When it comes to Q2 revenues, it meets road expectations. Although DHFL numbers did not reach P&L, managed assets increased by 40 percent. What do you think of the road ahead?
The past quarter has been a turning point for us. There are two major events that took place during the quarter. One of them is a combination of DHFL and PCHFL. This merger only came on September 30th and therefore the AUM has increased by 20,000 reais. But because of the merger, the profit was not made. It’s one point I want to bring home. So what did the merger accomplish? Today we want to improve the amount of retail loans. Prior to the merger, retail loans accounted for 11% of our total book. Post the merger with DHFL, retail loans are 34%. That is one big change.
The second big change this quarter is the announcement that we will dismantle our pharmacy and we will have two independent listed entities in the next 12 months; One is pharmacy and the other is financial services, which we have promised for some time. Now both of these things have come and so there will now be a strong pharmaceutical company and it will be part of another financial service.
With regard to the legal entity of DHFL merger – Piramal PCHFL or Piramal Capital – we have increased to AUM 20,000. The way we calculated 20,000 rupees is therefore the actual value of the total property that came with DHFL. We have taken a very conservative view. The total value of DHFL assets was initially about 88,000 Rebels. There was some accounting due to fraud and so at the beginning of June we had 44,000 railcars and now we have reduced it to 20,000 rupee. GNPA dropped from 4.4% to 2.9% in the expanded book. And the NPA fell to 1.4%.
That is very encouraging because the worst in the financial sector seems to be over because it is a broad topic that we have seen this season. As you can see, your retail sales have increased from 11 percent last June to 33 percent this September. When it comes to retail books, you want to hit 66%. How do you do it?
In retail, growth is coming at level two, level three cities. Today, our book includes affordable home loans. Today’s average ticket price is 17,000 birr, 50% of which comes from salary and 50% from unpaid. The sweet spot for banks and other institutions is in the payroll. On the one hand, our focus is on the transition from non-wage earners and non-wage earners to big cities and metro to level two and level three cities, and we are working on a strategy.
We increase the number of branches. Second, we use technology. Existing banks have some old rules. We are fortunate to be young and we are developing a comprehensive technology infrastructure that will help us better assess the quality of physics and credit quality. Third, we are introducing new products in addition to home loans with small business loans, SMEs or other unsecured loans. The combination of all this is where you see growth in the retail space.