Ladies and gentlemen, good afternoon, and welcome to HDFC Limited's Q4 FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during 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.S. Rangan. Member of Executive Management and Chief Investor Relations Officer, Mr. Joseph Conrad D'Souza, and General Manager, Ms. Anjali Tarapore. I now hand the conference over to Mr. Keki M. Mistry. Thank you, and over to you, sir. Good afternoon, everyone. At the outset, I would like to welcome all of you to HDFC's earnings call for the current financial year. The board of directors at its meeting held earlier today approved the financial results for the year and the quarter ending March 31, 2022, which were subjected to an audit. Over the next few minutes, I will give you a quick summary of the highlights of the performance. As I had mentioned in our earlier earnings call, business during the first half of the year was partially disrupted as a result of the second wave. We, however, saw a sharp recovery in the second half of the year. The third wave in January 2022 saw a rise in infections, but with lesser severity and disruption was minimal. Consequently, we had a strong growth during the quarter ending March 2022. The following were the main highlights of the fourth quarter. RBI has continued to ensure that there is adequate liquidity in the system, and we generally had stable interest rates during the quarter. In the fourth quarter, we have seen a slight uptick in interest rates, consequent to which we have increased deposit rates as well as rates on our non-individual loan products. The inflation trajectory was within the RBI's comfort zone. RBI had on November 12, 2021, issued guidelines on harmonizing NPAs across the financial system. On February 15, 2022, RBI clarified that the applicability of the revised NPA norms will be from September 2022. We have, however, continued to report NPAs under the new norms based on the November 12, 2021. Ladies and gentlemen, please stay connected. The line for the management dropped. Ladies and gentlemen, thank you for your patience. We have the line for the management reconnected. Sir, you may go ahead. Yeah, I'm sorry there was some technical glitch. Let me start from where I left off. RBI had on November 12, 2021, issued guidelines on harmonizing NPAs across the financial system. On February 15, 2022, RBI clarified that the applicability of the revised NPA norms will be from September 2022. We have, however, continued to report NPAs under the new norms issued on November 12, 2021. Liquidity coverage ratio became applicable from December 1, 2021. This has resulted in higher levels of liquidity carried during the second half of the year. Let me start by quickly summarizing the progress of our business through the quarter. Our individual loan approvals for the year ended March 31, 2022 were higher by 38% compared to the corresponding period in the previous year. For the year ended March 31, 2022, individual loan disbursements grew by 37% over the corresponding period in the previous year. Individual loan disbursements in the fourth quarter were 18% higher compared to the corresponding period in the previous year and were sequentially 21% higher than during the third quarter. Similarly, individual loan approvals were 24% higher than in the corresponding quarter of the previous year. It is important to note here that during the third and fourth quarters of the previous year, we had the reduction in stamp duties in Maharashtra, which had resulted in substantial growth during that period. The month of March 2022 saw the highest monthly individual disbursements ever in HDFC's history at INR 20,944 crore. Housing disbursements constitute 94% of individual disbursements during the financial year. Growth in home loans were seen in both the affordable housing segment as well as in the middle and high income groups. 91% of new loan applications were received through the digital channels. During the fourth quarter, we sold individual loans aggregating to INR 8,367 crores. The total loans sold during the year ended March 31, 2022 amounted to INR 28,455 crores. 99% of these loans were assigned to HDFC Bank pursuant to the mortgage sharing agreement with the bank. Besides individual loans, the corporation also assigned INR 1,500 crores of standard non-individual loans during the quarter. Individual loan growth on an AUM basis was 17%. If the loans amounting to INR 28,455 crore had not been sold during the preceding twelve months, then the growth in the individual loan book would have been 25%. Our individual loan book increased to INR 4,31,533 crore, a growth of 17% over the previous year. In addition to this, the loans securitized by the corporation and outstanding as on March 31, 2022 amounted to INR 83,880 crore. HDFC continues to service these loans. Individual loans outstanding on an AUM basis amounted to INR 5,15,433 crore. With regard to the non-individual portfolio, we have seen a pickup in the book during the fourth quarter. We presently have a strong pipeline of construction finance loans, as well as in the lease rental discounting segment. As I had mentioned during the last quarter's earnings call, we have seen a strong Q4 for the non-individual portfolio. As at March 31, 2022, our non-individual loan book grew by 7% on an AUM basis compared to the previous year, and by 6% sequentially from December 2021- March 2022. The overall loan book is now INR 5,68,363 crore, a growth of 14%. The total assets under management as at March 31, 2022 amounted to INR 6,53,902 crore as compared to INR 5,69,894 crore in the previous year, a growth of 15%. If no loans had been sold during the preceding 12 months, then the growth in the total loan book on an AUM basis would have been 20%. Prepayments on retail loans for the current year on an annualized basis amounted to 10.3% of the opening loan book, which is the same as it was in the previous year. The average size of individual loans for the year ended March 31, 2022 stood at INR 33 lakhs as compared to INR 29.5 lakhs in the previous year. 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 year to 45% from 40% during FY 2021. Our thrust on affordable housing loans continued. During the year ended March 31, 2022, 29% of home loans approved in terms of number of customers and 13% in value terms were to customers from the economically weaker sections or the lower income groups. The average home loan to customers in the EWS segment amounted to INR 11.2 crores and to customers in the LIG segment amounted to INR 19.7 lakhs. If you break up the loan book outstanding on March 31, 2022 on an AUM basis into different categories, then individual loans constituted 79% of the total loan book as compared to 77% in the previous year. Construction finance constituted 9% of the total loan book. Lease rental discounting loans constituted 7% of the total loan book, while corporate loans constituted 5%. If you were to look at the incremental loan book growth and split that growth between individuals and non-individuals, then for the quarter ended March 31, 2022, the ratio of growth in individual loans versus non-individual loans would be 78% individuals and 22% non-individuals. For the year ended March 31, 2022, the ratio of the incremental growth in the loan book would be 88% individuals and 12% non-individuals. Clearly, you can see the pickup in the fourth quarter. 98% of the loans were sourced through distribution channels. However, this is largely through HDFC Sales, a 100% subsidiary of HDFC, and through HDFC Bank. HDFC Sales accounted for 52% of the loans sourced, while HDFC Bank accounted for 28%. Third-party DSAs 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 1.0, 2.0, and 3.0, we have accrued an aggregate amount of INR 2,216 crores, of which INR 1,747 crores has been disbursed by March 2022. Amounts disbursed under this facility are guaranteed by the central government. The Reserve Bank of India permitted a one-time restructuring of loans under its resolution for COVID-19 related stress. Out of the total restructured loans, just 1 non-individual account constituted as much as INR 2,764 crores, and I'm happy to mention that in the last quarter, we have recovered the entire exposure against this account. As of March 31, 2022, the outstanding loans under OTR 1 and OTR 2 amount to INR 4,572 crore, which is equivalent to 0.80% of the loan book as compared to a peak of 1.4% in September of 2021. 98% of the OTR loans are in the individual loan category. The overall collection efficiency for individual loans has improved significantly in the fourth quarter. The average collection efficiency for individual loans on a cumulative basis, I repeat this is cumulative basis, over the last quarter is over 99%. RBI had on November 12, 2021, issued guidelines on harmonizing NPAs across the financial system. Subsequently, RBI has deferred the effective date of the applicability of these guidelines to September 2022. We have, however, continued to report NPAs for the quarter ended March 31, 2022, in accordance with the revised RBI circular of November 12, 2021. As of March 31, 2022, calculated under these new norms, gross non-performing individual loans stood at 0.99%, down from 1.44% in December 2021, while gross non-performing non-individual loans stood at 4.76%, down from 5.04% in December 2021. As per the new regulatory norms, the gross non-performing loans as of March 31, 2022, stood at INR 10,741 crores, equivalent to 1.91% of the loan portfolio, down from 2.32% in December 2021. Based on the earlier method of calculating NPAs, prior to the RBI circular, individual NPAs as of 31 March would have been 0.78%, which is 21 basis points lower than under the new method. While total gross non-performing loans in the aggregate would have been 1.74%, which is 17 basis points lower than under the new method. As of 31 March 2022, we carried a total provision of INR 13,506 crores. Under Ind AS accounting, both asset classification and provisioning have moved from the incurred loss model to the expected credit loss model. Based on this model, the total exposure at default of INR 5,67,927 crore is broken up as follows: Stage One is 93.3%, Stage Two is 4.4%, and Stage Three is 2.3%. As you can see, we have seen a 2.5 percentage point reduction in the aggregate of Stage Two and Stage Three assets from the peak of 9.2% in June 2021 to the current level of 6.7% of the exposure at default in March 2022. During this quarter, we have charged the profit and loss account with a sum of INR 401 crore towards provisioning. The aggregate charge to profit and loss account for the year is INR 1,932 crore. The ECL to EAD coverage ratio for Stage Two assets is now 20%, and for Stage Three, it's 54%. The provisions carried as a percentage of the EAD amount now to 2.38%. Annualized credit costs for quarter four was 26 basis points compared to 50 basis points during quarter one, 32 basis points during quarter two, and 27 basis points during quarter three. For the year ended 31 March 2022, the total credit costs amounted to 33 basis points, down from 56 basis points in the previous year. As asset quality-related issues normalize over time, we should, over the next few quarters, be in a position to further normalize the credit costs to pre-COVID levels. This, in turn, 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 other subsidiaries and associate companies at the original cost of acquisition, which is the price we have paid whilst making those investments. These investments are not accounted for on a fair value basis. If we were to mark-to-market the listed investments as of March 31, 2022, the unrealized gain, which is the difference between the market price on March 31, 2022, and the carrying cost, would be INR 234,248 crore. This unrecognized gain is not part of our net worth, nor has it been considered in our capital adequacy calculations. Our Tier I capital as of March 31, 2022, stood at INR 98,024 crore. Risk-weighted assets as of that date amounted to INR 441,000 crore. Accordingly, the capital adequacy ratio is 22.8% for Tier I and 0.6% for Tier II. This capital adequacy is well above the regulatory requirement. At this stage, it is important to talk about return on equity. Under the Ind AS accounting requirement, net worth includes certain items which do not form part of Tier I capital under the prudential norms. These include Ind AS transition reserve, deferred tax liability on special reserve, fair value gains on investments through OCI, investments in subsidiaries and associates in excess of 10% of net own funds, securitization gains recognized upfront in accordance with the Ind AS accounting requirement. These items aggregate to INR 22,227 crore. Hence, Tier I capital is INR 98,024 crore as against the reported net worth of INR 1,20,251 crore. A more appropriate way of calculating the ROE would therefore be on regulatory Tier I capital as against the conventional method of computing it on total net worth. Annualized return on equity on Tier I capital for the year ended March 31, 2022, stood at 15%. As of March 31, 2022, the corporation's total borrowings amounted to INR 4,88,681 crore. Term loans, including external commercial borrowing and refinance from NHB, accounted for 28% of these borrowings. Market borrowings, that is NCDs and commercial paper, accounted for 40%, while deposits at the end of the quarter amounted to INR 1,60,900 crore and constituted 32% of the borrowings. 67% of the deposits were onboarded digitally. Before I get to the net interest income, let me outline issues which would have an impact on the NII. In the second half of the current year or current quarter, RBI has introduced a liquidity coverage ratio which needs to be invested in high-quality liquid assets. We therefore have a higher liquidity buffer as compared to the previous year. Secondly, the interest earned on net worth in the current year is lower than the previous year due to lower interest rates. Thirdly, in the current year, the proportion of retained loans has increased from 77%-79%. Net interest income solely on the basis of interest without taking cognizance of the profit and sale of loans during the year ended March 31, 2022, amounted to INR 17,119 crores compared to INR 14,970 crores in the previous year. The net interest income calculated in a similar manner for the quarter ended March 31, 2022, was INR 4,601 crores compared to INR 4,027 crores in the corresponding quarter of the previous year, which is a growth of 14.3%, and this is despite the higher level of liquidity we now carry. The sequential growth in net interest income during the fourth quarter compared to the third quarter was 7%. The sequential growth in the loan book during the same period, which is fourth quarter compared to the third quarter, was 5.4%. Net interest margin for the year ended March 31, 2022, stood at 3.5%, same as in the previous year. The spread on loans over the cost of borrowing for the year stood at 2.29%. The spread on loans during the previous year was a similar 2.29%. Income earned from deployment of surplus funds in cash management schemes of mutual funds and government securities was much lower at INR 561 crore as compared to INR 813 crore in the previous year. This was due to average level invested this year in liquid funds at INR 11,800 crores as compared to INR 21,700 crores in the previous year, as also due to lower return on liquid funds during the year. There was no profit on sale of investments during the fourth quarter. During this year, the corporation has booked profit on sale of investments amounting to only INR 263 crores compared to INR 1,398 crores during the previous year. Under Ind AS accounting standards, the stock options granted to employees are measured at fair value of the options on the date of the grant. This fair value is accounted for as employee compensation cost over the vesting period of the options. Employee benefit expenses for the year includes a charge of INR 390 crores compared to INR 338 crores 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 year ended March 31, 2022, the cost-income ratio stood at 8.1%. For the year ended March 31, 2022, the standalone profit before tax was INR 17,246 crores compared to INR 14,815 crores in the previous year, a growth of 16.4%. Tax provision during the year ended March amounted to INR 3,504 crores compared to INR 2,788 crores in the previous year. The tax rate for the year was 20.3%. The standalone profit after tax for the year stood at INR 13,742 crores compared to INR 12,027 crores in the previous year. For the quarter ended March 31, 2022, the standalone profit before tax was INR 4,622 crores compared to INR 3,924 crores during the fourth quarter of the previous year, a growth of 17.8%. The standalone profit after tax for the fourth quarter stood at INR 3,700 crores compared to INR 3,180 crores in the fourth quarter of the previous year, representing a growth of 16.4%. 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 was INR 76.01 and INR 75.20 respectively. The consolidated profit before tax for the year stood at INR 28,252 crore as compared to INR 24,237 crore during the previous year, a growth of 17%. After providing INR 4,210 crore for tax, the consolidated profit after tax for the year, for the period stood at INR 24,042 crore as compared to INR 20,488 crore, a 17% increase over the previous year. The profit attributable to the corporation was INR 22,595 crores as compared to INR 18,740 crores in the previous year, an increase of 21%. The board of directors, after assessing the capital buffers and liquidity levels, have recommended a dividend of INR 33.0 per equity share of INR 2 each, as compared to INR 23 per share in the previous year. The dividend payout ratio is 39.6%. As at March 31, 2022, we have a total of 3,599 employees and 97% of our staff has been vaccinated. Total assets per employee stood at INR 173 crores and net profit per employee stood at INR 3.8 crores. Let me now spend a few minutes to give you an update on the merger. As you are aware, on April 4, 2022, the board of directors of HDFC Limited and HDFC Bank Limited approved a composite scheme of amalgamation of HDFC with HDFC Bank, subject to requisite approvals from various regulatory and statutory authorities, respective shareholders and creditors. Upon the scheme becoming effective, the subsidiaries and associates of the corporation would become subsidiaries and associates of HDFC Bank. HDFC Bank will then be 100% owned by public shareholders and existing shareholders of HDFC will own 41% of HDFC Bank. A question which a lot of people ask is why now? We have over the years from time to time evaluated the option of merging HDFC and HDFC Bank. However, in the past, we found the cost of a merger to be high and hence did not proceed further. In recent years, however, there has been a series of regulatory changes which now makes the merger extremely attractive. Some of these changes have been as follows. Firstly, the requirement to maintain CRR and SLR has been progressively reduced over the years to a current level of 22%. Secondly, interest rates are lower today, so the negative carry, if any, on meeting any regulatory requirements on liquidity is much lower. Thirdly, RBI now permits banks to hold priority sector lending certificates. These certificates are instruments that enable banks to achieve their priority sector lending targets without actually disbursing the loans. Fourthly, HDFC presently has non-convertible bonds of nearly INR 90,000 crore, which have an original maturity of over seven years. Subject to RBI approval, these bonds would qualify as affordable housing bonds and consequently would not carry CRR, SLR or PSL requirements. Fifthly, there has been a harmonization of the regulations governing NBFCs and banks. Consequent to the introduction of the liquidity coverage ratio, we now carry significantly higher levels of liquidity than before. The merger will benefit the shareholders of both HDFC and HDFC Bank as follows. The merger will provide the combined entity with a host of synergies. Lower cost of funds will be made available for the mortgage business. The mortgage business has immense potential and hence the merger will help the group enhance its market share consequent to leveraging on the distribution network of HDFC Bank. The bank will have access to the time-tested mortgage origination and loan servicing processes of HDFC, which have been built up over the last 40+ years. The combined entity will be in a position to enhance operational efficiencies and offer the mortgage product seamlessly as against the current arrangement between HDFC and HDFC Bank, wherein the bank sources mortgages and acquires a predetermined percentage of the loan source through the assignment route. As per our estimate, 70% of the customers of HDFC and its subsidiaries do not bank with HDFC Bank, and hence the merger will provide the ability to cross-sell banking products to this large pool of customers. Presently, the bank does not source housing loans from all their branches, but only from those branches which are within physical proximity of the HDFC office. Post completion of the merger, progressively, more and more of the branches of HDFC Bank will source housing loans. The merger will enable the delivery of the home loan offering to a large base of over 68 million customers of HDFC Bank in a seamless manner. Today, just 8% of the bank's customers have a mortgage product, and just 2% of the customers have a mortgage from HDFC. Also, under the banking structure, the features of a mortgage product can be enhanced in terms of product design, etc. Apart from the synergies mentioned above, the value of HDFC will not be depressed by the holding company discount so far as it relates to the shares of the bank. The unrealized gain on HDFC Bank shares as of March 31 amounted to INR 1,57,118 crore. HDFC does not get full credit for this, and the market typically applies a holding company discount, which in some cases is as high as 40%. Consequent to the merger, the holding company discount will not be there, and this by itself should add over INR 62,000 crores to the market capitalization of the combined entity. The holding company discount will go away in as far as it relates to the shares of HDFC Bank. Thirdly, post the effective date, HDFC shareholding of 21% in HDFC Bank will be canceled. This will open up a potential headroom of over 10% of further holding for FIIs in HDFC Bank. The cancellation will also be as accretive for the combined entity. Fifth or fourthly, the mortgage product will increase the asset duration of the bank's retail books. HDFC Bank currently has 11% of its assets in mortgages. Post the merger, this percentage is expected to increase to over 30% with the potential to grow much higher. Infusion of capital in the bank will no longer be a drag on the return on equity of the mortgage business. These were some of the attractions of the merger. The bank has requested RBI for phased compliance in terms of timelines for CRR, SLR, and priority sector lending requirements. The bank has also requested RBI to permit the bank to hold equity in the subsidiaries and associate companies of HDFC Limited. These requests are under consideration by RBI. HDFC's distribution network spans 675 outlets, which include 211 offices of HDFC's wholly owned, sub-wholly owned distribution company, HDFC Sales Private Limited. HDFC covers additional locations through its outreach program. We have continued to engage deeply with all our stakeholders on ESG. Our disclosures and reports are on the website. For further information on ESG-related queries, you may engage with our investor relations team, Anjali and Conrad. During the year, corporate social responsibility activities focused primarily on COVID-19 relief, healthcare, sanitation, education, and livelihoods. Additionally, our support for the specially-abled cut across all focus areas. CSR activities were conducted either directly or through the H T Parekh Foundation. The total CSR spend during the year was INR 191 crores. These are some of the highlights of the results for the year ended March 31, 2022, and the quarter ended on that day. Before I conclude, I would like to wish each one of you good health and all the very best. Please stay safe. We may now proceed to question and answers. I would request you to kindly introduce yourself and be as brief as possible with your questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Suresh Ganapathy from Macquarie. Please go ahead. Yeah. Hi, Keki M. Mistry. My question is the strategy ahead of the merger. You know, first to begin with, would you like to grow your non-individual book? Now, of course, it's shown some traction in the last couple of quarters, but you know, ahead of the merger, you still want to focus on this segment because obviously the bank perhaps would like to have a lower proportion. That's question number one. The other two questions is again related to the issues surrounding it. For example, as per RBI rules, banks cannot borrow from other banks. Term loans are not allowed, and I'm seeing 25% of your entire borrowing is term loans. So what would you do 12-18 months down the line because that is not allowed as per RBI? The other aspect is your tie-ups with RBL Bank and others. Again, once it goes to the bank, those tie-ups won't be there. Now, that is another 10%-15%. I mean, I don't know, the direct selling agents and others put together is 18% of your sourcing. Just wanted to get a clarity on all these three aspects. Thanks, Keki. All right. The first one to answer your question, Suresh, is that the bank recognizes that to do retail individual housing loans, you also need to do construction finance loans. The activity of giving construction finance loans will continue even in the banking structure. Okay. That was your question number one. Yeah. Your question number three, I think you said was on borrowings. We have asked RBI to grandfather the existing balance sheet and grandfather the assets and liabilities. Whenever these liabilities mature, at that point of time, these will have to be replaced by other liabilities. Okay. That was your second question. Your third question was tie-up with the likes of RBL Bank and, you know, banks, bank structure and other agents. Total loans sourced through all distribution partners other than HDFC Bank and HDFC Sales is 18%. Out of that 18%, the amount which is sourced through RBL Bank is very, very small, extremely small. We can give you the exact percentage in a while. As far as the other agents are concerned, they can continue to distribute housing loan products for the bank. There is no embargo on agents sourcing asset products for banks, so they will continue. Okay, that's very clear. Keki, one last question is the morale or the motivation of employees prior to the merger. Obviously, there's a lot of uncertainty. The next 12-18 months, you are confident that the employees will be pretty motivated because the numbers are pretty good, right? You have really delivered this particular year despite being a very tough year. You can expect that to continue in the coming year also? Yes, we certainly expect that to continue in the current year. Here when you talk of integration, what you must understand is that unlike the merger of two banks, where both banks will have similar products, both banks will have credit cards, both banks will have personal loans, both banks will have housing loans and so on and so forth. In our case, that is not the case. There is complete uniqueness in the mortgage product. HDFC Bank does not directly do housing loans, as you know, and would like to do housing loans because it adds to the duration of their assets. All of HDFC's employees will be fitted into the bank, will have a major role to play in the bank, and the bank wants to drive the mortgage business going forward. To my mind, the morale is high. There will obviously be some amount of, you know, people sometimes feel a little uncomfortable when something like this happens. To my mind, the morale by and large is very, very high. Okay. Thanks, Keki M. Mistry, for all the answers. Thank you. The next question is from the line of Mahrukh Adajania from Edelweiss Financial Services. Please go ahead. Hello. Congratulations. My first question early on is on sector demand. If you see total bank housing loans, and that does not include HFCs, they've grown by 9% year-on-year when there's so much talk about an uptick in real estate and so many registrations. Of course, the larger players are growing much higher, including yourself. Why is the overall banking sector demand only at 9%, and how does this augur for future demand? I mean, despite so much rate competition, everyone wants to grow mortgages. All right. The answer, Mahrukh, is that we have grown our individual loan book both on an AUM basis as well as on a net basis by 17% on a very, very large base. As you said, housing loans in the banking system have grown at sub-10%. That clearly answers the question which I've been repeatedly telling investors that whilst there is competition in the market, there is no aggressive competition. No one is trying to, you know, make you do unreasonable things or give loans at very low interest rates or anything of that sort. There is competition in the market. It is healthy competition. Now, why the banks are not growing the mortgage book is, I guess, a question the banks itself will have to answer. To my mind, the structural demand for housing in India is extremely strong. We saw a period from 2017- 2020 when there was a slowdown in demand in the metro cities. Post-COVID, that demand has also come back. Today we are seeing demand from across the country, whether it is in tier one cities or tier two cities or otherwise, and we expect that growth momentum, that demand will continue in the period ahead. You must also realize one thing, that structurally, in India, housing as a product will always grow. It will grow by virtue of the fact that as most of you would know, two-thirds of India's population is below 35 years of age, and the average age of a first-time homebuyer is about 37 or 38 years. Many of India's population today, you know, the younger people have not even thought of buying a house. Structurally, over the next 1, 3, 5, 7, 10, 15 years, all these younger people will get to an age where they will necessarily have to buy a house. A house gives the ownership of a house, gives the individual that much more security. Therefore, to my mind, structurally, the demand will always remain strong. I have a few number-related questions. Firstly, what will be the stock of government securities at March end? Total? It's about INR 40,000 crore, approximately. In terms of your total priority sector or your total loans that could qualify as priority sector for the bank as on March, what would that number be? We don't. I don't have the exact number with me right now. We can give you the number a little later. We were carrying an excess stock of priority sector loans which have not been assigned to anyone, where we have not borrowed money from banks against all, we have not sold to the bank. When we saw it some time ago, it was over INR 20- INR 25 thousand crores. This is a number which will keep changing, and we will build on that number in due course. Would that be allowed as priority post-merger? Because of the bonds, it won't be allowed because you have affordable bonds, right? It'll be lower of the two, or how does it work? No, no, both. This qualifies for both. The affordable bonds that you are talking of, which is seven-year bonds, gives you exemption both from CRR, SLR, and if the money is used for doing priority sector loans, it also qualifies for exemption from priority sector requirement. Please read that circular. Yes, yes. No, my confusion on the circular was that we are allowed INR 250 billion or 25,000 crores as priority or just the amount of affordable bonds as priority? No. The amount raised which has been utilized for doing affordable loans, which would be the full amount. Whatever we borrowed, the seven-year plus bonds of INR 90,000 crore would entirely have been used in doing affordable housing loans, and the affordable housing loans would be more than that. Would be higher than the INR 90,000 crore that we have borrowed. Okay. My last question really is on deposits. I heard the grandfathering reply that you gave, but on deposits it's a bit more complicated, right? Because the rates on deposits, which if they're allowed grandfathering, would be higher than the rates that HDFC Bank could be offering to its customers. So, as- Will that also be allowed? I mean, the rates are determined by the bank. Whatever rate a customer or a depositor has got money at, that customer will or that depositor will continue getting the same rate from the bank. Subsequently upon the deposit maturing, if the depositor wants the deposit to be renewed, which in most probabilities most people renew their deposit, then it will move to whatever rate the bank wishes to offer at that point of time. The current rate at which the deposit has been taken, that rate will sustain, will continue. Okay. Thank you so much. Thank you. The next question is from the line of Shubhranshu Mishra from Systematix Group. Please go ahead. Hi, sir. Thank you for the opportunity. I have two quick questions. One is that you mentioned about the overlap with the HDFC bank branches. HDFC Bank currently caters for around 25%-26% of the AUM for the P2P. What is the estimate? Where does it go after the merger? Because you said that a couple of branches don't cater to the HDFC home loans. No, what I said, if it was not clear, was that all HDFC Bank branches do not source housing loans currently. The reason is that we would like to, for us, like the bank to source loans from locations where we have a nearby office because we would like to be in touch with the customer, meet the customer, et cetera, before the loan is given. Now, once we become a merged entity, then obviously that requirement will not be there and the bank will be able to source loans from all their 6,500 branches over a period of time naturally. Right. What is the aspirational number as a percentage of AUM? Where do we get to from current- Sorry, what is which number as a percentage of AUM? HDFC Bank, that's roughly sourcing around 20%-27% of the AUM for that. Yeah. HDFC Bank currently sources 28% of the new business that we have done. 28% of new business. They have a right to buy back up to 70% of these loans. The 70% does not appear in our balance sheet anymore. It would go to the bank. The total loans outstanding which have been sold to the bank is about eighty-eight odd thousand crores. Eighty-three thousand crores, I'm sorry. 83,880 crores, if memory serves me right. Right. This 28% will go to what kind of a number for in the future once this merger happens? That's the question that I'm posing here. 28% will go to what number over time? Well, I mean, I would not be able to put a number on the table at the moment, but obviously the 28% number has the potential to become significantly higher. Because today the bank is not sourcing loans from all their 6,500 branches, and as they progressively start doing that 28% number can become very, very significant. Sure. The second question is on the yield on home loans, last CS times. Your voice is not coming clearly. Maybe you could speak closer to the mic. Hi, sir. I wanted to know the yield and the incremental yield on home loans, LAP and construction finance? You want the breakdown? No, sir. The individual yields on these books, sir, and incremental yields. Why don't you get all those details later on from Conrad? If you look at the splits of our loans I've already given you, individual loans constitute 79% of our total loans. Construction finance is 9%. Lease rental discounting loans is 7%, and corporate loans is 5%. Sure, sir. Thank you. If you look at incremental growth, that figure also I mentioned in the call. If you look at the full year, then 88% of our loans were to individuals and 12% were for non-individuals. If you were to look only at the fourth quarter, it was 78% individuals and 22% non-individuals. You may recall that when we were giving our results in the first quarter, we had mentioned that progressively over a period of the year, the proportion of non-individual loans or as a proportion of incremental lending will go higher. You see in the fourth quarter, it has become 78: 22. Sure. Thank you so much. Thank you. The next question is from the line of Adarsh from CLSA. Please go ahead. Yes. Hi, sir. Congrats on good numbers. Question on the NII seemed quite strong in this quarter as against previous times. The NII growth is like close to 8%-9%. Our interest rates have kind of headed up on the funding side. If you could just explain what helped the momentum on NII. NII has continued to remain strong. We saw a slight reduction in NII growth during the third quarter because of the higher level of liquidity that we were carrying. We were carrying about INR 55,000 crores of liquidity at that time. The average level of liquidity during this quarter has been about 46,000. Because the level of liquidity has gone lower, the net interest margin has consequently gone higher. Again, this is something which we had guided for towards the when we were giving the December results. This is one reason. The other reason is when you talk of interest rates going up, at the end of the day we do a transaction where we move from a fixed rate to a floating rate. Given the yield curve, we are able to raise money at a lower cost after swapping it into a floating rate. Got it, sir. My second question was, when you speak about the disbursements by the bank, just wanted to check all these disbursements are by the bank's branches, right? Is the bank very actively using its non-bank channels, be it agency and DSAs now, or is there an incremental delta that even that channel of the bank will start sourcing mortgages? I would guess that that channel of the bank will also start sourcing mortgages. That will also contribute to the overall growth that you would see in the mortgage business. It's not just the branches of the bank, it will also be the other channels who, you know, source asset products for the bank. Because in mortgages that will be a large number, right? Because it's secured products. The share of, agency versus bank getting the business is quite a lot. Yeah, that's right. That, that's also will contribute to the higher growth in the mortgage business. All right, sir. This is helpful. Thanks. Thanks a lot. Thank you very much. I request all the participants to be in brief while asking the questions. Next question is from the line of Shweta Daptardar from Elara Capital Plc. Please go ahead. Congratulations on good set of numbers. What percentage of HDFC borrowings are linked to external benchmark rates as opposed to MIBOR, treasury bills? Well, we match our assets and liabilities in a manner in which the liabilities are linked to certain external benchmarks. There are different external benchmarks that are used. This is part of the treasury operations which are there, and the details you will find in the annual report. V.S. Rangan, you want to add anything? Yeah, I just wanted to say that, I mean, there are various benchmarks, as you rightly said. If you take, for example, the bank borrowing, almost 95% of the bank borrowings are actually linked to external benchmark borrowing. On the debentures and all, as you rightly said, we do conversion of those liabilities into floating rates. These are again linked to either the, you know, the treasury bills and the structured benchmarks. Sure. Noted, sir. Thank you. Thank you. The next question is from the line of Gurpreet Arora from Aviva Life India. Please go ahead. Yeah. Hi. How do we look at the composition of liabilities for the current year? I mean, what sort of paper issuances, what sort of deposit accretions are you looking at? A related question to that is, what cost of funds are we looking at for this full year, sir? Clearly speaking, the source of liabilities will keep changing depending on, you know, what is the best at that point in time. Broadly, I think the endeavor would obviously as the interest rate curve is currently sort of. Yeah, I think the line dropped for a bit. Sorry, our line dropped. Please carry on. Yeah. As we are looking at the current level of interest rates, I think, you know, you basically end up borrowing medium to longer term and then swapping it back to a, you know, appropriate benchmark so that, you know, you can be both on interest rate as well as on the duration curve, you are on the right part of the balance sheet. That would be broadly the best thing. In terms of the actual borrowing of how much exactly you'll borrow through a debenture or a bond, you know, deposits, bank loans, this would actually depend upon at that point in time, what is the best, you know, source and the quantum and rates which are available at that point in time. Please carry on. Gurpreet, do you have any follow-up question? No, I'm done. Thank you. Thank you. The next question is from the line of Subrat from SBI Life Insurance. Please go ahead. Hi. Thanks for taking my question. This is a follow-up of what was discussed in the previous question about the funding mix. What I understood was that the funding mix decision would be based on market and not influenced by the pending merger. Is that right? Yes, absolutely. Absolutely. Okay. That's all. Thanks. Thank you. The next question is from the line of Kunal Thanvi from Banyan Tree Advisors. Please go ahead. Yeah. Hi, thank you for the opportunity. I had two questions. One was on, you know, you mentioned about the fact that, while the overall banking credit, if you see the mortgages, they've been growing at 8%-9%. Because when you look at the top, you know, private banks, their mortgages group has been growing at a faster and we also have been growing at a faster. Now how does one interpret into it? Is it, you know, market share gain on the back of balance transfers or HFCs are growing faster than banks? Because it, you know, kind of, makes a confusion in the mind because the underlying, you know, credit, overall credit is not growing, but the players within it are growing. Can you explain that to us, please? Well, difficult for me to explain how, why the bank credit is not growing fast enough. My sense is, and I do not know, but my sense is that when some of the banks report their mortgage number, it might be including, you know, loans which are not strictly housing loans. For example, if you look at certain reports, I've also seen cases where construction finance loans given for residential purposes are included as part of housing, because at the end of the day, it is supposed to be housing finance. But we don't include that. When RBI, and again this is my interpretation, you know, prepares this consolidation, they would actually look at only the housing loan numbers and that would come to whatever the 9% number which is there in public domain. Sure. Got it. The second question was on our loan mix prior to merger, and see there are three large components. One is the retail, the individual book, then there's construction finance and there is a corporate book. Construction finance, you have given an explanation that will continue with the bank coming in. Any sense on the corporate book, which of course is like 5%-6% of our book as of fourth quarter. That would also continue because the bank also does corporate loans. As you mentioned, it's not a very large part. It's just 5% of our total lending. That would continue because the bank does corporate loans in any case. Sure. Got it. Thank you so much. All the best. Thank you. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yes, sir. Thank you for taking the question. Just a small clarification. You report spreads on non-individual loans on a cumulative basis. I think if I see what is right in front of me is, I mean, you reported 3.25% as the spread on your non-individual loans as on nine months, and at the end of this year it's 3.4%. Is this increase that we've seen in this quarter predominantly coming from that one non-individual account where we have completely kind of written off we can recover? Not entirely, but some bit of it would be because that particular account would have been carrying a lower rate because it was to a, you know, a customer was speculative. There would be other reasons also. There's been a pickup in the construction finance portfolio, which would contribute to a higher yield and so on and so forth. Also, the book itself has really grown a lot in this quarter compared to the earlier quarters. We had a negative 1% growth in the non-individual book till December, and we now have a positive 7% growth. Yes. I mean, would it then be fair to say that, I mean, all the incremental lending that you're doing, which you probably did in 4: 2 or what you're doing in 1: 2 now, I mean, are happening at rates which are, maybe significantly better than the rates at which you were doing non-individual disbursements until now? I mean, at the end of the day, interest rates in the economy by and large have been increasing. As interest rates go up, naturally, the lending rate will also go higher. The increase is from 3.3- 3.4 or something, which is not some very significant increase. It's 10- 12 basis points or something. Right. All right, sir. Thank you so much, and wish you the very best for the upcoming months. Thank you. Thank you. Next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead. Hi. Just two small questions. You know, last quarter there was some pressure on margins because of higher liquidity that you were running on the balance sheet. Just wanted to check, you know, has that liquidity come down? I mentioned that total excess liquidity which we were carrying or total liquidity that we were carrying last quarter was INR 55,000 crore, and this quarter the average is INR 46,000 crore. Sure. Just, you know, if I look at the schedules from P&L on the standalone numbers, the other interest and surplus on deployment of liquid instruments, you know, that number has actually grown significantly quarter-over-quarter from around INR 736 crores to around INR 920 crores. I think we can look at those numbers in detail, and maybe Conrad can explain. Sure, sure. No problem. Just one last, data keeping question again was, you know, if you could share the individual disbursement number which you've been sharing for the last few quarters. That'll be fantastic. Disbursements for the quarter or for the. For the quarter because I think you've mentioned the number for March. We'll give it to you. We'll give it to you. We'll give it to you in a minute. Also, there was a question earlier on how much RBL Bank sources for us, and it comes to. 10 basis points. 10 basis points. 10 basis points, 0.10%. Not material at all. I think that's also Conrad's question. Nischint, the disbursements for this quarter was INR 48,000 crores. INR 48,000 crores. Okay. Sure. Thank you very much and all the best. Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead. Thank you. The INR 46,000 crore of average liquidity which was kept in this quarter, would you call this a normal level or is there scope for reducing this further? Well, it is still higher than what is required by regulation. It's something which we will evaluate from time to time and take a call. Yes, technically there is scope to bring it down a little further. We might like to internally decide to carry a higher buffer. That's a call which the ALCO committee will have to take. It is higher at the moment than what the regulatory requirement is. Got it. Can you comment on the inward balance transfers now versus historical experience, if it is possible to get a sense of it? Our total prepayments which we received during this year was the same as in the previous year in percentage terms. It was 10.3% of the total opening loan book. Out of the 10.3%, typically you would find that part, this part prepayments, which is people who want to just reduce their liability, they get a bonus at the end of the year or they get some lump sum payment at the end of the year and they sort of reduce their liability. That would normally be about half the total prepayments that we receive. The amount of loans we receive versus the amount of loans we were sort of giving away would broadly be the same. Okay. You're saying inward balance transfers and outward would be roughly. Broadly the same. Yes. Okay. Effectively are you saying that inward balance transfers are broadly in line with historical levels? Yeah. There is no masking effect due to the. Yes. Yeah. Broadly in line, also reflected in the fact that total prepayments have also been similar as a percentage of the book. Got it. Thank you. Thank you. Next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead. Yeah. Hi. JD, just two questions. One is, if I'm not wrong, I think HDFC Bank had taken some approval to buy back INR 60,000 crore worth of loan in this financial year, fiscal 2023. Would that be applicable now in this event of merger? During the current year I think it's business as usual. As you know, the same principles will apply. As to whatever they source, they have the option of buying back 70%. You know, Rahul, as you know, the arrangement is that a bank sources loans for us. Yeah. We do the credit appraisal, the legal appraisal, the technical appraisal. We decide whether to lend money to a particular customer or not. If we decide to lend money, we make the disbursement and then the agreement with the bank is that they have a right to buy back up to 70% of these loans. You can calculate backwards. We've given you the percentage of loans sourced by the bank. We've given you the total disbursement-to-total loans done during the year. You can work backwards and see what 70% of that would be. Correct. No, I was referring more towards the next 12 months, which is fiscal 2023. I think they had taken approval from the shareholders under the AGM to buy back INR 60,000 crore. Yeah. You need approval from shareholders. When you take approval from shareholders, this is now a SEBI requirement. Okay Because it's a related party transaction. You can't calculate an amount, you can't calculate a number, so you always keep a buffer. You take shareholder approval for a higher amount, and then whatever you actually do, you do. The actual what gets done will be equivalent to 70% of what they saw. It is business as usual, Rahul. Nothing changes. Sure. Appreciate it. The second question is, with regards to the liquidity. You know, appreciate you you know ran it down somewhat in this quarter. But given the SLR requirement closer to the merger approval or confirmation date, let's say, you know, 12 months, 15 months out, will we need to rebuild this liquidity if we need to hold more or we can continue with the regulation? We do not believe we will need to build up further liquidity. We do not believe so. At the most we can maintain or we can run it down to the extent possible. Yeah. Except that the total amount of liquidity we need to carry, I think progressively increases by, I think, 10% or something. Rahul, you know, effective December 2022, you know, as of now our minimum required is 50%. We are around 80% as of March. Okay. By December 2022 it will go to 60% and so on, and then 75%. Progressively the amount minimum requirement goes up. We are already carrying more than what the requirement for 2023 would also be. In that sense it should not fall. Fair enough. Fair enough. Just can I squeeze in one last question? So on this restructuring, pardon my ignorance, but I think in this quarter, you know, the recovery of INR 2,700 crores or one account that you talked about, did it have any impact on the interest income also? Did we recover the entire amount in this quarter? Because I think we recovered somewhat in the previous quarter. No, no. The interest would have been accrued from time to time, and whatever was due, including the interest, would have been recovered. What would that quantum be in this quarter? Just for this quarter? Recovered from then, but then nothing extra which is recovered. Whatever was recoverable up to December would have been accrued up to December. What you see- Standard account, JP, so there is no question of. There was no stopping of the interest accrual internally. No, it was never NPA, so. Yeah, yeah. It was never NPA. Got it. It was always classified as a stage two account. Fair enough. Got it. Appreciate it. Thank you so much. Thank you. The next question is from the line of Mayank from Citadel LLC. Please go ahead. Hey, thanks for taking my question. I just have a question on the cost of funds. On a calculated basis, in my model, I see a close to 40 basis points decline in your cost of bond funding. My model could be wrong because these are on endpoint averages. Could you just give me a sense on what's been the movement on the bond cost for us in aggregate? Rangan, would you be able to answer that? The reason I'm asking this question is that since you said that most of our bonds are swapped to short-term rates, and short-term rates have moved up in the last three to four months, I'm just trying to understand. Rangan, you want to What we've seen in this quarter and what we'll see going ahead. Rangan, you want to answer that question on how the rates have come down. I'll come back on that one. Sure. Mayank, just to give you a quick for, you know, for the year, if you look at on, I'm talking of bonds and all market-related borrowings. Last year the cost, I'm talking of FY 2021, the cost was around 6.5%. This year it has been about 5.7%. This is the interest debit for the year based on the portfolio that we have carried. Right. That's the movement in the cost of the market-related instruments. Now that short-term rates are moving up and most of our existing bonds are 70% close to that maybe is linked to that, are we likely to start seeing this move up from next year in- I don't believe. In terms of interest rates? I don't believe that there would be any change in the borrowing cost which may not be reflected in terms of a higher yield that we will get. You would have seen that this morning we have increased the retail prime lending rate by five basis points. Yeah, Mayank, we have, you know, over the last four months on the non-individual portfolio, we have increased it by 30 basis points, including 10 this morning. From a spread perspective, we will ensure that we maintain the spreads for you. That also perhaps partly explains the question that somebody else had asked earlier as to why the spread for non-individuals went up from whatever 3.3%-3.4%. Got it. If I can just get in one more question. The five basis points RPLR change that we have done, should we read this more as a small adjustment or is this now signaling towards, you know, home loan rates increasing? No, I would say this is an adjustment. It doesn't signify anything. We had, whilst our short-term rates may have gone up a little bit, the five basis points that we have done will take care of our requirement in sort of ensuring that the spreads remains stable. Obviously, if rates go up further, then there would be some change. If rates come down further, then there would be a change. At these levels we are comfortable. Got it. Perfect. Perfect. Thank you so much. Thank you. Next question is from the line of Ravi Naredi from Naredi Investment Private Limited. Please go ahead. Sir, with regards to all of you, what will be your role along with Deepak Parekh and other eminent Board of Directors of HDFC in merged entity? As I told you, all employees of HDFC will move to the bank. Specifically role of Deepak Parekh and me, that is something which the board of HDFC Bank has to take a call on. All employees of HDFC will move into the bank. Okay. Thank you. Thank you, sir. Thank you. The next question is from the line of Sartaj Shah, Individual Investor. Please go ahead. Good afternoon, sir. I being an individual investor, I just wanted to have a simple calculation as to what would be the ROA of core HDFC business, since I was finding it difficult to calculate. The ROA on a pre-tax basis is 2.9%. On a post-tax basis is 2.3%. Okay. This is of the core HDFC business, right? Excluding the investment incomes and all those things. No, no. Sorry. This is on the combined. This is on combined. I'm asking of the core ROA. I mean, we can work on that, but I just mentioned the total. Yeah. I heard that in the introduction. Okay. Can I know the core ROA? As of now I would not have that working, but we can talk separately. Okay, fine. Why don't you speak to our company secretary and he will put you in touch with Conrad D'Souza, who's our Investor Relations head? Okay. Yeah. That's it from my side. Yeah. Thank you. Thank you very much. I now hand the conference over to the management for closing comments. I would only say that the outlook looks, continues to look very strong. As you would have seen in the fourth quarter, the growth has been strong. NIMs have been, you know, come back. The net interest income is higher than what it was in the third quarter. Most importantly, collection efficiency has further improved during the course of this quarter to the current level of over 99% during this quarter. At the moment things look good. My sense is that the merger is also on track. We are going ahead with all the, you know, discussions, et cetera, with the regulators. So far, all the regulators have been extremely supportive and positive. Thank you. Okay. Yeah, I have that number. Yeah, please go ahead. Bonds, the bonds adjusted for the swap between December and March. The December number is 5.70%, and the March number is 5.85%. Thank you very much. On behalf of HDFC Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you. Thank you. Thank you. Thank you.