Q1 2027 PNB Housing Finance Ltd Earnings Call

August 5, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to the PNB Housing Finance Limited Q1 FY27 earnings conference call. As a reminder, all participant lines will remain in listen-only mode.

Operator: Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q1 FY2027 earnings conference call. As a reminder, all participant lines will remain 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 the operator by pressing star then 0 on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Ms. Niti Gupta, investor relations manager, for opening remarks. Thank you, and over to you.

Operator: Ladies and gentlemen, good day, and welcome to the PNB Housing Finance Limited Q1 FY2027 earnings conference call. As a reminder, all participant lines will remain 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 the operator by pressing star then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Ms. Mita Gupta, Investor Relations Manager, for opening remarks. Thank you, and over to you.

Speaker #1: There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star, then zero, on your touch-tone telephone.

Speaker #1: Please note that this conference is being recorded. I will now hand the conference over to Ms. Mithi Gupta, Investor Relations Manager, for opening remarks.

Speaker #1: Thank you, and over to you.

Speaker #2: Thank you, Riyan. Good morning and welcome, everyone. We are here to discuss PNB Housing Finance Q1 FY26–27 results. You must have seen our business and financial numbers in the presentation and the press release shared with the exchanges, which are also available on our website.

Miti Gupta: Thank you, Ryan. Good morning, and welcome, everyone. We are here to discuss PNB Housing Finance Q1 FY2026-2027 results. You must have seen our business and financial numbers in the presentation and the press release shared with the exchanges and are also available on our website. With me, we have our management team led by Mr. Ajai Kumar Shukla, managing director and CEO of the company. We will begin this call with the performance update by the management team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements which exemplify our judgment and forward future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.

Miti Gupta: Thank you, Ryan. Good morning, and welcome, everyone. We are here to discuss PNB Housing Finance Q1 FY 2026-2027 results. You must have seen our business and financial numbers in the presentation and the press release shared with the exchanges and are also available on our website. With me, we have our management team led by Mr. Ajai Kumar Shukla, Managing director and CEO of the company. We will begin this call with the performance update by the management team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements which exemplify our judgment and forward future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statements to reflect future events or circumstances.

Speaker #2: With me, we have our management team, led by Mr. Ajay Kumar Shukla, Managing Director and CEO of the company. We will begin this call with the performance update by the management team, followed by an interactive Q&A session.

Speaker #2: Please note, this call may contain forward-looking statements which exemplify our judgment and forecast future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations.

Speaker #2: 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 45 of the investor presentation.

Miti Gupta: A detailed disclaimer is on slide 45 of the investor presentation. With this, I will now hand over the call to our managing director and CEO, Mr. Ajai Kumar Shukla. Over to you, sir.

Speaker #2: Will this? I will now hand over the call to our Managing Director and CEO, Mr. Ajay Kumar Shukla. Over to you, sir.

Speaker #3: Thank you, Mithi. Good morning, everyone, and thank you for joining us today. Before I discuss our performance for the quarter, let me briefly touch upon the industry environment.

Ajai Kumar Shukla: Thank you, Niti. Good morning, everyone, and thank you for joining us today. Before I discuss our performance for the quarter, let me briefly touch upon the industry environment. India entered financial year 2027 from a position of relative macroeconomic strength, although external risks increased materially during Q1. Domestic demand remained resilient, supported by government infrastructure spending, healthy banking system liquidity, and steady service activity. However, geopolitical tension in West Asia, volatile crude oil prices, and uncertainty around the monsoon led to a slightly more cautious growth outlook. The housing finance sector particularly continues to benefit from strong structural drivers, including rising urbanization, increasing home ownership, aspirations, favorable demographics, and continued government focus on affordable housing. Demand remained healthy across retail mortgage segments during the quarter, particularly in affordable and emerging markets, which continue to offer significant growth opportunities.

Speaker #3: India entered financial year 2027 from a position of relative macroeconomic strength, although external risks increased materially. During Q1, domestic demand remained resilient, supported by government infrastructure spending.

Speaker #3: Healthy banking system liquidity and steady service activity. However, geopolitical tension in West Asia, volatile crude oil prices, and uncertainty around the monsoon have led to a slightly more cautious growth outlook.

Speaker #3: The housing finance sector, particularly, continues to benefit from strong structural drivers, including rising urbanization, increasing homeownership aspirations, favorable demographics, and continued government focus on affordable housing.

Speaker #3: Demand in retail remained healthy across retail mortgage segments during the quarter, particularly in affordable and emerging markets, which continue to offer significant growth opportunities. During the quarter, the RBI maintained the policy repo rate at 5.25%, providing a stable interest rate environment for borrowers.

Ajai Kumar Shukla: During the quarter, the RBI maintained the policy repo rate at 5.25%, providing a stable interest rate environment for borrowers, while also announcing measures to support liquidity and funding access within the financial system. Further, RBI revised its financial 2027 GDP growth forecast from 6.9% to 6.66% in its June 2026 policy review, reflecting concerns around higher energy costs, supply chain disruptions, and weaker external demand. Nevertheless, India continues to be among the fastest-growing major economies, with private consumption and services providing key support. The quarter was also characterized by heightened global uncertainty arising from the US-Iran conflict, which led to higher crude oil prices, increased market volatility, and tighter liquidity conditions. Despite these external challenges, India's macroeconomic fundamentals remain resilient, and housing demand continued to hold up well. Now coming to PNB Housing Finance.

Speaker #3: While also announcing measures to support liquidity and funding access within the financial system. Further, RBI revised its financial year '27 GDP growth forecast from 6.9% to 6.66% in its June 2026 policy review.

Speaker #3: Reflecting concerns around higher energy costs, supply chain disruptions, and weaker external demand. Nevertheless, India continues to be among the fastest-growing major economies, with private consumption and services providing key support.

Speaker #3: The quarter was also characterized by heightened global uncertainty arising from the US-Iran conflict, which led to higher crude oil prices, increased market volatility, and tighter liquidity conditions.

Speaker #3: Despite these external challenges, India's macroeconomic fundamentals remain resilient and housing demand continued to hold up well. Now, coming to PNB Housing Finance, we have begun financial '27 on a steady note, reflecting the strength of our retail-focused business model and disciplined execution.

Ajai Kumar Shukla: We have begun financial 2027 on a steady note, reflecting the strength of our retail-focused business model and disciplined execution. Further, kindly note that starting this quarter, disbursements are being recognized based on check realization rather than check handover basis. On a comparable check handover basis, disbursement delivered a strong 56% YOY growth, reflecting sustained business momentum. Disbursement growth should normalize from Q2 onward and should reflect a strong growth trajectory going forward. Post the one-time impact of this transition, disbursement for Q1 2027 grew at 18% YOY at INR 5,882 crore. At segmental level, prime and emerging market has seen a double-digit growth at year-on-year level and stood at INR 3,083 crore and INR 2,029 crore for Q1 2027.

Speaker #3: Further, can you note that starting this quarter, disbursements are being recognized based on sanction realization rather than check handover basis. On a comparable check handover basis, disbursements delivered a strong 56% YoY growth, reflecting sustained business momentum.

Speaker #3: Disbursement growth showed normalization from Q2 onward and should reflect a strong growth trajectory going forward. All the one-time impact of this transition, disbursements for Q1 '27 grew at 18% year-on-year to ₹5,882 crore.

Speaker #3: At the segmental level, prime and emerging markets have seen double-digit growth. Year-on-year, these stood at ₹3,083 crore and ₹2,029 crore for Q1 FY27.

Speaker #3: We did disbursements of ₹555 crore in the affordable segment, which is currently less than the target level. We are actively focusing on increasing the productivity of affordable branches, while select prime and emerging market branches have also started contributing to the affordable business.

Ajai Kumar Shukla: With a disbursement of INR 555 crore in affordable segment, which is currently less than the target level, we are actively focusing on increasing the productivity of affordable branches, while select prime and emerging market branches also started contributing to affordable business. This number which I quoted, INR 555 crore, is basically net. As I said that we have now transitioned from gross to net. Overall loan book grew by 15% YOY to INR 89,670 crore as on 30 June 2026. While the retail loan portfolio increased by 16% YOY to INR 89,178 crore. The affordable and emerging market segment continued to be our key growth engine, growing 27% YOY and contributing 41% of retail portfolio. We remain on track to increase the contribution to 45% by the end of 2027.

Speaker #3: This number, which I quoted as ₹555 crore, is basically net, as I said that we have now transitioned from gross to net. The overall loan book grew by 15% year-on-year to ₹89,670 crore as on 30th June 2026.

Speaker #3: While the retail loan portfolio increased by 16% year-over-year to ₹89,178 crore, the affordable and emerging market segment continued to be our key growth engine, growing 27% year-over-year and contributing 41% of the retail portfolio. We remain on track to increase the contribution to 45% by the end of FY27.

Speaker #3: I am pleased to share that, as part of our new initiative to augment high-yield portfolio growth, we disbursed ₹71 crore under the Emerging Developer Finance Program.

Ajai Kumar Shukla: I'm pleased to share that as part of our new initiative to augment high yield portfolio growth, we disbursed INR 71 crore under emerging developer finance program. We also started affordable business from selected prime and emerging branches, successfully disbursed in first month of the quarter, which was June, almost INR 30 crore in affordable business from these branches. Also, as part of our growth strategy, we have commenced full buyout transactions and acquired loan assets aggregating to INR 146 crore during the quarter. These initiatives will support faster scale-up of the loan book by enhancing portfolio yield and maintaining portfolio quality. We are particularly pleased to have facilitated over 7,000 subsidies under the PMAY 2.0, reinforcing our commitment to affordable housing and supporting the government vision of housing for all. Our corporate loan book stood at INR 493 crore as on 30 June 2026, with dispersal of almost INR 215 crore during Q1 2027.

Speaker #3: We also started affordable business from selected prime and emerging branches, successfully disbursed in the first month of the quarter, which was June, almost ₹30 crore.

Speaker #3: In affordable business from these branches. Also, as part of our growth strategy, we have commenced full buyout transactions and acquired loan assets aggregating to ₹146 crore during the quarter.

Speaker #3: These initiatives will support faster scale-up of the loan book, while enhancing portfolio yield and maintaining portfolio quality. We are particularly pleased to have facilitated over 7,000 subsidies under the PMAY 2.0, reinforcing our commitment to affordable housing and supporting the government’s vision of housing for all.

Speaker #3: Our corporate loan book stood at ₹493 crore as on 30 June '26, with disbursals of almost ₹215 crore during Q1 '27. We continue to accelerate our digital transformation agenda by reimagining the customer journey and core operations with a digital-first mindset.

Ajai Kumar Shukla: We continue to accelerate our digital transformation agenda by reimagining customer journey and core operation with a digital-first mindset. Our focus on conversational AI and document intelligence is helping simplify processes, enhance service quality, improve responsiveness, and strengthen operational efficiency. During the quarter, we successfully completed voice AI proof of concept for the sanction, but undisbursed pool and pre-due collections. With encouraging results, while AI-powered policy and knowledge assistants are currently under evaluation. Wanted to share that 100% of our first dispersal are happening through our new LOS platform, which we call as SFDC. More than 70% of our business is now being onboarded through our in-house onboarding app, which is Infinity app. More than 2,600 e-sign executed through our Digirity platform. We also remain focused on building proprietary AI capabilities as reflected in our in-house competitive intelligence platform.

Speaker #3: Our focus on conversational AI and document intelligence is helping simplify processes, enhance service quality, improve responsiveness, and strengthen operational efficiency. During the quarter, we successfully completed a voice AI proof of concept for the sanctioned but undisbursed pool and pre-due collections.

Speaker #3: With encouraging results, while AI-powered policy and knowledge assistance assistants are currently under evaluation. I wanted to share that 100% of our first disbursals are happening through our new LOS platform, which we call SFDC.

Speaker #3: More than 70% of our business is now being onboarded through our in-house onboarding app, which is the Infinity app, and more than—sorry—through our Legality platform.

Speaker #3: We also remain focused on building proprietary AI capabilities, as reflected in our in-house competitive intelligence platform. Alongside enabling paperless operations and supporting our sustainability objectives, these initiatives are helping us deliver a more seamless customer experience and create long-term value for all stakeholders.

Ajai Kumar Shukla: Alongside enabling paperless operation and supporting our sustainability objectives, these initiatives are helping us deliver a more seamless customer experience and create long-term value for all stakeholders. As far as geographical presence, on the distribution front, we added 12 new branches during the quarter, taking our network to 404 branches. Early results from the co-located branches models have been encouraging. As far as asset quality, asset quality continues to remain one of our key strengths. Gross NPA remains less than 1%, which is 0.95%. Minor increase seen in 30 and 90 plus is cyclical in nature and are expected to come down in Q2. During the quarter, a legacy account was classified as fraud.

Speaker #3: As far as geographical presence is concerned, on the distribution front, we added 12 new branches during the quarter, taking our network to 404 branches. We have also begun leveraging our selective prime and emerging markets branch network to expand our affordable business, and early results from the co-located branches model have been encouraging.

Speaker #3: As far as asset quality, asset quality continues to remain one of our key strengths. Gross NPA remains less than 1%, specifically at 0.95%.

Speaker #3: A minor increase seen in 30 and 90 plus is cyclical in nature and is expected to come down in Q2. During the quarter, a legacy account was classified as fraud but the exposure had already been fully provided for in the year 2022-23 itself.

Ajai Kumar Shukla: The exposure had already been fully provided in the year 2022/2023 itself. Therefore, it has no incremental financial impact on the company. Recoveries remained healthy at INR 67 crore from written-off pool, resulting a negative write-offs of 12 basis points during the quarter. The company is now left with written-off pool of around INR 340 crore in retail. As far as margin is concerned, our spread remained stable sequentially at 2.12%, while NIM moderated by 19 bps QOQ to 3.50%, out of which 12 bps is attributable to increase in leverage and 7 bps into impact of Q4 2026. Our portfolio yield improved marginally to 9.48% for Q1. We witnessed an improvement in incremental yield across all businesses vertical, which will support future margin performance. Marginal increase in cost of borrowing to 7.36% during Q1, financial year 2027 compared with 7.35% in previous quarter.

Speaker #3: And therefore, it has no incremental financial impact on the company. Recoveries remained healthy at ₹67 crore from written-off pool, resulting in a negative rate cost of 12 basis points during the quarter.

Speaker #3: The company is now left with a written-off pool of around ₹340 crore in retail. As far as margin is concerned, our spread remained stable sequentially at 2.12%, while NIM moderated by 19 bps Q-on-Q to 3.50%, out of which 12 bps is attributable to increase in leverage and 7 bps is due to the impact of Q4 26.

Speaker #3: Our portfolio yield improved marginally to 9.48% for Q1. We witnessed an improvement in incremental yield across all business verticals, which will support future margin performance.

Speaker #3: Marginal increase in cost of borrowing to 7.36% during Q1. Financial year 27 compared with 7.35% in previous quarter. Incremental cost of borrowing increased by 18 bips primarily due to higher tighter liquidity condition and volatility in financial market.

Ajai Kumar Shukla: Incremental cost of borrowing increased by 18 bps, primarily due to higher tighter liquidity condition and volatility in financial market. As far as profitability is concerned, as a result, profit after tax for the quarter grew by 4% YOY to INR 557 crore, leading to ROA of 2.37% and ROE of 11.44%. Our capital position remains strong with a capital adequacy ratio of 28.26% and Tier 1 capital ratio of 27.87% as of June 2026. With a strong balance sheet improving operating efficiencies, accelerating digital transformation, continued focus on portfolio quality, we remain well-positioned to deliver sustainable growth in the coming quarter. Just to conclude and summarize the conversation, let me again reiterate that what we expect that margin seems to be bottomed out. From H2 onwards, gradually there should be improvement in margin. Yield is also bottomed out. It would improve by change in mix.

Speaker #3: As far as profitability is concerned, as a result, profit after tax for the quarter grew by 4% year-on-year to ₹557 crore, leading to an ROF of 2.37% and an ROE of 11.44%.

Speaker #3: Our capital position remains strong, with a capital adequacy ratio of 28.26% and a Tier One capital ratio of 27.87% as of June 26. With a strong balance sheet, improving operating efficiencies, accelerating digital transformation, and continued focus on portfolio quality, we remain well positioned to deliver sustainable growth in the coming quarter.

Speaker #3: Just to conclude and summarize the conversation, let me again reiterate that what we expect is that margin seems to have bottomed out, and from the second half onward there should be a gradual improvement in margin.

Speaker #3: Yield has also bottomed out, and it would improve with a change in mix. As far as growth in, you know, quarter one, primarily what worked well for us was improvement in productivity by use of technology and enhancement in distribution, strengthening of our team, particularly in the affordable and emerging market segment.

Ajai Kumar Shukla: As far as growth in Q1, primarily, what worked well for us, improvement in productivity by use of technology and enhancement in distribution, strengthening of our team, particularly in affordable and emerging market segment. July over June is much better in affordable under new leadership team, particularly new CBO. Driving additional volume through existing prime and emerging markets, which has started contributing almost 15% to 18% of affordable business in July itself. Focused approach on low-performing branches. Expecting Q2 to be much better than Q1, particularly in affordable business. Maintaining full year guidance of 18% to 20% overall book growth. Maintaining growth guidance of 50% to 60% in affordable loan book. Thank you so much. Now I would like to hand over call to our CFO, Mr. Vinay Gupta.

Speaker #3: July over June is much better in affordable under the new leadership team, particularly the new CBO. We're driving additional volume through the existing prime and emerging market, which has started contributing almost 15 to 18% of affordable business in July itself.

Speaker #3: Focused approach on low-performing branches. Expecting Q2 to be much better than Q1, particularly in the affordable business. Maintaining full-year guidance of 18% to 20% overall book growth.

Speaker #3: Also, we are maintaining growth guidance of 50 to 60% in the affordable loan book. Thank you so much. Now, I would like to hand over the call to our CFO, Mr. Vinay Gupta.

Speaker #2: Thank you, sir. Good morning, everyone. I would now like to talk about Q3 financial parameters. As mentioned by MD, after the one-time impact of change in disbursement recognition, our disbursements grew 18% year-on-year to ₹5,882 crore in Q1.

Vinay Gupta: Thank you, sir. Good morning, everyone. I would now like to talk about Q3 financial parameters. As mentioned by MD, after one-time impact of change in disbursement recognition, our disbursements grew 18% year on year to INR 5,882 crore in Q1. We will catch up on our growth rate from next quarter onwards. I'm happy to share that our run-off rates have also stabilized to around 17% versus 19% to 20%, which we witnessed in the last few quarters. Our retail portfolio also grew 16% year on year to INR 89,180 crore. As mentioned earlier, on check handover basis, we have delivered a very strong quarter. Our disbursements grew 56% year on year, and our loan book would have grown at around 18%, in line with our guidance. We should catch up on our guided numbers, guided growth rates from the next quarter onwards.

Speaker #2: We will catch up on our growth rate from next quarter onwards. Further, I am happy to share that our runoff rates have also stabilized to around 17%, versus 19% to 20% which we witnessed in the last few quarters.

Speaker #2: Our retail portfolio also grew 16% year on year, to ₹89,180 crore. As mentioned earlier, on a cheque handover basis, we have delivered a very strong quarter. Our disbursements grew 56% year on year, and our loan book would have grown at around 18%, in line with our guidance.

Speaker #2: We should catch up on our guided numbers and guided growth rate from the next quarter onwards. During the quarter, our net interest income grew 6%, and our gross margin grew 9%.

Vinay Gupta: During the quarter, our net interest income grew 6%, and our gross margin grew 9%. As mentioned in the previous quarter, our yield should start improving from Q1 onwards. Happy to share that this quarter we delivered a marginal improvement in yield at 9.48% versus 9.47% in previous quarters. Due to ongoing global geopolitical uncertainty, our cost of borrowing also witnessed marginal increase to 7.36% from 7.35%. This is primarily due to increase in our incremental cost of borrowing by around 18 basis points. Despite the prevailing headwinds, we maintained our spread at 2.12%, demonstrating resilience in our business model and disciplined pricing approach. The 19 bps moderation in NIM during Q1 relative to Q4 was largely attributable to higher leverage and lower yield on total assets.

Speaker #2: As mentioned in the previous quarter, our yield should start improving from Q1 onwards. Accordingly, happy to share that this quarter we delivered a marginal improvement in yield at 9.48% versus 9.47% in the previous quarter.

Speaker #2: However, due to ongoing global geopolitical uncertainty, our cost of borrowing also witnessed a marginal increase to 7.36% from 7.35%. This is primarily due to an increase in our incremental cost of borrowing by around 18 basis points.

Speaker #2: Despite the prevailing headwinds, we maintained our spread at 2.12%, demonstrating resilience in our business model and a disciplined pricing approach. The 19 basis points moderation in NIM during Q1 relative to Q4 was largely attributable to higher leverage and lower yield on total assets.

Speaker #2: Further, there was a true-up for Q4, which was basically due to monthly conversion versus our number of days conversion, as we saw an inverse relationship in Q4 which got trued up during this quarter.

Vinay Gupta: There was a true-up for Q4, which was basically due to monthly conversion versus our number of days conversion, as we saw our inverse relationship in Q4, which got trued up during this quarter. We feel NIM has largely bottomed out and should start improving from H2 of this financial year. Operating expenses increased 10% year on year to INR 237 crore from INR 216 crore in Q1 last year, primarily due to manpower addition and annual compensation reviews. Operating efficiency continues to improve, with Opex to ATA declining by 9 basis points to less than 1% now versus 1.08% in Q4 FY2026. Supported by healthy operating leverage, our pre-provision operating profit also grew 9% year on year to INR 689 crore. On asset quality, gross NPA continued to remain less than 1% mark and stood at 0.95% as of 30 June 2026.

Speaker #2: Going forward, we feel NIM has largely bottomed out and should start improving from the second half of this financial year. Operating expenses increased 10% year-on-year to ₹237 crore from ₹216 crore in Q1 last year, primarily due to manpower addition and annual compensation revisions.

Speaker #2: However, operating efficiency continues to improve, with opex to AUM declining by 9 basis points to less than 1% now, versus 1.08% in Q4 FY26.

Speaker #2: Supported by healthy operating leverage, our pre-provision operating profit also grew 9% year-on-year to ₹689 crore. On asset quality, gross NPA continued to remain below the 1% mark and stood at 0.95% as of June 30, 2026.

Speaker #2: The company continued to deliver healthy recoveries from its return of pool, recovering ₹67 crore during the quarter, which translated into a negative credit cost of 12 basis points.

Vinay Gupta: Company continued to deliver healthy recoveries from its written-off pool, recovering INR 67 crore during the quarter, which translated into a negative credit cost of 12 basis points. PAT for the quarter grew 4% year-on-year to INR 557 crore. ROA stood at 2.37%, while ROE stood at 11.44% for the quarter. Balance sheet remains well capitalized. Capital adequacy ratio is at 28.26%. Our net worth is at INR 19,800 crore, with book value now increasing to around INR 760. With strong balance sheet, healthy capitalization, robust asset quality and continued focus on operational efficiency, we remain confident in our ability to deliver sustainable and profitable growth. With that, I conclude my remarks. Thank you for your continued support. With this, we will now open the call for Q&A.

Speaker #2: PAT for the quarter grew 4% year-on-year to ₹557 crore. ROA stood at 2.37%, while ROE stood at 11.44% for the quarter. The balance sheet remains well-capitalized; the capital adequacy ratio is at 28.26%. Our net worth is at ₹19,800 crore, with book value now increasing to around ₹760.

Speaker #2: With a strong balance sheet, healthy capitalization, robust asset quality, and continued focus on operational efficiency, we remain confident in our ability to deliver sustainable and profitable growth.

Speaker #2: With that, I conclude my remarks. Thank you for your continued support, and with this, we will now open the call for Q&A.

Speaker #1: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone.

Vinay Gupta: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wish to ask a question, please press star and one. We take the first question from the line of Viral Shah from IIFL Capital. Please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wish to ask a question, please press star and one. We take the first question from the line of Viral Shah from IIFL Capital. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants who wish to ask a question, please press star and one. We will take the first question from the line of Viral Shah from IIFL Capital. Please go ahead.

Speaker #3: Yeah, hi. Thanks for the opportunity to allow me to ask the question. Hello, am I audible?

Viral Shah: Yeah, hi. Thanks for the opportunity to allow me to ask the question. Hello. Am I audible?

Speaker #2: Yeah, yeah, Viral, you are audible.

Ajai Kumar Shukla: Yes.

Ajai Kumar Shukla: Yeah.

Operator: Yeah.

Ajai Kumar Shukla: Yeah, Viral you're audible.

Speaker #3: Yeah good morning team. So I have three questions. One is first on the margins right. So two parts over there. How should we look at say yields and cost of fund trajectory from here on say of course all of this is assuming the macro kind of remains stable in the near term but more importantly does the thesis of say the gradual nim expansion as the book makes kind of changes with the scale up of your affordable emerging CF etcetera more from a medium term perspective not the next two three quarters but say over the next two years does that thesis kind of still hold true so that was my first question.

Viral Shah: Yeah. Good morning, team. I have three questions. One is first on the margins, right? Two parts over there. How should we look at, say, yields and cost of fund trajectory from here on, say, of course, all of this is assuming the macro kind of remains stable in the near term, but more importantly, does the thesis of, say, the gradual NIM expansion as the book mix kind of changes with the scale-up of your affordable emerging CF, et cetera, more from a medium-term perspective not the next two, three quarters, but say over the next two years, does that thesis kind of still hold true? That was my first question.

Speaker #2: Yeah so yeah Viral so thank you so much Viral for joining the call and asking. You know as I said in my conversation that we expect that margin our bottomed out and yield is also bottomed out and cost of fund also we we strongly believe that you know it should it should it is also bottomed out.

Ajai Kumar Shukla: Yeah. Thank you so much, Viral, for joining the call and asking. As I said in my conversation that we expect that margin are bottomed out and yield is also bottomed out and cost of fund also, we strongly believe that it is also bottomed out. Gradually, maybe H2 onward, we will see some improvement. I would say medium to long-term perspective, I think this should help in the margin for the organization. As far as the mix is concerned, I think you rightly said that we are positioning ourselves in right mix approach. Construction finance portfolio, as I said earlier also, we will restrict it to 3% of my book in this year which is 2027, which will help us in overall improvement in my basically margin.

Speaker #2: So, gradually, maybe H2 onward, we will see some improvement and I would say from a medium to long-term perspective, I think this should help to, you know, in the margin for the organization.

Speaker #2: As far as the mix is concerned I think you you you rightly said that we are positioning ourselves in right mix approach. So you know construction finance portfolio as I said as I said earlier also we will restricting to 3% of my incremental you know 3% of my book in in in this year which is 27.

Speaker #2: This will help us in the overall improvement in my, basically, margin. Also, the mix of affordable and emerging will improve; like we saw, currently we are placed at 41%, which used to be less than 40% earlier.

Ajai Kumar Shukla: Also the mix of affordable and emerging will improve like we saw that currently we are placed at 41%, which used to be less than 40% earlier and expecting to touch 45% by the end of this year. Which will further, if I talk about two-year horizon, it would be nearly 50% of my overall book in emerging and affordable.

Speaker #2: And expecting to touch 45% by the end of this year, and which will further—if I talk about a two-year horizon, it would be nearly 50% of my overall book in emerging and, you know, affordable.

Speaker #3: Got it. No, that's very clear. And the second, I would say, question is more with regards to growth. I know you and Vinay also pointed out that of course this quarter there was this recognition change, but when I look at, say, the gross number, right...

Viral Shah: Got it. No, that's very clear. On the second, I would say question is more with regards to growth. I know you and Vinay also pointed out that of course this quarter there was this recognition change. When I look at, say, the gross number, right? Gross number is a very strong number of 55% plus disbursement growth. Now, this is not lost, right? This will come through in Q2. One is if I look at, say, Q2 with this kind of a trajectory and of course, there is also somewhat further, of course, growth that will come through on this number. Should we expect the gross number to be whatever it is currently in this quarter plus the growth and that trajectory to sustain in the near term?

Speaker #3: So, gross numbers show a very strong growth of 55% plus in disbursement. Now, this is not lost, right? This will come through in the second quarter.

Speaker #3: So, one is, if I look at, say, the second quarter with this kind of a trajectory, should we—and of course, there is also somewhat further growth that will come through on this number.

Speaker #3: Should we expect the gross number to be whatever it is currently in this quarter plus the growth, and that trajectory to sustain in the near term?

Speaker #2: Yeah, I think, you know, if I talk about Q2, I'm sure that you're asking about next quarter, which is the running quarter from Q1.

Ajai Kumar Shukla: Yeah, I think if I talk about Q2, I am sure that you are asking about next quarter, which is a running quarter from Q1. I think we will try to beat both the numbers, whether it is gross or net. I think net will also give us benefit of whatever hit we have taken in Q1 will give us fruit in Q2. Also we expect that our gross Q2 will also be much better than Q1. July already we have witnessed very good momentum in terms of gross and net.

Speaker #2: I think we will beat—we will try to beat—both the numbers, whether it's the gross or net. I think net will also give us the benefit of whatever hit we have taken in Q1; it will give us fruit in Q2.

Speaker #2: And also, we expect that our gross Q2 will also be much better than Q1. July, already we have witnessed very good, you know, momentum in terms of gross and net.

Speaker #3: Got it. And with that kind of a trajectory, your 18% to 20% loan growth guidance seems very conservative. Would that be a fair assessment?

Viral Shah: Got it. With that kind of a trajectory, Ajay, your 18% to 20% kind of loan growth guidance seems very conservative. Would that be a fair assessment?

Speaker #2: I think, you know, we are maintaining.

Ajai Kumar Shukla: I think-

Speaker #3: Coming down.

Viral Shah: Coming down.

Speaker #2: So, I think 18 to 20%—that's the guidance which we are going to, definitely. You know, the team is focusing on better growth than what we have given as guidance.

Ajai Kumar Shukla: I think 18% to 20%, that's the guidance which we have given. Definitely, team is focusing on better growth than what we have given guidance. I think we should do much better than what we have given guidance.

Speaker #2: I think we should do much better than what we have, you know, given as guidance.

Speaker #3: Got it. And my last question is basically on the micro housing. You have mentioned that you have started it from this quarter. Of course, in terms of, say, the contribution and the P&L also, it will take quite some time.

Viral Shah: Got it. My last question is basically on the micro-housing. You have mentioned that you have started it from this quarter. Of course, in terms of, say, the contribution and the P&L also, it will take quite some time. Just wanted to get a sense of about how are you going about building this book in terms of are there separate branches, how is the team, underwriting, sourcing, et cetera?

Speaker #3: I just wanted to get a sense of how you are going about building this book in terms of the separate branches. How is the team underwriting, sourcing, etcetera?

Speaker #2: So, you know, like we did the experiment and we got very good fruit in prime and emerging to source more affordable, and we got very good numbers in the month of July in prime and emerging of affordable.

Ajai Kumar Shukla: We did experiment and we got very good fruit in prime and emerging to source more affordable and we got very good number in the month of July in prime and emerging of affordable. We will also do currently micro-housing business from our affordable branches. I don't think at this point of time we need to open more number of branches. We will leverage our existing branches to contain our OpEx also because the key metrics is to be watched. In Q2, the policy was already formalized. It is rolled out. People have started sourcing, but real source you will be able to see from H2 onward.

Speaker #2: We will also do current micro housing business from our affordable branches. I don't think, at this point in time, we need to open more branches.

Speaker #2: We will leverage our existing branches to contain our opex also because the key metric is to be to be you know watched. You know in Q2 the policy was already already formalized.

Speaker #2: It is rolled out. People have started sourcing. But the real fruit you will be able to see from, you know, H2 onward.

Speaker #3: Got it. Thanks, that's very clear. I'll come back if I have any other questions. Congrats and all.

Viral Shah: Got it. Thanks. That's very clear. I'll come back if at all I have other questions. Congrats and all the best.

Speaker #2: Thank you Viral.

Ajai Kumar Shukla: Thank you, Viral.

Speaker #1: Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant. We will take the next question from the line of Sameer Bhise from Diamond Asia.

Ajai Kumar Shukla: Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant. We take the next question from the line of Sameer Bhise from Dymon Asia. Please go ahead.

Operator: Thank you. Ladies and gentlemen, in the interest of time and fairness to others, we request you to restrict to two questions per participant. We take the next question from the line of Sameer Bhise from Dymon Asia. Please go ahead.

Speaker #1: Please go ahead.

Speaker #3: Yeah, hi. Thank you for the opportunity, sir. I just have a couple of questions. Firstly, on the leverage impact on margins for this quarter—Vinay, can you guide us through how it has played out? Because if I see, the debt-to-equity has moved just from 3.7 to 3.72, but the NII impact looks a tad sharp.

Sameer Bhise: Yeah, hi. Thank you for the opportunity, sir. Just had a couple of questions. Firstly, on the Leverage impact on margins for this quarter. Vinay, can you just guide us through how it has played out? If I see, debt to equity has moved just from 3.7 to 3.72, but the NII impact looks a tad sharp. I think some sense there will be useful.

Speaker #3: So I think, in some sense, there will be usefulness.

Vinay Gupta: Yeah. Sameer, those were the ending numbers, end of the quarter numbers. On an average, our leverage has gone up from 3.6 to 3.75. That is one reason. Secondly, there is also a flow-through impact. If you see Q4 generally is very high on disbursements, and most of that got realized in the current quarter and hence it actually translated into higher borrowings during the current quarter. Plus, there is an impact also on the overall yield being slightly lower while the loan book yield has improved, but overall yield has slightly moderated due to lower investment yields. These are two, three factors which has led to impact of higher leverage.

Speaker #2: Yeah. So Sameer those were the ending numbers end of the quarter numbers. But on an average our leverage has gone up from 3.6 to 3.75.

Speaker #2: So that is one reason. Secondly, there is also the flow-through impact. If you see, Q4 generally is very high on disbursements, and most of that got realized in the current quarter.

Speaker #2: And hence, it actually translated into higher borrowings during the current quarter. Plus, there is also an impact on the overall yield being slightly lower. While the loan book yield has improved, the overall yield has slightly moderated due to lower investment yields.

Speaker #2: So these are two, three factors which have led to the impact of higher leverage.

Speaker #3: And secondly, the entire gap between the actual reported disbursement number and the gross, which is the adjusted number— is it entirely due to the affordable housing segment, or are there some other segments as well, like emerging and all?

Sameer Bhise: Secondly, the entire gap in the actual reported disbursement number and the gross, which is the adjusted number, is it entirely due to the affordable housing segment or there is some other segment as well, like emerging and all?

Speaker #2: That's a combination of all the businesses. So, whatever impact we have witnessed is a combination of Prime, Emerging, and Affordable, because in the retail business and wholesale, you know, we have completely migrated from cheque handover to basically being debited from our account, as recommended.

Vinay Gupta: It's a combination of all the businesses. Whatever impact which we have witnessed is a combination of prime, emerging, and affordable. Because in retail business and wholesale, completely we are migrated from check handover to basically money debited from our account.

Speaker #3: So then, can you, sir, provide the mix on a gross basis? Because if I see affordable disbursement in the reported number, it looks down on a year-on-year basis also, which is obviously not the case.

Sameer Bhise: Can you still provide a mix on a gross basis? Because if I see affordable disbursement in the reported number look down on a YOY basis also, which is obviously not the case, but from a mix perspective.

Speaker #3: But from a mix perspective.

Speaker #2: So I think in affordable, if we compare April to April, which is, you know, year-on-year growth, I would say there is growth of almost 11% in affordable.

Vinay Gupta: I think affordable, if we compare apple to apple, which is YOY growth, I would say this is growth of almost 11% in affordable.

Sameer Bhise: On a check handover.

Speaker #2: On a check handover basis. But since we have moved from check handover to relation, and that is the particular.

Vinay Gupta: On check handover basis. Since we have moved from check handover to realization.

Speaker #3: Sorry I'm asking. Yeah yeah.

Sameer Bhise: That's what I am asking. Yeah.

Speaker #2: Sorry. Handover basis, 11% growth. 11% growth in affordable also.

Vinay Gupta: Sorry? Handover basis is 11% growth in affordable also.

Speaker #3: Okay. And finally, on credit cost, should one see that credit cost kind of turns to positive territory in the second half? And then just how would ROA kind of shape up, given that we have optimism on NIM, but we will also have normalization of credit cost?

Sameer Bhise: Okay.

Vinay Gupta: Yeah.

Sameer Bhise: Finally, on credit cost, should one see that credit cost turns to positive territory in H2, just how would ROA shape up, given that we have optimism on NIM, but we will also have normalization of credit cost. Some trajectory there will be useful, sir. That's all from my side.

Speaker #3: So some trajectory there will be useful, sir. That's all from my side.

Speaker #2: No, Sameer, this year I think we should continue to remain negative. We still have line of sight on good recoveries quarter on quarter.

Vinay Gupta: No, Sameer. This year, I think we should continue to remain negative. We still have line of sight on good recoveries quarter-on-quarter, this year at least. This year, we should be able to maintain the negative credit cost.

Speaker #2: At least for this year. So, this year we should be able to maintain the negative credit cost.

Speaker #3: Okay, thank you. That's all from my side.

Sameer Bhise: Okay. Thank you. That's all from my side.

Speaker #1: Thank you. We take the next question from the line of Abhijit Thebrawal from Motilal Oswal Financial Services Limited. Please go ahead.

Sameer Bhise: Thank you. We take the next question from the line of Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Please go ahead.

Operator: Thank you. We take the next question from the line of Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Please go ahead.

Speaker #2: Yeah, thank you for taking the question. So, the question is, I mean, for the benefit of all of us...

Abhijit Tibrewal: Yeah. Good morning.

Abhijit Tibrewal: Yeah. Good morning. [inaudible]

Sameer Bhise: Abhijeet.

Operator: Abhijeet.

Speaker #1: Abhijit, you apologized. Sorry, sir. Please go ahead.

Sameer Bhise: I do apologize. Sorry, sir. Please go ahead.

Operator: I do apologize. Sorry, sir. Please go ahead.

Speaker #2: We can't hear you, Abhijit. Could you please speak a bit louder?

Vinay Gupta: We can't hear you, Abhijit. Speak a bit louder.

Speaker #3: Is it better now sir?

Abhijit Tibrewal: Is it better now, sir?

Speaker #2: Yeah much better.

Vinay Gupta: Yeah, much better.

Speaker #3: Yeah. So, sir, I mean, I was just trying to understand for the benefit of all of us, if you could explain this query.

Abhijit Tibrewal: Sir, I was just trying to understand for the benefit of all of us if you could explain this true-up. Essentially, you did mention a couple of things that one was the monthly versus number of days during the quarter. What exactly happened? The seven basis points difference, is it more to do with maybe Q4 having lesser number of days, so lesser interest income, and to that extent it got overstated and should have been lower by seven basis points. Is that the right understanding? Or is there some timing difference because of which this true-up that you found out?

Speaker #3: Essentially, you did mention a couple of things—one was the monthly versus the number of days during the quarter. So, what exactly happened is a seven basis points difference.

Speaker #3: Is it more to do with maybe Q4 having a lesser number of days, so lesser interest income, and to that extent it got overstated and should have been lower by 7 basis points?

Speaker #3: Is that the right understanding, or is there some timing difference because of which this issue you called out occurred?

Speaker #2: You are right, as you explained. I think that is the exact reason—Q4 being a shorter quarter, only 90 days. So we get the benefit in MIN, because there the annualization happens based on monthly annualization.

Vinay Gupta: As you rightly explained, I think that is the exact reason. Q4 being a shorter quarter, only 90 days. We get the benefit in NIM because there the annualization happens based on monthly annualization. It is a monthly numbers which gets annualized for NIM calculations. Whereas that starts getting normalized from Q1 onwards. Q4, you will get some benefit, but that is more like artificial, and hence ideally what should have been a Q4 number. Hence that is our seven bps delta, which was purely on account of the calculation difference in Q4. Adjusted for that, the gap is only 12 bps in the current quarter, which is on account of increase in leverage and lower yield on the overall total assets.

Speaker #2: So it is a monthly which the monthly numbers which gets annualized for min calculation. Whereas that gets start getting normalized from Q1 onwards. So Q4 you will get some benefit but that is more like artificial and hence ideally we have given ideally what should have been a Q4 number and hence that is a seven bits delta which was purely on account of the calculation difference in Q4.

Speaker #2: So, adjusted for that, the gap is only 12 bps in the current quarter. This is on account of increasing leverage and a lower yield on the overall total assets.

Speaker #3: Got it. And then, sir, I think on the margins—we called out earlier during the opening remarks that margins had bottomed out. So should we now think about margins as maybe remaining stable in Q3 and then starting to expand from the second half onwards? Because I remember, during the opening remarks, we also mentioned about this incremental cost of borrowing being up about 18 basis points in the first quarter.

Abhijit Tibrewal: Got it. Then sir, on the margins you called out earlier during the opening remarks that margins have bottomed out. Should we now think about margins as maybe remaining stable in Q2 and then starting to expand from the H2 onwards? Because I remember during your earning, you also mentioned about this incremental cost of borrowing has been up about 18 basis points in the Q1. Won't that have some bearing on cost of borrowings in the coming quarters? Just trying to understand how are things on the incremental cost of borrowing front. Have things cooled off a little bit in the last maybe one and a half months?

Speaker #3: So, won't that have some bearing on the cost of borrowings in the coming quarters? I'm just trying to understand how things are on the incremental cost of borrowing front.

Speaker #3: Have things cooled off a little bit in the last, maybe, one and a half months?

Speaker #2: So yes, I believe there is some improvement versus what it was, let's say, at the beginning of the previous quarter. But still, it remains elevated.

Vinay Gupta: Yes, I believe there is some improvement versus what it was, let's say at the beginning of the previous quarter. Still it remains elevated. The reason that we are positive about NIM bottoming out is because we see improvement in our yields now. It has started improving from Q1 onwards, and now Q2 onwards with higher contribution of affordable CS business and emerging business. We feel that we will be able to offset the impacts, if any, of cost of borrowing as well as of any further impact of leakage. Yields are giving that confidence and we should be able to offset that. In case there is any positive movement on the ratings also, because we are yet to get two more upgrades from two rating agencies. That is another lever which will help us further on the cost of borrowing side.

Speaker #2: The reason that we are positive about NIM bottoming out is because we are seeing improvement in our yields now. So it has started improving from Q1 onwards, and now from Q2 onwards, with higher contribution of affordable CF business and emerging business.

Speaker #2: We feel that we will be able to offset the impacts, you know, if any, of the cost of borrowing, as well as of any further impact of leakage.

Speaker #2: So yields are giving, you know, that confidence, and we should be able to see any positive movement on our, you know, the ratings also, because we are yet to get, you know, two more upgrades from two rating agencies.

Speaker #2: So, that is another lever which will help us further on the cost of borrowing side.

Speaker #3: Got it. Then, the last question that I had was on the ROAs. You mentioned that, at least this year, we are confident that credit costs should remain negative, but at least the quantum of write-backs and the quantum of recoveries—they are maximally slowing down.

Abhijit Tibrewal: Got it. The last question that I had was on the ROAs. You mentioned that at least this year we are confident that credit cost should remain negative, but at least the quantum of write-backs, the quantum of recoveries, they are maximumly slowing down. From here, as we see this quantum of -credit costs, write-backs normalize over a period of time, maybe over the next few quarters, how should we think about the ROAs this year and next year?

Speaker #3: So so from here I mean as we see this this quantum of negative credit cost write backs normalize over a period of time maybe over the next few quarters.

Speaker #3: How should we think about the ROAs this year and next year?

Speaker #2: So, as we guided, I think on a long-term basis we are expected to settle around 2.3 kind of an ROA, 2.3 to 2.35.

Vinay Gupta: As we guided, I think on a long-term basis, we are expected to settle around 2.3 kind of a ROA, 2.3 to 2.35. For this year, I think it should be in the range of 2.35 to 2.4. 2.4 is what largely we are targeting this year. It should remain in this range for the current year.

Speaker #2: And for this year, I think it should be in the range of 2.38 to 2.40. So, 2.40 is what largely we are targeting this year.

Speaker #2: It should remain in this range for the current year.

Speaker #3: Got it. Thank you for answering all my questions, and I wish you and your team the very best.

Abhijit Tibrewal: Got it. Thank you, sir. Thank you for answering all my questions and I wish you and your team the very best.

Vinay Gupta: Thank you.

Speaker #2: Thank you.

Speaker #1: Thank you. We take the next question from the line of Renesh from ICICI Securities. Please go ahead.

Vinay Gupta: Thank you. We take the next question from the line of Rinesh from ICICI Securities. Please go ahead.

Operator: Thank you. We take the next question from the line of Rinesh from ICICI Securities. Please go ahead.

Speaker #4: Yeah, hi sir. Congrats on a good set of numbers. Sir, just two things. So, first on the credit cost side, again—you know, so this quarter, we saw recovery from return-off pool at around ₹77 crore.

[Analyst] (ICICI Securities): Hi, sir. Congratulations on a good set of numbers. Sir, just two things. First on the credit card side again. This quarter, we saw recovery from written-off pool at around INR 77 crore. And when I look at the ECL provision, it is roughly an increase of INR 23 crore. Ideally, the write-back should be around INR 50 crore and we have recognized only INR 29 crore. Rest is explained by what? Is it a write-off or something else?

Speaker #4: And when I look at the ECL provision, it is roughly, you know, an increase of ₹23 crore. So ideally, the write-back should be around ₹50 crore.

Speaker #4: And we have recognized only Rs 29 crore. So the rest is expensed by what? I mean, is there a write-off or something else?

Speaker #2: So there are some regular OTF settlements, et cetera, you know, which we do. So that has given some hit of around ₹10 to ₹12 crore.

Vinay Gupta: There are some regular OTS settlements, et cetera, which we do. That has given some make up around INR 10 to 12 crore.

Speaker #4: So, but when does it reflect? Ideally, it should reflect in ECL, right?

[Analyst] (ICICI Securities): where does it reflect? Ideally it should reflect in ECL, right?

Speaker #2: So, it's a write-off. So, it's like if you are doing a settlement, you are taking some hit while doing it, taking during the settlement.

Vinay Gupta: it's a write-off.

[Analyst] (ICICI Securities): Okay.

Vinay Gupta: if you are doing settlement, so you are taking some hit while doing the settlement.

Speaker #4: Okay. So basically, it's a write-off, right?

[Analyst] (ICICI Securities): Okay. basically it's a write-off.

Speaker #2: Write off yes.

Vinay Gupta: Write-off, yes.

Speaker #4: Yeah, yeah. And in which segment, sir?

[Analyst] (ICICI Securities): Yeah. In which segment, sir?

Speaker #2: It is basically across prime and emerging, on our legacy pools.

Vinay Gupta: It is basically across prime and emerging on our legacy piece.

Speaker #4: Okay, okay, got it. And to answer this second question, it's on the asset yield movement. Obviously, I understand that we are sort of working on changing the yield mix towards high-yielding products.

[Analyst] (ICICI Securities): Okay. Got it. Sir, just second question is on the asset yield movement. Obviously, I understand we are sort of working on changing yield mix towards high-yielding product. When I look back and sort of track your last 1 year performance, especially on the yield mix side, naturally your non-HL piece has gone up at least by 5% on YOY basis across the segment, whether it is prime, emerging or affordable. Simultaneously, your share of affordable has also gone up from 9.5 to 7.4. Somehow, despite this change over last 1 year, nothing is getting reflected on the asset yield, like it is down almost 50 basis points YOY. How would you think about asset yield movement?

Speaker #4: But when I look back and you know sort of track your last one year you know performance especially on the yield mix side. So naturally you know your non HL piece has gone up at least by 5% on YY business.

Speaker #4: Across the segment, right, it is prime, emerging, or affordable. And, you know, simultaneously, your share of affordable has also gone up from 9.5% to 10.4%.

Speaker #4: But somehow, you know, despite this change over the last one year, nothing is getting reflected on the asset yield, right? It is down almost 50 basis points year-over-year.

Speaker #4: So, you know, how should one think about asset yield movement? I mean, obviously, you guys are sounding more confident on yield trajectory going ahead.

[Analyst] (ICICI Securities): Obviously you guys are sounding more confident on your yield trajectory going ahead, but at least when I look at last 1 year, somehow it is not getting reflected. Just wanting to understand why is that and what are the, let us say, the key indicators which is giving you that confidence that yield should improve from maybe H2 onwards.

Speaker #4: But at least when I look at the last one year, somehow it is not getting reflected. So, just wanted to understand why that is, and what are the latest and key indicators which are giving you the confidence that yield should improve from maybe the second half onwards.

Speaker #2: See, Renesh, I think if you look at the last one year, there has been a change in the repo rate also. And the interest rate environment was also different.

Vinay Gupta: See, Rinesh, I think last 1 year, if you see, there is a change in the repo rate also, and the interest rate environment also was different. Right? Our incremental yields have gone down in line with the industry trend. Hence, you did not see that kind of a transition impact on the overall book yield. Now as we know that there is no further drop expected on the yield perspective, it is only expected to go up. Hence the only positive impact that we see from now on is on account of mix change. With better mix coming in, I think we should be able to deliver improvement quarter on quarter basis in our yields going forward.

Speaker #2: Right. So, our incremental yields have gone down in line with the industry trend. Hence, you did not see that kind of a transition impact on the overall book yield.

Speaker #2: But now, as we know, there is no further drop expected from the yields perspective. It is only expected to go up.

Speaker #2: And hence, the only positive impact that we see from now on is on account of mix change. So, with a better mix coming in, I think we should be able to deliver an improvement on a quarter-on-quarter basis in our yields going forward.

Speaker #4: Got it. Just one last clarification, sir. So, is it right to assume that the disbursement yield, you know, in Q1 is higher than the book yield of 9.48%?

[Analyst] (ICICI Securities): Got it. Just last clarification, sir. Is it right to assume that the disbursement yield in Q1 is higher than the book yield of 9.48%?

Speaker #2: Yes yes right.

Vinay Gupta: Yes, that's right.

Speaker #4: Okay. Okay, okay. That's it from my side, sir. Thank you, and best of luck, sir.

[Analyst] (ICICI Securities): Okay. That's it from my side, sir. Thank you and best of luck, sir.

Speaker #1: Thank you. We will take the next question from the line of Sankeet Cheda from DAM Capital Advisors. Please go ahead.

[Analyst] (ICICI Securities): Thank you. We take the next question from the line of Sanket Chheda from DAM Capital Advisors. Please go ahead.

Operator: Thank you. We take the next question from the line of Sanket Chheda from DAM Capital Advisors. Please go ahead.

Speaker #3: Yeah, hi sir. I have only two questions. One is just on the ROA thing, which you also alluded to. We logged 2.4 percent in this quarter, and if it was worse, which is negative, and margin is up as well.

Sanket Chheda: Yeah. Hi, sir. Two questions from me. One is just on the ROA thing which CFO, sir, highlighted. We clocked 2.4% in this quarter. Its pay call was between negative and margin as well from here on. I believe it was for next year without the payment of negative paid calls that we said 2.35% to 4% and this year could be 2.4% to 5%. Is that right? Is that understanding right?

Speaker #3: From here on, I believe it was for next year, without the development of negative credit cost, that we said 2.35 to 2.3524. And this year could be 2.425.

Speaker #3: Is that right? Is that understanding correct?

Speaker #2: Yeah, that's right, Sankeet. This year, with the benefit still continuing, we expect ROA guidance around 2.4%. Next year, with credit costs normalizing, we expect it to be around 2.3%.

Ajai Kumar Shukla: Yeah, that's right, Sanket. This year with the benefits still continuing, we expect ROA guidance around 2.4. Next year with credit cost normalizing, we expect it to be around 2.3.

Speaker #3: Okay. And so the second question was on disbursement. You alluded that disbursement would be strong. But this is what we would have logged in July, and we just accepted that for the next two months.

Sanket Chheda: Okay. The second question was on disbursement. You alluded that Q2 disbursement would be strong, but this is what we would have logged in July, and you just accepted that for next two months. On net-to-net basis, that is Q1 net to Q2 net, roughly how much growth you would expect?

Speaker #3: On a net-to-net basis, that is, given net to due to net, roughly how much growth would you expect?

Speaker #2: So, I think, you know, if I talk about, you know, net to net—particularly if I talk about the affordable segment, Sankeet, if you are asking.

Ajai Kumar Shukla: I think, if I talk about net-to-net, particularly if I talk about affordable segment, Sanket, if you're asking, if you disburse INR 555 crore to be precise in net, I think it should be 2.5 to 2.6 times higher than what we did in Q1.

Speaker #2: The growth should be, you know, around more than—so if you disburse ₹555 crore, to be precise, in net, I think it should be 2.5 to 2.6 times higher than what we did in Q1.

Speaker #3: Oh wow. And overall?

Sanket Chheda: Oh, wow. Overall?

Speaker #2: Overall, if I talk about net, it should be near 60 to 70 percent—70 percent higher.

Ajai Kumar Shukla: Overall should be also, if I talk about net, it should be near 60%, 70% higher.

Speaker #3: Is it 60 to 70 percent higher than the Q1 net?

Sanket Chheda: 60%, 70% higher than Q1 net?

Speaker #2: Net to net. I'm talking about net to net. Yeah.

Ajai Kumar Shukla: Net-to-net. I'm talking net-to-net. Yeah.

Speaker #3: Oh, that's roughly 9,500 to 10,000. Okay.

Sanket Chheda: Oh. That's roughly INR nine and a half to 10,000. Okay.

Speaker #2: Hope, hope—hopefully, yeah—you know, we are expecting growth there. Because July is definitely a promising month for us, and we have seen, you know, I would say, green shoots in the month of July.

Ajai Kumar Shukla: Hopefully. We are expecting growth there because July is definitely a promising month for us and we have seen, I would say, green shoots in the month of July.

Speaker #3: Okay, okay, okay. Right. And on rating upgrades, sir, just wanted to check—once we are doing more affordable, yields will be taken care of on the cost of funds?

Sanket Chheda: Okay. On rating upgrades, sir, just wanted to check, once we are doing more affordable, it should be taken care of on the posture front. Now we have received a rating upgrade from CARE. Do we expect other rating agencies to follow the suit sooner, ICRA and CRISIL there?

Speaker #3: Now, we have received a rating upgrade from CARE. Do we expect other rating agencies to follow suit soon? I try and pursue that.

Speaker #2: So, I think, you know, CARE is already done. ICRA is underway. I think we are expecting CARE very soon, and ICRA and CRISIL are underway.

Ajai Kumar Shukla: I think, CARE is already done. ICRA is underway. I think we are expecting very soon, CARE and CRISIL. ICRA. CRISIL is underway. That work is on. I think, whatever benefit which we were expecting to get off rating upgrade, this will now translate now because when the rating got upgraded earlier, the regime was higher rate of interest scenario. Now, I think it will start giving us benefit.

Speaker #2: So that work is on. So, I think whatever benefit we were expecting to get from the rating upgrade will now translate, because when the rating got upgraded earlier, the regime was a higher rate of interest scenario.

Speaker #2: Now, I think it will start giving us, you know, benefit.

Speaker #3: So all this—if, say, affordable momentum stays this year and next year, then the rating upgrades come through. Is there an upside risk to our ROA for next year, which we are assuming to be 2.35%?

Sanket Chheda: All this, if, say, affordable momentum stays this year, next year and the rating upgrades come through, is there a upside risk to our ROA for next year, which we are assuming to be 2.35?

Speaker #2: I think it's a range. I think we are talking—I think 2.4 is the range, you know. We definitely would like to maintain that.

Ajai Kumar Shukla: It's a range I think we are talking. I think 2.4 is the range. We definitely would like to maintain that. That's how we are working on that direction. It would be near to 2.4 only. One thing in affordable, I would like to reiterate that July being promising under new leadership. The CBO has taken the charge, and the entire month was under his leadership only, and I think we have got very good result out of that.

Speaker #2: That's how we will — you know — we are working in that direction. It would be near to 2.4 only. And one thing: you know, in affordable, I would like to reiterate that July has been promising under new leadership. You know the CBO has taken charge, and the entire month was under his leadership only.

Speaker #2: I think we have got very good results out of that.

Speaker #3: Right. And apart from CBO, are there any other changes that you would have made in the technical area?

Sanket Chheda: Right. Apart from CBO, any other changes that you would have done in the category?

Speaker #2: So so let me let me tell you as I I said in my commentary earlier that we have strengthened our team. So the investment major investment which this year we have done in affordable business only.

Ajai Kumar Shukla: Let me tell you, as I said in my commentary earlier, that we have strengthened our team. The major investment this year we have done in affordable business only. Even N minus two, I would say, under the CBO, we have strengthened our team all across geographies. We have two national level resources also who are managing businesses who have vintage of almost more than 20, 25 years in mortgage industry, and more so particular in affordable segment. The team has strengthened in affordable and emerging also. That is why we are very much confident that my emerging and affordable should contribute 45% of my overall book in 2027 and 50% in 2028.

Speaker #2: So, even N minus two, I would say. So, under the CBO, we have strengthened our team all across geographies. We have two national-level resources also, who are managing businesses, who have vantage of almost more than 20 to 25 years in the mortgage industry, and more so particularly in the affordable segment.

Speaker #2: So the team is strengthened in in affordable and emerging also. And that is why we are very much confident that my emerging and affordable should contribute you know 45 percent of my overall business overall book in in in 27 and 50 percent in you know 28.

Speaker #3: Sure, sir. Those are my questions. Thank you very much. All the best.

Sanket Chheda: Sure, sir. Those are my questions. Thanks a lot. All the best.

Speaker #2: Yeah, thank you so much, Sankeet.

Ajai Kumar Shukla: Yeah. Thank you so much, Sanket.

Speaker #1: Thank you. We will take the next question from the line of Kunal Shah from Citigroup. Please go ahead.

Ajai Kumar Shukla: Thank you. We take the next question from the line of Kunal Shah from Citigroup. Please go ahead.

Operator: Thank you. We take the next question from the line of Kunal Shah from Citigroup. Please go ahead.

Speaker #4: Yeah hi sir. Thanks for.

Kunal Shah: Yeah. Hi, sir. Thanks for taking the question.

Speaker #2: Hi Kunal.

Speaker #4: Question. Yeah, hi. Sir, so firstly, in terms of the entire mix—so, still, if you look at it, including the check disbursements, affordable is growing at around 11 percent.

Ajai Kumar Shukla: Hi, Kunal.

Kunal Shah: Yeah, hi. Sir, firstly, in terms of the entire mix, still if you look at it, including the check disbursements, affordable is growing at 11% odd. Prime seems to suggest that it is growing at 66%, and emerging is still growing at 48% odd, and that's where the overall disbursement growth is 51%. Just to change the mix and pull up the affordable, it will require a significant traction. Otherwise, prime still seems to be growing faster compared to that of affordable and emerging. How would that mix change over a period? Maybe it would require a recalibration, if that happens, would it have any impact on the growth side?

Speaker #4: Prime seems to suggest that it is growing at 66%. And Emerging is still growing at around 48%. That's where the overall disbursement growth is 51%.

Speaker #4: So just to change the mix and pull up the affordable, it will require significant traction. But otherwise, Prime still seems to be growing faster.

Speaker #4: Compared to that of affordable and emerging, so how would that mix change over a period? Because maybe it would require a recalibration, and if that happens, then would it have any impact on the growth side?

Speaker #2: So let me tell you that, you know, Kunal, the prime growth which you have witnessed there—the mix has also changed. So, because there was very tough competition in the salaried segment, much in prime...

Ajai Kumar Shukla: Let me tell you that, Kunal, the prime growth which you have witnessed, there also the mix has changed. Because there was very tough competition in salaried segment, much in prime, and that is why we have migrated from the composition of more salary to, I would say, rationalized self-employed segment. Also we increased our composition from home loan to non-home loan because we were having a good cushion in terms of PNBC norms. Regulatory also, we were very much well within line. Whatever improvement we have seen in prime largely was because of change in mix to get that better. If you see my yield chart also from Q4 to Q1 this year, sequentially, it has improved in prime even. That is the reason. That's why we got the opportunity to improve that business also.

Speaker #2: And that is why we have migrated from the composition of more salary to the, you know, I would say, rationalized self-employed segment. And also, we increased our composition from home loan to non-home loan because we were having a good cushion in terms of, you know, PVC norms.

Speaker #2: So, regulatory-wise, we were very much well within line. Whatever improvement we have seen in Prime and Prime, largely was because of a change in mix to get better yields. If you see my yield chart also from Q4 to Q1 this year, sequentially.

Speaker #2: It has improved in prime even. You know, that is the reason, and that's why we got the opportunity to improve that business also.

Speaker #2: We will grow in affordable. What we have given in the guidance, we are sticking to that. You know, we said that we will have a growth of around 60 percent in affordable.

Ajai Kumar Shukla: We will grow in affordable, what we have given the guidance. We are strict to that. We said that we will have a growth of around 60% in affordable. Still we are holding that, we will do it. My guidance will not change. It will continue. As I said that my July is much promising than my any of the month of June, which is a clear-cut indication that under new leadership, things have started improving drastically in affordable business. Second thing is that if I tell you my July affordable business contribution from prime plus emerging, it is almost double than what we delivered in Q1, in July itself.

Speaker #2: We will, you know, still—we are holding that, and we will do it. So, my guidance will not change; it will continue.

Speaker #2: As I said, my July is much, much more promising than any of the months of June. And this is a clear-cut indication that, under new leadership, things have started improving drastically in the affordable business.

Speaker #2: And and second thing is that my if I tell about if I tell you my July affordable business contribution from prime plus emerging it is almost double than what we delivered in Q1.

Speaker #2: In in in July itself.

Speaker #4: In terms of disbursements.

Kunal Shah: In terms of disbursements?

Speaker #2: In terms of disbursement of affordable business from even prime and emerging verticals.

Ajai Kumar Shukla: In terms of disbursement of affordable business from even prime and emerging vertical.

Speaker #4: Okay got it got it. So this when you look at it in terms of this 1870 crores of check disbursal and maybe check realization handover and the realization difference would this get achieved in two Q itself or maybe it will be spread over a period?

Kunal Shah: Okay, got it. When you look at it in terms of this INR 1,870 crores of check dispersal and maybe check realization, handover and the realization difference, would this get achieved in Q2 itself, or maybe it will be spread over a period?

Speaker #2: I think within it, it generally spreads across, you know, two months forward. So maybe a larger portion comes in next month, and then some portion comes in the second month.

Ajai Kumar Shukla: I think it generally spread across in two months forward. Maybe, larger portion comes in next month and then some portion comes in second month. Third month is any miniscule business only flow forward. Otherwise, because there is retail cases wherein sometime seller takes time to execute the transaction. Major portion covers in first month itself of the last month.

Speaker #2: Third month is any minuscule business only flow forward. Otherwise, because there are, you know, resale cases wherein sometimes, you know, the seller takes time to execute the transaction.

Speaker #2: So, a major portion is covered in the first month itself of the last month.

Speaker #4: Okay, so by September, everything should get realized, on an average.

Kunal Shah: Okay, by September, everything should get realized on an average.

Ajai Kumar Shukla: It's a cycle now, Kunal. It's a cycle now. The cycle is maintained now. That's why I said that my July month realization is much promising than my any of the month of last quarter.

Speaker #2: It's a cycle now, you know. Kunal, it's a cycle. The cycle is maintained now. That's why you said that my July month realization is much more promising than, you know, any of the months of last quarter.

Speaker #4: Got it. And one last question—in terms of the overall incremental spreads, I would believe like maybe the disbursement incremental yield is closer to 9.4%.

Kunal Shah: One last question in terms of the spreads. When we look at the overall incremental spreads, I would believe like maybe the disbursement incremental yield is closer to 9.4% and our overall incremental cost of funds is 7.4%. We are at like almost a 2% spread or so.

Speaker #4: And our overall incremental cost of funds is 7.4%. So we are at almost a 2% spread or so. And...

Speaker #2: 2.12 we have yeah yeah.

Ajai Kumar Shukla: 2.12% we have, yeah.

Speaker #4: Sorry?

Kunal Shah: Sorry?

Speaker #2: 2.12—we have, you know, given. Incremental is also the same, Kunal: 2.12.

Ajai Kumar Shukla: 2.12% we have given.

Vinay Gupta: Incremental is also same, Kunal, 2.1.

Ajai Kumar Shukla: Same, 2.4.

Kunal Shah: Yeah, I was just saying maybe the difference between. Book spread is 2.12, maybe just leaving aside the margins, okay? Because margins would have the element of the account and the leverage. If I have to purely look at spreads, incremental spreads still appear to be lower than that of book spreads. Are you confident that mix change will take care of it in terms of the spreads itself, it can sustain or maybe improve from the current level?

Speaker #4: So I was just saying maybe the difference between, so book spread is 2.12. Maybe just leaving aside the margins, okay, because margins would have the element of day count and the leverage.

Speaker #4: But if I have to purely look at spreads, incremental spreads still appear to be lower than that of book spreads. So are you confident that mix change will take care of it, and in terms of the spreads itself, it can sustain or maybe improve from the current level?

Speaker #2: Yeah I think you know we have already started seeing you know positive results in you know in overall yield. If you see from Q4 versus Q1 my overall yield in affordable itself has grown by almost 50 bips.

Ajai Kumar Shukla: Yeah, I think we have already started seeing positive results in overall yield. If you see from Q4 versus Q1, my overall yield in affordable itself has grown by almost 50 basis points. In other product also, the yield has improved from Q4, which gives us confidence that it will improve.

Speaker #2: You know, and in other products also, the yield has improved from Q4, which gives us confidence that it will continue to improve.

Speaker #4: Okay, so spreads will improve or stay over here?

Kunal Shah: Okay, spreads will improve or stay over here?

Speaker #2: Yeah yeah.

Ajai Kumar Shukla: Yeah.

Vinay Gupta: Yeah.

Speaker #4: Okay, thanks. That answers all the questions.

Kunal Shah: Okay, thanks. That answers all the question.

Speaker #1: Thank you. We will take the next question from the line of Gaurav Khandelwar from JP Morgan. Please go ahead.

Kunal Shah: Thank you. We take the next question from the line of Gaurav Khandelwal from JPMorgan. Please go ahead.

Operator: Thank you. We take the next question from the line of Gaurav Khandelwal from JPMorgan. Please go ahead.

Speaker #3: Hi, good morning. Thanks for taking my questions. I've got a few questions. The first question is a follow-up to the last one.

Gaurav Khandelwal: Hi, good morning. Thanks for taking my questions. I've got a few questions. The first question is on a follow-up to the last one. When the prime yields increased 8 odd basis points, emerging was up 8 basis points, right? prime, does the mix shift on disbursement towards self-employed completely explain? And if you could help me understand, sir, what is the like for like increase or decrease in prime loan yields had we not done this mix shift? Any color on that, please?

Speaker #3: When your prime yields increased eight-odd basis points, emerging was up eight basis points, right? So, for prime, does the mix shift on disbursement towards self-employed completely explain this?

Speaker #3: And if you could help me understand, sir, what is the like-for-like increase or decrease in prime loan yields had we not done this mix shift?

Speaker #3: Any color on that please?

Speaker #2: Oh, I think, you know, if we would not have done that incrementally—yeah, no, incrementally, you know—incrementally, you know, Gaurav?

Ajai Kumar Shukla: I think if we would not have done that incrementally.

Gaurav Khandelwal: Yeah.

Ajai Kumar Shukla: No, incrementally. You want to go incrementally, Gaurav?

Speaker #1: Yeah incrementally yep.

Gaurav Khandelwal: Yeah, incrementally. Yep.

Speaker #2: So incrementally, if I talk about, if I talk about, and particularly you are focusing on prime, correct? So, prime, if you see, my Q4 was 8.92.

Ajai Kumar Shukla: Incrementally, if I talk about, and particularly you are focusing on prime, correct?

Gaurav Khandelwal: Yes.

Ajai Kumar Shukla: Yes. Prime, if you see my Q4 was 8.92%. 8 bps growth we have shown till now in Q1, and which has further improved in July. I think we would have been in the same range what it was in July. Around 10 to 15 bps, I would say, benefit we have got by changing the mix.

Speaker #2: So, eight bps growth we have shown till now in Q1, and which has further improved in July. I think we would have been in the same range as what it was in July.

Speaker #2: So, around 10 to 15 bps, I would say, is the benefit we have got by moving from, you know, by changing the mix, I would say.

Gaurav Khandelwal: Okay, got it. Had it not been for the mix shift, our prime yields would ideally have gone down, which is also what has happened across most of the other banks.

Speaker #1: Okay, got it. So, had it not been for the mix shift, our prime yields would ideally have gone down, which is also what has happened across most of the other banks.

Speaker #2: Maybe not gone down. You can say stable. So like July has further improved my prime yield. From so you have seen this I have we have shown this 9 percent of yield in Q1 which is you know Q1 yield July is further it has it is better now.

Ajai Kumar Shukla: Maybe not gone down, you can say it's level. July has further improved my prime yield. We have shown the 9% of yield in Q1, which is Q1 yield. July is better now. Okay. It would have been in the range of same 8.92% and 8.95%. That would have been the range. We got the benefit out of that.

Speaker #2: Okay, so it would have been in the same range of 8.92 to 8.95; that would have been the range. So we got the benefit out of that.

Speaker #1: Got it, sir. But in this entire process of shifting towards more self-employed, how are you thinking about the risk control mechanisms and the risk framework?

Gaurav Khandelwal: Got it, sir. In this entire process of shifting towards more self-employed, how are you thinking about the risk control mechanisms and the risk framework? Are we moving towards a higher risk book, and will it have a read-through on credit costs over the next few years?

Speaker #1: Are we moving towards a higher risk book, and will it have a read-through on credit costs over the next few years?

Speaker #2: No so I think you know let me tell you that the the kind of team which we have created and monitoring we have created in the system and if I tell you the while my yield has gone up my my you know I would say sequentially even my delinquency in prime and emerging has improved from last quarter.

Ajai Kumar Shukla: No. Let me tell you that the kind of team which we have created and monitoring we have created in the system, and if I tell you that while my yield has gone up, I would say sequentially even my delinquency in prime and emerging has improved from last quarter because team is very seasoned, underwriting team. The monitoring is also, I would say, very well in place. The collection strategy is also working very well. Considering that, we have good seasoned expertise team in underwriting, especially in self-employed segment.

Speaker #2: Because the team is a very seasoned underwriting team, the monitoring is also, I would say, very well in place. The collection strategy is also working very well.

Speaker #2: I know, considering that, we have a good, seasoned, expert team in underwriting, especially in the self-employed segment.

Speaker #1: Got it. And on the cost of funds following the credit rating, when do we start to see the benefits of those rating upgrades coming in numbers?

Gaurav Khandelwal: Got it. On cost of fund, following the credit rating, when do we start to see the benefits of those rating upgrades coming in numbers?

Speaker #2: I think some benefit has already started coming in, in terms of fresh borrowing, I would say. Maybe the fresh borrowing—we are getting at a better rate.

Ajai Kumar Shukla: I think some benefit already started coming in terms of fresh borrowing, I would say. Maybe the fresh borrowing, I would say, we are getting at a better rate now from if I talk about previous quarter. I think gradually it should improve.

Speaker #2: And now, if I talk about the previous quarter, I think gradually it should improve.

Speaker #1: Got it. And sir, can you quantify how much is this benefit—five, ten basis points, or whatever that number is?

Gaurav Khandelwal: Got it. Sir, can you quantify how much is this benefit? 5, 10 basis points or whatever that number is?

Speaker #2: Yeah, around 10 basis points at least should come in, Gaurav.

Ajai Kumar Shukla: Yes, around 10 basis points at least should come in, Gaurav.

Speaker #1: Got it, thanks. And my final question is on the fraud account of ₹420 crore, right? So, while this was written off, and there's no incremental—yeah, there's no incremental impact on the financial statements.

Gaurav Khandelwal: Got it. Thanks. My final question is on the fraud account of INR 420 crores. While this was written off and there is no incremental impact on the financial statements, how should one think about recoveries coming from these? How much were you factoring in recoveries for FY 2027, 2028, 2029? Just some color on that. Thanks.

Speaker #1: But how should one think about recoveries coming from these? How much were you factoring in recoveries for FY27, FY28, FY29? So just some color on that.

Speaker #1: Thanks.

Speaker #2: So till now, this is the account which we have declared this year. We have not factored in any recovery this year, because this entire legal process may take time. As per RBI, the declaration of fraud and recoveries are two different things and can go on in parallel.

Ajai Kumar Shukla: Till now, the account which we have declared this year, we are not factoring any recovery this year because this entire legal process may take a time. As per RBI, the declaration of fraud and recoveries are two different things and parallelly can go on. We have already started discussion with the borrower. He has also approached us. We are looking for either someone will join the hand and to solve the builder challenge or maybe he will start finding the customer to sell the project. There is no financial impact of this because 2022, 2023 only we declared that and the only thing which is pending is now recovery part, which we already have started working. All the remedial actions have been started now.

Speaker #2: So we have already started discussion with the borrower he has also approached to us. We are looking for either you know through some someone will join the hand and to to solve the the builder challenge or maybe he will he will start finding the customer to sell off sell sell the project.

Speaker #2: So, there is no financial impact of this because for FY22 and FY23 we already declared that. And the only thing which is pending is the recovery part, which we have already started working on.

Speaker #2: So, all the remedial actions have been started now.

Speaker #1: But sir, if you can just quantify, how much recoveries were we expecting from this account in '27?

Gaurav Khandelwal: Sir, if you can just quantify how much recoveries were we expecting from this account in 2027?

Speaker #2: I I I can't comment at this point of time because it will depend on the when when I get when I get the buyer and you know because now the buyer and seller meeting and they will meet they will evaluate the entire project and then then it will will be get the right picture.

Ajai Kumar Shukla: I can't comment at this point of time because it will depend on when I get the buyer and because now the buyer and seller are meeting and they will meet, they will evaluate the entire project and then we will get the right picture.

Speaker #1: Got it. And just to understand this better, over the years from your experience, once you classify an account as a fraud, is the recovery process actually expedited, or does it take longer to get the money back?

Gaurav Khandelwal: Got it. Just to understand this better, over the years from your experience, once you classify an account as a fraud, is the recovery process actually expedited or does it take longer to get the money back?

Speaker #2: No, generally it expedites because there are legal recourses. Because, you know, till the time you take this step, the customer will never come forward to discuss and close it.

Ajai Kumar Shukla: No, generally it expedite because there are legal recourse because till the time you take this step, the customer will never come forward to discuss and close it because nobody would like to have classification as a fraud. Definitely one would like to close it and settle it much faster than what is expected.

Speaker #2: Because nobody would like to have classification as a as a fraud. So definitely one would like to you know close it and you know settle it much faster than what it is expected.

Speaker #1: Got it. Okay, thank you very much. Those were all my questions.

Gaurav Khandelwal: Got it. Okay. Thank you very much. Those were all my questions.

Speaker #2: Thank you.

Ajai Kumar Shukla: Thank you.

Speaker #1: Thank you. We will now take the next question from the line of Ms. Chin from Kotak. Please go ahead.

Ajai Kumar Shukla: Thank you. We take the next question from the line of Ms. Chin from Kotak. Please go ahead.

Operator: Thank you. We take the next question from the line of Ms. Chin from Kotak. Please go ahead.

Speaker #3: Thank you, sir, for taking my question. You know, under disbursement, non-change—did it have any impact on the margins?

[Analyst] (Kotak): Thanks for taking my question. On the disbursement norm change, did it have any impact on the margins?

Ajai Kumar Shukla: No. I think because disbursement norm change and margin doesn't have any.

Speaker #2: No, I think because disbursement is non-changing and margin doesn't have any, the only impact will be the interest income, which we will book in our, you know, quarterly results.

[Analyst] (Kotak): Interest income.

Vinay Gupta: Interest income.

Ajai Kumar Shukla: The only impact will be the interest income which we will book in our quarterly results, which will definitely stabilize in the next quarter. Once your realization happens. As per the new norm, you cannot charge the interest from the customer until the money is debited from your account. The impact is only on interest income for the quarter.

Speaker #2: So, this will definitely stabilize in the next quarter, once the realization happens. Because as per the new norm, you cannot charge the interest from the customer until the money is debited from your account.

Speaker #2: The impact is only on interest income, for the quarter.

Speaker #3: Yeah, and that won't be material. That is what you're suggesting.

[Analyst] (Kotak): Yeah. That won't be material. That is what you are suggesting.

Speaker #2: Yeah.

Speaker #3: And since you spelt out spelt out margin walk in within bits that's why I was asking. But anyway just trying to understand what is the what is the what is the share of BT ins in your overall sourcing?

Ajai Kumar Shukla: Yeah.

[Analyst] (Kotak): Since you have spelt out margin walk within bps, that's why I was asking. Anyway, just trying to understand what is the share of BT-ins in your overall sourcing across segments?

Speaker #3: Across segments.

Speaker #2: So, BT in has slightly reduced. I think if I talk about Q1 versus Q1, it is 5.4 percent now. Twenty bps reduction we have seen in BT in.

Ajai Kumar Shukla: The BT-in has slightly reduced. I think, if I talk about Q1 versus Q1, it is 5.4% now, 20 basis points reduction we have seen in BT-in.

Speaker #3: And this is an overall.

[Analyst] (Kotak): This is at an overall-

Ajai Kumar Shukla: Sorry. It is 4.4% in Q1 2027 from 5% in Q1 2026.

Speaker #2: Sorry, sorry, sorry. Sorry. It is 4.4 percent in Q1 '27, down from 5 percent in Q1 '26.

Speaker #3: And this is at an overall level if you if you want to sort of you know split this between between prime emerging and affordable?

[Analyst] (Kotak): This is at an overall level if we want to sort of split this between prime, emerging, and affordable?

Speaker #2: So if I talk about affordable, actually affordable has drastically been down, which suggests that the team has started focusing on new customers. In Q1, it used to be 10.5 percent last year, which has gone down to 3.4 percent.

Ajai Kumar Shukla: If I talk about affordable, actually affordable has drastically BT-in has down, which suggests that the team has started focusing on new customer. In Q1, it used to be 10.5% last year, which has gone down to 3.4%. It means whatever growth we have done in last quarter, the business, it is primarily new customer in the market. Overall at company level, the BT-in has down by 60 bps almost.

Speaker #2: Whatever growth we have achieved in the last quarter in the business is primarily from new customers in the market. So, overall at the company level, the BT-in has come down by almost 60 basis points.

Speaker #3: Got it, got it. Thank you very much.

[Analyst] (Kotak): Got it. Thank you very much.

Speaker #1: Thank you. We will take the next question from the line of Harshit Soshniwal from Premji Investments. Please go ahead.

[Analyst] (Kotak): Thank you. We take the next question from the line of Harshit Toshniwal from Premji Invest. Please go ahead.

Operator: Thank you. We take the next question from the line of Harshit Toshniwal from Premji Invest. Please go ahead.

Speaker #4: Hi sir. Am I audible?

Harshit Toshniwal: Hi, sir. Am I audible?

Speaker #2: Yeah Harshit.

Ajai Kumar Shukla: Harshit. Go ahead.

Speaker #4: Audible, sir. There were two questions. One was on the income. So obviously, what it seems like, it's going to be a pretty strong year on disbursement.

Harshit Toshniwal: Sir, there were two questions. One was on the fee income. Obviously, what it seems like it is going to be a pretty strong year on dispersal, per se, and Q1 obviously the dispersal numbers were not good. Sir, should we ideally expect the fee income to also grow at a reasonably fast pace in 2027 because of the fast dispersal which we have seen? Probably Q1 might not be true reflection because it is more linked to the dispersal we are reporting. Is that true? Does it happen that way? Or dispersal of the fee income does not get impacted by the recognition phase? Sir, the second question was on what Mr. Vinay was asking that, ideally if I have a lower interest income being recognized, but on my cost of funds there is no change in recognition.

Speaker #4: Let's say, and the answer obviously, the disbursement numbers were not too bad. So, should we ideally expect the fee income to also grow at a reasonably fast pace in 2027?

Speaker #4: Because of the fast disbursement which we have seen, and certainly, one fee might not be a true reflection because it's more linked to the disbursement we are reporting.

Speaker #4: Is that true? Does it happen that way with disbursement, or does the fee income not get impacted by the recognition pace?

Speaker #4: The second question was asking that, ideally, if I have a lower interest income being recognized, but on my cost of funds there is no change in recognition, what listing was I referring to?

Speaker #4: So, mathematically, is it having any impact on the margin? That is what I was trying to just understand—or it should not be the case.

Harshit Toshniwal: Mathematically, is it having any impact on the margin or it should not be the case?

Speaker #2: You know, sir, let me answer that. First of all, on the fee income side, the change in disbursement recognition would not have any impact, because we still, you know, continue to get that amount or fee based on the committed disbursement.

Vinay Gupta: No, sir. Let me answer that. First of all, on the fee income side the change in disbursement recognition will not have any impact because we still continue to get that amount or fee based on the committed disbursement. You are right, based on the good disbursement growth, solid performance, the fee income growth should also be in line with the disbursement growth going forward.

Speaker #2: And you are right, based on the good disbursement growth and solid performance, the fee income growth should also be aligned with the disbursement growth going forward.

Speaker #4: Okay. But it's not as if this one fee number is also understated because of the disbursement recognition. Fee income is recognized in its own way.

Harshit Toshniwal: Okay. It's not as if this Q1 number is also understated because of the dispersal which needs to be, fee income grows in its own way of recognition.

Speaker #2: Correct. Correct. That's right. That's right.

Vinay Gupta: Correct. That's right.

Speaker #4: Okay.

Harshit Toshniwal: Okay.

Speaker #2: And on the interest income side, it should not impact because now the income you are booking is on the book itself. So, if you are not booking that income also—

Vinay Gupta: On an interest income side, it should not impact because now the income you are booking is on the book itself. If you're not booking the underlying book, you are not booking that income also. It will not impact your fee. It will impact the absolute income, but it will not impact the fee.

Speaker #2: So, it will not impact your field. It will impact the absolute income, but it will not impact the field.

Speaker #4: Okay. Okay. Okay sir.

Harshit Toshniwal: Okay.

Vinay Gupta: Okay.

Harshit Toshniwal: Okay, thanks.

Speaker #1: Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to Ms. Mithi Gupta for her closing comments.

Harshit Toshniwal: Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to Ms. Niti Gupta for her closing comments.

Operator: Thank you. Ladies and gentlemen, with that, we conclude the question and answer session. I now hand the conference over to Ms. Niti Gupta for her closing comments.

Speaker #5: Thank you, everyone, for joining us on the call. If you have any unanswered questions, please feel free to get in touch with Investor Relations.

Miti Gupta: Thank you everyone for joining us on the call. If you have any questions unanswered, please feel free to get in touch with investor relations. The transcript of the call will be uploaded on our website. Thank you.

Speaker #5: The transcript of the call will be uploaded on our website. Thank you.

Speaker #1: Thank you. On behalf of PNB Housing Finance Limited that concludes this conference call. Thank you for joining us and you may now disconnect your lines.

Miti Gupta: Thank you. On behalf of PNB Housing Finance Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.

Operator: Thank you. On behalf of PNB Housing Finance Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.

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Q1 2027 PNB Housing Finance Ltd Earnings Call

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