Operator: Ladies and gentlemen, good day and welcome to PNB Housing Finance Limited Q2 and H1 FY 2026-2027 earnings call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chaitanya Yadav, National Head, Corporate Planning and Investor Relations. Thank you, and over to you, sir.
Chaitanya Yadav: Thank you, Ikra. Good evening and welcome everyone. We are here to discuss PNB Housing Finance Q2 and H1 financial year 2026-2027 results. You must have seen our business and financial numbers in the presentations and the press release shared with the Indian stock 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 future expectations concerning the development of the business. These forward-looking statements involve risks and uncertainties that may cause actual development and results to differ materially from our expectations.
Chaitanya Yadav: 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. With this, I will hand over the call to our MD and CEO, Mr. Ajai Kumar Shukla. Over to you, sir.
Ajai Kumar Shukla: Thank you, Chaitanya. Good evening, everyone, and welcome to PNB Housing Finance Q2 and H1 financial year 2027 earnings call. Thank you for taking the time to join us today. We are delighted to share that CRISIL has upgraded our credit rating to AAA with a stable outlook. With this upgrade, we are now AAA by all four leading domestic rating agencies, CRISIL, ICRA, CARE Ratings, and India Ratings. This achievement reflects the strength of our balance sheet, prudent risk management, strong asset quality, and the consistency of our operating performance. Before discussing our operational performance for the quarter, let me begin by sharing some perspective on the industry environment and the key trends shaping the housing finance sector. The recent 25 bps repo rate hike by RBI and clear policy guidance reinforce confidence in the housing finance sector's medium-term prospects.
Ajai Kumar Shukla: While broader macroeconomic developments may influence growth trends periodically, the sector continues to benefit from strong structural drivers, including urbanization, improving infrastructure, rising incomes, favorable demographics, and increasing home ownership aspirations. These factors continue to support resilient housing demand and a healthy growth. Industry prospects also remain encouraging. ICRA expects affordable housing finance companies to deliver AUM growth of 19% to 21% in financial year 2027, supported by robust demand, expanding distribution reach, and the significant opportunity presented by India's under-penetrated housing finance market. Coming to PNB Housing Finance Q2, financial year 2027 was a landmark quarter for the company. Some of the key highlights for the quarter are as follows. Overall disbursement grew 60% YOY to INR 9,609 crore. This includes pool buyout of INR 838 crore. Retail disbursement reached an all-time high of INR 9,250 crore, registering a growth of 54% YOY.
Ajai Kumar Shukla: Loan book grew by 19% YOY, in line with our guidance, led by strong disbursements. GNPA improved to 0.91% versus 0.95% in Q1 financial year 2027. Spread improved to 2.43% as 2.12% in Q1 2027. ROA and ROE improved to 2.53% and 12.33% respectively. At segment level, the affordable business witnessed a strong revival following the strategic initiative undertaken over the past few quarters with disbursement growth of 40% YOY to INR 1,149 crore. The emerging market business delivered another strong quarter with disbursement growing 36% YOY to INR 2,882 crore. Our prime business continued its steady momentum with disbursement reaching INR 4,380 crore, up by 44% YOY. Corporate disbursement stood at INR 360 crore for Q2 financial year 2027 versus INR 215 crore in Q1 financial year 2027. This translated to an overall loan book of INR 95,079 crore as on 30 September 2026, representing growth of 19% YOY.
Ajai Kumar Shukla: Our retail loan portfolio also grew by 19% YOY to INR 94,391 crore. Within retail portfolio, the affordable and emerging markets segment continued to be our key growth engines, representing YOY book growth of 45% and 22% respectively, and together contributing 41% of overall retail portfolio. We remained on track to increase this contribution to 45% by the end of financial year 2026, 2027. Let me also update you all on our four strategic initiatives that we highlighted during Q1 earning call. We disbursed INR 107 crore under Emerging Developer Finance in H1 2027 and INR 241 crore of affordable business from selected Prime and Emerging branches. As announced in Q1 2027, we launched our micro-housing business during Q2 2027 and have already disbursed INR 71 crore under this initiative. Additionally, we completed a pool buyout of INR 986 crore during H1 2027, further supporting growth in our earning assets.
Ajai Kumar Shukla: These initiatives are expected to accelerate the scale-up of our loan book while enhancing portfolio yield and maintaining portfolio quality. Under PMAY, we undertook an extensive awareness campaign through PMAY Yatra across key markets in Gujarat, Madhya Pradesh, Maharashtra, Rajasthan, Tamil Nadu, and Uttar Pradesh. These initiatives have helped thousands of families better understand the benefits of the scheme and navigate their homeownership journey with greater ease. We further strengthen our affordable housing outreach through the inauguration of India's first PMAY Nodal Branch in Siliguri and Kanpur. Till date, we have facilitated benefits for over 8,000 PMAY-Urban 2.0 beneficiaries, and with another 1,200 applications submitted for approval. Going forward, we intend to scale the impact of this initiative through our extensive network of more than 400 branches across India. The corporate loan book stood at INR 689 crore as on 30 September 2026.
Ajai Kumar Shukla: During the quarter, we successfully completed Voice AI POC for bucket X calling with very promising results. We also completed POCs for AI-powered policy and knowledge assistance, as well as intelligent document processing, where AI help in classification, summarization, cross-validation and extraction of the population of data. Apart from core business functions, we also successfully completed agentic AI POC for our employee hiring. The next couple of quarters will now be focused upon translating these successful POCs into production deployment and redefining our customer journey by leveraging GenAI and agentic AI across various functions. On traditional AI front, we continue to strengthen our robust machine learning ecosystem. We have developed an end-to-end collection solution suite, right from early warning system to signal to bounce reduction to settlement reduction and prioritization. The solution suite covers the entire collection life cycle.
Ajai Kumar Shukla: As far as geographical presence is concerned, our distribution network stood at 404 branches across India as on 30 September 2026, which include 234 affordable branches, which we call Roshni, 88 emerging market branches, and 81 Prime branches. The extensive reach give us a strong foothold in Tier 2 and Tier 3 markets, where we continue to witness significant growth opportunities and a strong customer demand. Asset quality continues to strengthen during the quarter, with GNPA improving to 0.91% as compared to 0.95% during Q1 2027. During Q2 2027, we recovered INR 75 crore from the written-off pool, resulting in a negative credit cost of 19 bps. Our retail written-off pool has now reduced to approximately INR 320 crore, reflecting sustained progress in recoveries and portfolio cleanup efforts. Coming to margins, our spread increased by 31 bps sequentially to 2.43%.
Ajai Kumar Shukla: Excluding one-off, spread would be 12 bps higher, that is 2.24%. NIM improved by 19 bps sequentially to 3.67%. Excluding one-off, NIM would be flat sequentially around 3.49%. Our portfolio yield improved to 9.74% in Q2 from 9.48% in Q1 2027. Cost of borrowing also improved by 5 bps to 7.31% in Q2 2027, and incremental cost of borrowing also improved by 15 bps to 7.26%. On profitability front, profit after tax for the quarter grew by 6% YOY to INR 617 crore, translating into a ROA of 2.53% and ROE of 12.33%. Our capital position remains strong with a capital adequacy ratio of 27.03% and Tier 1 capital ratio of 26.62% as of 30 September 2026. As we look ahead, we remain confident in the opportunities before us.
Ajai Kumar Shukla: Our strategy remain focused on driving profitable growth, increasing the share of high yield retail segment, strengthening portfolio quality, leveraging technology to improve productivity and customer experience, and building a resilient and scalable franchising. With a strong balance sheet, improving operating efficiencies, accelerating digital transformation and disciplined risk management, we believe PNB Housing Finance is well-positioned to deliver sustainable growth and create long-term value for all its stakeholders. Before I conclude, I would like to extend my heartfelt wishes to all our stakeholders for a joyous and prosperous Diwali. Now, I will hand over the call to our CFO to discuss the financial performance in greater detail before we open the floor for questions. Thank you so much.
Vinay Gupta: Thank you, sir. With that overview, let me now take you through the key financial highlights for the quarter. Led by strong loan book growth during the quarter, our net interest income grew 15% year on year, and gross margin increased 16% year on year. Our portfolio yields continued to improve and is now at 9.74% in Q2, increase of 26 basis points sequentially. Incremental yields have also improved by 18 basis points to 9.64%. Cost of borrowing improved sequentially by 5 basis points to 7.31%, while incremental cost of borrowing improved by 15 basis points to 7.26%. Better liquidity position in July, incremental borrowing through NHB and IRS deals done on fixed rate deals led to lower cost of borrowing in Q2. As a result, our spread expanded to 2.43% and NIM improved to 3.67% during the quarter.
Vinay Gupta: The reported yield spread and NIM includes one time recovery of charges on prepayment of one legacy corporate account. Adjusting for this one-off item, yield spread and NIM would have stood at 9.56%, 2.24%, and 3.49% respectively. With higher incremental yield versus book yield and rising interest rate scenario, we feel that spread and NIM should further improve from here on. Following the recent 25 bps policy rate hike, we anticipate a modest increase in our borrowing cost. To offset this impact, we are also evaluating an increase in our retail lending rates by 10 to 15 basis points and corporate lending rates by 15 to 20 basis points. This will be effective from the 1st of November. As a result, we expect the overall impact on NIMs to remain broadly neutral to positive.
Vinay Gupta: Operating expenses increased by 20% year-on-year to INR 260 crore in Q2 from INR 217 crore in Q2 of FY26, largely in line with the growth in business volumes, and driven primarily by investments in manpower addition with the affordable vertical. Despite the scale-up in investments, our OpEx to ATA ratio remains well contained at 1.03% during the quarter. Reflecting strong business momentum and disciplined cost management, our PPOP, pre-provision operating profit, grew 16% year-on-year to INR 749 crore. Moving to asset quality, our gross NPA improved further to 0.91% as of Q2 FY27, reflecting the continued strength of our underwriting and collection processes. Company continues to deliver healthy recovery from the written-off pool, recovering INR 75 crore during the quarter. Consequently, we reported a negative credit cost of 19 basis points during the quarter. Profit after tax for the quarter grew 66% year-on-year to INR 617 crore.
Vinay Gupta: ROA stood at 2.53% and ROE at 12.33%. Reflecting the strength of our balance sheet, capital adequacy ratio remains strong at 27.03%, including a Tier 1 capital ratio of 26.62%. Our net worth stood at INR 20,250 crore, while book value of shares increased to INR 776. As we move forward, we remain focused on disciplined execution of our strategic priorities, underpinned by strong fundamentals and differentiated strengths of our franchising. With a strong capital base, healthy asset quality and improving profitability, we are confident in our ability to deliver sustainable growth and long-term value creation. With that, I conclude my remarks. Thank you for your continued support. Now I hand it over back to Chaitanya.
Chaitanya Yadav: Thank you, Vineet. Now we can open the floor for the Q&A.
Operator: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal: Yeah. Good evening, everyone, and thank you for taking my question. First thing I wanted to understand are two clarifications on what we have reported in this quarter. First is, if you could explain this one-off charges that you have spoken about, that you have collected from this legacy corporate account. What exactly it is, what is the nature of charges that you have collected, and how does it get accounted for in the interest income? The second thing is, in this quarter, sir, you have also spoken about these portfolio buyouts that you have done over H1. One is, what is the intent behind doing that? The second is, in which product segments, basically home loan, LAP, or basically the different segments that you have, Prime, Emerging, Affordable, where exactly are you evaluating these portfolio buyouts?
Ajai Kumar Shukla: Question number two I will take first, and then Vineel will take question number one. I hope it is okay, Abhijit.
Abhijit Tibrewal: Yes.
Vinay Gupta: Basically, portfolio buyout, it is a combination of home loan and LAP, both. It is not that only one portion of the mortgage we have purchased. It is a combination. It is a combination of both. Vineel, you want to address first?
Ajai Kumar Shukla: You also wanted to ask why we did that. Basically, it is a part of our annual plan. We took a budget of almost INR 2,000 crore of portfolio in our budget this year. We have done close to INR 986 crore of buyout by H1, and this was as per our plan.
Vinay Gupta: Yeah. On the charges part, Abhijit, this is related to one legacy corporate account that we had. There were certain overdue charges and overdue interest which got collected at the time of closure. We account for it only on the receipt basis. Hence, as we have received it now, it is accounted for during Q2. This is more like a one-off as the account is now fully closed.
Abhijit Tibrewal: Got it. Thanks for the clarification. Sir, the other question that I had is, like you rightly mentioned in your opening remarks, that with this rising interest rate cycle, the expectation is that the NIM should remain stable to an improving trajectory. If you could just help us understand what is the sensitivity of your cost of borrowings and maybe margins to a 50 basis points rise in the repo rates?
Vinay Gupta: Sure. First of all, leaving the interest rate scenario aside, overall if you see our now incremental yield is better than the book yield. That will definitely support the better yield on a book level also going forward. Our incremental yield is now 9.64% versus book yield is around 9.54%. So it is definitely going to further support the yield trajectory. Secondly, on the interest rate perspective. Probably with 25 bps change, we expect around 9 to 10 basis points increase in our cost of borrowings. Accordingly, we are also contemplating increasing our portfolio rate between 10 to 15 basis points. Immediately 8 to 10 that can increase to 12 to 15 also by end of Q4. This is the sensitivity from the current 25 bps hike that we saw.
Vinay Gupta: So 50 will become between 15 to 20 basis points.
Abhijit Tibrewal: 50 basis points will translate into how much would you say?
Vinay Gupta: 20 basis points impact.
Abhijit Tibrewal: 20 basis points increase in the cost of borrowings, and likewise you said yields will continue to improve.
Vinay Gupta: Yeah
Abhijit Tibrewal: given that incremental yields are better than the book yields.
Vinay Gupta: Exactly.
Abhijit Tibrewal: Got it, sir. This is useful. The last question for MD sir. Sir, when we look at this quarter, disbursements obviously they have been very strong. I am assuming there was some spillover effect given that effective April we are realigning how we do disbursements and how do we book it in the AUM and loan book. Do you think whatever we have seen until now in October, the momentum, which is typically better in the H2 of the fiscal year, you are seeing that? Or what we have started hearing now, right, interest rates going up, droughts. Are they having any impact on the demand today, or do you think the demand continues to remain strong and maybe we keep building on the momentum in terms of disbursements in the coming quarters?
Ajai Kumar Shukla: So honestly, I think, this 25 bps repo increase, we have not seen any change in terms of momentum in the market because the market has easily absorbed that, which reflect in overall industry. If you see the logins sanctioned and disbursed, I think we have not seen any impact of that as of now. So I think momentum is still there. Because when there was a downturn, it went up to 1.25% repo down. These rates which are operating as of now are not the new phenomena, I would say, because this is how the cycle works. There was almost, I would say for a longer period, the rates were not increased. Now the scenario has changed, but we have not seen any impact as of now by increase of 25 bps repo till now. The momentum is there.
Abhijit Tibrewal: Got it, sir. That is useful. Thank you so much. Maybe I will come back with the question to you, but I wish you and your team the very best.
Vinay Gupta: Thank you.
Operator: Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address questions from all the participants in the conference, kindly limit your questions to 2 per participant. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Renish from ICICI Securities. Please go ahead.
Renish Bhuva: Yeah. Hi, sir. Congrats on a good set of numbers. Sir, just 2 things. First on this affordable housing yields moment, right? In the commentary, we have said that given the incremental business is coming from Prime and Emerging branches. I just wanted to find the strategy here. If yields are dilutive, then is it a fair strategy to expand branch network or maybe open more branch network to do affordable from Prime and Emerging?
Ajai Kumar Shukla: Renish, thank you so much, first of all. As a part of our strategy, we have enabled our Prime and Emerging Market, and largely these are the markets which are metro and state capital kind of locations where you get this business. So definitely there is some competition in comparison to the Tier 3 and Tier 4. But in spite of that, our strategy to focus will remain to open more number of branches in Tier 3 and Tier 4 cities only. Overall, if you see the yield impact is 10 to 12 bps only, not much. If I turn my face here for Roshni vertical, the yield is flat, so there is no reduction and no drop in the yield. For example, if you operate in Delhi periphery, definitely you will get a better customer.
Ajai Kumar Shukla: But there you would have some maybe compromise in pricing because of the
Ajai Kumar Shukla: A property value and all those good properties which are there. Sometimes the customers are also very good, but the property is affordable. That way it is a kind of minor trade-off, I would say. But overall strategy remains to grow more affordable business in Roshni vertical, which is my affordable vertical.
Renish Bhuva: Got it. Then just related to that, internally when you assess the P&L. For example, at the cohort basis, the customer source at Prime and Emerging offer better profitability than Roshni because obviously, given you are sweating the existing infrastructure, the cost of customer acquisition will be lower in Prime and Emerging than general Roshni. Hence, we can afford to lose a few basis points. Is that the understanding?
Ajai Kumar Shukla: I think you are absolutely right. What has happened. For example, let me tell you the example that in September month, my Prime and Emerging Market contributed more than INR 100 crore business in affordable. Now imagine my infrastructure was there, INR 100 crore business at affordable rate without adding any infrastructure cost. It is a win situation for me. I think this strategy has worked really well and I am very much confident that this will further improve.
Renish Bhuva: Got it. Just last thing on the growth side. We are already at 19%, and going ahead, as you rightly mentioned, the underlying momentum seems to suggest a good traction. Are we closing this year with 20% growth or more or maybe when we enter FY28, what is the growth target in your mindset?
Ajai Kumar Shukla: I think, the growth guidance which we given was 18% to 20%. I think we will be always very happy to grow what we have delivered now. But currently, we are maintaining the guidance, but I am pretty sure that currently it is 19%, so it should improve.
Renish Bhuva: And 28, would you like to comment anything?
Ajai Kumar Shukla: Sorry.
Renish Bhuva: Twenty-eight.
Ajai Kumar Shukla: 20 and next year, I think maybe we are working on the strategy of 28. I think we will start working on Q3.
Renish Bhuva: Got it.
Ajai Kumar Shukla: But the idea is not to degrow.
Renish Bhuva: Got it. That is very helpful, sir. Thank you and best of luck.
Ajai Kumar Shukla: Yeah.
Operator: Thank you. Next question is from the line of Viral Shah from IIFL Capital. Please go ahead.
Viral Shah: Yeah, hi. Thanks for the opportunity and congrats on a good set of numbers.
Ajai Kumar Shukla: Thank you, Viral.
Viral Shah: I have two questions. First is basically, it has been now almost 20 days since the policy announcement that came through. Of course, you also mentioned that you have taken some pricing action, which will be effective from 1 November. But over the last 20 days, what is the texture that you get in terms of the market and the competition? Are people able to price in or at least pass through this, say, incremental 25 bps kind of rates, whether it is 25 or 20 on an incremental acquisition basis? So what is it that you are seeing and are you confident that this pricing will sustain? Because when we look at the repo rates that many of the banks have, that has definitely moved up by 25 basis points.
Ajai Kumar Shukla: Yeah. So Viral, I think we are also having very close watch on how the competitions are playing in the market. Currently, with the increase of 25 bps repo rate, I think most of the housing finance companies they have increased their pricing by 15 to 20 bps, in the range of 15 to 20 bps. Few have increased to 30, few have increased 20, depending on their cost of fund and because there is a methodology which everybody has submitted to the regulator how they compute their overall pricing. And how they pass on to the customer and how it costs to them. I think everybody used that methodology because everybody has different borrowing on their book. Few of them are having borrowing which is linked to the repo, some are having combination.
Ajai Kumar Shukla: Coming to the incremental question also and a few are having mix of MCLR and repo and some company like us, we are also having fixed deposit also and NHB refinance also. So I think with increase of 25 bps repo, the pass-on would be in the range of 15 to 20 bps. I think that will happen. And what is your next question, Viral?
Viral Shah: The second question I have is basically when I look at the credit cost for this quarter, right? If I adjust it for the INR 75 crores of recovery that you mentioned, currently it is standing at around 11 basis points. Is this a run rate that we should expect, say, sometime next year once the recovery is kind of stop coming through and we see a more normalized credit cost. What should be that?
Ajai Kumar Shukla: Yeah. That's right, Viral. It should be in that range, around 10 to 12 basis points.
Viral Shah: Okay.
Ajai Kumar Shukla: Post normalization.
Viral Shah: According to you.
Ajai Kumar Shukla: Yeah, post normalization.
Viral Shah: Got it. Can I ask two more, I would say follow-up questions, clarificatory?
Vinay Gupta: Yeah, please.
Viral Shah: So one is basically, Vinay, you mentioned that for 50 bps rate hike, you will see around 15 to 20 basis points actually. Sorry, 20 basis points increase in cost of fund. What will be the pass through you mentioned on the lending rate side in that scenario?
Vinay Gupta: Similar. We would be passing on whatever impact we will see on our cost of borrowing. So 20 to 30 basis points, whatever increase we will see on cost of borrowing, it will be passed on to the portfolio.
Viral Shah: Got it. That is very clear. And the other, I would say follow-up is basically on the insurance commission side. Have you assessed the potential, say, do you have offsets and any thought process over there? What is the expectation?
Ajai Kumar Shukla: I think this is a very hot and burning question, Viral, nowadays. See, every company, I think they are working on their model, I would say. If I talk about us, I think we are exploring opportunities, maybe more opportunities if we can source more business from the market and have an opportunity of pool sale also, some DA out also to get some front income. That is one. We will also see improvement in processing fee also. Some portion can be offset by that. And see, my belief, Viral, is that when suppose this is being implemented as it is in the industry. Now, what will happen, the premium will go down by almost substantially, maybe 30% to 40% for the consumer.
Ajai Kumar Shukla: One is that your opportunity to do more business in that segment will increase because when the premium is low, you can sell more product or maybe combo product to the consumer. So that way your premium will improve. And whatever penetration you are having because the premium will be reduced, so you will have more opportunity to cover more number of customers. I think this is still in discussion stage. The final outcome still has to come how it will shape up because there was a preliminary discussion which were happening. But honestly speaking, we have started working that even if it is implemented as it is, how much portion we can compensate to various opportunities, maybe some cost control mechanism, an increase in fees, as I said, some DA out, some focus more on the more high NIM product.
Ajai Kumar Shukla: I think that is how it will help.
Viral Shah: Got it. That is very clear. Thank you so much and all the very best.
Vinay Gupta: Thank you, Viral.
Operator: Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah: Yeah. Hi, this is Kunal Shah.
Vinay Gupta: Hi Kunal.
Kunal Shah: Yeah, hi. Firstly, in terms of overall NIM trajectory, just to understand in terms of on the outstanding portfolio and on the incremental basis. There are not many levers. In fact, we are increasing the proportion of the non-housing loans, that is inching up every quarter. Plus, we have this credit rating benefit which will flow through. Even in terms of the rate pass on, given that it is a repo, everything generally gets passed on. Maybe some gets offset with the competition. Overall, in terms of NIMs, does it clearly suggest that there should be maybe a good level of improvement from 3.5 odd percent or not really?
Vinay Gupta: See, Kunal, definitely there will be a positive impact on spread as well as on NIM, but again, NIM will also have an offsetting impact of leverage. Our leverage is also continuously going up, so it will offset some of the impact. Yes, there will be a positive rub-off on both spread and NIM.
Kunal Shah: Yes, on spread definitely it should be there. Maybe looking at the mix and the credit upgrade and all. Shouldn't we see maybe from currently where we are at, say, 2.24 adjusting for this one-off, shouldn't ideally we see an improvement in the rising interest rate environment?
Vinay Gupta: Yeah, definitely. That's what I'm saying. Spread definitely should improve. However, if you see on the credit rating side, that will take some time. It will not come immediately. We have started working on it, but if you see between us and other AAA-rated companies, the gap is not much. For example, Tata is at 7.3. We are also at 7.3, right? Not too much of gap. But yes, we will try to work on repricing some of the existing old borrowings. Obviously the new borrowings will come at a better rate.
Kunal Shah: If the old borrowing already we have started negotiating with our banker after this Q4. All four ratings which are AAA.
Vinay Gupta: Next year, I think we should get some real measurable benefit. Yeah.
Kunal Shah: Got it. In terms of this non-housing proportion, today it is like almost 35% odd. Last quarter it was 33%. On incremental disbursement basis, how much would this proportion be between maybe the individual housing and the non-housing loans in the overall mix as well as within the Prime?
Vinay Gupta: I think it is in the range of 40% to 43% if I talk about in Prime.
Ajai Kumar Shukla: Is in non-housing. Overall?
Kunal Shah: 52.
Ajai Kumar Shukla: Overall, I think it is around 52% is housing and the remaining is non-housing. Overall.
Kunal Shah: Okay. So almost 48% of incremental disbursements are happening on the non-housing side.
Ajai Kumar Shukla: Because we have enough cushion in terms of PBC norms. So we will ensure that our principal business criteria norms are within reach.
Kunal Shah: Okay. How long can this continue?
Ajai Kumar Shukla: No. I think, Kunal, now we are very close.
Kunal Shah: In terms of PBC criteria.
Vinay Gupta: We will maintain that, and I think that
Ajai Kumar Shukla: That is why there is a DA sell-down and buy-out strategy as well, which we will start playing out.
Vinay Gupta: We will also have some. We are exploring some opportunities this quarter for pools sell-down also.
Kunal Shah: Okay. Got it. So on the non-housing side, you might sell down the pools, yeah.
Ajai Kumar Shukla: Yeah. Non-housing.
Vinay Gupta: Correct.
Ajai Kumar Shukla: Absolutely.
Kunal Shah: Okay. Got it. Perfect. Yeah. That helps. Thanks for answering the questions.
Operator: Thank you. Ladies and gentlemen, a reminder to all the participants, kindly limit your questions to two per participant. Thank you. Next question is from the line of Gaurav Khandelwal from J.P. Morgan. Please go ahead.
Gaurav Khandelwal: Hi. Good evening. Thanks for taking my questions. My first question is more on the business side. Your AUM market share as well as disbursement mix has increased quite a bit for Delhi NCR. Can I know what geography is this? Is this Noida or some other part of NCR?
Ajai Kumar Shukla: No, it is not particularly any geography. See, being company having headquarter in Delhi, we have a very big presence in this market since long. Our distribution, our number of branches are much higher, whether it is a Gurgaon or it is Delhi NCR or it is a Ghaziabad, Noida. So our presence in Delhi NCR is really very good, because head office of the organization started from Delhi and it still is in Delhi only. That's how I think we have very strong footprint in this market. It is not that it is Noida because builder contribution. Maybe your question could be that Noida, is there any contribution from builder market? The answer is that it is a very insignificant amount of builder contribution comes. If at all it comes, it comes independent house, for purchase or resale or balance transfer or construction.
Gaurav Khandelwal: Got it, sir. Thanks. My other question is, if you can share details on your Prime disbursements, how much is the mix between salaried and self-employed? Because you had this data in the last quarter. If you can share that for this quarter in terms of disbursement.
Ajai Kumar Shukla: In Prime, the self-employed is almost 60%, and salaried is almost 41%. 40% and 60%.
Gaurav Khandelwal: 40/60. Okay.
Ajai Kumar Shukla: In Q2.
Gaurav Khandelwal: Got it. Thanks for that. In terms of your fee income, almost INR 130 crore this quarter. Can I ask what is driving this underlying strength?
Ajai Kumar Shukla: Yeah, Vinay.
Vinay Gupta: For Q2, it is driven by disbursements. As our disbursements went up excluding DA by around 50%. Hence, there is a strong growth on the fee income as well.
Gaurav Khandelwal: Got it. Thanks. Vinay, within the different cohorts, Prime, Emerging and affordable, which part of the business generates the highest fee income on disbursement?
Vinay Gupta: The highest-
Ajai Kumar Shukla: No, in terms of let me answer. I think Prime and Emerging has a big volume. As a percentage, fee could be less, but if you talk about overall, value-wise, it would be high. But in Emerging, which is Roshni, the fee percentage would be high. But since the volume is almost 12% to 13% of my overall monthly business, so in absolute value could be low, but percentage would certainly be high.
Gaurav Khandelwal: Got it. Okay. Thanks. My final question, if I can. The 24-month vintage on 30 plus delinquency, that has increased from almost 0.2% to 0.4% quarter on quarter. Can we know what is happening there?
Vinay Gupta: 30 plus overall.
Gaurav Khandelwal: This is, I think, on slide 23 of your deck.
Ajai Kumar Shukla: Just a second. First of all, let me tell you that if you see how we are controlling our overall delinquency and how we are working on that. See our overall bounce percentage at our national level, which is very well within control. Since now gradually the book is maturing. So if you see 30 plus has increased from 24 to 0.40.
Vinay Gupta: Not a significant jump.
Ajai Kumar Shukla: Yeah.
Vinay Gupta: While 90% plus remains stable, this is also between 25 to 40 basis points. We will further deep dive and see if there is anything to.
Ajai Kumar Shukla: Even if you see the bounce percentage has also improved.
Gaurav Khandelwal: Got it. Perfect. Thank you very much. This is very clear. Thank you very much and good luck.
Operator: Thank you. Next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Avinash Singh: Good evening. Thanks for the opportunity. So two questions. First one, if I see your asset mix in affordable also, there is a kind of a nearly similar 35% or 130 into non-housing or LAP. So how is your comfort in terms of the asset quality trends in this affordable LAP? And also in the affordable segment, your yields have come down in previous quarters. So what is driving that yield compression? The second question is, in the wake of competitive dynamics playing out, if the public sector banks continue to play aggressive rates in the new Prime home loan, what would you prefer? You will still compete with them, or you would sacrifice growth for the profitability? Thanks.
Ajai Kumar Shukla: So, let me tell you the first question you asked was the ratio of affordable between home loan and LAP. See, one thing which has happened in the past by the regulation and this happens particularly in affordable segment and in smaller market, wherein, if any self-construction case. If the construction stage is more than 60% and customer comes to you for a loan, then you have to book while it is a construction loan, but you have to book your balance amount as a LAP only, which is a non-home loan. That is why the ratio is changing. Actually, it is a home loan only, but since the regulations is that more than 60% See earlier what used to happen, even if the stage is 90% or house constructed within six months of construction, you would have booked as a home loan. So that scenario has changed now.
Ajai Kumar Shukla: That is why in most of the company you will say gradually the ratio is looking different, while in actual it is different. The second question is that yield, which I addressed in my first question itself. Basically, we enabled our Prime and Emerging branches also to source affordable business. And these are the branches largely which are operating from metro and the state capital. And that is why these are the price sensitive markets. But overall, if you see on standalone basis, if I say the yield of affordable vertical is still same. And that is why the overall yield is looking slightly 10, 12 bps lower. And the third question is your nationalized banks availability of fund and how to compete in the market.
Ajai Kumar Shukla: Honestly speaking, we do not want to compete much where the nationalized banks are present because they are more into salaried and the Prime salaried. That is why purposefully we enabled our team, we structured our team in a way that they have expertise of self-employed business and experience, I would say, underwriting team and keep a balance of self-employed and salaried and also the loan against property and home loan, so that my overall margin and yields are maintained.
Avinash Singh: Got it. Thank you.
Operator: Thank you. Next question is from the line of Dhaval M. Gala from Aditya Birla AMC. Please go ahead.
Dhaval M. Gala: Hello, sir. Am I audible?
Ajai Kumar Shukla: Yeah, Dhaval, you are audible.
Dhaval M. Gala: Thanks for taking the question. Good set of numbers. Sir, couple of questions. How do you look at sustainable disbursement rates, maybe say 3 to 4 quarters down the line, and how that translates into AUM growth? Second, a lot of people have asked already, but how do you look at margins given our asset mix is improving more towards high-yielding, affordable and emerging loans. So what should be sustainable margins? We also have seen rating upgrades. Rate cycle is also now a little better for us. How do you look at both these things?
Ajai Kumar Shukla: Okay. So, first of question is how do you
Dhaval M. Gala: The disbursement trend, sustainable disbursement trend.
Ajai Kumar Shukla: Yeah, I am answering that. First of all, if you see in general, Q3 and Q4 are better months than the Q2 month because these are the festive months when business starts shaping up. This is a trend which is continuing from a number of years, I would say many number of years. So, one is that whatever we have delivered in Q2, I think that is a new set of benchmark for us, and we have to grow from there. That is one thing. As I said that 25 bps repo hike also does not have much impact on the sourcing. In fact, I was checking with the many competition today morning itself that how the logins are placed, how disbursement. Everybody was very confident that there is no problem of number. It suggests that the business is available and people are doing.
Ajai Kumar Shukla: There is a sequence of festivals now which are there, and the demand of money also keeps on coming. Once the growth is there, so it will translate into ultimately the AUM also. You rightly said that to maintain the margin, I think we have certain levers, which I said that we will focus more on high NIM product, where focus would be on Emerging and Affordable. That is why this year whatever investment majorly we have done, that is towards Affordable only, whether in terms of branches or people. So the investment has there only. That is one. Some opportunities for, as I said, that sell-down of portfolios will also be one of the tools which we will use for that. Some portion of, I think, construction finance, while we have not done much construction finance, we have some book of some INR 700 crores.
Ajai Kumar Shukla: But we will also, as we said, that this year we are aiming to get INR 3,000 crores of book this year. I think that will also help us to improve because that is again high NIM business for us. So overall, we are confident. Rating upgrade is definitely going to help in terms of our cost of borrowing because this was due from longer period, but now we have got it. But it may translate in phased manner, may not be immediately. But yes, by upgrade of this rating, we have started negotiating with many bankers and I think we have done some good deals also in that.
Dhaval M. Gala: Last question. The DA income in the current quarter, will this be a consistent trend for us? Is this one of the ways how you can improve ROAs and ROEs in coming years?
Ajai Kumar Shukla: It will depend on how we feel the requirement is. This depends on the
Vinay Gupta: Dhaval, there is no DA sell-down. We have only done DA pool buyout.
Ajai Kumar Shukla: He is asking, I think, future. Correct, you are asking future or you are asking till now, Dhaval?
Dhaval M. Gala: No, I am asking in for future the way other affordable housing companies are doing.
Ajai Kumar Shukla: Yes.
Dhaval M. Gala: Basically, I am trying to understand how you can expand your ROAs in next 2 years, thereby also improving ROE. You have got the growth momentum now. The margins are also on the trend of improvement or sustainable numbers are around 3.5. How do you look to improve ROAs and ROEs?
Vinay Gupta: That is right, Dhaval. This is going to be one of our sustainable strategies now that we have hit our stated guidance on the book growth. We will have some room and buffers to do DA sell-downs so that we will start evaluating now from Q3. We will start doing some of the deals which will help in terms of the overall NIM as well as the ROE. It will be part of the strategy going forward.
Dhaval M. Gala: Sure, sir. Thank you.
Operator: Thank you. Next question is from the line of Vaish Solanki from RSPN Ventures. Please go ahead.
Vansh Solanki: Thank you, management, for taking my questions. Sir, my first question is on that you mentioned that there is a retail written-off pool around INR 320 crores. Is there any other corporate written-off pool as of now, as of September?
Vinay Gupta: Yeah. We have a corporate pool of around INR 650 odd crores, which are basically the two accounts which we have declared fraud, which we are now pursuing for recovery.
Vansh Solanki: Okay. Also the second question is on the other expense, like it is sequentially increased too much on other expense side. Is there any reason for this increase?
Vinay Gupta: There is an increase of, I think, 10% there. It has not increased too much. But again, that also had some one-time payment of GST on prior year's royalty to PNB, which is paid this time after the AGM approval. It is more like a one-off.
Vansh Solanki: Okay. Can you quantify the amount of the GST and the royalty which you have given?
Vinay Gupta: Around INR 7 crores.
Vansh Solanki: Including both of them?
Vinay Gupta: No, no. It is basically only the tax component which is reimbursed. The other part was, in any case, we are paying royalty to them on a quarterly basis.
Vansh Solanki: Okay. Thank you, that is all from my side, and all the best for the future.
Vinay Gupta: Thank you.
Operator: Thank you. Next question is from the line of Vikas from Blue Sky Fintech. Please go ahead.
[Analyst] (Blue Sky Fintech): Hello, am I audible?
Vinay Gupta: Yeah.
Ajai Kumar Shukla: Yeah, Vikas.
[Analyst] (Blue Sky Fintech): Yeah. I just wanted to ask on the ROA that we have guided for 2.4 range. If I look at the quarterly basis, we are now at 2.53% in Q2. On a half yearly basis, we are on 2.44%. We are already ahead of our guidance. We have a festive season coming up and stay high. How are we looking at our guidance? Is there any kind of upgrade or are we maintaining that?
Vinay Gupta: No, we are maintaining that. This time again, as we said, there is some one-off in the overall interest income, which has led to higher ROA. The normalized ROA is 2.4%, which is in line with Q1. We are pretty much maintaining what we have guided.
[Analyst] (Blue Sky Fintech): Thank you. Thanks. Thank you. That is all from my side.
Operator: Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference back to the management for closing comments.
Chaitanya Yadav: Thank you, everyone, for joining us on the call. If you have any questions unanswered, please feel free to get in touch with investor relations. The transcript of this call will be uploaded on our website, that is www.pnbhousing.com. Thank you.
Operator: Thank you very much, sir. On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you all for joining us today and you may now disconnect your lines.
