Ladies and gentlemen, good afternoon, and welcome to HDFC Limited's Q3 FY 2022 earnings conference call. As a reminder, all participant lines will be in 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. We have with us HDFC's Vice Chairman and CEO, Mr. Keki M. Mistry, Managing Director, Ms. Renu Sud Karnad, Executive Director, Mr. V. Srinivasa Rangan, and Member of Executive Management, Chief Investor Relations Officer, Mr. Conrad D'Souza, and General Manager, Anjalee Tarapore. I would now like to hand the conference over to Mr. Keki M. Mistry. Thank you, and over to you, sir. Thank you very much, and good afternoon, everyone. At the outset, I would like to welcome all of you to HDFC's earnings call for the third quarter of the current financial year. The board of directors at its meeting held earlier today approved the financial results for the nine months ended December 31, 2021, which were subjected to a limited review. Over the next few minutes, I will give you a summary of the key highlights of the performance for the nine months and the quarter ended December 31, 2021. Let's first talk of individual loans. As I had mentioned in the last earnings call, business during the first quarter was partially disrupted as a result of the second wave. We, however, saw a sharp recovery in the second quarter, and this momentum has continued throughout the third quarter. The third wave in January 2022 has seen a rise in infections but with significantly lesser severity. We have had partial disruption at some locations, but there has not been a material impact on business. Some of the highlights of the performance for the third quarter, let me try and enumerate that. Firstly, RBI has continued to ensure that there is adequate liquidity in the system, and we generally had stable interest rates during the quarter. In January 2022, we have seen a slight uptick in rates. We have increased deposit rates as well as rates on our non-individual loan products. The inflation trajectory is within the RBI's comfort zone. RBI has on November 12, 2021, issued guidelines on harmonizing NPAs across the financial system. Accordingly, NPAs for the quarter, for this quarter, have been computed in accordance with this regulation. Liquidity coverage ratio became applicable from the quarter ended December 31, 2021. This has resulted in higher levels of liquidity carried during the quarter. Let me start by quickly summarizing the progress of our business during the quarter. Our individual loan approvals for the nine months ended December 31, 2021, were higher by 45% compared to the corresponding period in the previous year. During the nine months ended December 31, 2021, individual loan disbursements grew by 48% over the corresponding period in the previous year. It is important to note that in the third quarter of the previous year, we also had the reduction in stamp duties in Maharashtra, and therefore, we have seen a very sharp spurt in business during the third quarter last year. Despite this, individual loan disbursements in the currently ended third quarter were 15% higher compared to the corresponding period in the previous year. Sequentially, if you were to look at third quarter over second quarter, they were 5% higher compared to the second quarter of this year. Similarly, individual loan approvals were 20% higher than the corresponding quarter of the previous year. The month of December 2021 saw the second-highest monthly individual disbursements ever in HDFC's history. Growth in home loans were seen in both the affordable housing segments as well as in high-income groups. 89% of new loan applications were received through digital channels. Approvals and disbursements continued to be strong in January. As of January 31, 2022, approvals and disbursements have crossed the full year of the last, of the previous financial year, which is financial year 2021, and are both at about 105% of the FY 2021 full year levels. Retail loan application inflow in January 2021 has continued to be strong. During the third quarter, we sold individual loans aggregating to INR 7,468 crores. With this, the total loans sold during the nine months ended December 31, 2021, amounted to INR 20,089 crores. These loans were all assigned to HDFC Bank pursuant to the mortgage sharing arrangement with the bank. Individual loans sold in the preceding 12 months amounted to INR 27,591 crores as compared to INR 16,956 crores in the previous year. Individual loan growth on an AUM basis was 16%. If the loans amounting to INR 27,591 crores had not been sold during the preceding twelve months, then the growth in the individual loan book would have been 24%. Our individual loan book increased to INR 4,08,356 crores, which is a growth of 16% over the previous year. In addition to this, the loans securitized by HDFC and outstanding as on December 31, 2021, amounted to INR 79,748 crores. HDFC continues to service these loans. Individual loans outstanding on an AUM basis amounted to INR 4,88,104 crores. With regard to the non-individual portfolio, we have seen a pickup in the Lease Rental Discounting book since June 2021. LRDs, that is lease rental discounting loans, are disbursed against ready projects with tenants in place, and hence, the turnaround between approvals and disbursements is relatively short. Other disbursements of construction finance is based on progress of construction, and accordingly, has a longer lead time between approval and full disbursement of the facility. We presently have a reasonably good pipeline in construction finance loans as well as in the lease rental discounting segment. As I had mentioned in the last quarter, we expect to see a positive growth in non-individual loans for the full year. As of December 31, 2021, our non-individual loan book amounted to INR 1,38,638 crores. The overall loan book is now INR 5,38,994 crores. The total assets under management as at December 31, 2021 amounted to INR 618,917 crore, as compared to INR 552,167 crore in the previous year, which is a growth of 12%. Prepayments on retail loans for the current year on an annualized basis amounted to 10% of the opening loan book. This is within the band of 10%-12% that we've always had historically. The average size of individual loans for the period ending December 31, 2021 stood at INR 32.3 lakh as compared to INR 28.5 lakh in the previous year. For the third quarter, the average size of individual loans amounted to INR 33 lakh. The contribution from the higher income group, defined as customers with an annual family income of INR 18 lakhs or more, has increased during the first nine months to 44% from 40% during financial year 2021. Our thrust on affordable housing loans continued. During the nine months ending December 31, 2021, 30% of home loans approved in terms of number of customers and 13% in value terms were to customers from the economically weaker section or the lower income groups. The average home loan to customers in the economically weaker section amounted to INR 11.10 lakhs, and to customers in the lower income group amounted to INR 19.5 lakhs. If we break up the loan book outstanding on December 31, 2021 on an AUM basis into different categories, individual loans constituted 79% of the total book as compared to 76% in the previous year. Construction Finance constitutes 9% of the total book. Lease Rental Discounting loans constitute 7% of the total book, while corporate loans constitute 5% of the total book. If we were to look at the incremental loan book growth and split that growth between individuals and non-individuals, for the quarter ending December 31, 2021, the ratio of growth in individual loans to non-individual loans is 94:6, which means that 94% of the incremental growth in the loan book came from individual loans. If you were to look at a similar number for the nine months ended December 31, 2021, the ratio of incremental growth in the loan book is 95: 5. In other words, 95% of the growth in the loan book during the nine-month period came from individual loans. 98% of the loans were sourced through distribution channels, although this is largely through HDFC Sales, which is a 100% subsidiary of HDFC and HDFC Bank. HDFC Sales accounted for 52% of the loans sourced, while HDFC Bank accounted for 28%. Third-party DSA accounted for 18%. Thus, 82% of HDFC's individual business was sourced directly or through our associates. The Emergency Credit Line Guarantee Scheme was extended to mitigate the economic distress caused by the second wave of the pandemic. Under ECLGS one, two and three, the corporation has approved an aggregate amount of INR 2,215 crore, of which INR 1,643 crore has been disbursed till December 31, 2021. All amounts disbursed under this facility are guaranteed by the government. The Reserve Bank of India permitted a one-time restructuring of loans under its resolution for COVID-19 related stress. In this regard, the net aggregate amount of loans for which restructuring has been implemented under both OTR One and OTR Two constitutes 1.34% of the loan book. 64% of these loans are individual loans and 36% are non-individual loans. Also, out of the total restructured loans, as much as 34% is in respect of just one non-individual account. I'm happy to mention that in January 2022, which is after the quarter, we have recovered. This is the operator. Mr. Mistry, are you able to hear us? Seems like we lost the connection for the speaker. Requesting all the participants to please stay connected while we reconnect. Overall collection efficiency for individual loans has further improved in the third quarter. The average collection efficiency for individual loans on a cumulative basis over the last quarter is 98.9%. RBI has on November 12, 2021, issued guidelines on harmonizing NPAs across the financial system. NPAs reported for the quarter December 31, 2021, are consequently in accordance with the RBI circular. We had earlier indicated that as a result of the revised norms, the reported NPA would go higher without a material change in credit costs. As you will observe, NPAs have increased in December 2021, whilst credit costs have reduced during the quarter to 27 basis points on an annualized basis. As of December 31, 2021, gross non-performing individual loans amounted to 1.44%, while gross non-performing non-individual loans amounted to 5.04%. As per regulatory norms, the gross non-performing loans as at December 31, 2021, stood at INR 12,419 crore. This is equivalent to 2.32% of the loan portfolio. Out of the total reported gross NPAs of INR 12,519 crore, INR 1,219 crore is on account of individual loans, which have been reclassified as non-performing in accordance with the November 12 circular, but are less than 90 days past due. Similarly, in respect of the non-individual portfolio, an amount of INR 1,527 crore is in respect of loans which are less than 90 days past due as of December 31. This accounts for 30 basis points of the individual loan portfolio and 117 basis points of the non-individual loan portfolio. Therefore, against a reported NPA of 2.32%, 51 basis points consists of loans which are less than 90 days past due on 31st December, but have been classified as stage 3 loans and have been treated as non-performing loans. As per the revised regulatory norms, the corporation is required to carry a total provision of INR 7,450 crores as of December 31, 2021. As against this, the actual provision carried is INR 13,195 crores. The excess provision over the regulatory requirement is INR 3,745 crores. Under Ind AS accounting, both asset classification and provisioning have moved from the incurred loss model to the expected credit loss model for providing for future credit losses. Based on the model, the total exposure at default of INR 5,38,543 crore is broken up as under: stage one is 92.2%, stage two is 5.1%, and stage three is 2.7%. Stage three includes accounts with exposure at default of INR 2,795 crore, which are classified as stage three, where loans are outstanding for less than 90 days. Even after considering the impact of the RBI circular, we have seen a reduction in the aggregate of stage two and stage three assets from the peak of 9.2% in June 2021 to 7.8% of the exposure at default as of December 2021. Exposure at default and ECL for stage two and stage three are lower than the levels as at June 2021 by INR 3,953 crore and INR 282 crore, respectively. This clearly reflects an improvement in the collection efficiency as well as stabilization of credit costs on a marginal basis. During the quarter, we have charged the profit and loss account with a sum of INR 393 crore towards provisioning. The aggregate charge to the profit and loss account for the nine months for the expected credit loss is INR 1,531 crore. The ECL to EAD coverage ratio for stage two assets is 17% and for stage three is 49%. The provision carried as a percentage of the EAD amounted to 2.45%. As of December 31, 2021, we carry a COVID-19 provisioning of INR 1,187 crore, which is 9% of the overall provisioning. Annual credit costs for quarter three was lower at 27 basis points compared to 50 basis points and 32 basis points during quarter one and quarter two, respectively. For the nine-month period, the average annualized credit cost amounted to 35 basis points. As asset quality related issues normalize, we should over the next few quarters be in a position to both normalize the credit cost to pre-COVID levels and at the same time, this will have a positive impact on the return on equity. We continue to hold all our investments in HDFC Bank, HDFC Life, HDFC Asset Management, and all our other subsidiaries and associate companies at the original cost of acquisition, which is the price we had paid while making these investments. These investments are not accounted for on a fair value basis. If we were to mark-to-market the listed investments as at December 31, 2021, the unrealized gain, which is the difference between the market price on December 31, 2021, and the carrying cost, would have been INR 249,914 crore. This unrecognized gain is not part of our net worth, nor has it been considered in our capital adequacy calculations. As part of the capital raise in August 2020, we raised warrants at an issue price of INR 180 and an exercise price of INR 2,165 per share. The exercise period of the warrants is up to August 2023. As of date, no warrants have been converted into equity shares. Our Tier I capital as of December 31, 2021, stands at INR 92,942 crore. Risk-weighted assets as of that day amounted to INR 4,28,000 crore. Accordingly, capital adequacy ratio stands at 22.4%, of which Tier I capital is 21.7% and Tier II capital is 0.7%. The capital adequacy is well above the regulatory requirements of what we are required to carry. At this stage, it is important to talk about the return on equity. Under Ind AS accounting requirement, net worth includes certain items which do not form part of Tier I capital under the Prudential Guidelines. These include Ind AS transition reserve, deferred tax liability on special reserve, fair value gains on investments through OCI, investments in subsidiaries associates in excess of 10% of the net owned funds, and securitization gains recognized upfront in accordance with Ind AS requirement. These items aggregate to INR 22,458 crore. Hence, Tier I capital is actually INR 92,942 crore as against a reported net worth of INR 1,15,400 crore. A more appropriate way, therefore, of calculating the return on equity would therefore be on regulatory Tier one capital as against the conventional method of computing it on total net worth. Annualized return on equity on Tier one capital for the nine months ended December 31, 2021, stands at 15%. As at December 31, 2021, our total borrowings amounted to INR 4,89,002 crore. Term loans, including external commercial borrowings and refinance from the National Housing Bank, accounted for 27% of the borrowings. Market borrowings, that is NCDs and commercial paper, accounted for 41% of the borrowings. Deposits as at the quarter end amounted to INR 1,55,807 crore and constitute 32% of the borrowings. 61% of the deposits were onboarded digitally. Let me now come to the profit and loss items. Before I get to the net interest income, let me outline issues which have had an impact on the NII. In the current quarter, RBI has introduced a liquidity coverage ratio, which has to be invested in high- quality liquid assets. As at December 2021, for the purpose of LCR, the corporation carried approximately INR 27 crore in unencumbered high- quality liquid assets, held entirely in government securities. Further, approximately INR 13,000 crore is held in high- quality liquid assets as SLR against deposits, and INR 15,000 crore is maintained for general liquidity purposes. The corporation therefore has a liquidity buffer of approximately INR 55,000 crore as compared to INR 28,000 crore in the corresponding quarter of the previous year. Therefore, there is an increased impact of negative carry. There was uncertainty on the eligibility of SLR holdings which qualify for the purpose of LCR. As a result, we carried a higher level of liquidity as at December 31, 2021. Post receipt of clarifications on the matter, the revised high quality liquid asset requirements are INR 11,000 crore lower than what we actually carried. We shall bring down the excess liquidity during the course of the fourth quarter in line with the clarifications. Interest earned on net worth in the current year is lower than the previous year due to lower interest rates. This is the second point. The third point is that in the current year, the proportion of retail loan book has increased from 76% to 79%. Net interest income calculated purely on the basis of interest without taking cognizance of the profit on sale of investments or straight sale of loans during the nine months ended December 31, 2021, amounted to INR 12,519 crore compared to INR 10,943 crore in the corresponding period in the previous year, which represents a growth of 14%. The net interest income calculated in a similar manner for the quarter ended December 31, 2021, was INR 4,284 crore compared to INR 4,005 crore in the corresponding quarter of the previous year. If you were to look at it sequentially, then the sequential growth in the net interest income during the third quarter compared to the second quarter was 4.24%. The sequential growth in the loan book during the quarter was 3.49%. Net interest margin for the nine months ended December 31, 2021, stood at 3.6% compared to 3.5% during the corresponding period of the previous year. The spread on loans over the cost of borrowings for the period ended December 31, 2021, was 2.26%. Spread on the individual book was 1.93% and on the non-individual book was 3.25%. The spread on loans during the corresponding period of the previous year was 2.28%. Income earned from deployment of surplus funds in cash management schemes of mutual funds was much lower at INR 329 crore as compared to INR 666 crore in the corresponding period of the previous year. This was due to a sharp drop in short-term rates, where we earned 3.12% on our surplus liquidity as compared to 3.66% in the previous year. Also, the average level invested this year in liquid funds is INR 13,549 crore as compared to INR 23,749 crores in the previous year. Dividend income. During this quarter, we received dividend income aggregating to INR 195 crores. During the nine months, we earned INR 1,383 crores by way of dividend income as compared to INR 623 crores in the corresponding period in the previous year. There was no profit on sale of investments during the third quarter. During the nine months, the corporation has booked profit on sale of investments amounting to INR 263 crore compared to INR 1,398 crore during the same period in the previous year. Under Ind AS accounting standards, the stock options granted to employees are measured at the fair value of the options on the date of grant. This fair value is accounted for as employee compensation cost over the vesting period of the option. Accordingly, employee benefits expenses for the nine months includes an amount of INR 379 crore compared to INR 194 crore during the same period in the previous year. The charge is on account of stock options which were granted during the second quarter of the previous year. For the period ended December 31, 2021, the cost-to-income ratio stood at 8.1%, the same as during the corresponding period of the previous year. For the quarter ended December 31, 2021, the standalone profit before tax was INR 4,048 crore compared to INR 3,753 crores during the third quarter of the previous year. The standalone profit after tax for the third quarter stood at INR 3,261 crores compared to INR 2,926 crores in the third quarter of the previous year, representing a growth of 11%. For the nine months ended December 31, 2021, the standalone profit before tax was INR 12,624 crores compared to INR 10,891 crores in the previous year, a growth of 16%. Tax provision during the nine months ended December 2021 stood at INR 2,582 crores compared to INR 2,044 crores in the previous year. The standalone profit after tax for the nine months stood at INR 10,042 crores compared to INR 8,847 crores in the previous year, a growth of 14%. Pre-tax return on average assets was 2.9%. Post-tax return on average assets was 2.3%. The basic and diluted earnings per share on a face value of INR 2 per share were INR 55.58 and INR 54.91 respectively. The consolidated profit before tax for the nine months stood at INR 20,195 crores as compared to INR 17,533 crores in the corresponding period last year, a growth of 15%. After providing INR 3,045 crores for tax as compared to INR 2,715 crores in the previous year, the consolidated profit after tax for the period stood at INR 17,150 crores compared to INR 14,818 crores, a 16% increase over the corresponding period in the previous year. The profit attributable to the corporation was INR 16,136 crores as compared to INR 13,390 crores in the previous year, an increase of 21%. As at December 31, 2021, we had as much as 3,514 employees, and 97% of our staff have been fully vaccinated. Total assets per employee stood at INR 172 crore. Net profit per employee stands at INR 3.8 crore. HDFC's distribution network spans 651 outlets, which include 206 offices of HDFC's wholly owned distribution company, HDFC Sales Private Limited. We cover additional locations through our outreach programs. We continue to engage deeply with all our stakeholders on ESG. During the quarter, HDFC was conferred with the Best Integrated Report by the Asian Center for Corporate Governance and Sustainability. Our disclosures and reports are on the website. For further information on ESG-related queries, you may engage with our investor relations team, Anjalee and Conrad. The above are some of the highlights of the results for the period ending December 31, 2021. Before I conclude, I would like to wish each one of you good health and all the very best. Please stay safe. I'm just told that there was some portion which got missed out because there was a connectivity issue. Mm-hmm. This was on the restructured loans. I'll just repeat that portion. 64% of our restructured loans are individual loans, and 36% are non-individual loans. Out of the total restructured loans, as much as 34% is in respect of just one non-individual account. I'm happy to mention that in January 2022, we have recovered INR 683 crore in this, against this account, and we expect the residual to be settled shortly. Post this recovery in January 2022, the total restructured book now constitutes 1.21% of the loan book. The overall collection efficiency for individual loans has further improved in the third quarter. The average collection efficiency for individual loans on a cumulative basis over the last quarter is 98.9%. I think this was the portion which got missed out when the line got disconnected, and we can take questions if you wish. 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 one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to limit their questions to two per participant. If time permits, you may join the queue for any follow-ups. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead. Yeah, hello. My question is on repricing of loans when you hike rates. The old book does not reprice, right? You can hike rates on new loans without repricing the old book. Well, it depends on how we reprice the loans. The way we would normally do it is we would increase the Retail Prime Lending Rate. When we increase the Retail Prime Lending Rate, then the existing loans, all loans are linked to the Retail Prime Lending Rate and accordingly, even existing customers end up paying the higher rate. Right. It happens effective that day only. That should be effective from that moment, from whatever date we do it. What proportion of your liabilities would be linked to external benchmark? Rangan, you have an answer on that, what percentage is linked to external benchmark? Yeah. Broadly, almost the entire bank loan book is actually linked to external benchmark. Either it is linked to repo or it is linked to the T-bill rate or the CP rate. Over and above that, our NCDs, we have a swap book of close to about INR 1,20,000 crore, where we have converted our NCDs from fixed rate to floating rate. This entire floating rate is actually linked to the MIBOR, the daily setting of the MIBOR. Basically, if you look at our bank loan book, it is close to about INR 97,000 crore. Plus, this is about INR 1,20,000 crore. Say about 50%-60% of the liability book is actually linked to external benchmark directly. The rest of the book obviously will have certain, may not necessarily be linked to external benchmark, but we have an option of either, you know, repricing them or, repaying them on a, based on our own, you know, during the course of the tenure of the loan, et cetera. That's the way the book is actually composed of. Thanks a lot. Thanks. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Hi, sir. Firstly on LCR, you said like with the eligibility of SLR, now this will actually come up to 11K. Still when we look at it, given well matched element, even if we have to look at it in terms of the shorter tenor maturity, does it seem like this is more of a one-off because of some repayments that are due, or this is the normal LCR requirement which will be carried forward? Given this is 50-odd%, in fact, that number seems to be quite high. How should we look at it? It is more like we will retain this or this is more one-off for and just the introduction of the norms. Let me answer that question. I think a little bit of this is a one-off because there would be some amount of fairly large repayment which would have been due in the next month, which is why it is high. My sense is that going forward, it would be a little lower than this. KK, can I answer a little bit on this? Just Kunal, on that basically the LCR is the next 30 days repayments and disbursements and all that which needs to be covered. What is happening is over a period of time as we are borrowing, the new borrowings are also happening for a longer duration. Automatically the LCR number also keeps readjusting themselves into a lower level. You can readjust the LCR to a lower level depending upon the duration in which you are borrowing your this thing liabilities also. As KK said, we would think that this would have a room to go down further. Yeah. This is 50% yet or maybe we have covered entirely? Starting is 50%. As we reported we are at about 120%. Somewhere I think against the 50% we want to be there at about 60%-70%. That's the range in which we want to probably operate. That will leave us with the gap of the surplus which we can use to deploy for the loans or we can, you know, sort of repay some of the liabilities and things like that. Okay. Perfect. Basically, Kunal, we would not want to be exactly at 50, but the 120 that we are is obviously very high and we would want to bring it down over the coming quarter. Sure. Currently it is 120 with this, INR 27,000 crore earmarked. Yeah. Exactly. Okay. Got it. Secondly with respect to one of the- Mr. Shah, may we request you to rejoin the queue, sir, for any follow-ups? Yeah. Thank you. A reminder to the participants, please limit your questions to two per participant. The next question is from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah, hello. Actually, I'm just not clear about this NPL increase. You're saying that some 2,700 odd crore was standard or less than 90-day overdue, but you still decided to keep it as an NPA. I mean, in a housing loan, were you not following daily method of calculation of NPA or were you upgrading assets even without complete 3 months of repayment? Why this discrepancy between the reported NPA and the RBI rule? Historically, what used to happen is that if a loan was outstanding for more than 90 days and the customer paid, let's say, two installments and not the entire three installments, the loan would get upgraded and would no longer be classified as a non-performing loan. That was the regulations that used to apply to us. Now, based on the clarification or the guidelines or whatever RBI has issued in November 2020, 2021, a loan cannot get upgraded to a standard asset till and until the entire outstanding in respect of that account have been received. The difference on that on individual loans is about 30 basis points. As far as the non-individual loans are concerned, there is no difference between the RBI guidelines and what we have. The reason you have this large amount of loans, which are less than 90 days outstanding but have been classified as NPLs, is because either we started seeing some stress on those accounts and therefore we downgraded them to NPA. They were always stage two, we downgraded them to stage three. Alternatively, it could have been a case of, I think one or two loans which were restructured and therefore were classified as non-performing loans. In other words, just to understand, this INR 2,700 crore could also be loans which are paid through EMI, but earlier were shown as standard and now you have decided to show as NPA. Would that be my interpretation? They were shown as standard, meaning they were shown as stage two, and now they would be shown as stage three. Okay. How do you look at this? Final question. I just want to reiterate this point. How do I look at this number? I mean, do you carry any excess provision or do you think the true number to look at is 1.8 and all this provision which is there? Yeah. What number you wish to look at is really honestly your call. The reported NPL as per the RBI guidelines is 2.32%. I'm only mentioning that out of that 2.32%, 51 basis points is in respect of accounts where the outstanding is not 90 days, but obviously there is a stress on those accounts. Okay. Okay, I'm fine with this. Thank you. Thank you. The next question is from the line of Sanket Chheda from VNK. Please go ahead. Yeah. Hi, sir. My question was on traction on the non-retail book this quarter. Last quarter we had about equal amount of growth that we had in retail. How do we see it panning from here on? We are seeing lot of revival in activities, particularly in real estate and lot of construction activities also taking place. We being maybe one of the pioneers or only the few good guys wherein NPL issues have not hit. Are we thinking to go aggressive on non-retail in the coming quarters? How do we see it? All right, let me answer that question. As I told you, the individual loan book as of 31st December stood at 79%, and the non-individual book stands at 21%. Of that 21%, the breakup is 9% Construction Finance, 7% LRD and 5% corporate loans. This is outstanding on 31st December. If we were to look at the incremental growth in the loan book during the third quarter, it was 94% individuals and 6% non-individuals. Now, as I mentioned in the talk, what happens is that when we have a LRD loan, for example, the entire loan gets disbursed in one go. Whereas if you have a Construction Finance loan, the Construction Finance loan gets disbursed over a period of time because it takes a while for the construction to, you know, keep taking place. As the construction keeps taking place, the disbursement happens. I also mentioned that we have a reasonable pipeline of such loans, and we would expect to close the year with a positive growth in the non-individual segment against the negative minus 1% growth that we have in the December period. Okay, I remember last quarter you had guided that 3.6%-3.7% margins are not sustainable and we should ultimately have to move towards 3.3%-3.4% kind of level. This quarter, though we have seen some reduction in spread for individual loans, overall NIMs have not changed. Do we expect a 10, 15, 20 basis reduction in the coming quarters? Yeah, I don't want to make a forward-looking statement because honestly, a lot of this depends on where interest rates are headed, how we change our rates and so on and so forth. What I mentioned last quarter was that the 3.7 or 3.6 I think we had last quarter had come down from the 3.7, which it was earlier. I said that somewhere NIMs will settle between the historical rate, which was about 3.2 odd% and the 3.6 that we had last time. This quarter, we've not seen any change in the net interest margin, which continues to remain at 3.6%. I would hope that we would be able to continue maintaining net interest margin at these levels. I would hope so, but as I said, a lot will depend on how interest rates pan out. Sure, sir. That helps. Thanks a lot. Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities Limited. Please go ahead. Yeah, hi. A couple of questions from my side. The first is, there was a sharp reduction in the non-individual NPA, especially when I compare it on a like-for-like basis, which is, you know, removing the impact of, you know, the RBI definition change. So was this like a particular account or were there a number of accounts out here? If you could give some guidance in terms of the way- Sorry, I couldn't follow your question. You're saying that there was a reduction in the NPL? Yes. In the non-individual segment. Yeah. I mean, if I just set aside the impact of, you know, whatever. In the non-individual segment, there will be movement because these are bulky loans. Mm-hmm. In a quarter, if you're able to recover money on some loan and the loan moves away or if the loan gets fully paid off, then naturally the level of stage two or stage three accounts will change. This quarter, was there any bulky account or is it? There would be a lot of accounts. Now, we have so many accounts there would be some large account which would have got paid up during the quarter. Sure. You know, now that the definition of NPL or gross stage three, whatever you call it, has been sort of reset, would you look at revisiting the PD ratios, you know, in your ECL calculations? Obviously, it is something that we would look at in the fourth quarter, which is when we normally do an analysis of, you know, likelihood of default and so on and so forth. The reality of the matter is that the loss ratio is not going to change just because the definition of NPL changes. The loss ratio is still going to remain the same. Absolutely. The PD has to probably come down. Yeah. Whilst there might be some impact on the D because of the default, the loss ratio to my mind would not change. This is a statistical model which will be worked on during the fourth quarter and when we have the March numbers, the March numbers would reflect the changes in the model. Sure. Just final one. In light of, you know, improvement in the overall real estate cycle, how do you see the Construction Finance book growing from these levels? I mentioned earlier that, we are seeing a pipeline, a decent pipeline of Construction Finance loans, but as I said also that, Lease Rental Discounting loan, the disbursement is immediate because the property is occupied, the rentals are coming in, so we can disburse the whole amount in one go. Whereas in a Construction Finance case, the disbursement happens progressively based on how the construction takes place. The disbursement is more progressive. There is a decent pipeline and we are, as I said, would expect to see a positive growth for the whole year. Perfect. Those were my questions. Thank you very much and all the best. Thank you. Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Thanks for the opportunity, sir. What is the share of individual housing loan in overall assets to comply with the RBI guidelines for the classification? I just want to understand whether we have headroom to increase the share of non-individual loans in overall assets or not going forward. The requirement is that 60% of our total housing loans have to. Sorry, is it 50, Rangan? [Non-English content] 60% retail. 60%. Yeah. Oh, yeah. I'm sorry. 60 housing. 60% has to be retail and at the moment we are ahead of 60. Rangan, you have the exact percentage. No, no. KT. Yeah, yeah. KT, one second. KT, hold on. Yeah, please go ahead. 60% has to be housing. Of that, 50% has to be retail. No, no. The total housing has to be 60%. Correct. Retail has to be 50% housing. Yes. Against that 50%, and this is to be achieved over a period of three years. It kicks in somewhere in 2024. Correct. As of now, as on December, we are 53.13% against that. Requirement of 50. From a headroom point of view, we have enough headroom. The other one we are 51.1% against 60%. Mm-hmm. All these numbers are on asset side, so total asset side or on loan book? These on total assets. It has to be completed on total assets. As the LCR liquidity runs down, we may have slightly more headroom and that. Yeah. That cash, whatever is there, it will get deployed in assets. Depending on which assets it get deployed, the composition will change. Sure. Today it is classified as a non-housing asset. Hmm. As that money gets deployed into retail housing loans, it will start reflecting on the housing asset. Understood. Just to put that in perspective, against the 50% required for individuals, we are at 53%. Now on a balance sheet size as big as ours, a 3% margin can be quite substantial. Yeah. Understood. Thank you, sir. That's it from my side. Thank you. The next question is from the line of Shubhankar Mishra from Systematix. Please go ahead. Sir, thank you for the opportunity. The first question is if you can split the HL book into Cat A, Cat B and Cat C employees. Again, within the HL if you can speak on the customer, what is his average age, average income? What is the average FOIR that is on book as of now, not the onboarding FOIR, sir. Yeah, that's about it. You want to know the average income of a customer? Yes, sir. Renu, you have some figures? No, no, I don't think we'll have those figures. The average age would be around. Thirty. Around 37, 38. As far as I can tell you what we don't do. If you really want these numbers, we can get back to you. These are such varied loans to get an average might give you different, an idea, but we can give you, depends on whether they are in the larger cities, whether it's a self-employed, whether it's an employed loan. All these things are there, but generally our effort is that, the FOIR that we are willing to live with should not be more than about 50, 55 of the person's income. Otherwise we won't keep the loan. See, the loan is based on his ability to repay. It is merely customized to every customer depending on what his other liabilities are, and based on that, we work out an eligibility. Of course, we don't go beyond what we can fund as per NHB guidelines, which is 75% for loans over INR 75 lakhs. Keeping that in view, the credit underwriting is based on, you know, what his other loans are. Normally, we are within that, the total liabilities that he has should not exceed 50%-55%. We can give you exact numbers if you get back to us. Sure. Split of the book. Just the average age of a customer is about 38 years, and the average loan to value ratio at origination, I repeat at origination, is about 67%-68%, which means an individual at origination has about a 30%-33% equity in the property. All our loans are repaid through equated monthly installments, which start immediately. The moment the loan gets disbursed, the next month the individual starts paying an installment and that installment has got a principal component. With every passing month, the outstanding amount of the loan keeps declining. If we were to assume stable property prices, it means that the loan to value ratio for the loans outstanding in the books will over a period of time keep reducing. Right. My second question is unanswered, sir. If you can split the salaried books into Cat A, Cat B, and Cat C, customers? Yeah. Can't hear you. Sir, my second question was, the split of the housing loan book in Cat A, Cat B, and Cat C customers. The housing loan book into Cat A, Cat B, and Cat C customers. Cat A companies, Cat B companies, you would have that split. Okay. I would just say, you know, we have a huge component of our loans are government. They're either central government or they are state government or they are the armed forces. I would say that we would put them as far as that is concerned in Cat A. Right? In terms of, again, you know, it all depends on the person's position, his income, and that is how we appraise the case. It's not necessary that he has to be working with a Cat A employer. It is very customized to that individual to what his income is, what his saving habit has been, what his past record or what his how his CIBIL score has been. It's really based on that. It's really not based on a employer categorization. Right. Sure. Thank you. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. The question was with respect to one of the non-individual account, wherein some resolution was happening and that was at a steep haircut and HDFC was the largest lender to it. Given that overall provisioning under stage two and stage three on the non-individual side, that's in fact coming off or stable, is it fair to assume that it's well accounted for and there would be no impact on account of that big resolution or maybe a higher haircut? No, there would not be any impact. You would see that the credit costs for the quarter have actually come down to INR 393 crore. Okay. It's well accounted for. Yeah, it's well accounted for. Okay. Secondly, in terms of for ESOPs, should we assume that maybe in couple of quarters this cost will move away or in terms of the- These ESOPs were granted in August of 2020, and there is a two-year vesting period. In some case, in some part of the stock options, the vesting period was one year, and for the other part it is two years. For the portion which is one year vesting, that is over. There'll be no further charge to the profit and loss account in respect of that vesting. For the second vesting, which takes place in August 2022, there will continue to be some charge to the profit and loss account till August 2022. Obviously the charge will come down because till August 2021 the charge was at its peak because you had both the first round of option and the second round of option, for both of which a charge was being debited to the profit and loss account. Sure. Got it. Okay. Yeah. Thanks. Thank you. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead. Yeah. Thank you, sir. Thank you for giving me the opportunity. My question has been answered. Just a single data point, if you can share. Absolute number, the disbursement done during this quarter, sir? Yeah. Conrad, do you have a figure? Sorry. The retail disbursements are around INR 40,000 crore. INR 40,000. Yes. Thank you. Thank you very much, sir. Thank you. The next question is from the line of Alpesh Mehta from IIFL Securities. Please go ahead. Hi, thanks for giving me the opportunity. Just one question. If I look at the total cumulative provisions on the balance sheet, the number has gone down from INR 13,340 crore to INR 13,195 crore and the charge to P&L was INR 400 crore. Looks like almost INR 540 crore of either termination losses or the write-off. Is the understanding correct? I just wanted to confirm that. I think we can give you that reconciliation later on. I wouldn't be able to give it to you off the cuff, but, Conrad can give it to you later. Okay. Thanks. I'll give it to you later. Yeah, yeah. Thank you. Thank you. The next question is from the line of Pranay Agarwal from Tusk Investments. Please go ahead. Hello. Yeah, yeah. Go ahead. Thank you for taking the question. From what I see from your presentation is that 30%. Mr. Agarwal, sorry to interrupt, your voice is breaking up. Sir, if you can take the phone off speaker, please. Hello. Is it better now? Slightly. If I look at your pre-presentation, as a number, it states that 30% of the loans are being, in volume terms, have been disbursed to low-income group or middle-income group. Is that correct? Yeah. Yes. From what I understand, it is a different ballgame to disburse loans in this segment, in this customer segment, which basically belong to tier two, three, or tier three cities versus disbursing loans in tier one metro cities. How are we sourcing these loans and how, and what are the underwriting standards on these loans? All right. Venu, you can answer the underwriting part. Yes, sure. I just mentioned that this 30% has been there for a very long time. It has always been in the range of around 30%-32%, between 30% and 32% for a very long time. Let me just say that these are from tier two and tier three cities. But you know, these are in, many of them are employed. As you said, you know, today our self-employed is 20%, 80% of our people are employed. The underwriting standards are very similar. Again, it goes really back to the person's savings, how much is his income, how much are we willing to, how much the loan will be based on what percentage of the income, how much he'll be putting in and what is his own contribution. Honestly, being in a metro to get a loan from HDFC doesn't give you any benefit or being in a smaller city is not a negative at all because this is a housing loan. It's based on, you know, the value of the property, location of the property, salability of the property, how much is the person putting in, what is the rent that he's paying currently. It's all based on that. Honestly, to do this business, we have not reduced or brought down our guards at all and the way we appraise a case has continued to be the same. We are equally cautious. We are equally careful for the loan that we do in the larger cities as we do in a smaller city. I don't think there's any change in the way we are looking at it because it's these are not really, in case you have in mind, that these are not cases where they are, you know, slum developers or they're not loans of INR 3 lakh and INR 5 lakh that we are doing. The average loan in these affordable housing is also about INR 9-10 lakhs. People have income, they have regular income. These are not based on, you know, assumed income. I just wanted to say that, the credit underwriting norms are really not, different or actually brought down to be able to do this business. Just to put it in perspective, the actual average loan amount to customers in the lower income group is INR 19.5 lakhs, and to customers in the economically weaker section is INR 11.1 lakhs. It's not small loans. Yeah. What would be the yield that HDFC would be earning on those loans? The rates on these loans are slightly higher. It's currently as we speak, our rate of interest, again, it all depends on that individual, what his credit rating is. We started using credit rating also as a benchmark as to how we price our loans. Just because we are in a smaller city doesn't necessarily mean that you'll get a higher rate. By and large, customers would be getting anything between 6.7% to 6.75%, 6.8%. I'm talking about an employed customer. Self-employed customers are different. Rates of interest can vary, could be higher in self-employed customers, depending on the risk that is perceived by us. Got it. Thank you so much for entertaining my question. Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead. Yeah, hi. Thanks for the opportunity. Just one quick check. Is the entire restructured book in stage two or some of it has a NPL overlap? No, the entire restructured book would be either in stage two or in stage three. Some of it would be in stage three. Can you share the split? We can give it. I don't have it off the cuff. Sure. No problem. How much is stage three and how much is stage two? I think, Sameer, as a part of the release to the exchange, it is there as a note. I can give it to you separately, but it's also there in the table. Oh, okay. Thank you. Thank you. The next question is from the line of Hiren Kumar Desai. Please go ahead. Thank you for the opportunity. Sir, have you seen any upticks in prices of the property and corresponding change in the average size of loan? That is question one. Second question is the proportion of loan that we give, which is fixed rate and floating rate. These are the two questions. All right. Let me try and answer that question. The average loan amount has gone up during the course of the year. Our total average loan for this year, individual loans for this year is INR 32 lakhs and 30,000. The average loan for the third quarter in isolation is INR 33 lakhs. Last year, the average loan amount was INR 28.5 lakh. If you were to compare second quarter with third quarter, second quarter average loan amount was 32.7 lakhs, third quarter is 33 lakhs. Effectively, average loan amount has marginally gone up in this quarter, but had gone up, you could say, six months or nine months earlier. Have property prices gone up? Look, this varies from city to city, location to location. In some locations, yes, could have seen an uptick in prices. What has happened is income levels have gone up. Income levels have gone up quite sharply over the course of the last one or two years because some of the companies held back on salary increases because of the, you know, during the first wave of COVID. Later on, as things started normalizing for them, they started giving salary increases, which would have made the individuals eligible for a higher loan. Yeah. Sameer, just to answer your question, on the restructured loans, the NPA is around INR 130 crore, which is under 2% of that portfolio. This is Hiren Desai. My second question was the proportion of loans which are floating rate loans versus fixed rate loans. Most of our retail loans are all floating rate loans. Not even 2% or 3% are going to be on a fixed rate basis. People, you know, we've seen that in the past also, when rates are going to start moving up, a smattering of people come for fixed rate loans, but thereafter it's because there is a difference between the fixed rate loan and the floating rate loan. As you know, housing loans, we don't keep housing loans for more than 4-5 years, as you know. We don't. Very few people opt for fixed rate loans. Okay. Thank you. Thank you. That answers my question. Thank you. The next question is from the line of Omank Shah from Sharath Capital AIF. Please go ahead. Hi, sir. Thank you for the opportunity. Sir, we had our last major fundraise in 2018. Just wanted to understand, at what level of debt to equity do you envisage raising new funds? We do not envisage raising capital for a very long period of time. We would be guided more by the capital adequacy ratio rather than just the debt equity ratio. As against the regulatory requirement, our capital adequacy ratio is significantly higher. Our Tier one capital stands at 21.7%. What we have to do over the next few years is to sweat the balance sheet more, increase the leverage, increase the debt equity ratio, and consequently increase the return on equity. Right, sir. Thank you so much, sir. We have no plans to raise equity for a very, very long time. Right, sir. Sir, one more if I could, understand. Sir, the collection infrastructure is all managed in-house. All the employees are on our own payroll. Yes. are they outsourced? Yes, it's all managed in-house. Okay. Even possession and selling of the property, all of it is done in-house? Yeah. Okay. Thank you so much. Thank you. As there are no further questions, I now hand the conference over to the management for their closing comments. Over to you. On behalf of, you know, all my colleagues, just thank all of you for attending this call. In case you all do need any further clarifications, either get in touch with Anjali or me. Thank you, KK, Renu, Rangan, everybody. Thank you. Thank you, everyone. Bye-bye, everybody. Stay safe. That's the most important thing. Thank you. Thank you, everyone. Bye-bye. Take care. Thank you. Ladies and gentlemen, on behalf of HDFC Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.