional Securities — Analyst

Yeah. I wanted to know the slippages this quarter? And secondly if there were any interest reversals?

Jugal Kataria — Group Controller

So, on the slippages as we mentioned that the new portfolio that we have created which is representing 70% of the portfolio that we have created from July 21 onwards which has run on one year kind of a tenure there the PAR-1 is about 0.6%. So, we are confident that the new portfolio is behaving well and there is no concern whatever was the issues with regard to the old portfolio on restructured book that has already being taken care of in the results. So, there are no major concern on the fresh slippages. And what was the second question?

Varun Ghia — Dimensional Securities — Analyst

What is the amount of slippages this quarter?

Jugal Kataria — Group Controller

So fresh — as I said that our gross NPA has come down from 8% to 4.3% so they are known either.

Harvinder Pal Singh — Chairman of the Board, Managing Director

So, they are no fresh slippages and if I can give you 0.6% which is at par which is PAR-1 technically there is no GNPA technically from whatever we disburse since the last one year. So, if you can counter that you can probably look at that.

Varun Ghia — Dimensional Securities — Analyst

Okay. And any interest reversals?

Jugal Kataria — Group Controller

So we are doing it in line with Ind AS, so — wherever we are writing it off, so to that extent, interest has also been reversed.

Varun Ghia — Dimensional Securities — Analyst

Okay. Thank you.

Operator

[Operator Instructions] The next question is from the line of Abhishek Agarwal from Prithvi Finmart. Please go ahead.

Abhishek Agarwal — Prithvi Finnmark — Analyst

Hello Sir, my question are pertaining to cost-to-income ratio. When we look at cost-to-income ratio, our cost is quite high, okay, compared to other industry peers in our same industry, so how we are looking to bring it down? Because if we specifically take our employee costs, it’s quite high compared to other players with the same AUM size. So in the future, how will — how we are planning to reduce it and, secondly, on the provisioning side also. Because with this kind of cost ratio — how our business will be profitable in the future. This is the first question.

Harvinder Pal Singh — Chairman of the Board, Managing Director

So let me give you an answer to that. So two things which you have to bear it in mind. One, because of the write-offs and all, our denominator has probably been flattened for the last for — even this — for this quarter, it’s probably been flattened. So that is the reason why, when you look at it, the cost-to-income ratio probably is slightly higher as compared to what it was. So that’s point number one. The second is because of the COVID pandemic and whatever was — recovery was being done, we had to deploy additional resources now. Technically we were looking at getting money back from the PAR clients as well as from the write-off clients as well as from the other clients. So that is probably also one of the reasons which has been here now with write-offs happening across to a large level. And we have just lifted now a portfolio which is technically very, very clean. And there is collection efficiency, as we mentioned earlier in our previous statement, which is close to about 99.0 — 99.4%. I think for us now this will start coming down. And if you really look at it, because of the latest guidelines of risk-based pricing, technically the profitability, which never used to, arrives earlier to a — maybe to a lower extent because of the margin gap being there. I think that has been filled out. So that will also look at in a positive way of enhancing our profitability in the future as well as in this quarter.

Abhishek Agarwal — Prithvi Finnmark — Analyst

So sir, can you particularly guide about your employee cost? As you said, that it was one times. Kind of because of COVID, employee cost has increased. So at the AUM percentage, what percentage we can take as employee cost.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Because — I don’t have a reference on the employee cost, whatever it is, but I think we only look at numbers how we can probably bring it down. My own sense is I think, out of the total OpEx of close to about — whatever it is, about 6%, 7%, I think 70% is the employee cost. I think that is what the — and that is what the entire industry probably works on, and that will probably be the same for us also.

Abhishek Agarwal — Prithvi Finnmark — Analyst

Okay, sir. And second question, like in the next four to five years, what the AUM size we are targeting. Because we have already a pan-India presence right now, which were earlier, 5 to 6 years back, we have mainly catered UP and Bihar, but now we have the pan-India presence. So how we are looking to shape up our AUM size in next five years?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So what we are looking at is about a 25% growth year-on-year for the next five years. That is what our benchmark is and that is what we will achieve. And going forward, because of the pan-India presence and all these things which we have put together, I think, for us, achieving 25% is not something which is difficult. So that is what we are doing, including subsidiaries.

Abhishek Agarwal — Prithvi Finnmark — Analyst

And — okay, sir. And my last question. Like some — we have allotted some equity to some of new P/E fund, okay? So RBI only finance — are financing business. Or they will take some Board seat. Or how it is?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So that is something which is probably not there. It’s not in public domain. So right now there is no Board seat technically. The warrants have to get converted. And I think — when they come in, I think —

Abhishek Agarwal — Prithvi Finnmark — Analyst

But in future, it will be possible that they will take some seat —

Harvinder Pal Singh — Chairman of the Board, Managing Director

I can’t comment on that right now.

Abhishek Agarwal — Prithvi Finnmark — Analyst

Okay sir. That’s from my end. Thanks a lot.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Rajiv Mehta from YES Securities. Please go ahead

Rajiv Mehta — YES Securities — Analyst

Yeah, sir. Hi. Good morning. Am I audible?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes, yes, yes, audible.

Rajiv Mehta — YES Securities — Analyst

Thank you. So sir, a few questions from my side. Firstly, sir, if you can share the PAR zero number. Because you have done a good amount of write-offs in this quarter and the reduction in gross NPL. But overall, PAR zero, how should we look at the movement between two quarters? Have you seen any reduction in the intermittent buckets because of better collections? If you can just give that flavor.

Aditi Singh — Head Strategy

So Rajiv, the PAR zero for last quarter was 9.4%. And this quarter is 9.2%. It has slightly reduced. And the PAR 30 is around 7%.

Rajiv Mehta — YES Securities — Analyst

Okay, okay, yes. And sir, this — when I look at our disbursement in the first quarter, you have done really well in terms of disbursing a significant amount of volumes. And we had this implementation also of the new guidelines kicking in from 1st of April, so I mean, was it not leading to any significant changes for us in the systems and we were able to kind of navigate that more smoothly as compared to others? Because when I reflect on other players’ disbursement activity in the first half, they would have done much lesser disbursement. Or their momentum would have slowed down significantly, but for us that is largely continuing.

Harvinder Pal Singh — Chairman of the Board, Managing Director

So Rajiv, frankly, I will not be able to comment on the other players of ours, but we were very upfront. The moment the guidelines kicked in, our process policy team as well as the IT teams were set in motion. And we had fixed up our target that we will not lose business technically because of this. And thankfully so, that we were able to disburse within a couple of days the moment this begin there in our elements. So I think we’ve always taken — and as we’ve said earlier, I mean, we’ve got a very strong process as well as a technology team, I think I would like to give it to our team basically to have done it in probably the shortest period of time and all.

Rajiv Mehta — YES Securities — Analyst

And sir, any changes in rejection rate? Because I don’t see because since the disbursement rate has continued. So there was no major change in the rejection rate after the process change and before the process change.

Harvinder Pal Singh — Chairman of the Board, Managing Director

No. The rejection rates have inched up. They have increased by about 5% to 7%. They are higher now, but we are sourcing more in terms of to have maybe the 25% growth which we are talking about for this year. And that is on track for us.

Rajiv Mehta — YES Securities — Analyst

Correct. And sir, pricing-related changes. So whatever price increase we would have taken. Just to recollect: We would have taken about 1.5%, 2% price increase. And would that be uniformly applied to all geographies and all customers? Or there is some differentiation.

Harvinder Pal Singh — Chairman of the Board, Managing Director

No, there’s no differentiation. The same is applied to all the geographies basically and that came in from April onwards.

Rajiv Mehta — YES Securities — Analyst

Right. And what was the lift in pricing that we took?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Sorry —

Rajiv Mehta — YES Securities — Analyst

What was the increase in price that we took?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Up to 2%.

Rajiv Mehta — YES Securities — Analyst

Okay, got it, okay. And sir, with regards to our — so we have a restructured accounts of INR580 crore. And then we also have NPLs of 220 crore, 217-odd crore. I’m sure there will be an overlap here also because a lot of restructured would have flown to NPL buckets in the recent months because of nonpayment. So what is that overlapping pool a year?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So I — technically what we are tracking — which is probably the stressed asset, which is the restructured pool of INR584 crores, Rajiv. So we are working on that. And as we mentioned earlier, that the 70% — 72% collection efficiency is still there. Though we don’t provide it, basically looking at not — to be very, very frank, we wanted to build up our — and we wanted to insulate our P&L, basically. That’s the reason why we’ve shored up our provisioning to a large extent to really look up. So our sense is, once this pool — because this got restructured last September. So by this September we will probably have a year ahead. We could have probably also not been able to really look at it from that angle. So the moment 1 year passes by, by September, we’ll have a fair idea. And that is the reason why we were able to build up that provision and insulate our P&L. So that is where it is as things stand. There are some of the other things that are probably going as normal as I told you. The new asset class is absolutely fine, which has probably no GNPA coming in. So our sense is that the pain is over. We have adequately provided — as an institution, we brought our GNPAs down. We are profitable. So I think, whatever we possibly could do, we have done it in this quarter.

Rajiv Mehta — YES Securities — Analyst

Correct. So you mean that, if the current collection efficiency holds up, then we may not require more provisions in the coming quarters.

Harvinder Pal Singh — Chairman of the Board, Managing Director

You’re right. We probably would be able to release provision, in fact, not building more provisions. So that is the positive which we’re — we’ve been trying to let people understand.

Rajiv Mehta — YES Securities — Analyst

And that would be because a lot of — a bulk of the customer pool in restructured asset and even in — right now in NPL after write-off must be paying, right? Because we used to typically give that breakup between paying and not paying, so —

Harvinder Pal Singh — Chairman of the Board, Managing Director

So we’ve taken flat — at about 73%, 75% are paying. And let’s say about 25% will be irregular in paying. I am not saying that they are not paying. They will be irregular in paying, so they probably will remain in NPA for some point of time or, after a certain time, may also probably be — come down to PAR zero once their demand and everything finish off.

Rajiv Mehta — YES Securities — Analyst

Right, right, right. Sir, just lastly, on Assam —

Jugal Kataria — Group Controller

And one more thing. 50% of the gross NPAs are from Assam and that — as on today, there’s all the, so to say, probability that, that money will come from government slightly early, slightly late. So that is also to be kept in mind, that 50% of the gross NPAs are from Assam.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes, exactly, Rajiv. So Rajiv, if you really look at the complete picture as such, including 2% of Assam which is there which — we hope that the money will — which the signs are that the money will come from the state government. Technically we don’t have — practically we have huge provision now which is there, which is about 180% of our own book whatever the NPLs are. So if you really look at it, it is all positive, positive down from here which has been captured in the results for this quarter.

Rajiv Mehta — YES Securities — Analyst

Correct, correct. Sir, I have a few more questions. I mean, if there is a queue, I’ll come back. Or else I can continue if you permit.

Harvinder Pal Singh — Chairman of the Board, Managing Director

No, no. Please go ahead, Rajiv.

Rajiv Mehta — YES Securities — Analyst

Yes, yes, okay. Thank you. So on this Assam situation, I know it’s a very small part of our portfolio, but how have — so in the last couple of weeks, have you seen any major improvement in collections in Assam? And when do you think can it fully normalize?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes. So just to give you an update. So whatever we’ve disbursed — again, in Assam we’ve started disbursing about six months back. So that portfolio is behaving absolutely fine. What happened is, for people who were under stress because of the government or whatever the Assam things have been going on, there has been improvement, though it has been slight. I can just probably — I don’t have benchmark numbers and such, but there was about 5% to 10% increase in the collection efficiency even for the Assam portfolio also over there. So that probably goes on. We are just waiting for once — whatever has been decided by the state government and everything, once that starts releasing. And then probably we’ll have some windfall also coming in.

Rajiv Mehta — YES Securities — Analyst

Yes, yes, yes. Sir, more specifically, I was wanting more color in the recent weeks because we had major floods in May and in June. So July was a stabilization month. So maybe, towards the second half of July — yeah — toward the second half of July, have you seen improvement?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So there has been no disruption in terms of floods. So that is very key. There has been no disruption because of floods in Assam.

Rajiv Mehta — YES Securities — Analyst

Okay, great, great. And sir, in terms of liquidity now that we had to kind of address the stress in the book and we took upfront provisions and which led to a loss. So first quarter, we started off with a meaningful loss in the book. Would it kind of impact liquidity availability for growth? So while we would want to grow at 20%, 25%, but — with this loss, do you anticipate some kind of moderation of liquidity availability? Or I mean — or otherwise, I think the decision was taken to — taken in to confidence the lenders and the liquid should then come through.

Harvinder Pal Singh — Chairman of the Board, Managing Director

So Rajiv, when you talk of loss, which loss are you talking about, the consol loss?

Rajiv Mehta — YES Securities — Analyst

Yes, consol, yes.

Harvinder Pal Singh — Chairman of the Board, Managing Director

So consol has no bearing. So let me give you a perspective. I think Jugal will give you a very clean perspective about it. I think Jugal will give you a very clean perspective about that I think people have really not been able to understand because — I think you are also mentioning a lot. There is no loss as such even if we take out the unrealized gains through the fair value of the investments. So let Jugal clarify this to you, the numbers.

Rajiv Mehta — YES Securities — Analyst

Sure, sure, yes.

Jugal Kataria — Group Controller

Rajiv, there are two things that I think everybody should understand. One, that the valuation gain that we have booked is not theoretical. It is actual valuation gain. We have been investing into these businesses for last three, four years. Slowly, we have invested that money. And then we have not specifically raised money to invest into subsidiaries, so that money has gone out of our borrowed funds/equity. And the approximate cost of funding that we have invested into subsidiary over a period of time is close to 100 crore on costs. And in case we take it on lending basis, it is almost double. So almost 100 crore in costs and 200 crore on revenue side has impacted our P&L for the last three, four years, which is purely accounting.

On the other side, we have actually created value in those businesses. So to that extent, the value that we have created, we had accounted for that to show the real picture as to what the actual financials are. So if we are talking about stand-alone financials, there is a INR70 crore PBT, INR69 crore PBT; and INR60 crore of PAT, which is actually not theoretical. And on a consol basis also, that value had been created, though because of the accounting standard, we cannot reflect it there. So that is one point that you should be convinced that this is actual profit which is being accounted for technically for the standalone and financials. And on the other side, in case we eliminate both the credit cost and the valuation gain, we are still operationally into profit — close to about 45-odd crore of profit, operational profit, is there in case we eliminate both the valuation gain and this 5-odd percent of loss. So there’s no lost effort. The value that we have created, we have brought it on to record to show a right picture.

Rajiv Mehta — YES Securities — Analyst

Correct. So Jugal, how frequently will you keep on revaluing the investments in subsidiaries? So this was the first time we did to reflect the fair value of our investment. So would this be an annual phenomena? Or so how do we go about taking incremental up or down in the value in the P&L going forward?

Jugal Kataria — Group Controller

So we are still in the process of discussing it with the auditor. As per standard, it has to be done on every reporting date, but we are still in the process of finalizing that, unless there is a meaningful up or down, should we do it at every reporting date, once a year and on. We will have more clarity by the end of next quarter.

Rajiv Mehta — YES Securities — Analyst

Got it. And I think sir spoke about 30%, 35% growth. So sir, even in this year, are we looking at 25%, 30% growth FY ’23? [Indecipherable] Okay. And if that comes through, would we require capital by the end of the year?

Harvinder Pal Singh — Chairman of the Board, Managing Director

I don’t think so. I think we are profitable technically. Or the other thing which we will probably do is the warrants have to get executed. So if required, we will roughly prepone our — one is because the end date is sometime in July ’23, but if required for growth, I think you will prepone the warrants before that. So technically we do not require any further capital [Indecipherable].

Rajiv Mehta — YES Securities — Analyst

Got it, got it. And sir, just last question about, ROAs, ROAs in FY ’24, because I believe that the true franchise efficiencies will reflect in FY ’24 when the credit costs will normalize and when also our spare operating capacity will come into play. Because with the growth coming, the costs will not increase along with that. So in FY ’24, what should be an ROA number that one can expect on a reasonable basis?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So it’s all positive. The way — I think, if somebody reads the result truly, I think it’s all been positive. My own sense is it will be north of about 2.75% to about 3% ROA for sure.

Rajiv Mehta — YES Securities — Analyst

Okay. Sure sir. Sir, thank you so much for answering all my questions. And best of luck sir. Yeah.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Vishwinath Singh, an investor. Please go ahead.

Unidentified Participant — — Analyst

My question is basically I just wanted to know. Can you shed some light on the 5,000 crores funding which we recently mentioned? How is this going to be utilized? And specifically now that you have subsidiaries also, right, can you also give us the breakup? Like if you are going to raise 5,000 crores, how are you going to utilize? And what exactly will be invested in the subsidiaries?

Jugal Kataria — Group Controller

So that is the enabling resolution that, whatever money we borrow and — whatever money we want to borrow through NCD route, we need to have an annual approval from the shareholders. So that was more like an enabling resolution that we want shareholders to pass. And that is the same amount, so at no point in time, our outstanding NCD can go beyond 5,000 crores as on today. So that is more like a enabling resolution that we have to pass every year at the shareholders’ meeting, but to achieve this year’s budget, we have to raise close to about 6,500-odd crore of money. We have already raised 1,300-odd crore in the first quarter and have received another of 500-odd crore till date post first quarter. So we are on track and sitting on 1,000 crore liquidity, so on track to raise the money to achieve budget, the year’s budget.

Unidentified Participant — — Analyst

Okay. And also, within subsidiaries, I think — I mean, as an investor, we are expecting more from the Satin Housing Finance because, as we understand, there is a lot of scope of growth from this business. So can you shed some light on, I mean, what is the expected growth in terms of percentage in terms of AUM which we can expect by the end of this year or maybe for next two years? How much growth do you expect in the Satin Housing Finance loan book?

Harvinder Pal Singh — Chairman of the Board, Managing Director

So housing has been growing at about 50-odd percent year-on-year. I — our sense is, I think, they will continue to do that in the next couple of years to about 50%, 60% growth because the base has been small. That will keep on continuing, so I think — whatever we require in terms of capital for them, I think we’ll be able to put it across to the parent company…

Unidentified Participant — — Analyst

Okay. Sir, you like mentioned 50%, I mean, but is that tracking the financials or the numbers for the competitors? I think, as the portfolio — where we stand, right, shall we — shouldn’t we expect like 100% growth year-on-year? Or is it that we are being more conservative just to see how the market goes and then go for the full…

Harvinder Pal Singh — Chairman of the Board, Managing Director

You’re talking about housing.

Unidentified Participant — — Analyst

Yes, specifically for housing finance, yes, correct.

Harvinder Pal Singh — Chairman of the Board, Managing Director

See, we’ve always been very prudent and conservative in how we go forward because you never know when a crisis do arise and everything. And thankfully, during this crisis, since we had built up a very solid portfolio in housing, we had a 100% collection efficiency. There was absolutely no collection efficiency going down or GNPA coming in. So I think that is probably the pure reason why I think housing has been one of our stars and which reflects in the valuation which we’ve done. So I think, going forward, we would like to have more stress on portfolio quality rather than looking at numbers, numbers we’ll achieve in any which ways maybe two years hence or maybe one year hence, but portfolio quality is probably the best thing which we want to really look at across all the subsidiaries as well as the parent company —

Unidentified Participant — — Analyst

Correct. So like 50% which you mentioned, I mean, it’s on the conservative side, right? I mean you can —

Harvinder Pal Singh — Chairman of the Board, Managing Director

Well, you can interpret it in any which way.

Unidentified Participant — — Analyst

No. I mean I just wanted to like — I mean so you’re saying it’s a reasonable 50% growth which we can expect. Or it’s the maximum growth?

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes. 50% is something which will happen, definitely. I think, anything more than that, I think you win on that and I’ll lose on that.

Unidentified Participant — — Analyst

Yes. No. I mean, as an investor, I mean, I have high hopes from Satin Housing Finance because I’ve been tracking this business closely and I see a lot of potential in the next few years. So I was particularly interested in how we are trying to drive the growth of this housing finance.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Hopefully, we won’t let you down. I think that probably can be seen in the valuation which has probably come in. So I think it will — definitely will be very clear.

Unidentified Participant — — Analyst

Definitely. All the best for the future sir. Thank you so much answering.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Thank you so much.

Operator

Thank you. The next question is from the line of Ronak Sangui, a retail investor.

Unidentified Participant — — Analyst

Hi, good morning — good morning everyone. I had most of my questions answered in your conversation with Rajiv from Yes Securities, but I have a few other questions. One is on this fair value revaluation which we have done or valuation we have done. From a regulatory and lenders perspective, will they sort of look at from a positive perspective in terms of increase in net worth? Because otherwise adjusted net worth has come down considerably due to the write-offs and the 328 crores of provisioning which you have taken from — in the current quarter. So that is an important point which I just wanted to understand.

Jugal Kataria — Group Controller

Our understanding is that the regulation permits that. And as I explained in reply to Rajiv’s question, that this is the actual valuation that we have created. And because of accounting, the notional cost of that fund that we have invested is close to about 100 crore on costs and 200 crore on revenue side. So unless we do this kind of accounting, we’ll continue to have negative carry in the stand-alone financials, and to that extent, the stand-alone numbers will always be understated. And we have tried to explain that in our investor presentation, and then we’ll communicate and explain that to all the stakeholder, that this is the right way of looking at the performance of the company both on stand-alone and consolidated bases. The value is actually being created. And we want to scale up these subsidiaries out of our own resources for some more time. So we feel that this is the right approach to do the accounting. We don’t see any challenge from lenders side or regulator. We will explain that. We have discussed it with the auditor and taken all the financial help to reach this conclusion, so we’ll be able to communicate that to all the stakeholders positively.

Unidentified Participant — — Analyst

Sure. And I just also wanted to understand the write-off of INR275 crore and ARC sale of INR100 crores this year. This is like close to INR375 crores being taken off the book from — practically. So I just wanted to understand. On the INR375 crores, how much has been from the restructured book? Or these are all from the GNPAs.

Harvinder Pal Singh — Chairman of the Board, Managing Director

I think the restructured book, out of this INR375 crores, was close to about INR225 crores, about — Yes, about INR225 crores [Indecipherable].

Unidentified Participant — — Analyst

Okay. So because I was seeing that the slippages in the quarter from — primarily from the restructured book would be then around a net of 180 crores, and some 45 crores would have sort of come back. I’m just doing a basic math from INR217 crores. It looks —

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes, yes, so — yes, yes, exactly, exactly. That is what the real math works out to be right now basically.

Unidentified Participant — — Analyst

Yes, yes, yes. And the pre-provisioning operating profit. And I am just talking about the operating profit because, in the press release, the pre-provision operating profit also includes the fair value. It’s obviously not an operating profit per se. It’s coming at around 47 crores. Is my math correct there?

Jugal Kataria — Group Controller

So broadly, yes. Our PBT is about INR70 crores. So if we exclude both the fair valuation of INR351 crore and credit costs of 324 crore, so — this number is close to about INR45 crore, INR47 crore. So your understanding is correct to that extent.

Unidentified Participant — — Analyst

Okay, yes. Thank you. Thank you very much.

Harvinder Pal Singh — Chairman of the Board, Managing Director

Yes. Ronak, just to add up. I think when you look at these numbers, I think this is what — we mentioned it to Rajiv and to you also, I think. This is exactly what it is. So technically it’s not an operational loss. It’s an operational profit of about INR45 crores, practically pre operating profit of about INR45 crores. So where people do understand that it’s an operational loss, it’s not that.

Unidentified Participant — — Analyst

Yes, yes, yes. Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Ms. Aditi Singh, Head, Strategy, for closing comments.

Aditi Singh — Head Strategy

Good morning, everyone. I take this opportunity to thank everyone for joining this call. And it was a very intense call and I hope we’ve been able to address all your queries and explain everything, to your satisfaction. However, should you still need some more information, you can reach out to me. My name is Aditi Singh, and I head the strategy for Satin Creditcare. You can also reach out to my colleague, Ms. Shweta Bansal, DGM Investor Relations. And we shall be able to provide you with whatever information we shall be able to within the permitted limits. And any clarification you want, we’re happy to discuss. Stay healthy. Stay safe. Have a great day. Bye-bye.

Operator

[Operator Closing Remarks]