Ladies and gentlemen, good day and welcome to the Can Fin Homes Limited Q2 FY23 earnings conference call hosted by Investec Capital Services. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Nidhesh from Investec Capital Services. Thank you, and over to you. Thank you, Mike. Good afternoon, everyone. Welcome to the Q2 FY23 earnings call of Can Fin Homes Limited. To discuss the financial performance of Can Fin Homes and to address your queries, we have with us today Mr. Girish Kousgi, MD and CEO of Can Fin Homes, Mr. Amitabh Chatterjee, Deputy Managing Director, Ms. Shamila, Business Head, and Mr. Prashanth Joishy, CFO of Can Fin Homes Limited. I would now like to hand over the call to Mr. Kousgi for his opening comments. Over to you, sir. Good afternoon to all the investors, and welcome to the earnings call. It's been a fruitful quarter, a very good quarter, I must say, because we've done well on almost all the key parameters. If you look at book, we have grown by 22%. If you have to talk about disbursement, even sequentially, we have grown by about 2%. If you have to compare on a YOY basis, you know, it is marginal growth. That's only because last year, quarter one, there was COVID, and therefore we couldn't disburse much. There was a spillover effect. Last year, quarter two, we did very well. We did about INR 2,208 crores. This quarter we have done INR 2,245 crores. If you have to compare YOY quarter, I think there has been a marginal increase. If I have to talk about revenue on a quarterly YOY, we have grown at 40% and half-yearly 38%, operating profit 33%. If I have to compare H1 and H1, 37%. There is a growth of PAT by 15%. If I have to compare the half-yearly, it's 31% over last year. NIM has been pretty stable at about 3.55%. There has been a five basis points drop in NIM, and spread is 2.51, dropped from 2.66. I had indicated earlier, on a steady state we'll be able to maintain 3 and 2.4. Even though we are at 3.55% NIM and 2.51% spread, we will be able to maintain 3.5% and 2.5% for next few quarters. In the long run, I think it will somewhere settle down around 3% NIM and 2.04% spread. I think in last few quarters, there has been increase in the cost, and especially for last quarter, the cost went up from 5.8%-6.04%. So there has been increase in cost by about 24 basis points. In the last quarter, the yield was 8.46%, which improved to 8.55%. Incremental yield is about 9.02%, and incremental cost is 6.48%. Our portfolio yield, as I mentioned, is about 8.55%. If you have to look at asset quality, it improved. Last quarter was 0.65%. This quarter is 0.62%. Net NPA on a like-for-like basis, apples-to-apples comparison, last quarter was 0.3%. This is under IRAC. Under IRAC this quarter it is 0.28%. What has happened is that we have moved to ECL model. We have migrated to ECL model, and therefore there has been a rearrangement within the total provision between NPA and standard. We have withdrawn INR 21 crores from NPA, and that is now sitting in standard provisioning. Total standard provisioning is about INR 33.5 crores. Out of INR 33.5 crores, INR 21 crores is something which has moved from NPA. That is why you will see net NPA increase from 0.3% to 0.35%. 0.3%, what we're referring to last quarter is IRAC. Equal comparison now is 0.28%. Under ECL it is 0.35%. Therefore we see that the net NPA has gone up and the PCR has come down. It's only an internal adjustment because of migration. If you have to look at the total slippage, it is INR 1 crore net slippage because we have, I think INR 12 crores is the slippage and we have recovered INR 13 crores. Therefore, you know, you will see there the asset quality and the slippage is being pretty okay. In terms of credit cost, it is 0.04%. Demand is pretty good. We are seeing this across all geography, all segments. We're seeing this, you know, amongst all the products. In terms of salaried and self-employed, we see salaried to be driving, you know, a better growth compared to self-employed non-professional. Self-employed non-professional has improved. It's improving every quarter. I think another quarter or two, I think it will be back to 30% incrementally. Otherwise, we see, you know, good momentum across in spite of interest rate hike and also in spite of cost of construction going up. There has been on an average in some markets 10%-12% increase in the property prices. Especially, you know, on the apartment side. Construction, the cost has gone up by 6%-7%. In spite of this increase, we are seeing a robust growth. This is a quick brief on, you know, what happened in quarter two. We'll be happy to engage because I'm sure there'll be a lot of questions because we have moved from IRAC to ECL, you know. There'll be a lot of questions, so I'll be happy to take any questions. Thank you very much. We will now begin the question answer session. Anyone who wishes to ask a question may press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. We have the first question from the line of Dhaval from DSP. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. I had three questions. First one is relating to the borrowings. You know, in the last six quarters, we've sort of seen commercial papers share in the borrowing mix come down from 18-19% to about 8%. Incrementally, I mean, what is your thought process on the overall borrowing mix and specifically for CPs, if you could give some perspective. That's question number one. The second question is relating to spreads. We've seen some moderation in spreads this quarter. Just if you could give. I know you've given a medium-term guidance of spread, but just directionally, would you expect next couple of quarters, you know, to be more similar, in the similar zone as we've seen in the second quarter? Or there is, you know, further pressure likely, some perspective on that would be useful. The last question is relating to the provisioning change. Could you provide the stock of standard asset provisioning and any other provisioning, be it a restructuring provision, et cetera. Some perspective on the entire provision bit, that would be the third question. Oh, also the restructured book number. Yeah. Thanks. Yeah, sure. On the borrowing mix, you know, we don't see too much of a change from the current mix in the near term. Yeah, CP rates are going because the overall rates are going up and which will also, you know, we can see higher rate on NCDs. So we are seeing increase in rates across, be it, you know, term loan from banks, be it bonds, or CP. So what we will do is, you know, this is very, very dynamic, so we are agnostic in terms of the source beyond regulatory requirement. Therefore, we'll be very, very watchful because our endeavor is to keep the cost of funds low. So to that extent, you know, we will be quite conscious about getting the right mix at the right cost. Having said that, I think we will not be able to see too much of a change in the next couple of quarters. Borrowing mix will be almost the same. For example, today we have from banks 54% as a mix. The 54% maybe can become 52%, but it'll not become 45%. There'll be a small change here and there. Otherwise, not much change in the mix. In terms of margin, yes, we did increase rates in last one year. One thing is very sure, we have given guidance for long-term, that is 3% NIM and 2.4% spread. That definitely we will protect. How we will do is depending on the cost of funds, we will try to increase the yield so that we get the right margin and profitability. Having said that, in the near term, I think it will be somewhere around 3.5% or 2.5%. This would continue for next couple of quarters. In the long run, it will be about 3%, 2.4%. This is more to do because of our profile. You know, as I can say, you know, we are completely into retail, affordable, low ticket. You know, we are not into high value, we are not into non-home, we are not into builder funding, we are not into corporate funding. Therefore, the ability of the portfolio to generate higher yield is limited to that extent. Therefore, we want to moderate in the long term our NIM at 3% and spread at 2.4%. With respect to provisioning, Joishy will give you the details. Yeah. Regarding the NPA provisioning, in fact, I'm getting a lot of calls also. I thought give a detailed explanation. The provisioning requirement to be maintained as per the RBI or NBFC direction is IRAC norms or ECL model, whichever was higher. Till last quarter, it was the IRAC norms which was higher. Because in the ECL model, the standard asset attracts the provisioning at a higher rate compared to the IRAC norms on account of PD, LGD and non-recovery percentage. In June, the provisioning what we disclosed is INR 97.85 crores for NPA, INR 10.17 crores for standard asset. Put together, it is INR 199.02 crores. This is the provisioning held in the books as of June 30, 2022. Now, when we do that calculation, we do the calculation as per the ECL model also. The ECL model provisioning at that time was put somewhere around INR 184 crores. The gap was to the extent of around INR 15 crores. During this quarter, we have disbursed INR 2,245 crores. The full amount is a standard asset which requires the provisioning at the rate of standard asset provisioning as per the ECL model. On account of increased disbursement, the ECL model provisioning stood at INR 208.86 crores, whereas the IRAC provisioning stood at INR 204.83 crores. See, now the scenario has changed. ECL model has become more and IRAC has come down. Company has to hold the provisioning whichever is higher. We have to migrate to the ECL model. On account of that, the provisioning required for NPA as per the ECL model comes to INR 77.53 crores, which was INR 97.85 crores in June. That means the provision has been come down by INR 20.31 crores. Whereas as per the standard asset provisioning, which is required to be maintained comes to INR 131.33 against what we held, INR 101.17 crores. That means there is a difference of INR 30.16 crores which we have to provide. Further, for undispersed line of credit, we too have to provide as per the ECL model, which comes to INR 3.38 crores. On account of this, during the quarter, there was a withdrawal of provisioning on NPA to the extent of INR 20.31 and creation of additional provisioning in the set of standard assets to the extent of INR 33.55. With this, the total provisioning held in the books will be INR 131.33 for the standard assets, INR 77.53 is for the NPA. Put together is INR 208.86. Apart from them, restructure for provision we are holding in the books to the extent of INR 67 crores. Total provision in the book as on date stood at INR 239.94 crores. This is the total provisioning movement because we are getting the repeated calls. I thought this is the right opportunity to explain everything in detail, so most of the repetitive calls can be cleared it off. Thank you. The stock of standard restructured book? Seven. These have been disclosed in the semi-annual results. It is INR 704.85 crore. It is there in the semi-annual results second page notes, point number six. Thank you, sir. All the best. I'll come back. Joishy, please, share the original amount of INR 709 crore. What is that outstanding today? Because this will be with interest as well as outstanding. Yeah. Outstanding, outstanding. Correct. No, the original amount outstanding of the issue. Yeah. It was INR 694 at that time. Now it is how much? INR 708.95. Out of it. This is the operator. Can you hear us in the call, the management? From the initial restructured book, close to about INR 62 crores have been closed. Now, the INR 704.85 includes interest accrual. Which means out of the original book, INR 60 crores worth of loans are closed already. The outstanding is INR 645 crore approximately? From the original amount, because in what happened in restructured accounts, there will be interest accrual, right? This INR 704.85 includes interest accrual. The gross of this is INR 647, that is INR 709 minus INR 62. That is the actual gross. Understood, sir. Thank you. All the best. Thank you. It's about INR 647 crores. Outstanding is INR 647. With interest, it is INR 705. Thank you. We have the next question from the line of Harsh Shah from L&T Mutual Fund. Please go ahead. Yeah. Thank you for the opportunity. Just couple of questions. One, you mentioned a long-term NIM guidance of around 3%. Just two questions on that. Currently, we are at 3.55%, and for this year we are guiding for 3.5%. First, what are the levers to maintain that NIM? And once we come down to 3% on an average of ±10 basis points, what are the levers that we will have at that time to maintain our ROA at 2%? Because our rate cost is also lower. Our total cost as a percentage of asset is also not in step significantly. At 3% NIM, will we be able to do 2% ROA? See, our guidance on margin in the long run is about 3%, and not in the near future for the simple reason, I think once we grow on a larger base, showing growth will be difficult. But still we want to maintain that growth level and therefore there it will be a trade-off between growth and margins. The margins, the threshold would be 3% and 2.4%. Right? Now, having said that, we will also figure out, you know, avenues where we can try and increase our NIM, but we don't want to, you know, tell that at this point in time because it's very, very dynamic. I'm not getting into the ratios. All I'm saying is that our growth in terms of disbursement and book will be 18%-20%. In terms of margins, it will be 3% and 2.4%. In the near term, 3.5% and 2.5%. I, you know, whether we'll be able to maintain ROA of 2%, you know. I think all those things I will leave it to the investors. We can also work out on that. At this point in time, we are confident of. See, because for us margin is more a function of, you know, what is the profitability that we need to maintain, and it depends on the cost. Depending on the cost of funds, we would moderate the yield. Today we are at a particular yield because that is the decision point. If we have to improve yield on portfolio A, B incrementally also that we can try and do. It is something which is in our control. It's only a decision point from when we want to, you know, trigger that. Okay, just to cut short the answer, if you have to maintain profitability and the return ratios, we can always moderate the yield and ensure that we show a higher profit, we show higher margins. It's an action point when we reach that, you know, time, then we will trigger the action. When you say moderate yield, what do you mean by that? Moderate yield is, you know, increase or decrease in yield. For example, you know- There is a flexibility you are saying. Exactly, yeah. For example, today we are at yield of let's say 8.55% now. Let's say, you know, over next few quarters if you have to increase yield to show better margins. We will also try and build book at a higher rate and also on the portfolio, depending on the increase in the overall interest rate in the market. Sir, that change in yield, does that require you to lend to a new set of borrowers that does not classify under your current set of borrowers? Or is it the existing borrowers where you will increase the rate? Or is it a mix? Yeah. Whatever we have discussed till now and what we'll be discussing in this call will be based on no change in profile or the segment. You know, there is no change in policy, no change in product, no change in profile, no change in segment, no change at all. The only change is going to be today we are 100% retail. What we are discussing now going forward will be 99.95%, 99.5% retail and 0.5% will be builder funding. That we are experimenting now with very small ticket size. But for the small change of builder funding up to 0.5% over a period of next three years, there will be no change in strategy whatsoever. Understood, sir. Just a second question to the rest of the team also. Where are we in terms of hiring the new CEO? Are we at a preliminary stage? Have we shortlisted? You know, are we at an advanced stage? Where are we? See, we have already given the task to a headhunting agency and we are in the process. Shortlisting has begun, so we expect interviews to take place shortly. Depending upon which candidate is selected, we expect that whoever is selected will be needing some time. By that estimate, we estimate that around maybe new MD & CEO will be able to join at the end of this quarter. Okay. Before the end of the calendar year? Yeah. Understood, sir. Okay, that's it from my side. Thank you and all the best. Thank you. We have the next question from the line of Punit Mittal from Global Core Capital Limited. Please go ahead. Hi, can you hear me? Yes, we can. All right. right. Just one question or one observation and if you can comment on it. When the news of the resignation of the MD came out, the stock price started falling way before the official announcement came out on the exchanges. Naturally this information was passed on externally before the material in the news was published on the exchanges. Has the company looked into it of why that happened and who is responsible for that? Or has the company not observed any such thing? Now see, as far as we are aware, we have maintained complete confidentiality till such time we reported to the exchanges. Right? I think, as far as we know from the company management side, I think there has been, you know, no lapse on managing this entire resignation process. Okay. Thank you very much. Thank you. We have the next question from the line of Shreepal Doshi from Equirus. Please go ahead. Hi, sir. Congrats for the strong growth that you delivered during the quarter. Just one clarification. On the outstanding restructured standard restructuring book, you said that is INR 647 crore on which we are carrying a provision of INR 67 crore. Is that right? Yeah. Okay. Sir, with respect to the ECL norms, like would we be going, like going forward, would we be disclosing the stage one, two, three and the coverage on the same? Or if you could share currently, it would be very helpful. The disclosure will be as per the RBI guidance, what we are required to disclose. The same format is maintained. Okay. Sir, on the yield side, have we taken any rate hike during the quarter? Any changes on the repo rates? In quarter two we haven't increased because we had increased in quarter one. Okay. Going ahead like are we planning to increase it in the next quarter? This quarter we are planning to. It would be by how many basis points? That we have not decided because last quarter, you know, I think just before quarter two could begin, we had discussed, you know, in our internal meetings and like so and we decided that we should not immediately increase because we are pretty comfortable, you know, on the yield spread and with the overall margin and therefore we didn't increase the rates. This quarter we plan to increase and it will be marginal because even now we are pretty comfortable on the margins. Okay, got it. One last question. It is with respect to the Chief Risk Officer. I think there was a filing wherein Mr. Uthaya Kumar was designated as the interim CRO. Because I think there was a superannuation of Mr. Narendra, I suppose. Are we in process of you know, finding a replacement for that position as well? Yes, yes. We are in the process of hiring CRO and that process is already on and we have shortlisted few candidates and we have to see when who is going to join. Is there any update that is there for the CFO position? It is the same thing with CFO also. Same holds true for the CFO. Got it, sir. Thank you, sir. Thank you so much for answering my questions and good luck for the next quarter. Thanks. Thank you. We have the next question from the line of Ratik Gupta from Guardian Asset Management. Please go ahead. Yeah. Hi, sir. I wanted to understand the relation between the average business per the branch and the employees. What I see is there has been a decrease in your average business per branch for this quarter as against the previous quarter, while there has been an increase in the average business per employee. Also we are seeing a decrease in the employee expense for this quarter in a significant as compared to the previous one. Can you give a limelight on that? Regarding the employee expenses, last quarter was INR 22 crore, this quarter is INR 17.83 crore, mainly on account of actual valuation, that is as per Accounting Standard 15, where we have to make the provisions if the valuation of the investments are less than the committed. Now, as we are aware, the GSEC valuation has gone up this quarter, so the provisioning what is required has been come down. Last quarter, that is Q1, we made a provision to the extent of around INR 4.5 crore for the AS 15 consisting of PN encashment, sick leave and gratuity expenses. That is why it has come to INR 22 crore, but for which it was hanging around INR 16.8 crore. This year it is INR 17.8 crore with the additional provisioning of INR 15.51, so INR 0.51 crore or INR 51 lakh, which is mentioned in your statement, but for which it is INR 16.87. Employee costs almost remain the same as such. In terms of income, average business per employee, last quarter was INR 30.87 and now it is INR 30. This is a marginal increase. Yeah. But there has been also a decrease in the average business per branch. I mean what we can see is that. We opened four new branches. There is no, you know, difference in the branch count as well, but for four. Okay. My second question is on the borrowing going forward. Are we looking to increase our deposits or how is it? If you can give me interest-wise on what is the average interest rate that you are carrying for market borrowings and the CP deposits. See, in terms of deposit, of course, definitely we are keen on increasing our deposit base. It also depends on what is the additional cost burden, you know, we are willing to take in our cost structure. As of now, the cost of raising deposit is much higher than many other sources. Having said this, our long-term strategy would be to try and increase the deposit base. Near term, it depends on, you know, how well it will fit into our cost structure. Okay. Can you give me the average interest rate you are carrying for market borrowing and the CP? Market borrowing is below 5%. Okay. As of now, the deposit cost is higher than the average borrowing cost of the company. Okay. Yeah. Thank you, sir. Thank you. We have the next question from the line of Rishab Dugar from CD Equisearch. Please go ahead. Good afternoon. I want to understand what is your competitive advantage in lending compared to banks and other housing finance companies? Okay. Today if you look at market is quite large. Now, there are set of institutions, you know, which are building book at 8%, even less than 8%, and some at 9%, some at 11%, some at even 14%, 15%. Okay. Now, if you see there will be slight difference in the profile. There will be slight difference in the nature of property and there will be slight difference in the geography in which they operate. We are, you know, in between. We are not as competitive as banks by design in terms of pricing. Also we are, you know, very competitive compared to the next set of institutions which are building book at a higher yield. This market gives scope for institutions to operate at different yields depending on the risk appetite of each, institution. If you have to, for example, we will have overlap in terms of, business with PSU banks, with private banks, with HFCs, with NBFCs. At the same time, we'll also have, within HFCs, there are different categories of HFCs, broadly categorizing based on, the yield at which they build the portfolio. We are in between. We have that advantage of, you know, moderating if we want to grow our book. Now we can be a little competitive on pricing and slightly better our profile and growth. At the same time, if you want to balance and increase our margins and profitability, assuming we have enough and more growth coming in, then we can probably try and build book at a higher portfolio. Just to answer your question in short, I think market is quite robust. It's huge, and therefore there is opportunity for all types of institutions to build book at different yield levels. We are as of now somewhere in between. Okay. You talked about that there is opportunity for all yield levels, but I just want to understand that how much do you think these things matter when money per se is a commodity and whoever lends competitively gets the business? It actually depends on the risk appetite. For example, you know, today banks they have cost of funds advantage and therefore they go to Cat A builders, Cat A corporates. We don't have cost of fund advantage compared to banks. We have an advantage compared to all the HFCs and NBFCs, rather we are the best in the market as of now. But we can't really compete with big banks on cost. And therefore our segment is Cat B builders, Cat C builders. You know, Cat B corporates, Cat C corporates. If you look at set of other institutions, they focus on probably Cat C builders, Cat D builders. You know, there are different segmentations. Depending on the risk appetite and how well they underwrite and manage the portfolio, they can figure out, you know, in which segment they need to operate. Okay. Thank you. Thank you. We have the next question from the line of Ankit Shah from White Equity. Please go ahead. Thank you for taking my question. Sir, just one question. What is the collection efficiency in restructured, which become due? See, in restructured, as I mentioned, now the outstanding is about INR 647 crores from the original pool of INR 709. In restructured book, about 21% of customers are paying in advance. Now, out of the cases, what has fallen due, not even a single case is in between. All right. That's it. Thank you. Thank you. We have the next question from the line of Mahek Talati from Yellow Jersey Investment Advisors. Please go ahead. Hello. Hey, sir, first of all, congratulations on good set of numbers. Hello? Yeah, please go ahead. Thank you so much. Uh, so- I think small correction. Out of the entire restructured pool, INR 1 crore is in NPA now. Initially we had anticipated that 7% of the restructured book that is approximately INR 700 crores. 7% would come to INR 49 crores. INR 49 crores would slip to NPA. After a couple of quarters looking at the performance, we moderated that to 5%. That is about INR 35 crores. Now the outstanding is INR 650 crores. We expect in future, say, 5% of INR 650 crores to move into NPA. That is about INR 32 crores approximately. We have close to INR 49 crores, which we plan to recover from the existing NPA pool. As on a net basis, I think our GNPA will still be, you know, around 0.6%-0.65%. Yeah, please go ahead. Okay. First of all, like are there any plans for the, like for Canara Bank to exit from our company or do they plan to stay with us for the long term? As of now, I think bank doesn't have any plan to exit from the company. I think last earnings calls, Canara Bank has clarified they don't want to have any plans to exit from the company. Okay. How do we look at the growth from here in terms of net disbursement going forward? Comparing ourselves to other companies, like, how do we place ourselves in the market in terms of the growth journey from here on? Do we plan to having strategy to capture the market shares as such in the affordable housing segment itself? No. See, we don't chase market shares. We have a plan, we have a vision, and we try to execute to reach there. As of now, our plan is to grow at 18%-20% for next 3-4 years time. I think that is well, in place looking at the demand and, the way we generate source, underwrite, and manage the portfolio. We are, right up there. We generally don't, you know, focus on market shares, but we focus on we need to double in next 4 years and therefore what should be the growth rate and therefore what should be the internal, you know, enablements that we need to, be ready with to try and achieve that, growth rate. Growth story is very much there. We will grow. Our focus is on growth. We will grow. At the same time, maintain profitability, keeping the risk profile, you know, unaltered, which means GNPA will be very much under control, of course, with high liquidity. Okay. Sir, you mentioned that you are trying your hands with builder finance with a small ticket size, of course. If this works fine, like how in what timeframe will you be able to comment if this worked in favor or not? If it works fine, does the company plan to, you know, increase the exposure in this particular direction as well? Actually we raised funding to builders 2 years back. It's not that we are new to this segment. We were, but of course that was few years back. You know, this might take another, let's say, 12-18 months time to have some reasonable exposure, not in terms of percentage because we never intend to cross 0.5% of the portfolio in at least in next 3 years time. In next 12-18 months time, we might have a very small book. You know, I think then we'll be able to comment. We don't want to lose out on this opportunity. Having said that, we know it's very risky, so we will start very, very small. This is more of a pilot, I could say. I think once we are successful in pilot, then we will gradually, you know, probably try and increase. Definitely not more than 0.5% in next three years at a portfolio level. Okay, sir. Sir, like from this quarter's result, we see the interest cost has gone up for that in absolute terms, of course. Is it primarily because we have not passed on the cost to the user or to the customers? Partly, yes. You're right. Okay. What would be the other reason for that? There has been increase in cost by 24 basis from 5.8% to 6.04%. Now, if you look at the yield, I think yield has gone up only by, I think, 7 or 8 basis. Okay. Yes, thank you. Thank you so much. Thank you. We have the next question from the line of Sakshi Goenka from Sohum Asset Managers. Please go ahead. Hi, sir. Congrats for the good quarter, and thank you for the opportunity. Hello, am I audible? Yes, ma'am. Please go ahead. You're audible. Yeah. Thanks, sir. Sir, just two sets of questions. First, if you could tell us what is your rack rate? Secondly, sir, I just wanted to understand your cost of funds. You mentioned that your incremental cost of fund is currently at about 6.48%-6.5%. If I look at all sorts of borrowing avenues, the one-year CP or even bank MCLR, they are much, much higher than your incremental cost of funds. I just want to understand, is your bank borrowing fixed in the sense it's not linked to MCLR? Because how are you managing such low incremental cost of funds? Thanks for the question. I think we've been a leader in managing cost for many, many years. You are right. Our rack rate is 8.75%. Depending on the product, depending on so many other parameters, the rate could be more because our incremental yield is 9.02%. Our rack is 8.7%, so incremental yield is 9.02%. Incremental cost i s 6.48%. At a portfolio level, our yield is 8.55% and cost is 6.04%, which has increased, you know, by 20 basis points compared to last quarter. I think I must really thank my team for managing cost very effectively. We have a very efficient team, and they've been managing this. Having said that, the way we manage, you know, cost is that we don't use CP for funding purpose. We use CP as a cost-effective, you know, tool to keep the cost lower. Because we feel that generally, CP rates would be little lower than other source of borrowing, and therefore we have that arbitrage which we can try and then cash. Suppose if CP rates goes up, then we will not, you know, avail any CP. We are agnostic in terms of source as long as we get the right cost and if it fits into our structure, then we would try and go. This is beyond the regulatory norms. For example, you know, for all the incremental borrowing, 25% has to come in way of NCD. That irrespective of cost will go ahead and raise. We'll have to time the issue to keep the cost low. Otherwise, we are agnostic with respect to the source, and that is the way we're able to manage our cost better. Sir, is your bank borrowing linked to MCLR? See, in fact almost all barring some of the borrowings from NHB which is fixed. Some are fixed for some period and then of course it's floating. Otherwise, by and large, all the borrowings are linked to variable. In some way or the other. It could be repo linked, it could be T-bill linked, right? I think in some form or the other, almost all the loans are variable. But for the lending what we, you know, get from NHB, so there we have some portion of fixed. Understood, sir. Thank you so much. Thank you. Thank you. We have the next question from the line of Puneet Balana from Nomura. Please go ahead. Hello. Please go ahead, sir. Just one data-giving question from my side. Can you share the number of, like, the amount of write-offs for this quarter and for, like, for the entire H1 2023? This quarter is zero. Okay. Last quarter is zero. Last one year is zero. We have not written off anything at all. Last one year is zero. In fact, last two years. Just a minute. Last two years is zero. We've zero written off. So it's zero. Last two years, it's zero. In fact, we've not written off at all. Okay. Yeah. Okay. Yeah, that's it from my side. Thanks. Thank you. Thank you. We have the next question from the line of Anusha Raheja from Dalal & Broacha. Please go ahead. Yeah, thanks for taking my question. Just one question from my end. Why you are looking for replacement, you know, at the top team? Like you said, you know, there will be replacement for CRO, CFO and MD & CEO. MD & CEO we understand, you know, he got a better opportunity but why at the CRO and CFO level? Board has decided since company is growing to hire some professionals from the market. In line with that, it has been decided that CFO and CRO has to be hired from the market. Apart from that, any other reason? No, no, there is absolutely no other reason. All the existing CRO and CFO are the employees of the company since launch, and they will remain with the company. Okay. Thank you. We have the next question from the line of Shreepal Doshi from Equirus. Please go ahead. Sir, thank you for giving me the opportunity once again. The question was on yields. If I look at the calculated yields and the difference between calculated yields and the reported yields is significant. The re-calculated yield comes out to be at close to 9.3% versus your reported yield of 8.6%. Just want to understand what explains this, significant difference here. Like, what all things does come in the base when you calculate it. Just want to understand it, sir. No, calculated yield. See, incremental yield is 9.02%, as we told earlier in the con call. The book yield is at 8.55%. What you told is correct, 9.02% is correct yield, but it is only for the quarter earnings. That means fresh disbursement what we've done is 9.02%, and overall is 8.55%. That is the book yield. In the book you only take the advances or like, right? It consists of all advances, housing loans, non-housing loans, yield on our investments and all put together. It is the average yield of each and every loan. Okay. Sir, what would be the impact of the investment yield on our overall yield? If you could just give some color for this quarter at least. Yeah, investment yield will be now almost at par with the slightly higher than our incremental average cost. Okay, sir. Thank you so much. I'll come in the queue if I have more questions. Thank you. Thank you. We have the next question from the line of Dhruvish Pujara from Mirabilis Investment. Please go ahead. Yeah, thanks for the opportunity. I have two questions. First is on the four branches which we expanded in the current quarter. Three out of the four come from Telangana. Wanted to understand, like, the thought process there. Like, is the market dynamics different there? Less bank competition or what is driving that? And secondly, what is our Telangana geography AUM mix? And also you can state the top three states AUM mix. That's the first question. And second, you already touched upon this, but I am trying to reiterate and understand it better. In the annual report, we have disclosed the bankwise borrowing. There we have shown the exposure versus the rate. If you do a weighted average of that, and if you compare that with the respective bank's MCLR, it is at least 100 to 120 basis points lower. Trying to understand what is making the banks lend us at 100 basis points- 120 basis points lower and what will make them continue doing this. Yeah, those are the two questions. Thanks. Okay. If you look at the entire country, what is working for Canfin well is Southern region. Within South, if you see, I think initial days Karnataka was doing really well. Now along with Karnataka, Telangana is doing very well, which is basically Hyderabad and a few districts, right? Therefore, you know, of course even T.N. too, I mean, entire T.N. is doing well. A.P. also is doing well. Within five states in South, Kerala is very, very, very small for us. Okay. From the rest four states, I think top two states are Karnataka and Telangana, and therefore we had planned to open more branches in Telangana and Karnataka. We have opened two branches in Karnataka, that is Bangalore and two branches in Hyderabad. Three in Hyderabad. Okay. Our focus would be on the states which can give us, you know, more value in terms of business proposition and therefore we have chosen this. This is the first question I think it was. See today, I think we feel that for any, you know, finance company, be it HFC or NBFC, the starting point is asset quality, which is NPA. If a company is able to manage the portfolio well, because we basically do business based out of... Basically it's a levered business, so the entire business works on borrowed funds and therefore the company has to be very, very clear in terms of managing the portfolio well. Since we are the lowest in the industry, I think lot of banks draw that comfort and they lend us, you know, at AAA rate rather, you know, sometimes we get the best rate. I think fortunately this has been continuing for a very, very long time, and we feel that as long as we're able to show growth, maintain profitability and keep portfolio well, keep asset quality stable, I think we will enjoy this, you know, recognition from all the banks to be lent at a lower rate. Okay. I got it. Just one question here. Can you also state the percentage of AUM coming from Karnataka and Telangana individually? Karnataka and Telangana would be close to about 42%-43%. Okay. Out of this, 30% would be coming from Karnataka, right? Like No, no, no, no, no. Because see, for example, Karnataka and Telangana would be almost same. Okay. Got it. Thanks. Over time, I think Karnataka exposure as a percentage of total AUM would have come down because earlier I think it was 50%. Yeah. Even though absolute numbers it has gone up, as a share it has come down because other states are now contributing. Got it. Yeah. Last question. Is there any change in the guidance which we have given on the 10-15 branch expansion for the fourth 2023? Like, I mean, since this quarter is for- No, no. On an annual basis, I think, around 12-15 branches is the plan. That there is no change in that guidance. Got it. The branches which we will open in this year, I mean, in what timeframe do we expect them to do a disbursement per branch what we have right now? Would it take like maybe a year or two? For us, on average, a branch would take about 8-9 months to break even. How what time would it take to d o the disbursement per branch? Month 1. Okay. Got it. Thanks. Thank you. We have the next question from the line of Jigar Jani from Edelweiss. Please go ahead. Yeah. Thank you for taking my question. Couple of questions from my end. The first one is on the restructured books. Can you let me know how much would be still in moratorium and when would most of the book come out of moratorium? That is the first question. The second is on credit costs. What would be your guidance for the full year now? Because I presume the provisions that you have taken in this quarter are largely because of the increased standard asset provisioning, if I'm not wrong, because you have not had any incremental tech slippages in this quarter. Credit cost guidance for the full year would be in the range of 0.12%-0.14%. Okay, thanks. No, no. This is the maximum cap I'm talking about. In fact, for this quarter it is 0.04. Yeah. Regarding the restructured books, we have given. Answered your question? Restructured book is in moratorium, is it the entire book as of now? Yes. See, we have disclosed in the Q3 results in the Note 5. The outstanding restructured books as on date up to the current accounting is INR 74.5 crores. They are coming out of the restructure in a phased manner from December, January, February and March. By the end of the financial year, all the loan records will be out of the restructure. Okay. Understood. Thank you so much. Thank you. We have the next question from the line of Aahan Tulshan from Trivantage Capital Limited. Please go ahead. Hi. Thank you for taking my question. I just had one question. If you could speak a little more about the demand trends that you've been noticing, whether across different customer segments and different geographies. If you could talk about that a little bit. Thank you. Yeah. We are seeing demand from almost all geographies, but we are going little slow on Kerala and a little slow on Delhi NCR region. For this we are seeing demand coming from all the other geographies. In terms of segment, you know, it is very good in affordable, it is very good in non-affordable also, but affordable is slightly higher than non-affordable. And because of the increase in construction cost, in the premium segment we see slightly less demand, maybe by 5% or so. Otherwise, I think by and large, demand is good across geography, across segment, across products. In terms of profile, self-employed there is slightly less demand vis-a-vis compared to salaried. This is, you know, for Canfin. We feel that in another one or two quarters, we will again get back to incremental mix of 70 salaried and 30 self-employed. Okay. Thank you. That's it from me. Thank you. We have the next question from the line of Umang Shah from Kotak Mahindra AMC. Please go ahead. Yeah. Hi. Thanks for the opportunity. Two questions that I have. One is on the provisioning front. How should we look at it going forward? I mean, do we follow the ECL model or depending on the balance sheet structure, we'll keep on providing as per IRAC, or keep switching between IRAC and ECL? I think, yeah, I think it's a very good question. I think structurally, even though technically it says IRAC or ECL, whichever is higher. If you see the structure, ECL is always going to be higher compared to IRAC. Therefore, going forward, the provisioning would be based on ECL model. Basically the credit card guidance that you have spoken about takes this into consideration? Yes. Exactly. Okay. Perfect. Second question is on how should we look at the equity raise that we had anticipated earlier? About INR 1,000 crore is what we were looking at. Any changes in terms of timelines or plans or we still intend to kind of close it by the end of this fiscal? Yeah. We are planning to raise capital. This could be now probably before March. Having said that, it's not, it may not be the full amount. It may be part of the enabling the total quantum. Because as of now, our DR is less than eight and capital adequacy is very comfortable. Basically, if we raise, it's going to be capital, it's going to be growth capital. We have planned. You know, but we have not decided on the timing and the quantum. Of course, we've been saying this for a long time. That's only because, you know, we are ready. We are ready to raise capital. As and when we feel the need, we will raise capital. It may not be near future, but we are ready in terms of raising capital. Each time we take enabling approval and be ready. Understood. All right. Thank you so much, and wish you all the best. Thanks. Thank you so much. Thank you. We have the next question from the line of Gaurav Jani from Prabhudas Lilladher Pvt Ltd. Please go ahead. Thank you, sir, and congrats on a good quarter. Couple of bookkeeping questions, please. One is, what was the investment income for the quarter? Yes, sure. Yeah, we'll tell him. Second question. I would want the investment income, so for Q1 and Q2, that is the first half put together also. Secondly, the tax rate this quarter was higher. You know, what would be the reason for that? Actually, no, in fact, the tax, there's no change in the tax rate. See, we had returned INR 21 crore from NPA, right? On that, there was additional tax. Therefore, if you calculate the total amount of tax and all it comes to INR 30 crore, actually, there is no change in the tax rate. Only because we withdrew from NPA and now it is sitting in standard, I think that additional thing is adding on to the total tax component. The interest from investment income what we had for SLR and LCR is INR 41.52 crore as of half year ending 30th September. The same was INR 19.12 crore as of June. Okay. Got it. This helps, sir. Secondly, sir, more of a, you know, structural question. You know, if you, if I have to look at the cost of funds trajectory, you know, the pass on or the pass through was pretty quick in terms of, you know, the rise, right? Now, I'm sure, systemic rates would stabilize at a point in time. Would that mean, that, you know, the following quarter or the immediate quarter, this cost of funds rise would immediately get arrested, and probably we are looking at a better margin directly? No, this quarter, I think even the, you know, interest rate scenario in the market, I think rates could slightly go up. We are also prepared for that, and we'll also increase our yields. Just in case if it stabilizes, then we might still increase, but by a small, you know, portion. Small amount. No, I meant stabilization in terms of, say, about two, three quarters down the line. Yeah, definitely, yes. We don't expect, you know, interest increase, you know, by a large extent in next few quarters. In that sense, you know, it'll get stabilized even our yield will get fixed. Sure. Last question, sir, more on the management side. One is, you know, when is the CEO, CFO, CRO tenure ending? And how would it impact the intensity of the business if that is the case? I think our present MD is demitting office on 20th of this month. I think it will be business as usual because the team remains and guidance remains for the same. We'll do as we have been doing well. We are confident that the present momentum will be continued. Sure. In the interim, someone else would, you know, be the interim CEO or something, or how would that come through? Because I think you mentioned that by the year-end is when the new person could join, so. Now, till such time new person join, board has given me, I am the MD of the company, to run the affairs of the company. Sure. Sir, when is the CFO and CRO tenure ending? CFO and CRO are present. They don't have any definite tenure. They are the permanent employees of the company. Till new CFO, CRO joins, they will be functioning as CFO and CRO. Got it. Thank you, sir. All the best. Thank you. We have the next question on the line of Bhuvnesh Garg from Investec Capital. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Just want to know your gross stage two number for the quarter and the provisions against it. Can you please repeat again? Sir, gross Stage 2 number for the quarter and the provisions against gross Stage 2? You want to know the Stage 2 account. Stage 2 loans are around INR 1,050 crores and provision held against the Stage 2 loans is around INR 60 crores. Okay. This INR 1,050 crore includes a restructured book as well, right? No, restructured book separately INR 7 crore and INR 4 crore. Put together, if you take into consideration, it is INR 750 against which you hold the provision of INR 50 crore. Okay, sir. All right. Thanks. Thank you. We have the next question from the line of Chirag Sureka from UTI Mutual Fund. Please go ahead. Thank you for the opportunity, sir. Can you throw some light on the existing funding lines and the liquidity policy that we follow? Have you seen any cost impact in the incremental funds that we are raising from banks and capital market? Yeah, we generally maintain 7-8 months of liquidity. This used to be higher earlier, but we thought that is too much and therefore you know since we have better planning and better you know milestone you know in terms of business as well as fundraising and therefore we maintain 7-8 months of liquidity. Yeah, we have seen increase in cost and sometimes very dynamic, so we see increase in cost between various sources of funds. This will continue for next few quarters as well. May not be drastically, but to a certain extent the cost would go up. Our liquidity is in the range of 7-8 months. Okay. In absolute amount, what could be the sort of bank lines that we would be having currently? Unutilized bank lines, I mean. Unutilized bank line, what we are currently having to the extent of around INR 3,860 crores. This would include NHB funding as well? Yeah, NHB funding is yet to be released sanction for the current year. That will be around INR 2,500 crore. That is in the pipeline. We have couple of loan sanctions which are in the final stage. If we take that will be around INR 5,000 crore and this is already documented. Available amount is INR 3,860. If you see the NHB and other banks which are in the final stage, if you consider, that will be totally going to come around INR 8,800 crore. That is around 6-7 months of our commitment line. Sure, sir. Thank you. Thank you. We have the next question from the line of Varun Basrur from Julius Baer Wealth Advisors. Please go ahead. Yeah, good afternoon, sir. Thanks for taking my question. Just two questions. One is, what percentage of the advances is from self-construction property? And in this case, what is the loan to value? And the second question is, how much of the loans that we have are sourced from the parent company? Okay. The self-construction would be about self-construction also includes plot purchase and construction. This is about 30%. Business from parent bank, we don't have any formal arrangement with the parent, so we do market sourcing. Market sourcing, how much is from DSAs and how much is, you know, from our own, you know, branches? DSA is about 79% and the rest is from branch. When we say DSA, it's only origination and the entire process is managed by the branch. In terms of, you know, mix, 79% is DSA and the rest is from branch. Okay. Now, sorry, in self-construction, what's the LTV? LTV will be, if it is self-construction, that is, without including the composite, LTV is about 65%. All right. Okay. Thank you. Thank you. That was the last question. I would now like to hand it over to the management for closing comments. From Can Fin Homes side, we thank all the investors for standing with us since all these long years. We expect that same patronage will continue in the future also. Thank you. I thank all the investors for supporting Can Fin Homes and supporting me in this entire journey of three years. I think with all your support, Can Fin Homes has put up very good show in last three years. Every single quarter I think has been a milestone quarter for us. In spite of COVID wave one, wave two and wave three, then we had moratorium, we had restructuring, we had difficult times. I think in all the times, I think all of you have supported Can Fin Homes and me. I thank you all and look forward to engage with you very shortly. Thank you. Thank you. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us and you may now disconnect your lines.