IndoStar Capital Finance Limited — Call Transcript 2020

Aug 27, 2020

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ICFL/LS/0094/2020-21

27 August 2020

BSE Limited

Listing Department, 1[st] Floor, P J Towers, Dalal Street, Fort, Mumbai - 400 001

Scrip Code: 541336

National Stock Exchange of India Limited Exchange Plaza, C-1, Block G, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051

Symbol: INDOSTAR

• Sub.: Transcript of analyst(s) / institutional investor(s) call held on Thursday, 13 August 2020 at 2:30 p.m. (IST)

Dear Sir / Madam,

Please find enclosed herewith transcript of analyst(s) / institutional investor(s) call on Unudited Financial Results for the quarter ended 30 June 2020.

The transcript is also available on the website of the Company at www.indostarcapital.com.

Request you to kindly take the above on record and disseminate the same on your website.

Thanking you,

Yours faithfully,

For IndoStar Capital Finance Limited

JITENDR Digitally signed by JITENDRA BHATI A BHATI Date: 2020.08.27 14:11:32 +05'30'

Jitendra Bhati

SVP – Compliance & Secretarial (Membership No. F8937)

Encl: a/a

IndoStar Capital Finance Limited

Registered Office : One Indiabulls Centre, 20th Floor, Tower 2A, Jupiter Mills Compound, Senapati Bapat Marg, Mumbai - 400013, India . T +91 22 4315 7000 | F +91 022 4315 7010 | contact@indostarcapital.com | www.indostarcapital.com CIN : L65100MH2009PLC268160

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“Indostar Capital Finance Limited Earnings Conference Call” August 13, 2020

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– ANALYST: MR. PIRAN ENGINEER MOTILAL OSWAL SECURITIES LIMITED

– MANAGEMENT: MR. RAMACHANDRAN SRIDHAR EXECUTIVE VICE CHAIRMAN & CHIEF EXECUTIVE OFFICER - INDOSTAR CAPITAL FINANCE LIMITED MR. AMOL JOSHI –CHIEF FINANCIAL OFFICER - INDOSTAR CAPITAL FINANCE LIMITED MR. PANKAJ THAPAR, DIRECTOR - STRATEGY MR. PRASHANT JOSHI - CHIEF OPERATING – OFFICER INDOSTAR CAPITAL FINANCE LIMITED – MR. DEEPAK BAKLIWAL HEAD, CORPORATE LENDING - INDOSTAR CAPITAL FINANCE LIMITED MS. JAYA JANARDANAN – COO DESIGNATE - INDOSTAR CAPITAL FINANCE LIMITED

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IndoStar Capital Finance Limited August 13, 2020

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MODERATOR : Ladies and gentlemen, good day and welcome to IndoStar Capital Finance Earnings Conference Call, hosted by Motilal Oswal Financial Services. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Piran Engineer from Motilal Oswal Financial Services. Thank you and over to you Sir!

Piran Engineer:

Thanks, Janis. Hi, everyone, and welcome to the call. On this call, we have with us the entire management team of IndoStar Capital Finance Limited led by Mr. Sridhar. We shall start with opening remarks from management, followed by a Q&A session. Over to you, Sir!

R. Sridhar:

Good afternoon to all of you. Let me welcome all of you to the Q1 FY2021 earnings call. I would also like to take this opportunity to wish you and your family health and safety during this pandemic.

I would like to first recall some of the updates I had given during the Q4 earnings call on June 18, 2020. So, the first thing which we had mentioned there is the investment by Brookfield. As you know, Brookfield has invested about Rs.1,225 crore primary equity capital, which triggered open offer and they have now completed the open offer also. Post the open offer and the primary issuance, they now hold around 57% on the fully diluted equity share capital of the company. That is the first update I would like to give.

The second one is, as we had mentioned, that we are running down the corporate lending business, which had been the mainstay business of IndoStar, and we are going to focus on the retail businesses. Now at the end of this Q1FY21, we have 71% retail business and 29% of corporate lending business.

Third is that with these two major decisions, we have also taken accelerated provisions and aggressive write-offs during Q4, including the provisions prescribed by the Reserve Bank of India which is the 10% provisions on cases where we have extended moratorium, we have taken the provision upfront in 1 quarter instead of the 2 quarters which was allowed as per RBI. We have also taken additional Rs.100 Crores of COVID provision. The provision coverage ratio has gone up substantially as against the non-performing loans. So, with these three steps we have strengthened and ring-fenced the balance sheet against all possible risks associated with COVID in the coming couple of quarters.

So, having done that, with the lockdown as well as the COVID impact, we have started focusing on a few important things during this period, particularly in the Q1FY21. The first thing which we are focused is on the rationalization of the cost. So as against the cost, which is more in salary, rent and other expenses, we have made substantial reduction during this quarter and the run rate will be similar in the coming quarters.

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IndoStar Capital Finance Limited August 13, 2020

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So that would be estimated on a like-to-like basis around 20% to 25% reduction we could achieve over FY20 cost. The second important thing, which we are going to focus is on the digitization as all of you are aware that during the lockdown, we have learned to do everything literally through online and through digital mode. We have raised the capital, we are raising resources from banks and institutions, everything we had to do during this period has been done from a work from home mode. We feel that going forward digitization will be a very, very critical aspect of our business. Already, most of our collections and credit processes are through the digital mode. But we are also trying to bring even the sourcing, customer evaluation, documentation through online method. So, we are focusing on digitization. This digitization will help us reduce the operating expenses as well as the enhance productivity. And the third important aspect, which we are focusing, is on the asset quality.

As we all know at the end of March, 2020, the Reserve Bank of India introduced the moratorium for three months March, April and May. So, like all the other companies, we have also extended moratorium to all our customers in Moratorium 1.0. And those customers who want to come out of the moratorium and pay, we have allowed them to do. During the month of March, April and May, steadily the customers who are coming out of the moratorium and paid up have considerably increased. And subsequently, in the month of May end, again, RBI extended the moratorium for another three months June, July and August. During this period, June, July and August, we adopted a different method of extending the moratorium as against Moratorium 1.0, where we extended moratorium to everyone, this time, we didn't extend moratorium to anyone. We have asked the customers, if they want a moratorium, they should opt for it. That is how we have managed the moratorium during 2.0. So, you will be happy to know that the collections have considerably improved in the month of July in retail business, as more than 56% of the customers have paid, leaving 44% of the customers seeking moratorium. Out of this in the CV segment, about 58% of the people have paid; in affordable home segment 76% of the people have paid and in SME segment, about 50% of the people have paid. So, our asset quality remains intact without any deterioration.

On the liquidity front, we have enough liquidity on the balance sheet, about Rs.2,100 crore of liquid cash is available. This is also aided by the capital of Rs.1,225 crore we have raised. Apart from that, even in this challenging period, we were able to raise funds from banks and from some institutions, including NHB, at very competitive rates. So, one loan we have got at below 6.5%, and majority of them are between 8.5% and 9.5%. So, about Rs.976 crore, we have been able to raise until today from 1st April, 2020, which has strengthened our liquidity. And with this money, even if no other money is raised, we would be able to manage all our liabilities even after March 2021 making our ALM strong. We are positive in all buckets up to September 2021. So aided by a capital adequacy of around 37% plus, a leverage of less than 2 times, focus on reduction of cost, digitization and asset quality, the resources debt -which we have raised, partnership with ICICI - I feel IndoStar is in a very strong position to take advantage of the potential, which will unfold post-COVID. So, what we are doing now is that we are focusing on

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IndoStar Capital Finance Limited August 13, 2020

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3 retail businesses: CV, affordable home finance as well as SME. In the CV space, our focus is going to be in the mid-segment of customers up to three vehicle owners, and we will be focusing more on used vehicles. And about new vehicles, we have already built a partnership with ICICI Bank, which would continue.

Similarly, on the SME business, our strategy would be to source all these loans in our balance sheet and then subsequently decide to park these through securitization or direct assignment with the banks. The affordable home finance business is one of the best businesses, which we have been able to build in the last 2.5 years. With the kind of capital we have, this business is now in a position to become a stand-alone business. All these 2 or last 3 years, it has been tagging along the CV business. So, we have a plan to make this business stand-alone. For the next couple of months, we are going to lend the money under the emergency credit guarantee scheme, which has been introduced by the government.

The earlier scheme, which has been announced by the government, was only for the enterprises, private limited and partnership firms. But after the NBFC industry made a representation to the Honorable Finance Minister, she was kind enough to consider extending this facility to the individuals, so all our customers are now eligible, out of which, we estimate that Rs.400 crore to Rs.500 crore can be lent under the scheme. We have already started lending, and in the next one or two months, we will complete this and I am very confident about the kind of progress our economy is making. The impact of COVID slowly, gradually coming down, and unlocking, is happening. I am sure that we will be able to start lending in normal course to our new customers from October 2020. I now look forward to an exciting two quarters in 2021. After that, when the complete impact of COVID has disappeared, we will have a fantastic road ahead for us to grow. With these words, I leave the forums for the questions, and we would be very happy to take your questions.

Moderator:

Thank you very much. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question is from the line of Aakash Dattani from HDFC Securities. Please go ahead.

Aakash Dattani:

Good afternoon. Thank you for taking my question. So, my first question is on, there is a mention about operating costs on Slide #5 of your investor presentation where it says the CI ratio is excluding front-ended costs. Could you elaborate on this, please?

Amol Joshi:

Sure. Thank you for the question, Aakash. As we had mentioned earlier, and Sridhar also covered on the call, that we are creating various initiatives for digitization. And considering this will be multi-pronged project on various fronts, these front ended costs are related to certain projects that we have undertaken for which we will have upfront costs booked in, a part of which is already baked into the Q1 numbers. So that quantum of amount is around Rs.10 crore, which is part of my cost base for Q1.

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IndoStar Capital Finance Limited August 13, 2020 Aakash Dattani: Okay. My next question is, if I look at last quarter's profit AUM and I add those things and compare it with this quarter's AUM, there is like a negative repayment. So, would this be because of interest capitalization? Amol Joshi: Aakash, for certain portion of the exposure interest has been capitalized. The growth you see is only because of that. Aakash Dattani: That’s, it from my end. Thank you very much. If I have other questions I will get back in the queue. Moderator: Thank you. The next question from the line of Kishore an individual investor. Please go ahead. Kishore: Thanks for taking my question. Sir, I have a question regarding the branch expansion. So is there any ongoing branch expansion that is planned like after the post-COVID, seems like we will be more focusing on retail lending and all. So, is there any plan to expand branches post-COVID? R. Sridhar: Definitely. See, branch expansion is a must because the businesses where we are operating are all neighborhood businesses. So, we will have to be present. But, COVID has given us an insight as to how to manage that in a different way. So, our first focus is towards digitization, which we are planning and secondly, we are working on the smart branches. So, we are bringing a new concept of smart branches, which would be smaller in size. The capex, which we will be doing, will be lesser, by creating more tech-friendly kind of branches. That is what we are trying to do. So, we will be expanding our branches, but that won't be during this year but only from FY2022. This year, we would be using the period up to March 2021 to prepare the initiatives, which I had outlined, to you. So smart branches, digitization and some recruitment are what we will focus on. So, we have prepared ourselves to use the potential, which is going to unfold. Kishore: So, like, until this financial year, so there will be no branch expansion. Is that so? R. Sridhar: No, that is a guideline. It is not a rule. If the recovery of the COVID is faster, we would even do something in this year also. But as of now, in the kind of unlocking, which is happening, the COVID and all that, we feel that the branch expansion we should do only from FY2022. Kishore: My second question is on asset quality, sir. So, if you see the slide no. 14, wherein we have the gross NPA for corporate lending remains at Rs.154.6 crore. There is no reduction in that, so which means like there is no provision. Why is that payments same across the five quarters? Amol Joshi: Kishore, your observation is right. Yes, gross NPA you see of Rs.154.6 crore, we have only one account, which turned NPA in Q1FY20 last year. Hence, you find that number steady. In terms of provisioning, we have done a 10% provision in Q1FY20 last year. And you will see that the net NPAs reduced between Q3FY20 and Q4FY20 last year. So, after Q4FY20, the number in Q1FY21 is the same. So Rs.154.6 crore is the gross amount and Rs.123.7 crore is the net amount.

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We increased the provision for this account in Q4FY20. No incremental provision has been made in the current quarter. Kishore: Okay. So, like is there any recovery that we are seeing, Sir, or how is this account will be set in the future? Amol Joshi: The underlying security that we have for this exposure is robust enough. It is just that in the real estate sector things have been a bit slow, as you're aware. And in last four months things were mostly at a standstill. We are quite confident that while we have done the provision, eventually we will see recovery in that particular asset. Kishore: So, it is supported by the collateral, Sir? Am I correct? Amol Joshi: Yes. Yes. There is a good quality security available against that. Kishore: Thank you so much. I will come back in the queue. Moderator: Thank you. We will take our next question from the line of Dipanjan Ghosh from Kotak Securities. Please go ahead. Dipanjan Ghosh: Three questions from my side. The first is, can you give your stage-wise ECL coverage that you are having on the book? The second will be, if you can shed some light on the customer profile or geographies as to where stress is larger in the SME or the CV business, the type of customer segments who are really facing cash flow crisis? And the third will be, if I see a slide on moratorium and collections, I see that the collections as on 31[st] July, 2020 for housing finance segment was 86%, CV segment was 48% and this is a percentage of pre-COVID monthly billing. So, I wanted to know if the numerator also includes your collections from overdue accounts. And in case I try to adjust for that, then what will be the collections for, let us say, the last two months in each of the segments? Prashant Joshi: Yes. Thanks, Dipanjan. I will answer your questions in the reverse order. So, the last question that you talked about, the collections as percentage of pre-COVID monthly billing. In the numerator, we have also taken the collections against overdue and if we were to adjust for that and purely take EMI billing and EMI collection, only in the month of July in the numerator as well as in the denominator, roughly and it will vary by business, but roughly, you should see between 4% to 5% of reduction in this ratio.

So that is the answer to your third question. To your second question, which kind of customer profile, I will first talk about the CV. Since the slowdown began sometime this time last year in the whole industry, what came through was particularly in Central India and North India, due to a new vehicle financing, particularly which was involved in infrastructure sector that came under a lot of pressure and that is true of our portfolio also. Where we are seeing pockets of pressure in

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IndoStar Capital Finance Limited August 13, 2020

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Central India and North India, mainly in new vehicle financing exposure where relatively, the stress is higher. Comparatively, I think used vehicle financing performance has been all right. As far as SME is concerned, actually, while you are seeing the 58% moratorium there, what we have actually been able to do even during the lockdown is that actually, we have reduced our NPLs and actually improved our bucket book. But where we are seeing stress, it is more sectoral dependent. So, wherever the activities are ongoing, in all those sectors, we have been able to collect our money. And, in SME, it is not that customers do not have money, but they have taken advantage of the moratorium to conserve cash. So, there is a geography and new vehicle financing bias in CV. And in SME, only those segments where activities have come to a halt have come under a little bit of pressure.

I will come to your first question, which is in the stage-wise ECL coverage. So, different business-wise, we have different provisions and LGDs that we have taken. So, in stage three, typically, as far as CV is concerned, we have two portfolios, organic and inorganic, the composite ratio will be about 27%. If you take housing finance segment, it is about 20%, and SME segment will also be about 20%-22%. That’s the stage 3 and stage 1, of course, we do minimum 0.4%, which has been set by RBI. But our stage 1 provisioning has been higher than that across all the businesses. And stage 2 overall is in the ratio of about 6% to 8%.

Dipanjan, you are also aware that we took that Rs.280 crore Covid related provision, which was moved our Provision Coverage Ratio to 95%.

Dipanjan Ghosh: Yes. So, the number of 6% to 8%, that also incorporates COVID provisions you have incurred in the two quarters, right?

Prashant Joshi:

No, The COVID provision of Rs.280 crore is over and above the normal stage-wise ECL provision.

Dipanjan Ghosh: Okay. So just one question in respect to answer on the second one so in the SME business, could you shed some light with respect to your customer segment, what will be the typical customer or even some broad idea as to what will be the customer cohort? And what will be the mix as I am just trying to understand like what is the portfolio that could be at risks?

Prashant Joshi:

We do the SME business in 10 cities in the country, the metros and the mini metros. And our typical customer is someone, whose turnover is up to Rs.10 crore. It would be either a manufacturer, trader or engaged in services. And our average ticket size in this business is about Rs.1 crore. If you look at our portfolio, our total AUM is about Rs.1,650 crore, while what is on our books is about Rs.1,300 crore only. So, a lot of portfolio, we have been able to assign. And the way we are looking at it, we think that we have been able to reduce buckets as we have been able to recover our money. So, we are not seeing a major risk on this portfolio as far as increasing delinquency is concerned.

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Dipanjan Ghosh: Thanks a lot for the detailed explanation and all the best. Moderator: Thank you. We will take our next question from the line of Sai Kiran from CLSA. Please go ahead. Sai Kiran: Sir, just one question on Slide #16, if I look at it, the percentage of customers opting for moratorium based on value for CV product is 42%. But if I go to the next slide, when I look at the days past due, the current book as of June 2020 is for CV is 62%. What am I missing? Even though does this mean that even some portion of the customers who opted for moratorium had paid the installments? That's how one should read it? Amol Joshi: So, 2 things. One is that the data for moratorium, we wanted to give the latest data. Therefore, we have provided the data as of July, 2020, and the data that you are looking at was DPD is as of June, 2020. Leaving that aside, I think both things have happened. There are some customers who have been under moratorium they have paid. And with some customers who have not taken moratorium also have not paid. So, both things have happened. Hence, this is the net result.

Sai Kiran: Got it. Understood. And the second question, I missed opening remarks, so I apologize if I am repetitive. Just a broader question in terms of the CV we all are aware, I think you were also mentioning in one of the earlier calls that they were showing some stress even through the last year and now this COVID had come over. How are you looking at the sector as a whole in terms of behavior and also the stress? And what does this mean for the industry growth as well in terms of industry-level NPAs? And second question is that if you compare your CV moratorium book and also the behavior, how do you compare yourself versus the industry based on whatever the data you would have looked at in the bureau side? Thanks a lot.

R. Sridhar: The CV business, as you know, that it is cyclical. So, few years, it goes up and it comes down. And so, every company is going through that kind of a cycle, whether it is a manufacturer, or it is a financial institution. And you know that about a year back, post the IL&FS issue, the CV industry also started that downward cycle. Combined with the liquidity constraint, growth got affected and then GDP went into a slowdown, and now with COVID it has been impacted. But if you see post to the lockdown, even the unlocking has happened. Some of the data is encouraging, including the toll collection and all that is showing that the revival is picking up. And this industry is directly linked to the economy. And our data itself is showing only 40% of our customers are not able to pay for various reasons. So, 60% of the people paying is a good progress, and this performance is also in line with other competition, which are bigger companies than us in the same space. But I would say that our performance is slightly better than some of our competition, which had given the numbers. And when I look at our moratorium numbers, our customers are loyal than some of our competitor’s customers. The second point is that when the economy revives, this will be the first industry, which will come up. So, I am very confident in the next few months, the efficiency and the earnings of this industry, will improve and so will our

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IndoStar Capital Finance Limited August 13, 2020

collections. Simultaneously, the government is also coming up with some measures, including the scrappage policy which are going to improve the demand for used vehicles substantially which is a focus area of the company. So, we are confident, but we had to go through this turbulence. And once this settles down, then the next cycle would be an upward cycle, where we can build a huge value and profitability.

Sai Kiran:

Thanks a lot Sir. That is helpful.

Moderator: Thank you. We will take our next question from the line of Piran Engineer from Motilal Oswal Financial Services. Please go ahead.

Piran Engineer: I just wanted your views on RBI's recent onetime restructuring. How are you all thinking about that? Will it be more on a case-by-case basis? Or will it be offered to all, say, stressed customers or all moratorium customers from September,2020 onward? How are you all thinking about that?

R. Sridhar: See, we are in two businesses, one is wholesale and the other is retail. So, in the wholesale, we are in the real estate business, which you know has been impacted and its recovery is a bit slow. There, we have given moratorium to a greater number of borrowers. We have given them a short moratorium. And we would consider restructuring them on a case-to-case basis where RBI has given that benefit now. And as we have escrow mechanism, and here is a waterfall mechanism for recovering the amount from our borrowers, the reschedulement is not going to affect our cash flows in any way, so that is one kind of restructuring we will do. And in the case of retail, we are very confident that we have reached 40% moratorium-seeking customers by July 2020 and we are very confident that it will come to 20%-25% in August 2020 and that gives us enough courage to look at September, October, November, where we will go to more than 90% of our collections.

So there, very few customers would be looking at restructuring, which could be larger customers who are fleet owners, which had come through our acquisition from IndiaInfoline when we bought it. That is what will be there. Some customers in SME will be there. There will be no reschedulement that is required in the affordable housing finance segments. So, in our case, caseto-case only, we will view, but more in the wholesale and very less in the retail segment.

Piran Engineer: That is all from my end. Thank you.

Moderator Thank you. The next question is from the line of Darpin Shah from HDFC Securities. Please go ahead.

Darpin Shah: Thanks. My question is on, again, moratorium. So, the fall, which has happened in moratorium book, how do you define this moratorium? I remember you said part EMI or at least one EMI?

Amol Joshi: So, these customers have come out of moratorium and paid at least one EMI.

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Darpin Shah: Okay, second, I do not know if I have missed but our NPAs in the vehicle finance book has gone up on a sequential basis from 180 crore to almost 200 crores. Any color on that? Amol Joshi: Yes. So, if you see the numbers, we have had reduction in the SME book by about Rs.10 crore and an increase of about Rs.19 crore in the CV book. There is an increase of gross NPLs. These are customers where we thought it was prudent not to provide the moratorium. We could have theoretically postponed the inevitable by providing moratorium, but we did a review of the portfolio and thought that it is best, even given a moratorium later these customers will not be able to pay. And therefore, we took the decision and didn't give the moratorium and allowed these customers to become stage 3.

Darpin Shah: One last bookkeeping thing. Our tax rate for this quarter is on a lower side. Any specific reason for it?

Amol Joshi: Yes. Darpin, there have been a certain change in policy as to how we compute the differed taxrelated calculation. So certain credits have been taken in the tax line. Hence, the overall ETR looks lower. And just to remind you that in Q4FY20, we also had a huge loss because of the topup provisions that were taken. So that also affects the current tax line as well. So, both things have contributed to a lower ETR in Q1FY21.

Darpin Shah: That is, it from my end. Thanks a lot.

Moderator Thank you. The next question is from the line of Pratik Sheth from UTI Mutual Fund. Please go ahead.

Pratik Sheth: I hope everything is fine in the COVID lockdown. So I just wondered if you have given just color on the wholesale book and how we are seeing it as to in terms of what are the level of stress testing that you have done, in the sense that there would have been largely the book, at least on the real estate part, is largely concentrated in the cities where the lockdown has been a lot. So, in terms of stress testing and security cover, anything -- any color as to what you have done? And whether we see any stress going forward in any of these cases? At least on the macro part, the thing that's not included.

Deepak Bakliwal: Yes. So, you are right that the dominant real estate book is in the key cities, which has experienced a lockdown. But you would see that most of our exposures are in the affordable segment. We are not in the high-ticket segment. We are in the low-ticket underlying segment. And therefore, in the stress testing, we feel that as the things will normalize, the collection & sales efficiency will improve. And therefore, we are confident that the servicing will be normalised. And from that perspective, free cash flow cover perspective and overall cover perspective, we are there.

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Pratik Sheth: I just wanted to sort of clarify, I think that in the real estate, generally, what happens is some borrowers are already under moratorium because the nature of the lending is specific largely back-ended structures. So, does that 90% include everything or it is just these specific 6 months moratorium that we were talking about? Deepak Bakliwal: The 90% is specific 6 months moratorium. Pratik Sheth: Thank you. That is, it from my side. Moderator: Thank you. The next question is from the line of Kishore, retail investor. Please go ahead. Kishore: Sir, I have a question related to the technology utilization and the risk management metrics that we incorporated. So, is there any focus to improve those perspectives like accurate underwriting and good disbursals, so on this perspective? R. Sridhar: See, digitization is one initiative we are taking. About our risk management and the credit policies and all, it is an ongoing exercise. So, every time any event happens, the credit policies are reviewed, and changes are made. So, there is a Chief Risk Officer in there, the national credit managers are there. So that is an ongoing thing. But what I have mentioned about digitization is an exercise, which we are going to do post COVID. So that most of the things which we are going through and which we have been doing physically, now will get converted into digital space. So, we are taking that initiative to build something, which would bring a lot of operating expenses saving and improve the productivity. So that is what we are planning.

Kishore: So, it is like we will also reduce the time for a customer to get the disbursals and all, right? R. Sridhar: Yes, turnaround time will be reduced. Kishore: Yes. I have a second question related, I am sorry if, this question is related to the previous quarter, regarding the impairment of financial instruments in the results. So, could you please shed some light on this one, like what you did the last time? Amol Joshi: Kishore, when you see impairment on financial instruments, most of our impairment provisions are against the loan book. And the key item in Q4FY20 last year was a top-up provision of Rs.280 crore, which we had taken over and above these accelerated write-offs that we had done and that Rs.280 crore was also on top of the ECL model outcomes, which had a certain amount of provision hitting the P&L. So, the key item in that impairment line is these write-offs plus normal ECL, plus the top-up provision that we have done. So, the specific item you said about impairment of financial instruments, what you see in the P&L is the provisioning line that is the loan loss provision that we made on our loan book.

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Kishore: Okay. So, this is regarding which division, Sir? Like retail or corporate lending or which account was it?

Amol Joshi: So, I will just walk you through. There were certain write-offs that we had done in Q4FY20 of Rs.207 crore, which we did in the corporate loan book; Rs.60 crore write-offs was for the CV book; that Rs.280 crore is an overarching provision that we maintain against the portfolio, considering the COVID situation. And there are 2 parts for this Rs.280 crore. One is the RBI mandate of having at least a 10% provision on the book under moratorium, and we had topped that with Rs.100 crore provision, which is sort of our provision available against the full book. Hope that helps.

Kishore:

Thank you.

Moderator: Thank you. Ladies and gentlemen, as there are no further questions, I will now hand the conference over to the management for their closing comments.

R. Sridhar: Thank you very much for your participation. As I mentioned earlier, we have prepared ourselves very strongly from the capital, liquidity, asset quality point of view. So, we are waiting for the COVID to end. And we are very confident that the next few years, we will look for very good growth, profitable growth and quality growth. Thank you for your support and thank you for your participation.

Moderator: Thank you. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, we conclude today’s conference. Thank you all for joining. You may now disconnect your lines.

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This is a transcription and may contain transcription errors. The transcript has been edited for clarity. The Company takes no responsibility of such errors, although an effort has been made to ensure high level of accuracy

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