Ladies and gentlemen, good day and welcome to Piramal Enterprises Limited Q2 and FY 2023 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. I now hand the conference over to Mr. Hitesh Dhaddha, Chief Investor Relations Officer from Piramal Enterprises Limited. Thank you, and over to you, sir. Hi. Good evening, everyone. Hope you are safe and in best of your health. I'm pleased to welcome you all to our Q2 and H1 FY 2023 earnings conference call. Our results materials have been uploaded on our website, and you may like to download and refer them during our discussion. The discussion today may include some forward-looking statements, and these must be viewed in conjunction with the risks that our businesses face. On the call today with us we have our chairman, Mr. Ajay Piramal, Mr. Rupen Jhaveri, our group president, Piramal Enterprises, Mr. Jairam Sridharan, MD, Piramal Capital & Housing Finance, Mr. Yesh Nadkarni, CEO of Wholesale Lending, and Ms. Upma Goel, CFO of our company. With that, I would like to hand it over to our chairman and would request him to share his initial thoughts with us. Good evening. I hope that all of you have had a safe, healthy, and joyous Diwali. I'm pleased to announce that we have completed the demerger of Piramal Pharma well within the guided timelines, creating two separate sector-focused listed entities of the Piramal Group into financial services and the pharma sector. This is the first quarter wherein we are reporting the results of Piramal Enterprises Limited as a listed RBI-regulated NBFC, and our discussions going forward will be focused only on the financial services business. Also, now PL being a sector-focused entity, we have also significantly enhanced disclosures on the business over the last few quarters. Let me now comment on the performance of the quarter. Despite a reduction in the wholesale o... AUM by 12% to INR 38,908 crore, our total AUM has grown 35% from prior year due to the DHFL merger, and it is now INR 63,780 crore. Our revenues grew 37% on a year-on-year basis to INR 997 crore, primarily driven by a healthy growth in the retail lending business. Retail loans are now 43% of the overall loan book, as compared with 12% pre-merger. Given that this was the first quarter post demerger, INR 5,888 crore worth of assets were moved from Stage 1 to Stage 2, largely completing the asset classification cycle. We believe that we are now largely well provided for Stage 2 and Stage 3 assets. An additional provision was created of INR 1,399 crore, and a fair value loss was taken of INR 1,048 crore on our wholesale book during the quarter. Our total provisions as a percentage of wholesale AUM increased to 13.1% from 8.8% last quarter. Hence, there was a net loss of INR 1,544 crore during the quarter, as compared with INR 395 crore of recomputed net profit for the second quarter of FY 2022 for the demerged financial services entity. We continue to have a strong balance sheet with a capital adequacy ratio of 23% and net debt to equity of 1.9 x. Despite creating the additional provisions over the last few quarters, our company has an equity base of INR 27,506 crore in Q2 FY 2023. In addition, there are significant pockets of value embedded in our balance sheet where we expect value unlocking to take place in the coming few quarters. Coming to the retail performance, this is a milestone quarter for us as we successfully completed one year of our DHFL integration journey. Over the last one year, our loan book has grown and with diversification. The retail loan book has grown over four and a half times from the pre-merger levels to INR 24,872 crores. With retail now already at 43% of the overall loan book, we are now much closer to our stated target, having 50% of our total loan book as retail in the near term. We are building a diversified and granular retail portfolio at an average ticket size of nearly INR 12 lakhs, with a large part of the book comprising of secured lending products. Our disbursement growth during this quarter has been impressive. Quarterly disbursements grew across all the product categories by 8 x year-on-year and 62% quarter-on-quarter to reach INR 3,973 crores. We are already much ahead of our earlier stated guidance of INR 2,500-INR 3,000 crores by the third quarter of FY 2023. Over the last two quarters, as our disbursements grew higher than the run-offs, it has resulted in a growth trajectory for our retail AUM, where we ended this quarter at a 12% AUM growth. This performance has been driven by various endeavors we took in the last few quarters. One, addition of new branches. Two, adding multiple new products to diversify our retail portfolio. Three, activation of branches to sell multiple products. And fourth, growth in the customer base through the digital lending business, enabling in cross-sell opportunities. In the one year since the DHFL acquisition, we have opened 64 new branches and shut down 22 branches, resulting in our branch network growing to 343 branches now. We are now present pan-India across 293 cities and towns in 27 states of India. We aim to be present at 1,000 locations through 500-600 branches over the next five years. We have also launched multiple new products, now offering 11 retail products. During the last few months, we entered into microfinance via the business correspondent model. During the quarter, we also launched branch-led personal loans to salaried individuals in Tier 2 and Tier 3 towns. Apart from launching new products, we've also been focused on making our branches activated with multiple products. Nearly 82% of our branches are now selling products beyond just the home loans. Hence, not only housing and secured MSME loans disbursement grew 6x in the last 12 months, but also the disbursements under the non-mortgage loan categories have been much higher, seen much higher traction, though from a low base to INR 1,358 during the quarter. Non-mortgage loans had a 32% share in our overall retail disbursements. As of 30th September, we have 20 live partnerships with Fintech, OEMs, and aggregators under our digital embedded finance business. Our digital offerings have enabled us to significantly expand our customer franchise to 2.2 million, giving us substantial cross-sell opportunity. We achieved cross-sell disbursements of INR 945 crore over the last year. The asset quality of the acquired DHFL book remains in line with our expectations. We continue to make recoveries from the POSI book. We continue to invest to strengthen technology and analytics to further enable us to build, scale, and maintain a healthy asset quality in our retail businesses. I will now come to the wholesale business. Our focus on recoveries and monetization of Stage 2 and Stage 3, Stage 3 loans. While the Stage 3 assets remain stable, INR 5,888 crores worth of assets moved from Stage 1 to Stage 2, largely completing the asset classification cycle. We have been working towards making our wholesale book more granular. Progressing on the same, exposure to the top ten accounts reduced 33% since March 2019 by INR 6,050 crores, and now no account exceeds 10% of net worth as of September 2022. Our wholesale AUM has further reduced by 12% in the last one year to INR 38,908 crores. We will be increasing our focus on recoveries monetization of the Stage 2 and Stage 3 loans, which will further moderate the wholesale book size in the short term. In addition, we will continue to remain vigilant across our portfolio and have well provided for Stage 2 and Stage 3 assets. I would like to comment on the quality and granularity of our Stage 1 assets. Post these movements of loans from Stage 1 to Stage 2, our Stage 1 loan book is much more granular as the average ticket size of the Stage 1 wholesale book is lower at INR 189 crores per loan. Over 90% of the Stage 1 wholesale book is into asset-backed SPV Opco loans in real estate. Our Stage 1 book largely excludes promoter holdco corporate lending transactions. Over 78% of the Stage 1 real estate book is with large and medium developers, and over 60% of the Stage 1 real estate book has limited or no completion risk. We believe that this is an opportune time to build the real estate book. While efforts are being made towards largely completing the recognition cycle on the existing wholesale book, we are also investing to build a granular cash flow and asset-backed real estate and mid-corporate lending business that will give loans to well-capitalized promoters. We will build this book in a calibrated manner while capitalizing on this market gap. We are cognizant of the trends in the real estate industry that are now favorable to grow this business. Real estate lending is a large market of INR 4.5 lakh crores, with supply of credit significantly lower than the demand, offering significant growth potential for select players like us that have continued to remain strong even after a prolonged crisis environment. From a cyclical perspective, we believe it's a good time to build up the real estate book as the developer consolidation has resulted in a better quality ecosystem, which is now a lot more capitalized. A few major NBFCs/HFCs have vacated the space. We are also witnessing the beginning of a growth cycle as affordability is at an all-time high and inventory levels are bottoming out. Leveraging our retail setup, we will also be selectively entering into Tier 2 and Tier 3 markets which are relatively under-penetrated. Within the corporate mid-market lending book, we have already built a book of, say, INR 800 crore with an average ticket size of INR 50 crore. On the liability management, our ALM is well matched with positive gaps in all buckets. Due to our strong balance sheet and healthy liability mix, our average cost of borrowing stood at 8.8% for the quarter. With 80% of our liabilities being fixed in nature, we continue to maintain our cost of borrowing despite a rising interest rate environment. To conclude, the demerger, which is a long-awaited event by the investor and analyst community, has concluded successfully, creating two sector-focused entities, giving an investor an opportunity to choose the entity they would like to invest in. The DHFL acquisition turned out to have delivered better than expected results in the last one year. The retail business is continuing to deliver on its growth path, already taking the loan book mix much closer to a retail 50%, 50% wholesale now. The wholesale business has also largely completed the asset classification cycle now and has also well provided for its Stage 2 and Stage 3 loans. Our healthy mix of liabilities is helping us gradually bring down our cost of borrowing over the last few quarters despite the adverse rate environment. Our balance sheet remains strong with a capital adequacy ratio of 23%. With this, we continue to remain committed to our FY2027 aspirations, doubling the AUM from FY 2022 levels with strong growth in retail disbursement, keeping the net debt to equity 3.5x-4.5 x. In this process, making the loan book more retail-oriented with a loan mix of 2/3 retail and 1/3 wholesale. We will continue to work towards creating long-term value for our shareholders. Thank you. Should we open it up for Q&A? Yes, let's do that. 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. Steven, while the question queue assembles, there is one quick clarification that we would like to offer in case it wasn't entirely clear. There are two metrics which we wanna reiterate, the absolute numbers. The total amount of provision and fair value adjustments that have been done during the quarter is INR 3,311 crores. The second clarification is on that. You know, in case it wasn't clear, the net loss during the quarter was INR 1,536 crores. So those are two numbers. There was a little bit of confusion in the original call, so I just wanna clarify for everybody's records. Thank you. We can go to the question queue now. Thank you. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yes. Good evening, everyone. Thank you for taking my questions. Mr. Tibrewal, if you can take the phone off speaker, please. Your audio is coming in a bit low. Is it better now? Yes, sir. Good. Thank you for taking my questions. The first one was on the wholesale assets. I mean, the way I look at it, we have moved around INR 5,900 crore of assets from Stage 1 to Stage 2. Two things that I wanted to understand here. One is, I mean, we are still saying that this will largely complete the asset recognition cycle. The emphasis is still on largely completing, and it is still not completed, is what I'm able to understand. I mean, how should we read it? That's the first question. The other thing is, I mean, while we say that we are very well provided for Stage 2 and Stage 3, will it then be fair to say that given that we've now moved this INR 5,900 crore of assets from Stage 1 to Stage 2, the idea will be to monetize these assets which are now in Stage 2 rather than over the course of time moving them to Stage 3, which will again warrant higher provisions in Stage 3? The third question again on the wholesale assets is, you talked about taking a prudential write-off of about INR 360 crore during the quarter. So what were these write-offs about? If you could also give some color on this INR 5,900 crore that you've moved from Stage 1 to Stage 2, what was the nature of these wholesale assets? Were they in real estate or non-real estate? I mean, whatever, basically, whatever color you can provide. The last question is, in your P&L, you've talked about a net loss on fair value changes, which is included in this INR 3,300 crore of provisions or credit costs that you have reported. What are these net loss on fair value changes? Okay. Abhijit, there are like five questions that we heard in what you said. Between me and Yash, we will try and take all of them. Let me take the first stab at it, and then we'll keep trying to take all of your questions. The first question is the most important question, I think, that you know, the use of the phrase largely completed on our asset recognition cycle. I think you're worrying about the word largely. The way I frame it is, our emphasis is on the word completed, not on the word largely. I think we are in an uncertain business, so you know, there might be some new things that might come up in the next quarter that we are completely unaware of right now. As far as we are concerned, this was our first quarter as a financial services company entirely. It was our effort to go into the market with as clear an articulation as possible of what the overall level of stress is in the book. I know that there has been a lot of conversation and speculation about what could be potential levels of stress. Our intent was that in this first quarter, we should be very clear about what that is. We did a full-fledged analysis internally, and what you see is a reflection of that. Unless something kind of dramatically changes, we believe that we are done from the perspective of recognition of pockets of stress. Please, you know, focus on the word completed, like the word largely is just to keep some you know, completely unforeseen events you know in mind. That as far as the first one is concerned. You had a question on fair value loss and what fair value loss is. Fair value loss is essentially again, the same intent of saying that, in this our first quarter as an asset company, we got to make sure that the FS sort of you know balance sheet reflects all kind of potential problem areas. When we looked at the investment book, and we looked at the assets, to try to see what is the best sort of you know mark-to-market adjustments that we might need to make, that is what is reflected as fair value loss. We are clubbing it with the provisions item and giving you the full number of INR 3,300 crores. Roughly INR 1,000 crore is in that fair value adjustment piece and about, you know, INR 1,300 crore just under that is, INR 2,300 crore is in the provisions pool. What were the other questions? Sure. Prudential write-off. There's about INR 300 crores, 350 crores of prudential write-off that was done during the quarter. Prudential write-off is essentially those accounts where we had 100% provision or we had made 100% provisions. We want from the, you know, from the perspective of Stage 3, managing the Stage 3 book and ensuring that it reflects the right accounts there. We have gone ahead and actually, you know, prudentially written off those accounts. As you can see, even after that prudential write-off, our provision coverage ratio in Stage 3 is well north of 60% at an overall level and at about 74%-75% at the wholesale level. We are fairly well provided even after the prudential write-off of about INR 350 crores that we did during the quarter. You had a question on what were the nature of assets that moved from Stage 1 to Stage 2. They were largely real estate assets. You know, there are 18 assets in all which comprise this, you know, this group that you see here. Anything you add? I just wanted to add a couple of points to what Jairam said. This is Yash here. I think the movement of assets from Stage 1 to Stage 2 is driven purely by our desire to change our stance to get more proactive with regard to the management of these assets. That is to say that these are not necessarily those assets which are not performing in order. I just wanna make sure that that's clear to everyone. The common theme that we have seen in these assets as we manage our portfolio is that these are some of the larger and lumpy assets on our book. We have seen some sort of stress at the group level mostly, and in some cases at the underlying assets. We have seen performance-related delays and so on and so forth. This really is our overall strategy of being proactive about categorizing them as such, on Stage 2 of our book and systematically resolving them as we go from here. That's the background I wanted to add. That actually leaves the Stage 1 part of our book, which is roughly INR 27,000 crore in size. I think I just wanted to outline a few points as it relates to the belief we have and which is this is a very high quality book, which is a performing book, and which is why it is Stage 1. In a way, sort of bringing the assets that I just referred to earlier to Stage 2 is again clearly demarcating between the two buckets that we have on our balance sheet. Stage 1 assets really are 130+ crore loans. This is really a granular, super granular part of our wholesale portfolio, where the average size per loan is in the range of INR 190-odd crore, as Chairman alluded to earlier. These assets are well secured in terms of the underlying loan structures, security structures. These are senior secured, SPV-linked assets mostly, where the assets and cash flows are mortgaged to us. This book is very well seasoned. A significant part of this book doesn't have construction development risk, which is a key differentiator in risk as it relates to real estate assets. These projects largely are backed by established developers and sort of well-managed balance sheets with our counterparties. I just want to take the opportunity of summarizing our Stage 1 portfolio as well, while we describe Stage two in answering your question. Thank you, Yesh. Just one small follow-up here. Would it be fair to say that given that you've moved this INR 5,900 crores of assets from Stage 1 to Stage 2, you would have done that because, as you explained, you were seeing some pockets of stress, either at the group level or somewhere else. Then going forward, you would make some endeavor to maybe monetize this exposure. Lastly for Jairam, during your opening remarks, Chairman also kind of alluded to some hidden pockets of value. This DTA and DTL that we still have on our balance sheet, which we created at the time of the DHFL acquisition, have your conversations with tax experts or tax authorities progressed in terms of whether you will be able to utilize it going ahead? Managing these assets, categorizing these assets as Stage 2 doesn't make any difference to us whatsoever as far as management of these assets is concerned. I think I'll just remind that these are self-liquidating amortizing loans and therefore the monetization of these assets actually happens as we go, and that will not change at all. In certain cases, we'll be more focused on monetizing by way of considering various alternatives like recapitalization of the underlying SPVs or refinancing our exposures or any other means that we may consider appropriate in resolving it. There is no differentiation whatsoever between Stage 1, Stage 2, Stage 3, other than saying the fact that Stage 2 we would have even more focus on monetizing. The one thing that I would add to that, Abhijit, is that the moment you move something to Stage 2, you in some sense do that because it increases your ability to make provisions on those accounts. Once you have made a certain higher level of provision on that account, it increases your degrees of freedom in terms of potential ways in which you could resolve the account. Things like refinancing the account with somebody else, you know, becomes a lot more feasible once you have moved it to Stage 2, once you've made a certain amount of provision on it, and hence you have some room for, you know, for negotiation with any potential buyers, right? It does increase degrees of freedom a little bit. Operationally, as we are sort of mentioning, on the ground, people will keep trying to all sorts of tricks to try and work the account as you know, as appropriate. Your second question on pockets of value. The pockets of value, you know, you heard Chairman talking about it, that we expect value unlocking to take place in the coming few quarters. We remain fairly confident of that. Our confidence on some of those pockets of value has, if anything, increased in recent months. You know of 2 or 3 of these like that are there. We continue to, of course, have the retail FC book. From there we continue to get collections and recoveries. We continue to have the investments on our book of Shriram, et cetera, where the corporate action is proceeding and is likely to close imminently. The moment that happens, there's a lot more liquidity that gets introduced into our holdings and potential NPM gains that come through. The accelerated elements that you mentioned, both on the asset side and on the liability side. Both of them, we have made good progress in our conversations. A meaningful part of the contingent liabilities on the liability side that we have got set up is, you know, a meaningful part of that has already time-barred. We know that there are stronger reasons that are accumulating over time. Overall, I'd say that our level of confidence is fairly high. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Maybe with respect to this forward flow, what actually triggered that, okay? In terms of the development in last one quarter, and maybe also providing the indication in terms of maybe these are the assets wherein obviously to improve the resolution and the freedom from debt. These are like equivalent to almost when we look at it, so more than 10%-12% of the portfolio assets. Is it a pure management change that triggered it, or there were any other progresses with respect to this project that triggered this recognition? Let me start, and Yesh will, you know, jump in as well. Kunal, there is, as you know, in India's Stage 2, while there are a lot of rules that you can set up about how accounts can move to Stage 2, but there is a level of discretion which you can apply in actually determining significant increase in credit risk of accounts. As we mentioned before, this is our first quarter as a financial services company. It is our desire to make sure that the financial services balance sheet is as transparent and clear as possible. Given this very significant milestone in the life stage of our company, it was our desire to actually look into the portfolio in some detail and identify accounts where, if not at the account level, but maybe at the parental level, there is some stresses sort of building up. Make sure that the balance sheet is appropriately bulletproof towards that. We have more than adequate level of equity. The provisions are, you know, we have the ability to actually take, you know, what hits are necessary right now, but the transparency and clarity and balance sheet was really important. As Yash mentioned before, the INR 5,900-odd crore, you know, comes from roughly 18 accounts. That tells you the size on average of the accounts that have actually moved. They are fairly substantially sized accounts. That's certainly been a risk factor, you know, that has come through. As you mentioned in the previous question, you know, most of these are in the real estate sector. There are three broad categories of issues that have been used by Yash and team to identify. I'll invite Yash to speak about that, about what we have used to classify accounts as at Stage 2. I will reiterate that you know application of judgment in determining pockets of stress is what you're seeing reflected here. This is not 18 accounts that suddenly stopped paying in Q2. That's not what you're seeing here. Yesh? Absolutely, far from it. Look, I think that the core of all of this is an intent to get granular and de-risked, and also in line with our stated strategy of having two-thirds, one-third mix between retail and wholesale. So these accounts really are lumpy accounts. As I mentioned earlier, I think our objective was to really focus on resolution of these accounts, not because they are not performing in a stricter sense of the word, but because these are large risks on our balance sheet, and with the passage of time, we just want to granularize our portfolio. That's what we focused on. I think, as we reviewed our portfolio, we also have identified some of the assets where there are group level issues and therefore actually a speedier resolution and focus on sort of monetizing these assets is what we want to really drive in the following quarters. Just one addition. This is Rupen Jhaveri. In addition to what's been said, there are also some subset of these accounts, without getting into the specifics, which are nearing specific resolutions and closures. Hence that required a certain type of provisions as well. Yeah. If you look further, get granular in terms of this portfolio of INR 5,800 crores, have you done any ranking in terms of which stage of resolution and what? If we want to just highlight it into maybe something which is in the red zone, something which would be in the green zone. You mentioned some subset is there, which is nearing the resolution, but there will be few accounts, okay, wherein it would be really difficult, and there could be further forward flows into Stage 3 as well. Any maybe qualitative comments on this entire portfolio? See, let me say one thing. We just recognized the INR 5,900-odd crores. There are three buckets of issues that are there. Bucket one is essentially issues at one level up the parent entities of these companies, where the group essentially is in some sort of financial distress, while the particular specific project might not be. But the parent is going through some trouble, or the builder concerned has been kind of put behind bars. You know, we know some of the examples in sort of you know one major southern city, for example, et cetera. That's one category of issues. The second category of issues is where we believe a resolution is possible either through sale or through some sort of other resolution mechanism. That will come with a little bit of a haircut. Moving to Stage 2 allows us to make that provision, which enables you to do that. That's the second category. The third category is where genuinely there have been some amount of you know movement of the market against the borrower, though they have not really kind of defaulted on payments yet, but their cash flows seem weak. Those are kind of the broad three categories. We are breaking down the INR 5,900 into these three categories. To the bigger question that you're trying to ask off the Stage 2, what do you expect to happen in terms of movement to Stage 3, right? That's the mega question that you know that I hear you asking. The way I'd frame this is, you know, while one should expect some flow from Stage 2 to Stage 3, you're not gonna see any imminent big surge. B, you're not gonna see a big amount of you know provision requirement if the account moves from Stage 2 to Stage 3. Because even with the account in Stage 2, we have made fairly significant provisions, aligned with what we think many of these accounts can, you know, in any sort of reasonable view of the world, incur as LGDs. I'd just add one point to what you summarized there, Jairam, which is I think it's also important to remember that these are real estate loans where your underlying collateral is senior secured mortgage on the land and the project, right? So it's not that we are seeing cases where the outcome is kind of binary where you get zero or hundred. That's what I think the point that you're making about us having thoughtfully put this in category and set aside the provision that we have puts us in a position where we actually really go after the best possible strategy for resolving this as we go. Yeah. When we look at the provisions of almost 13 odd percent, and as you mentioned, these are collateralized at some places at senior security as well. What is the kind of stress? Okay, it's almost like more than 25 odd percent of the wholesale which is really under stress. When we are making this provisioning all through over last four to six odd quarters, the numbers which have been there in Stage 2 and Stage 3 have been much, much lower. Okay, is it like a deferred recognition, okay, which has happened on the entire wholesale book? Because situation has only improved in last six, nine months, as you are saying, like, maybe when you're confident of growing the portfolio again on the real estate side, saying that affordability is improving, inventory levels are improving, but still the recognition has not been there and provisioning is just inching up. Yeah. Could I reiterate what we said before? The you know, on the specific point of deferred recognition, I don't think this is a deferred thing. This is, if you look purely at repayment behavior, these accounts wouldn't end up in Stage 2. Our intent, this being our sort of first quarter as an FS company, was to actually increase you know, transparency and believability on the portfolio. We have significantly tightened the norms in terms of moving to Stage 2. If anything, it's the opposite, which is that you've pulled forward, you know, potential events which can happen, you know, in the future, and made sure that you've recognized all of them upfront. There's, you know, if we had continued to have the same policies based on pure repayment behavior of these accounts, you would have seen a very different picture during the quarter. To be specific, we put this note also in the account. There were some changes in our credit policy, which has been recommended and approved at the risk audit and board, which is now driving fairly model-based outputs, in addition to specific subjective inputs that we need to have for extremely stressed accounts in Stage 3, et cetera. Sure. Sure. Sure. Thanks for all the clarification. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead. Hi, thank you for the question. You know, you said there are some accounts in the stage two that were closer to resolution, some which will take a long time. If we look six months down the line, let's say by March 2023, would you expect a big chunk of these accounts to get resolved? Or is there some kind of timeline you can put forward to how the process will flow from here on? You know, at this time we would prefer not to. I think we can tell you that all efforts are on it. There are various teams working on each account, and all efforts are being made. Yash already mentioned the segregation between recognition versus what the business and the management teams need to do in terms of ensuring payments, recoveries, et cetera. The other point also that was mentioned, which I'll reiterate, that in some cases it's not like the payments have stopped. It's just recognition today of some potential stress X months, X quarters down the line based on cash flow mismatches that we see versus what the builder may see. Allow us some time, and at the right time we'll be able to share more information as time goes by. The other piece I'll also reiterate is what Chairman has mentioned in his opening comments, which is that with this and the other efforts that are going on, our intent is for us to consolidate and reduce the size of the wholesale book overall over the next few quarters. Between now and March, certainly the overall book will reduce. Yes, you should expect, you know, some of the reduction to come from Stage 2, a little bit from Stage 1 as well, and so on. You will see the reduction in the overall book in the next few quarters. Okay. Thank you and good luck. Thank you. A reminder to the participants, anyone who wishes to ask a question may press star and one. The next question is from the line of Sanket from B&K. Please go ahead. Yeah. Hi, sir. Again, from wholesale only, but basing your answers to the previous questions, it is right to assume that what you are suggesting is rather than looking towards how much stress or the extent of stress in the INR 6,000 crore addition in the Stage 2, rather the way to look at is these are the set of assets which you want to monetize. Rather than keeping it lingering for, say, many quarters, you have taken the hit in one quarter in terms of recognition and providing it. I think that's a good way to frame it. I mean, if you just look at our overall numbers, you know, you can see what the total amount is between Stage 2 and Stage 3, right? You can see the amount of provisions that you know that we have made on that. On essentially INR 11,000 crore portfolio in wholesale that is sitting in Stage 1 and Stage 2 and Stage 3, we've got about INR 4,400 crores of provision. 40% is, you know, we have covered on that Stage 2 and Stage 3 book. That gives you a lot of room to achieve whatever kind of resolution you wanna achieve within that portfolio. Okay. Out of this INR 9,000 crore, particularly in Stage 2, is it that the entire pool you look to monetize or maybe there is a portion which you feel will get regularized on its own? Just based on your last Very quickly, man. See these things, these flows, you know, forward and backward will happen account by account. It's very hard to be precise right now. However, on the full pool level, we know that we've got a lot of provisions. We've got, you know, one-third provision sitting in Stage 2, 75% provision sitting in Stage 3. So we know that our degrees of freedom in terms of what we can do as management action is significant with this level of provision already in there. And I just- Go ahead. Yeah. I just wanna add another point here. I mean, given the fact that we are stating now that we will shrink our wholesale footprint for the next few quarters to come, the bucket where you would want to focus on the shrinkage is Stage 2, clearly. That also directionally answers your question. Just to give you one data point, and since this question was asked, well, we won't go into more detail. In Stage 2, for example, we do have one transaction which was sitting in early November that just got repaid. That's about INR 150 crores. Just giving you an example. There will be some movements up and down. Jairam Sridharan just alluded to it. Allow us some time over the next one, two quarters where there'll be lot more clarity and you'll reflect, you'll see that in our numbers. Oh, sorry. One last question on wholesale, and then I have another question in general. In one of the last questions, participant's question, you mentioned that maybe going ahead, Stage 2 will come down and also Stage 1 will come down. Are there any assets in Stage 1 also that you look to monetize in the coming quarters? That is a matter of deliberate strategy. I would remind again that in our business these loans are self-amortizing loans, where with all cash pay and these actually reduce with the passage of time. Which basically means that if you're not adding new loans to that category, with the passage of time, you'll see the reduction. That natural rate of attrition, I would imagine, would pan out for Stage 1 as well, but not at RM. The only other element I would add is, in some cases you would also see, because these are good projects, there could be refinancing pressure from competing financing sources for the real estate builder. There could be some prepayment, but it's hard to gauge that behavior today. Sure, sir. Just one suggestion. We have provided one very good slide, which is giving a flavor on Stage 1 assets. In the wholesale books, it would be very helpful if we can provide some qualitative details, if not actual names, on the Stage 2 assets as well. Another question is on we have a lot of excess equity right, which is a drag on our ROEs. Also, maybe we are looking to monetize the investments that we have done in Shriram Group. Once that happens, maybe some inorganic acquisition looks more probable for us to put that excess equity to good use. Are we evaluating any assets? A qualitative comments like which segments would be useful on that front. I'll take that. Yes, we do recognize that there is excess equity, cash, potential monetizable cash in the near future. If you just look at the history of this group for the last many decades, it is a group that apart from strong organic growth, it has managed multiple inorganic acquisitions and the latest and the last one being DHFL, as you very well know. We from time to time will absolutely look at inorganic. We do think the financial services market is highly underpenetrated in the segments that we are in, including newer segments that we may enter in. We're actively engaged in pretty much multiple M&A dialogues. Nothing specific to discuss at this stage. Sure, sir. Those were the only two questions from me. All the best for the company. Thanks. Thank you. The next question is from the line of Bhaskar Basu from Jefferies. Please go ahead. Yeah. Good evening. Just a couple of questions. Firstly, just wanted to get, was there any POSI gains, which was netted off against provision, in this quarter of INR 334 crore? How much was that? A little over INR 100 crore, Bhaskar. INR 100 crores. That is at least, I mean, that's. The number is a net number, right? It's a net number, correct. Okay. Could you give some details around the fair valuation of investments? What was it regarding exactly? I may have missed it in the notes. Some color would be helpful. Yeah, look, these, I think you should treat the fair value losses/provisions effectively as part of our AUM. There are certain instruments which are effectively loans, but they're categorized more as fair value instruments given how these from an accounting standpoint, how they work. If they have variable rate attached to it. There were some loans that may have been enforced and we own assets slash investments. It's a combination of two. From your vantage point, and hence that's the way we've shown in the IR deck together, effectively it's the AUM hit on the PNL that has been taken. Just to be clear, this is, this also pertains to the loan book itself, right? Because you classify some of the loan, part of the loan book as investments. This is pertaining to the same book. You know, I think you should treat them similar to the provision, broadly. Okay. Got it. That's all from my side. Thanks. Thank you. The next question is from the line of Nischint Chawathe from Kotak Securities. Please go ahead. Thanks for the opportunity. I'm just looking at page 43 of the presentation. You have investments of INR 20,000 odd crores. Could you give some breakup in terms of these investments? How much of this is PTC? Sorry, how much of this is what? The PTC, the Pass-Through Certificates. Oh, PTC. Very little. INR 2,255 crores as of September. Okay. This is the current value, right? Yeah, yeah. Post markdown value. If there are any markdowns, everything is reflected here. Okay. The rest of it would be what? Around INR 19,500 odd crores or whatever. Actually, 20,000 crores would be what? If you go to page 44, I'm sure you have access. Here we've just shown you the equity. I'll read it for you. Broadly speaking, we do have non-FS lending equity also, against which there are assets, right? Shriram General Insurance, Alternatives. Okay? That's a large part. As we mentioned earlier, the AUM that we talk about is a combination of loans/investments, which are investments pertaining to the lending book itself. It's just the categorization of those loans are in investments. If you knock out these, about how much is this? INR 7,500-8,000 crores. The rest you should really add it to our AUM. When you add our AUM of INR 63,000 crores plus this, you've got. You add cash, you'll broadly tally to the number on page 43. I hope that answers your question. Yeah, it did. That's perfectly. On the network side, just to clarify, Shriram is on a mark-to-market basis, right? Shriram City Union is a mark-to-market in terms of capital because it is still not listed. You know, it's not mark-to-market. Okay. There may still be some leverages left out. Yeah. As Jairam mentioned earlier in the call, there is a corporate action that has been sanctioned at Shriram. In the next few days, weeks, we expect Shriram Finance to be listed and the rest of the companies to be demerged from Shriram Capital. Yes, all else equal and markets holding up with the values that they are, there will be some mark-to-market that one should expect. The exact number will be crystallized as of December 21st. Mark-to-market gains, just to be clear. That's right. Yes. A lot has been discussed, I guess, on the Stage 1 and Stage 2 loans on the wholesale side. Just one last point is that, is there a yield differential between Stage 1 and Stage 2? I mean, just to broadly understand, the return and risk profile of No, no, nothing material except that, you know, accounts which have shown some levels of stress, you would have interest reversals on them, so effective yields might end up looking lower. Growth yields are not materially different between the accounts in Stage 1 and Stage 2. Just one last question. What is the incremental cost of funds last quarter and this quarter? As you saw, the total cost of borrowing was at 8.80%. We have raised very little money this previous quarter. We raised about INR 1,000 crore at about 8.55% average. Okay. This quarter practically raising much. Okay. Sorry. Just one last one is on page 40, what is others? 21% over 23%. This others is nothing but just a categorization of the type of investors who hold the NCDs. The NCDs originally of INR 19,000 and change during the DHFL acquisition is held by a bunch of people. We can take it offline if you'd like to get more categorization, but large part of it is from that. Yeah. If you see the footnote, I think gives some more color on this front. Perfect. We'll take it offline. Thank you very much, and all the best. Thank you. The next question is from the line of Sandeep Jain from Baroda BNP Paribas. Please go ahead. Yeah. Hi. Thanks. The question has been answered. Just one clarification on, you know, previous question. When you have said that the fair value loss was on the same asset, you want to say it is on the wholesale book only? Yes. Part of it. Okay. Large part of it would be the wholesale book only. Okay. That is the case. Was there any yield readjustment or, what is the nature of that, if you can explain it? No. There will be no yield adjustment. These were assets, suppose, recorded as 100 in the last quarter. That 100 became less by the loss that's been recorded. Some of these assets are not yielding anything, some of them are yielding something. In one case, for example, there was a bit of an interest reversal, so we recorded that. Because it's an investment, it gets knocked off from the investment value itself, unlike a loan from a pure technical definition, which would come off interest income. Okay. Got it. Thank you. Thank you. Thank you. The next question is from the line of Yash Agarwal from JM Financial. Please go ahead. Hi. Hi. I want to know what is the interest reversal this quarter on account of the move into Stage 2? A little over INR 200 crore. Roughly INR 220-230 crore. Okay. You know, the movement to Stage 2, how does it impact your yields? I know, is this gonna be a recurring phenomenon, this sort of No, no. Change to Stage 2, moving to Stage 2 doesn't change the yield at all. Unlike moving to Stage 3, where interest recognition stops and happens on a cash basis, that is not the case in Stage 2. In Stage 2, interest accrual happens. Nothing changes as far as gross yields are concerned. We should be back at, broadly, INR 700 crore pre-op number next quarter, you know, assuming all things remain constant. Is that a fair assumption? All goes well, you're right. The only additional data point I would offer is, as mentioned by Jairam and Yash earlier and Chairman in the opening remarks, we are consciously bringing down the wholesale book. The natural attrition plus any specific actions that we take will obviously bring down that book. To that extent, you should expect similar ratios but adjusted for the AUM that we have. Sure. Fair enough. Incrementally as I'm seeing, I think retail quarterly run rate of INR 4,000 crores. Fairly about INR 9,000-INR 10,000 crores could be done in the next two quarters. Could we be 50/50, you know, just by the end of this financial year, not, you know, what we've guided before? It's possible. Like, we're not changing our guidance in this regard, but your math works. Got it. If I were to, you know, forecast a credit cost for the next two quarters, given the fact that we've already taken a substantial hit, would it be like a very minimal number, you know, incrementally the credit cost going forward? We have tended not to guide on credit cost till we've actually achieved kind of full stability with respect to this book. It's not something that we wanna do. The facts that you mentioned are correct, that we have done a fairly substantial level of provisioning. We are pretty much done on the recognition front. Provisioning, we have taken a fairly substantial level. As we mentioned before, between Stage 2 and Stage 3, we are 40% + provided. Let's just leave it at that and then we'll see as the quarters come. Okay. To put it another way, what is the steady state retail book credit cost that you're having, you know, till now? See, for the kind of mix that we are talking about in retail steady state, which should be maybe, you know, two to three years from now, we are probably talking about the credit cost, you know, around 1.5%-2%. Got it. Fair enough. All right. Cool. Thank you. Thank you so much. Thank you. Thank you. The next question is from the line of Harikant, an individual investor. Please go ahead. Hi. Thank you for giving this opportunity. Thank you. I just wanted to know. Sorry. You're You're sounding a little muffled. If you can change the mode of your handset, please. Is it fine now? Yes. Yeah. Thank you for giving me 15. I just want to know the share value is highly beaten down after the demerger when compared to the last few years, the real value of the enterprise. As per my previous information, what I was hearing the real value unlocking will be happening as I was getting the other few quarters. Is it dependent on the asset movement from Stage 1 to Stage 2? If yes, what is the time frame of this asset movement from Stage 1 to Stage 2 then to Stage 3? The second question I have is on the Shriram Transport monetization cash, which will increase the liquidity you were saying. Is there a specific timeline and what will be in the future? I can take the Shriram point for that. I didn't follow the first question. Can you kindly repeat? On the Shriram one, as I mentioned earlier, there will be the corporate action, and hence there will be some liquid shares available for majority of the holding that we have because we also have some illiquid holding in non-NBFC assets. As and when the time is appropriate, we will look to monetize it. We've anyways mentioned earlier that it is a non-core asset, so this is definitely not a long-term holding for us. I apologize. I think I couldn't follow the first question unless somebody Yeah. The way I answer your question is, see, our job as an executive team is to do what we think is in the best long-term interest of the, you know, of the firm and continue to take steps and actions which maximizes that long-term value. I know as specific individual investors, you know, the short-term or medium-term movements in share price does matter to a lot of our owners. However, it's beyond our ken to be able to influence that or manage that. You should continue to expect the management team to steer your firm towards long-term value creation and, hopefully along the way, the adjustments in multiples, et cetera, follow. Okay, thank you. Have a good. Wish you a happy new year in advance. Thank you. Thank you. The next question is from the line of Bharat Sheth from Quest Investment. Please go ahead. Hi. Thanks for the opportunity. I have only one question. Last year we have acquired a large piece of the land against our lending. What is the status of monetization of that piece? Where do we stand currently? We are actively looking at, engaging with, potential development partners. That land obviously, as you know, is a very large piece of land. It can be developed in pieces. There are certain critical items to take care of, including a bank settlement, including one or two other PTCs. Active movement on those. Unfortunately cannot give you a specific timeline on what will happen, but we can assure you that full efforts are being put on it to start towards the path to monetization. Any value that do we put? The value that we have is on the balance sheet. Outside of that, at least that's the value we believe. Whether it's more or less what we realize ultimately will be a function of what the plans on development over the next few years will be. Okay. Thank you. Thank you. Ladies and gentlemen, due to time constraint, we take one last question from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead. Hi. This last question might take a little time. We missed all the exciting developments on the retail front because of the wholesale questions. I see a real diversity of products coming about and I don't, I mean, what is the commonality in theme in terms of all the products because some are physical and some are very transparent and in fact in microfinance also you said you've led AI there. So how is the product width? Are each of these products going to attain scale? Is that the plan or is there something that will fall off and you're going to concentrate on a few products? There are two broad sort of connecting themes across all of these. Number one is, you know, serving the what we call the budget customer of Bharat. That's the core underlying theme, which says the budget customer of Bharat, what are the various products that the customer might need, and we wanna be present in all of those categories. We don't wanna be sort of product specific, but segment specific. Whatever that segment needs, we are here to offer that, right? That's one connecting theme. The second connecting theme is that from a capability standpoint, where we believe we are differentiated versus where many of the competitors are, is on tech and analytics, where we believe that we have a world-class team. Given that we are starting i.e., sort of in this era as opposed to five years ago or ten years ago, our ability to set up a particular kind of tech architecture and a particular kind of analytics workbenches is significantly different from what even the most tech advanced banks and NBFCs out there are able to do because they have legacy problems, which we don't have. Any kind of product line which maximizes you know our ability to flex that muscle of tech and analytics, we'd be quite happy to do. For example, the digital originations that you talk about are exactly of that variety. Even microfinance. Today in microfinance, a credit person of ours sitting in a central location can see a video that the sales RM on the ground is taking of the village or of the hut of the borrower. As the video is streaming, we can have an AI engine here, which is reading every image that is coming through and identifying assets that the potential client owns, running it through an ML model, and instantly figuring out what the potential credit rating of that client is and giving that as advice to the credit person sitting in the central office, right? That is capability that is incredibly hard for an established large firm, whether bank or NBFC, to be able to do. We are able to do that because we are starting now and we have that in our DNA of how we are setting up that business. Those are the two big connecting threads of what you're seeing in the product mix. The why of it though, the why we need a product mix is that we firmly believe that we are in the kind of business where cycles tend to come, and we wanna be diversified enough that no cycle in any single product can have a significant material impact on the overall outcome of the retail business. Hence we are building a portfolio that is sufficiently diversified and can deal with all parts of the credit cycle as and when they might come. Right now, of course, we are in a very benign part of the cycle, so everything looks great. We wanna build a portfolio that is robust enough to survive any scares in any part of the retail business in the years to come. Okay. Would it be right to say that the disbursement bar chart that you have will start eventually looking like the AUM chart as well in terms of diversity? Yeah, Directionally, the diversification on the AUM will absolutely grow. You will see more and more colors on that pie chart that you see on the AUM side. However, remember that secure businesses and longer duration businesses tend to be more sticky on the balance sheet compared to the unsecured digital businesses, et cetera. The digital side things will always contribute more to disbursement than they will ever contribute to AUM. The AUM will always be a little bit more secured heavy than what you see in the disbursement chart. Okay, great. Got it. Thank you so much, and I wish you good luck. Thank you. Thank you. I now hand the conference over to Mr. Hitesh Dhaddha for closing comments. Over to you, sir. Thanks everyone for joining the call. In case you have more questions, please feel free to reach out to the IR team. Thank you. Thank you. Ladies and gentlemen, on behalf of Piramal Enterprises Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.