Bajaj Housing Finance Limited (BAJAJHFL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Bajaj Housing Finance Ltd. Q1 FY27 Earnings Conference Call, hosted by ICICI Securities Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Anish Pooa from ICICI Securities. Thank you, and over to Mr. Pooa.

Thank you, Nirav. Hi. Good evening, everyone, and welcome to Bajaj Housing Q1 FI27 earnings call. On behalf of ICICI Securities, I would like to thank Bajaj Housing Management Team for giving us the opportunity to host this call. Today, we have with us the entire top management team of Pachaj Housing represented by Mr. Atul Jain, Managing Director, Mr. Dharao Kalani, CFO, and Senior Management Team. I will now hand over the call to Mr. Atul for his opening remarks, and then we will open the floor for Q&A. Over to you, sir.

Thank you, Rinesh and ICIC security teams. A very good evening to all the participants, and welcome to BHFL Q1FI 27 earnings call. I have the entire senior management team with me. I hope you got the chance to go through the Invested Act, which we have uploaded on our website, as well as both stock exchanges. We also just concluded our annual general meeting some time back, and shareholders' presentation is also now available on the website for you to refer. I quickly cover key updates of the quarter and management assessment, which should take close to 10-12 minutes, and then we will open forum to address questions. On the presentation, I am straight on the panel 3. Overall, strong quarter across metrics with highest ever quarterly EM growth and quarterly disbursement in last quarter. Disbursements grew 33% and EM was up 24% during the quarter with pat growth of 23% on YOY basis. On return metrics, annualized ROE was stable at 2.3% and ROE improved to 12.5%. QOPEX to net income improved from 21.2% in Q1 FI 26 to 19.6% in Q1 FI 27, and asset quality was also resilient during the quarter. Annualized credit cost was 5 BIPs for the quarter. GNPA stood at 29 BIPs and NNPA at 12 BIPs. For principal business criteria, the total number stood at 61.46% against regulatory requirement of 60% and capital adequacy ratio of the company stood at 21.59%, both above regulatory limits. The company geographical coverage remains across 224 branches and 182 locations. I'm moving to the next panel, which is a quarterly financial indicator. Overall, EVM was a tad below 1.5 lakh crore and stood at 1.496 lakh crore in Q1FI27. This was highest ever quarterly EVM growth, which we called out, 8,918 crore, compared to 5,736 crore for Q1FI26. The product level growth were good during the quarter. While home loans growth improved to 20%, LAP grew 22%, LRD grew 41%, and developer finance grew 19%. And portfolio composition also remained well diversified with home loan mix at 54.1%, LAP at 10.3%, LRD at 23.1%, and developer finance at 11.4%. Disbursement growth as called out was strong during the quarter at 19,509 crore against 14,651 crore in Q1 F526. The last quarter growth was highest ever quarterly disbursement, which grew 11% on sequential basis, as against 6% quarter-on-quarter in Q4, FI26. Panel No. 5. Such a fund's moderation of 7 beeps on sequential basis, from 7.3% in Q4 to 7.2% in Q1. Overall borrowing mix was well diversified with higher composition of money market at 52%, followed by bank borrowings at 38% and NHB refinance at 10%. Gross spread was stable at 1.7% in Q1, while NIM dropped by 14 BIPs from 3.8% to 3.7% in Q1 due to net income moderation. I have talked about operating efficiency improvement on the previous panel, which stood at 19.6% in the last quarter. During the quarter, with GNPA at 29 BIPs and an NPA at 12 BIPs, annualized trade costs at 5 BIPs against 15 BIPs in Q1 last year. Profitability, pad drew 23%, YOY from 583 crore to 715 crore, analyzed ROE's cable at 2.3% and ROE improved to 12.5% compared to 11.6%. Go straight to panel number 17, which is a new panel. We have added this new panel in the tech to share an update on a few AI initiatives which has been deployed by the company to improve internal controllership and efficiencies on one side and customer experience on the other. We are largely a tech-enabled company and continue to deploy multiple digital initiatives for seamless mortgage entry for our customers, which are being further enhanced through AI initiatives with core focus on improving customer experience, delivering seamless process, and most importantly, improving controllership. We are implementing these initiatives across the loan lifecycle, that is for elimination, underwriting, and collateral assessment, and then customer service, as well as in our internal customer processes, that is for our employees. Some of the major initiatives are voice agent for lead presentation, credit personal discussion, call intelligence, collateral assessment intelligence, and geo-analytics, AI customer assist platform, training platform, and AI interview agent for frontline hiring. Now, all this should improve conversion, evidence-based underwriting, reduce collateral risk, and provide round-the-clock self-service support and enhanced capability building for the company. I'll move to panel number 22, which is the quarterly performance financial metric. A majority of the metrics have been covered earlier in the first panel. Other metrics like net total income grew 16% to 1175 crore in Q1 and profit before tax increased by 23% from 757 crore to 929 crore. Moving to panel 24, portfolio yield stood at 8.9% in Q1 FI27 while cost of funds was 7.2% in Q1 FI27. Overall gross spread was flat at 1.7%. Other metrics have The panel, which is on the Treasury side, well-diversified borrowing mix across instruments with relationship backed by 18 banks. NCD mix improved on sequential basis by 2.6%, ICD by 10 bps with offsetting moderation in bank borrowings to the extent of 2.5% and NHB refinance by 20 bps. I'll move to panel number 30. The portfolio mix remains well-diversified with sequential movement of LRD increased by 70 bps, offsetting reduction of 50 bps in LAP and 10 bps in DL. Home loans remain by and last sequentially stable. Move to panel 32. Now, this is an update on the sum of housing. From last quarter onward, we have started updating the analyst call on the sum of housing. Business continued to progress well on the quarterly basis. For Q1, our monthly disbursement run rate was close to 450 to 465 crore. This was 410 to 425 crore Q4, which traditionally Q4 is better for the industry, so we sequentially also, this has grown from 410 to 425 crore on average to 450 to 465 crore. Average checker size remains stable. Around 65% of the customers in this segment also continue to have growth score of greater than 750. Business is operational now at 73 urban locations and 72 rural locations. Salaried mix was stable at 68% in the last quarter, and business is on track to achieve Moving to panel number 37. Stage 1 assets improved by 2 beeps sequentially from 99.37% in Q4 last year to 99.39% in Q1. Stage 2 assets also improved from 0.36 in Q4 to 0.32. Stage 3 from a sequential basis moved up by 2 beeps from 27 beeps to 29 beeps. Provisioning coverage ratio for stage 3 stood at 58.5% during Q1 FI27, largely stable over the last 3-4 quarters. I'll move to the next panel. The ratio was healthy across products. In terms of product level GNPA, home loans modulated by 1 beef sequentially to 34 beef. LAP instead of from 46 beef to 62 beef in Q1 due to movement of 1 week count, excluding which the asset quality continued to be fine. Historically as well, LAP GNPA remained in corridor of 50 to 70 beef, with Q4 being an exception. DFG NPA suits at 12 PIPs due to movement of one account from stage 2 to stage 3, where necessary resolution efforts are being undertaken. Overall, NNPA is inched up by 1 PIPs, sequentially to 12 PIPs. Now, I will go straight to panel number 41, which is a management assessment now for the current financial year. From last year, we have been sharing the management assessment for the year, along with the Q1 results. That's where we are sharing the assessment. We have seen various geopolitical factors which have played during the last 3-4 months and also a bit of a macro hookup which has been uncertain due to the various geopolitical factors. Inflation impact is yet to be assessed and volatile borrowing cost movement has been there in the money market in the quarter month. Now, given home loan industry grew by 9.4% in FI26, assuming that the growth rate remains in the corridor of 9-10% or 10.5% for home loan industry, That is where we are projecting the FI27 assessment also in the range of what we did the last year. While in the Q1, there has been some moderation in the BT out pressure in the home loan side. But we are right now cautiously watching that, whether it is a trend or we estimated it to go down from Q1, 27. As of now in Q1, it is looking at, it is moderated a bit from Q4. But we will watch for one more quarter for us to see that it is a trend which can then result into a higher EVM growth. Now, considering stable interest rate regime, which limits upward repricing opportunity because there is a stable interest rate regime. Now, the new old portfolio which is going out is a higher IRR portfolio, while the new portfolio which is coming in because of a competitive intensity remains the same in the way it was in Q4 and the pricing, there is a little pricing movement in the acquisition side. The NIM is expected to moderate by 2025 BEEF during FI27 from what it was in FI26. Operating efficiency shall continue to improve. We are estimating it to be 19 to 20%, which are broadly in line with what we achieved as the end of the quarter, but we will expect a bit of a movement in the positive side. No deterioration seen in the credit behavior across our products, and hence asset quality is expected to remain healthy with GNP of 3035 BEEFs and credit cost of 10 to 15 BEEFs. As per our normal guidance, shall remain in between 50% to 60% on the GMP. On a profitability, ROE is again assessed to be in the range of 2.1% to 2.3% for the year. Levels levels are likely to fluctuate between 5.8% to 6.3% times. We are already at close to 5.8%. So, we are likely maybe in the year at 6.1% or so. So, accordingly, ROE is expected to be in the range of between 12.5% to 13% for FI27.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question, may you press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question key assembles.

Participants, you may have to start in one to ask the question.

The first question is from the line of Abhijit Tabrewal from Motila Roswal. Please go ahead.

Good evening, sir. Thank you for taking my question. So the first question is around the daily guidance that we put out for FY27. We have said that we expect NIME to moderate by 22.25 basis points. So, within that, I'm just trying to understand what part of this compression you foresee coming from the pressure on cost of borings. We all know incremental cost of borings have been moving up for the last two quarters. So, some color around, has there been some despite over the last one, one and a half months on that front? And the other thing is, I'm just referring to panel 41 where you said that there are limited upward re-pricing opportunities within the stable interest rate regime. But I think, correctly if I'm wrong, but what is also true is that NCLR of banks have gone up by 5, 10 basic points. You've heard that PLR of NHB has also gone up, and NCB worries themselves have actually been coming at higher cost. So, is there a case for increasing the PLR from here, or what we have shared in the past, large HSEs like us have to remain price takers given that banks are the price setters? So, just trying to put this puzzle together, if you could help us on this one.

Thanks, Abhijit. So, Abhijit, your first question was on the NIM moderation 2025 base, what we are calling out. So, largely coming from the yield part, because like I called out what happens, both the answers, the second question, what you had said, limited upward pricing and the yield, because in the stable interest rate regime, which we are expecting now, stable interest rate regime, I am talking from the point of view, the pricing in the market, acquisition pricing in the market, which is by and large stable now for quite some time at the range what it is there in the prime housing space. Now, in the stable interest regime, whatever book is attracting, that book attracts at largely a historical book, which is at a higher yield than what the book is coming. So, a natural process in the stable regime is that your book what gets replaced is of a lower acquisition IRR than the portfolio, until unless you change the mix dramatically, change the mix dramatically where the business from where the incremental business is coming is different. And in the same business, if your asset mix is going to remain largely stable from the composition point of view, then in a stable interest regime, the pressure on the NIMS will come from the yield compression, assuming that the acquisition pricing in the market remains in the range where it stands. That's on your question one. On the question second, on the upward pricing partnership, we are rightfully called out. It is, we are in a, by banks might have increased NCLR and NCD borrowings in the market are priced higher, specifically post, from Q4 onward, Q4, Q1 largely were in the same range. Q4 was because of a liquidity and Q1 from the macro instability due to geopolitical factor. But the pricing opportunities in terms of a market acquisition are linked to the market players pricing, which we have rightfully called out. We have not seen any trend for large scale acquisition pricing up at the moment, which that's why we are not factoring. So that's why we say the limited opportunities. To an extent, whatever opportunities are coming is because of a balancing mix, balance mix. Like we had called out, today we are 84-16 In our mix within home loan of a prime to Sambhav, by the time we exit the year, we will be 80-20. Now, there will be an uptick in the yield or the pricing in because of a change of a mix. But if we remain the same mix, but that opportunity is limited because prime is much larger in size compared to the Sambhav housing. Have I answered your question, Sabi Chik?

Yes, sir. That answers my question. Second question I had is, this quarter we are seeing a lot of these large HFCs, including some of the small and affordable HFCs, moving to impassioned basis of checks. So, just trying to understand, you'll recall almost two years back, the regulator and HB had said that we should all move to check handover. So here, I mean, how do we recognize this person and say you have an interest income? We have a little question here. Sir.

So for last six years, we had always been on encashment while regulators gave the guidance two years back. Our whatever numbers are reported had always been reported even when we were an unlisted company long back is always on encashment. We start charging interest only on encashment from last six years. There is no check handover interest chart principle in BHFL. You got it.

That's that experience. Thank you. And lastly, sir, on NHB, we keep hearing that there's a lot of reviews that keep happening, a lot of thematic audits as well, like how do you conclude the PLR and things like that. So, again, regulator is the regulator we understand. But just trying to understand, are things there okay? Or as you recall, maybe two, three years back, there was a lot of overbearing that came from the central bank, especially in the industry sector. Are we looking at something like that in the housing finance space now? Or are things the usual in what they have been?

So, Abhijit, our stance has been slightly different since earlier as well, even if you called earlier. We always believe regulators are there to improve the market or set right any, let us say, any imperfections or any pattern what they see which is not in rightful interest of a long-term development of the market or in the customer interest. Now, there are certain practices on which he or any other company can get impacted, but from the spirit The spirit of regulators, whether earlier when you are calling out or now, we don't disagree with the regulator spirit in terms of driving the practices what they want to drive. I would not call it in any way impactful to the company. Rather, it will help the sector in the long run. We don't see any impact. Overbearing is probably a harsher word. I don't know.

And so, last question from my side, this quarter, obviously, credit costs are coming much lower, I think, five basis points. So, are there any one-offs there? Because I see for the full year, you're still guiding for 10 to 15.

So, this quarter, we had done an assignment out of close to 2,300 odd crore. That is what the difference in AUM you will look at. So, that's why the stage 1 provisioning is lower and which results into credit costs being lower. Second part also is there in the quarter 4 of last year, we had enhanced significantly our stage 2 asset coverage because of an uncertainty due to macroeconomic factors as a gulf port. There, we have not seen any impact now. So, we have not done that similar acceleration. So, there are two one-timers. One one-timer was in quarter four of last year when we did an acceleration. Second one-timer, what you can call out, is a much larger assignment out, which results into your release of your stage one provisioning to that extent. So, that's why we are, for the year, we are still guiding a 10-15 BIP, which is the normal range for...

Thank you so much for answering all my questions and my issue on your team. Thank you, Shabit.

Thank you very much.

Thanks for taking my questions. I've got two questions. One, when I look at the yields this quarter, so loan yields have been flat, cost of fund has been down 7 odd basis points, but how come is margin declining by 13, 14 basis points while spreads are also flat? So, can you just help me understand the mathematics behind all of these?

Yeah, so... Thanks, Gaurav. So, another Gaurav will explain you, Gaurav, on this.

So, spreads are largely flat because spreads are basically computed with this portfolio yields and cost of funds. So, portfolio yield as on the quarter end versus what you see as cost of funds as on the quarter end, or for the quarter. So, that's the difference where we are. Spreads predominantly flat. It's a 3-4 basis points movement, but that's why you're seeing 1.7 remaining 1.7. Portfolio yields overall have come down because of the reasons which Atula had mentioned earlier. Here, attrition, higher yield book going out, lower yield book coming in, etc. So, that's where you'll see compression which has come in in this quarter and some bit of it further expected through the year. That's where the guidance is on the yield compression. Predominantly, that is what will flow through on the NII and NTI compression as well, while some benefit will come from the cost of fund movement through the year, but largely, it will still have compression because of the yields going up.

Thanks for that, Gaurav. On cost of funds, how are July cost of funds looking compared to the first quarter exit cost of fund yield?

We will be sideways, Gaurav, for the quarter 2 in cost of fund with a tendency overall to be a minus from whatever cost of fund had been in Q1. So overall Q2 cost of fund would be sideways to the downward bias.

Got it. Just another one on the disbursement run rate at Sambhav. So, 450 to 465 crores. And we've seen that pick up in the last few quarters. But when I look at the average ticket size at Sambhav, that's constant at 28 lakhs in the last two, three quarters. So, how is affordable within that progressing? And once affordable becomes a bit more meaningful in the portfolio size, what should the average ticket size in Sambhav book look like?

So, the current mix of affordable within the Sambhav book is close to, say, one-third. So, that's what remains stable. 33% to 36% is a mix of affordable within the Sambhav housing. Affordable ticket size is close to 18 lakhs. We are generally not in the sub-10 lakh or sub-12 lakh kind of a bracket because affordable also, we are largely towards a, if you have to say, if there is any upper segment of affordable, then we are there and there. Our ticket sizes are generally between 10-12 lakhs to 27-28 lakhs in the affordable side, not from 3-4 lakhs, 5 lakhs to 15-20 lakhs. That's where the average ticket size is in affordable. So, as of, for next six months to one year, for the current, purposes of current financial year, that's a segment largely we are going to be there in affordable. So, average ticket size of affordable should remain 17, 18. A bit of a bias going downward for overall Sambhav housing, ticket size from 28 lakh in the current year to 26, 27, because as we continue to grow more in the non-top markets, because that's the geo-expansion is one of the strategies in the Sambhav housing. So, as we continue to grow more towards the Non-metro on the next level of location in somehow. A ticket size reduction should come from there. Mix between near-prime and affordable should by and large remain the similar mix as we exit the year. Ticket sizes in both the segments in the same market should remain similar. A bit of a negative bias or a downward bias on the average ticket size coming from a more contribution from a, let us say, tier 2 or tier 3 locations as we go forward. But for the current year, you should assume the ticket price is to be largely stable with a downward bias of 1 to 2 lakh rupees max as we exit the year.

Thanks. That's very clear. Thanks for those insights. The final one, sorry if I may, the construction finance asset quality NPAs have increased quarter on quarter. I think I missed your comments earlier. What are those? Is there something to worry about?

No, this is only one account. Gaurav, this was a stage 2 account in the last quarter, which has moved to stage 3. The teams are working to resolve that account. There is only one account. There is one account, which was stage 2, part of stage 2 last. Okay, got it. Thank you so much.

Thank you. Next question is from the line of Kunal Shah from Citigroup. Please, Gohan.

Yeah, so a couple of questions. Firstly, with respect to the guidance on spread, so we are saying it's a 2025 bps decline in terms of the margins from, say, the F526 levels. So FY26 was 3.9. We are already at 3.7. So from current level, I don't think we are looking at much of a pressure through the year. Maybe it's hardly able to 5 watt basis point. Is that correct?

Yeah. So from 2025 is when we are saying we are calling out from the last year. In the first quarter, there is a putting bips decline. So you can say 6 to 10 bips of a further decline. What we may envisage is in Q2 and Q3.

Yeah, because average for last year is still 3.9. Yeah, so maybe then not much in terms of the spread compression from the current level, less than 10 odd business points. Yeah, and the second question is, we have seen movement happening from stage 2 to stage 3, both in LEP as well as developer finance, but there is no increase in the provisioning. So, when we look at it in terms of the numbers, so 136 crores stage 2 plus stage 3 and 64 crores of provisioning, it is continuing, and same, like, it's a very small amount, nothing big, and against the 20 crores, which is there on the developer side, that is also, like, the 9 crores. So, why maybe transitioning from stage 2 to stage 3 not leading to any increase in provisioning?

So, generally, what will happen now, LAP is a different, so LAP and EF both are handled differently, because LAP, it's a pool which always comes in. So, if there is an earlier account which is highly, higher provision, it was, let us say, a much higher DPD, higher provision, if it gets normalized during the quarter, the release is much higher versus a new customer which moves to an NPA, the provisioning, so when the customer moves to a 90 DPD, the provisioning rates are different. As it moves to, let us say, 180, the provisioning rate is higher. As it moves to 210, it is much higher. As it moves to 240, 270. So, with every movement of a DPD, the provisioning increases. Now, at a point of a time in a pool account, whether in a home loan or lab, there is a pool account of an NPA. If an older account which has been rolled back had a much higher provisioning coverage compared to the new account which has moved in which will have a far lower, so there is a bit of a provisioning plus minus will happen basis that it is basis pure formula and a pure DPD based logic. So there is nothing else to see from there in terms of in the lab. In developer finance, the provisioning happens on the estimation basis the way we are seeing the account to So typically if you are seeing in stage 2, because there is a particular one account which moved from 2 to 3, we were aware as a management that the account is going to be in a longer term issue. So the provisioning in stage 2 when we increased in the last quarter was already higher than the provisioning what we required as it moves to 90 DPT. That is why you are not seeing any change in the provisioning. The account is provisioned at a higher number than what it is, at 49%, while at an entry level, it would have been required, let us say, at a 90 dpt when it moves to, so as per the ECL model, it requires a provisioning of close to 33-34%. So, the account in stage 2 itself was provided at a much higher level. That's where it remains. There is no requirement to increase provisioning on it as it has moved to 90 DPT. That's how on account you see the provisioning gets stable.

Okay, and this lap account, week account was of 18 crores, and maybe when you look at it, 63, maybe almost like say, 81 moving down to 63 in stage 2, and 55 moving up to 73 in stage 3. So this 18 crores account is just moving.

I think I, 18 crores is a total movement, not one account, sorry.

Okay, okay, okay. Yeah, so that's the reason you are saying the full.

Is this correcting me? You had mentioned one account. I said 18 crore movement, yes. Okay, got it. Perfect.

And similarly, when you look at it, stage 1, almost 7,500 crores of increase in stage 1, but in absolute term, the provisioning is almost 401, similar to that of last quarter. You indicated assignment, but I had assignment led to almost a similar kind of a release which would have required maybe 30, 32 basis on this 7,500 crores incremental pull in stage 1.

It would have, the release on account of assignment would be close to 20 to 22 crores, which would not have required a provisioning 13 to 14 crores, Gaurav is correcting me, 13 to 14 crores is a provision, lesser provision required. But, see, the provisioning Kunal moves, this is the type of a customer you have brought in, the rating of the customer, because, part of the type of assets what you have assigned out. Now, if the asset assigned out is of a higher rated customer, there is a ECL provisioning is different for each account, because ECL is a model-based, rating-based pool. So, there will be too many pluses and minuses. You will not be able to do a simple mathematics of a calculation. Simple mathematics. I absolutely agree.

The only question was, like, say, if 7,500 crores is the net increase, on that, even if we do, like, 30-odd, so there would have been almost, like, 26, 27-odd crores of provisioning, and the release was 13, 14. So the only thing was, the credit cost is much, much lower. In fact, would we have provided maybe slightly higher and improved the coverage across the buckets? Yeah.

So, you are saying that 26 crores, instead of that, we could have used this to do more provisioning coverage? That's what you are suggesting?

No, sorry. I was just saying 7,500 crores is the net increase in stage 1 assets from 1,23,000 crores to 1,31. On that, normally, our coverage is 30-32 basis points. Okay, so that would have called for at least 25 crores, 23-25 crores of provisioning. And our provisioning is remaining same at 401 to 401.

So, Kunal, what happens is that each year in the January board meeting, there is an ECL model recalibration which happens, which is the approval is done and which is validated by statutory auditors and then the external auditor. So, given that credit performance has been stronger in the last two years, the ECL rates in the last year when we revalidated the model have gone down on stage 1. The stage 1 provisioning is what provides for your next 12 months delinquency. All our portfolios have been behaving immaculately. So there has been a downward movement in the rate applicable on most of our portfolios in the recalibration of the model, what we did in January to March. So that's why you are seeing that. And second part, within that also, when you look at a 7,500, which I was seeing, there are moving pieces. So let us say in lease rental discounting, you onboard a AAA customer. The general provisioning requirement there is very different than you onboard as a local developer. So, there is a, and also, there is another moving piece, if I have to complicate your life more, we have dispersed 19,000 crore plus, AIM growth is 8,900 crore. Now, 11,000 crore attrition, what has happened, what was the category of that customer attracting, the provisioning on that could have been very different for, versus a new customer which is coming in. Because ECL model on a new customer coming in varies the provisioning from a bureau point of view also. So, if you acquire more customers with 770 or 780 plus kind of a bureau score, your ECL model throws up a much lower provisioning at that versus what has gone out. So, there are multiple, multiple moving pieces, Kunal. Got it, got it. There's not a computation calculation. That's what only I do.

Yeah, yeah, yeah, got it. Perfect. And if I can quiz one more question. Yeah, so just on OPEX to NTI, still maintaining at 19 to 20 odd percent with this kind of a growth rate. I understand there is maybe the incremental investments which are happening on Nia Prime and affordable, but still wouldn't that improve a bit and get towards the range of our medium-term guidance? So nothing visible during this fiscal in terms of the improvement of OPEX to NTI or operating leverage?

So Kunal, it would be sideways because there are two parts to the OPEX to NIM equation, what are the growth in the NIM? If you are calling for the moderation of a NIM, that also impacts the equation. Second side is what we continue to make investments. So, there will be, it will be a downward from the last year, but largely we are assuming it to be sideways from the last year because we are assuming a margin compression and a NIM downward. So, NIM downward itself creates a, while if you are more efficient also at the same, but with a NIM compression means that your OPEX to NIM income remains, looks the same, while if you are, even if you are more efficient.

Okay. Okay. Got it. Yeah. Thanks. That answers all the questions. Yeah.

Thank you. Next question is from the line of Viral Shah from IIFL Capital Service. Please, go ahead.

Yeah, hi. Hi, Atul and Gaurav. Thanks for the opportunity. I had actually three questions. So, Atul, I think you did call out and also a couple of participants called, referenced the increase in the lab GNPA. I'm not focusing more on the provisioning part, but is there anything specific with regards to, say, the cohorts of the 18 crore pool that you mentioned, say, whether geography or the customer profile that wherein we are seeing some stress? The reason why I'm asking is that one of the NBFC a couple of weeks back called out some stress in the salary tech employee kind of sub-segment in Bangalore. So, is there any connotation to that?

No, so Viral, if I take you to last, seven quarters lab GNPAs, and you will be able to refer them. Q3 FI 25 lab GNP was 0.76%, Q4 it was 0.65%, Q1 FI 26 was at 0.62%, Q2 it was 0.59%, then it came down to 0.52 and 0.46, it has gone back to 0.62. So, year-on-year or the previous years, GNPAs on lap hook had always remained because it's a bit of a, it is a customer segment which comes under a cyclical there. We are not in affordable lap. We are largely in a prime lap or a higher ticket lap. That is where when you look at even 7 quarter or even if I go because 7 quarter number is there right in front of me, but if I go back as well, it has always been in a corridor of 50, 60, 65, 70 bits. There is no exception or nothing to call out in terms of any segment or any geography outcome what we are looking at.

Got it. That's helpful, Atul. Two other questions that I had was, basically, on the cost of fund, Gaurav, if you can basically highlight what led to this 7BIPs kind of an improvement on a sequential basis, Was that predominantly the hedged book which was there, or is there anything else over here?

So, one part of the hedged book, Vira, second part is a natural repayment of a older, higher-cost borrowings, because there is a maturity cycle which happens of a older, higher-cost borrowings as well, and there was some reset of the old borrowings at a lower price, which has happened, Which is incremental, which has helped us to reduce our incremental costs compared to existing warring, and that's what has resulted into overall cost reduction, and what we are calling out also, this is a trend, what we are seeing, and the number what we are projecting. In the quarter two also, we are looking at it as sideways with a bit of a downward revision from here on as well.

Got it.

One, two, three. One is the hedging. Second is the repayment of older, higher cost borrowings. It's a natural process of attrition, what happens as the books matures. Third is reset of some of the old borrowings.

Got it, Atul. And the last, basically, again, just double-clicking on this piece, on the margin front and the guidance, I understand that incrementally you are guiding for only, say, another 5 or 7 WIPs kind of a margin compression. Given that our cost of funds should be on a sequential basis lower, plus the margin guidance that we have basically is at a total income level, which also includes the DA income, and given that our share of DA has been increasing, I was just expecting that shouldn't this be, or is there some conservativeness that you are baking in over here in this margin guidance?

No, Viral, I think we are estimating it in, I will not say conservative, we are cautious in estimation, I will not say conservative. This is our estimation, it should result into 25 with even a cost upon a downward, because the yield computation in terms of, because we are able to see every month what is going out at what yield and what is coming in at what yield. So that's where we are doing a mathematical projection, we are not being We are not being aggressive in assumption nor being conservative in calculation.

Got it. That helps a lot. Thank you, Atula. All the very best.

In the 12-13% corridor, it's not exceptional or higher assignments which we've been doing.

Yeah, that's what I was... So we had always been, Viral, in 12-13% of the book being assigned always. In one or quarter, it can be plus minus because the quarter movement here, we did it in there. But if you look at a trend line basis at a company level, 12% to 13% of a year is always what is assigned.

Yeah, I was just referring to your right. Just the incremental 50-100, that's kind of a difference, not much.

But if the number on the year basis remains in that range, then the year basis name compression is what we are calling what I said 25 basis. Because year basis number is not going to change from 12-13% the assignment. A quarter movement can happen. Like last year, quarter 1 was a lower, maybe quarter 3 or quarter 4 was heavier. So, this quarter distance can be there, but at a percentage level, the number doesn't move.

Got it. It makes sense. Thank you very much.

Thanks, Vira.

Thank you. Vardisabhan, Jime, plus star and one, two, ask a question. Next question is from Line of Mission, from Kodak Securities. Please, go ahead.

Thanks for taking my question. You know, we're just looking at the fee income line, And there's a very large increase this quarter. So, how should one think about it?

Hi, Nishant. Dwaravadi.

Your Nishant, just to clear, you're looking only at fee and commission income line or the entire other income?

No, fee and commission income line, yeah.

So fee and commission income predominantly considers insurance incomes, foreclosure, bonds, penal, etc., and all other those charges. Predominant movement year-on-year is because of, as the disbursements have increased, this is that the insurance incomes have increased. Other income lines are predominantly in sync with year-on-year, whether it is any kind of penal charges or stuff. So, it's all business-linked variable incomes?

Got it. Now, your loan growth guidance, you know, for the year, that I believe bakes in a lower BT out rate, right? I mean, what you see in the first quarter, we're saying it probably continues in the second quarter and so on. So, that bakes in a lower BT out rate or does it be bakes in a normalized rate and, you know, there could be a scope for an upgrade?

Slightly lower BT out rate, but not very, it is what we are big. See, because in last year also what happened is the BT out rate jumped up from July onward, because there was a 50 bips cut in June. July onward, the BT out rates had significantly gone up. So, one quarter, one quarter which has been, it's slightly lower than the previous quarter, but we are just holding on for us to assess it, quarter two, if you see the downward trajectory further, then I think we'll be more confident.

That's what you're making in the numbers. So, otherwise, I mean, very theoretically, there could be some downside if Bt increases or from the parent level.

If the price in market doesn't go down, which there is probably a little probability of it going down, then increase side should not be there. Decrease may or may not happen. But the increase can happen only if the pricing in the market goes down further, which will surprise me if the pricing goes down further in the market.

Fair enough. And just a little bit on the market itself, you know, in terms of demand dynamics, you know, you alluded to the fact that the industry has grown at some 9.5% last year. So, you know, where do you see the overall demand? Do you really see this going in double digits or between levels and, you know, how is the scenario right?

So, Nishinth, overall demand dynamics is slightly, I'll say, slightly muted versus what previously we used to see. The industry growth has been muted last year, and to the best of my understanding, because it is very difficult to predict sitting in July, August, but probably industry growth is likely to be in the similar range or a bit muted only from what normally we used to project at a 12% kind of industry growth there. My estimation, it may not be in the range of 11-12% what we normally assume the market to be there. Sales are also a bit tilted. I call it a stabilization phase more rather than a downward phase because the price momentum has stopped. Price momentum has stopped. So, in any market, if you have to, on the real estate market, when the prices are going up, you see a bit of a preponement of a demand, which I think we saw in two years prior in FI24-25, there was a lot of preponement of demand As the prices were going in, people were rushing to lock in, lock in there. As the price stabilization phase happens, people slightly postpone because there is a time value of money when you are, if you are confident that the price will hold. So, I will say the demand is stabilized or a bit muted compared to the previous two years.

Thank you very much and all the best. Thanks, Nish.

Thank you. A reminder to all the participants, you may press star and one to ask the question. Next question is from the line of Abhishek Murarka from HSBC Securities. Please, go ahead.

Hi, good evening. Hi, Atul. Hi, Gaurav.

Hi, Abhishek.

So, my first question is, you know, just taking up from Nishchen. So, you have mentioned in your PPD also that port foot attrition has reduced. A, this is in prime or this is across the board. Second, you know, what is leading to this tailwind? Because if I see your disbursements are up quite sharply, your DT out is a little lower. So, what is leading to this tailwind? Is it, you know, who stepped off the pedal? Is it PSU banks? Is it large private? Who's not competing? So, what is happening in the industry?

There is no one who is, there is a tailwind is purely the outcome of various actions, what we have been taking in the prime side, in the prime home loan side, What we've been taking actions of deepening and widening there, we have seen a reasonable uptick in the disbursal momentum. Commercial businesses have continued to do well. Somehow we have talked about there is a bio-wide growth, significant bio-wide growth. There we talk about not bio-wide, we talk about from last quarter and our previous quarter because given that historical base had been low. So all businesses or all units in the company, we are still Very, very small, Abhishek, compared to the overall market. So, if we gain a bit, it is from, we are taking a slightly more from the market growth. We are not taking from someone. So, our higher growth cannot be interpreted by someone else. Seeding the space, it is, we are just taking a bit more from the growth in the industry, because the industry is that large. There is no other dynamic change which has happened in the market. The BT out rate It is slightly lower, that is, when we talk about the BT outrate, that we are talking about only in terms of a home loan, because that's what largely people refer to. Developer finance, it's largely natural attrition, which is a project cash flow run, so at a company level, aggregate level, that continues there. The lease and discounting attrition are largely led by customer selling of assets, or some of the balance transfers are not that large Yeah, I

meant in home loan, whether it is in prime or also in near prime affordable law.

Our book is much, much, much younger. So the pricing acquisition, there is no much of a, you can say, opportunity of a BT out there because the book is largely, the average book will be 12 MOB because we started this business around 24, 28 months back or lower than 12 MOB because we have been growing faster every month. So, when we talk about a BT, we talk about largely the prime, which is our historical book, and also the segment which is most susceptible to the BT out by P. Got it.

And just one quick sort of data-keeping question. In your Sambhav disbursements, how much would be affordable and how much would be near prime? Can you split that up?

One-third would be affordable and two-thirds would be near prime.

So, disbursement mix is similar to AUM mix broadly. I think you said 33% of Sambhav is affordable in AUM.

I called out the disbursement mix only, so I had not called out the... That was disbursement.

Okay, got it.

I'm answering the same... In a way, my answer is the same. Okay, okay.

I thought that was the issue.

No, no. I called out on disbursement.

All right. Thank you. Thank you so much, and all the best.

Thanks, Abish.

Thank you very much. Is there no further questions? I'll now hand the conference over to the management for closing comments.

Thank you. Thank you all for patient listening, and thank you all for giving us an opportunity to explain our company results to all of you. A very good evening to all of you again. Thank you very much. Thank you, Rinesh.

On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.