FY18 - Q3 transcript:
Anil Kumar Tulsiram: Sir, the next question is I understand generally in construction finance there is a moratorium of one year - two years before which repayment of principal and interest begins. So what I want to understand is how should I look at how we say our NPA numbers are just 0.4%. So without the repayment even happening how do I look at the NPAs. So help me understand this.
Khushru Jijina: So let me correct you. In construction financial, there is no interest moratorium.
Anil Kumar Tulsiram: Okay. Only principle moratorium.
Khushru Jijina: Yes. In fact, as Chairman said, I want to share a number with you that this quarter we have grown but in fact, this was a quarter with the largest amount of repayment of Rs. 4,000 crores and where did this come from maximum from structured debt the high-yield, riskier debt.
FY18 - Q2 transcript:
Ronak Jain: Yes. So that is a good point, but we just wanted to know whether is it a case of refinancing by those companies for lower cost of funds?
Khushru Jijina: No. I have always said that please look at Piramal Finance as not a lender, it is a financial partner, we do end-to-end. So, without sounding arrogant today, I would say 99% of our developers would not leave us for rates because they know what we can provide, the service and solution, we are solution provider, the advisory which we go beyond lending, people do not leave us for rates. So, I am very happy to tell you that this prepayment has happened, especially into big accounts like Lodha and Omkar where massive prepayments have been done. So, which I always say on all of my calls that market could be good, could be bad but proof of the pudding is really into the underwriting. So, that is what it is all about. So if I may just take one more minute on that, for the benefit of everyone who is on the call. I myself said that the markets have slowed down, then why are we doing well? I have always given you all this example, and today it has really played out, let me just repeat it, if I take two minutes more of that. I always give this example, a simple example of underwriting of construction finance.
Construction finance is a banker’s domain. But I have always said it is not as simple as that.
Why? Because with that same example I will repeat, when the developer comes to you and wants Rs. 100, to make it very simple, or Rs. 100 crores of construction finance, what typically banks do that they look at probably whether the approvals have come, whether the site is mobilized. And obviously when a developer is asking for Rs. 100 crores he may actually need Rs. 250 crores to complete the project. And the assumption is that Rs. 150 crores will come from sales. That is where folly is, really, which I have always explained to all of you. At the end of the day, you have to be very clear whether the Rs. 150 crores will come from sales or you are ready to put in that money in that quarter where the deficit is. And that is why we look at construction finance very differently and we look at our deficits quarter-on-quarter in our assumptions. And only if we are comfortable giving more on day one, which the developer not aware, is when we sanction, because at the end of the day we want the project to get completed. So it is no more relevant than right now when the last mile funding is required. I mentioned to you’ll right, when the project is almost getting finished people thought that now we are in the easiest zone, the sales have stopped because of GST. It is because of our underwriting today, that I can reconfirm to all of you’ll that all our projects are on track. In fact, we are looking at this as an opportunity. We have now approached other developers where the other lenders are there and who are not able to grapple with this situation because of the last mile funding. Just to give an example, you put in Rs. 40 crores, the developer needs Rs. 40 crores and he has got locked in receivables of Rs. 400 crores. Those are the type of opportunities which are actually playing out for us; it is all about the underwriting at the end of the day.
If the loan book is unseasoned what does the following mean?
FY18 - Q2 transcript:
Ronak Jain: Sir, I want your views on the repaid and prepaid numbers in the real-estate lending portfolio.
So in this quarter it is Rs. 2,290 crores and in the previous quarter it was Rs. 1,807 crores. So, how should we look at this numbers, is it a matter of concern for our business?
Ronak Jain: Sir, I was looking at the repaid and prepaid numbers.
Khushru Jijina: Okay. So, no, as I mentioned to you, in fact, that should tell you the quality of our underwriting, because the churn is always good. In fact, in my mind, we always take anywhere from 30% to 35% of the book being churned on a regular business, and that is what is happening and that should tell you about the quality of the business, because if the book is not churning then that is a cause for concern. Am I making sense?
Khushru Jijina: … The other number which is very important when we talk about the real-estate industry slowdown and there is no cash and sales available, you all will be surprised to know that in this last six months, in spite of this growth, we have actually got prepaid and repaid to the extent of Rs. 5,400 crores. And to put it in context, Rs. 5,400 crores is 22% of our March AUM numbers of real-estate.
Also refer to the Q&A for the question a. It also has the answer to this question.
As some of the earlier answers show, the portfolio is churn is happening and hence doubting the NPA being defrayed is probably not justified.
As for the some other questions like duration of the loans, ALM mismatch etc, I could not get an answer. Let us continue to search for an answer to those concerns raised.