Manappuram Finance Limited (531213) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Earnings Conference Call of Manappuram Finance hosted by Monarch Network Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aalok Shah from Monarch Network Capital. Thank you, and over to you, sir.

Thanks, Stephen. Good evening to all on behalf of Monarch, we are excited to have Manappuram Finance Limited's management team here with us to discuss on their Q3 FY '22 results and the future outlook. From the management side, we have Mr. P.V. Nandakumar, MD and CEO; Ms. Bindu, the CFO; Mr. B.N. Ravinder Babu, MD Asirvad Microfinance; Mr. Yogesh, the CFO, Asirvad Microfinance; Mr. Suveen, CEO, Manappuram Home Finance; Mr. Mishra, our CFO, Manappuram Home Finance; and Mr. Senthil Kumar, Head of Vehicle and Equipment Finance. Without taking much of their time, I would request Nandakumar sir for their opening comments, post which we can get into Q&A session. Thank you. Over to you, sir, please.

Yes. Thank you. Good evening, ladies and gentlemen. Welcome to our Q3 FY '22 conference call. I hope all of you are safe and doing well. In our last con call to discuss Q2 results, I had mentioned, in respect of the economy that we were seeing signs of a sustained uptrend with the reception of -- with the resumption of economic activity, supported by the rapid pace of vaccination. Also that this recovery was beginning to be felt in our unorganized and rural sectors as well. While this optimism held it true for first 2 months of Q3, there was a marked slowdown in the December month, coinciding with the surge in the Omicron variant. At the same time, the important takeaway from our Q3 performance is that despite the Omicron impact, we have achieved good growth in our business volumes from our core business of gold loans, and also in vehicle loan and home loans. However, the microfinance book posted a modest decline in volumes. The overall results show a good growth in our gold loan for full year, which at INR 2,450 crores is up by nearly 9% compared to Q2. Importantly, this was accompanied by proportionate growth in gold collateral, which at 70 tons is up by 7.8%, Q-on-Q. On the last con call, I have also spoken about our efforts to impact high-value customers who are being forced by banks and other NBFCs, who competed on price. Since then, we have remained aggressive in our efforts to retain and acquire high-value customers with increased ad spend and better incentives to the staff. And that has had a near-term impact on our yield, OpEx and profitability. Accordingly, our consolidated quarterly profits, total net profit of INR 251 crores, represents a Q-on-Q decline of 29%. Away from gold loans, our microfinance subsidiary, Asirvad Microfinance, [ posted ] a Q-on-Q decline of 2.4%, to INR 6,859 crores in its microfinance portfolio. That was because we consciously chose to go slow for first disbursements to focus on prudent lending in this unsecured business, given the uncertainties around third wave of COVID-19. At the same time, our commercial vehicles business reported a brisk Q-on-Q growth of 19% to INR 1,510 crores, while our housing subsidiary grew its book by 11.5% Q-on-Q to INR 817 crores. This was achieved despite the loss of momentum in the final month of the quarter. The full details of the performance of our non-gold business and also a comprehensive look at the overall financial performance will be taken up by our CFO. Thank you. And now it is over to our CFO, Ms. Bindu.

Thank you, sir. Good evening, ladies and gentlemen. Thank you for joining us today. With respect to gold loan demand, we continue our offerings of competitive interest rate, high ticket sales gold loan customers. The impact of this new strategy is better growth, but decline on our spreads and margins. We foresee a steady to declining trend in our GNPA. Now coming to the operational overview. We are carrying surplus liquidity across all the businesses, cash and cash equivalents on a consolidated basis was INR 1,654 crores and undrawn bank line was INR 3,202 crores. Our CP exposure is 8 percentage of total borrowings in the stand-alone entity. Our ALM is well positioned across all buckets. Stand-alone borrowing cost has come down to 7.47% in comparison with 7.94% in Q2 FY '22. Our consolidated AUM for Q3 was INR 30,407 crores, up by 7 percentage Q-o-Q and up by 10 percentage Y-o-Y. The sequential growth in AUM was largely on account of gold loan growth and our average LTV, 65%, which is well below among the peer group. Consolidated profit after tax was INR 261 crores, down by 29.4% Q-on-Q and down by 46 percentage Y-o-Y. ROE on a consolidated basis was 13% and ROA was 3% for the quarter. About the gold loan business, which constitutes 67% of consolidated AUM and the remaining 33% comprises of microfinance, vehicle finance, housing and other loans. This quarter, we witnessed growth in gold loans in terms of amount and tonnage. The AUM increased by 8.8% Q-on-Q and up by 1.2% Y-o-Y. Our marketing campaign through print and electronic media and more number of employees for local marketing has to achieve a better growth. Our gold holdings stood at 70 tonnes, up by 7.8% Q-on-Q, down by 2.6% Y-o-Y. During the quarter, we were able to add 3.81 lakhs new customers. Gold loan average ticket sales and average duration was INR 53,397 and 111 days, respectively. Advertisement cost during the quarter was INR 51.4 crores, up by 126 percentage Q-on-Q and up by nearly 300% Y-o-Y. Our stand-alone PAT was INR 259 crores, down by 27% Q-on-Q and down by 44.3% Y-o-Y due to higher marketing spend and by lower yield. Interest receivable on gold loan was 3.6% on AUM and amounting to INR 738 crores. The total number of gold loan customers stood at 25.09 lakh. The weighted average LTV stands at INR 2,924 per gram or 65% of the gold price as on 31st December. Gold loan disbursement during the quarter at INR 24,929 crores and the online gold loan book accounts for 41% of the overall AUM. Coming to microfinance business, AUM stands at INR 6,859 crores, down by 2.4 percentage Q-on-Q and up by 28 percentage Y-o-Y. And this business reported a profit of INR 60 lakh in Q3 FY '22 compared to INR 12 crores in Q2 FY '22. Our collection efficiency from MFI business during the quarter stood at 96% and disbursements during the quarter was INR 2,000 crores. The company has a capital adequacy of 19.7%. Coming to Vehicle Finance, the business reported an AUM of INR 1,509 crore, which is up by 19.1% Q-on-Q and up by 52.8% Y-o-Y. Collection efficiency for the quarter was 103 percentage compared to 102 percentage in Q2 FY '22. Vehicle finance NPA at 2.7% against 3.7% in Q2 on a comparable basis and 5.6 percentage based on the revised RBI circular. The home loan business had a total loan book of INR 816 crores, which is up by 11.5% Q-on-Q and up by 28.9% Y-o-Y. It now operates from 73 branches and reported a profit of INR 1.8 crores. Collection efficiency for the quarter was 100% compared to 95% in Q2 FY '22. NPA at 6.4% in Q3 versus 6.5% in Q2 as per the revised circular, the NPA stands at 12.3 percentage. Loan to NBFCs, the portfolio at INR 56 crores and the small ticket MSME loans at INR 714 crores. Provisions and write-offs for the stand-alone entity during the quarter stood at INR 17 crores compared to INR 10 crores in Q2 FY '22, mainly due to the revised IRLC loans. Our GNPA is at 1.36% at the quarter compared to 1.59% at the end of Q2 FY '22. The Board declared an interim dividend of INR 0.75 for this quarter. Our capital position is strong, and the company is well capitalized with a capital adequacy ratio of 30.2%. Company's consolidated net worth stands at INR 8,160 crores at the end of 31st December 2021, and the book value at INR 96.4. Thank you. Over to you.

Should we open for Q&A?

Sure.

[Operator Instructions] The first question is from the line of Dhaval Gada from DSP Mutual Fund.

So the first question is relating to the OpEx. So could you just break down the INR 217 crore other operating expense, excluding the employee cost, into how much is advertisement and IT support and other OpEx, some perspective? And also the same for the last 3Q '22 -- 3Q '21 sorry. So that will give us some perspective around what's the growth within the OpEx line.

Yes. Dhaval, see, the majority of the expenses between the 2 quarters remain the same. If you see the increase between the quarters, this INR 40 crores, majority is coming from advertisement, some INR 10 crore impact from the depreciation element, that is more on account of 116 accounting. Other than that, we can say majority is coming from advertisement expenditure. IT support, be it support cost trend or other operating over, it remains a similar number.

Okay. So and in absolute terms, how much would be the ad expense now? Like in 3Q, how much did we spend on ad?

INR 51 crores.

Okay. And this compares to about INR 40-odd crores that we had -- INR 40 crore, INR 50 crore annual run rate that we had in '21 and '20...

Right.

So broadly, what's the trajectory for next year? I mean, how are you thinking about -- will we continue in the similar trajectory or any color if you could provide on this?

See, we have to go for a massive advertisement because we felt like there is a slump in the market as it is because of the down lockdown, long lockdown, et cetera. So we thought we should give a booster. So it was a booster dose to the market, which we are not continuing in the coming quarters. It will be moderated to a much lower level.

So sir, should we expect it to go back to the FY '20 kind of level or like...

No, it will be something in between. We felt like our market presence was being made known. So we have capped at settle level, which is far higher than whatever we have spent -- far less than whatever we have spent. It will be much more moderated.

Understood. The second question was relating to just the overall P&L construct. So once the expense sort of normalizes, the ad expense normalizes and as the growth sort of sustained, just overall, how do you see the return profile starting to improve? I mean, we've seen the cost to income and overall profitability compress a lot in the last 3 quarters. Just directionally, FY '22, what's your guidance...

See, our yield was higher compared to the other player in the market, our yield was higher. So because of the particular situation, particular situation with a high level of liquidity, et cetera, et cetera, so we have the challenge. And the NBFC customer -- NBFCs, et cetera, were weaning away customers. So particularly higher ticket customers. So in order to bring them back we had to put advertisement, we have to bring down our yield. Even now the competition is there, of the market at what I read is, the NBFCs are targeting business which is where the yield may slip to them to around 17% or so. This is what I read from the market. But we are maintaining our yield at around nearly 21%. And we are trying to maintain that. In this process, the growth may get moderated for some time, 1 or 2 quarters. And I feel like these players, also NBFC players also may not be able to sustain business at that deal, and they will have to increase. So I feel like the way to our -- amongst the NBFCs, is a temporary phenomenon. And I feel like in the coming quarters, the situation will improve. And about management of OpEx, particularly advertisement, I told also it will get moderated. The other cost also, there is no reason why it should go up. So it's -- it may be maintained. The incentive structure also has been moderated. In these areas, we'll be able to bring the cost down, and the business will have a reasonable growth.

Understood. Sir, just one final question on the OGL. So if you see the degrowth in that portfolio, it's like about 30-odd percent. And if you look at the number of OGL customer, that's also down like 34-odd percentage. So just what's leading to such a sharp drop, given that the OGL ticket is still around 58-odd thousand, before that, it was about INR 53,000, INR 54,000. So some perspective on that portfolio, why are we losing traction on that side of the business?

No, we are not losing traction. What happened is we started giving the same rebate to other customers also. Earlier, it was limited to the active OGL customers. Now when that has been brought to the others also, there was a decline. So what -- this number of 34% are genuine customers who wanted to operate through OGL. So from here, it will bottom up.

The next question is from the line of Piran Engineer from CLSA.

Just had a couple of questions. Firstly, you mentioned that competition is doing loans at 17%. Are you referring to banks or NBFCs? And I'm not quite understanding your reading. Did you say that our growth may slow down temporarily in the near term because of this competition because we will maintain yields at 20%. So if you could just clarify what you're implying.

See, by competition, I have in mind about the NBFCs in the public markets -- NBFCs in the public market. So I'm reading from the rates offered by them, which they have started recently. So it is because of the -- my reading is it is because of the excessive liquidity in the market. So money is available so at whatever rate they lend. So I don't think it is sustainable for an NBFC. So we decided to keep the rates around 21%, which will lead to a slower growth. So what I used to say we are targeting a growth of 10% to 15% per year. So the growth may be moderated to around 2% to 3% -- 1.5% to 2% per month for the time being. Why because when they are offering it at 17% when we want to maintain around 20% to 21%. So in terms of the interest rate, we don't want to compete. That's the reason why, yes, our growth may get moderated to around 1.5% to 2% per month, but we want to retain this.

Okay. Understood. Sir, we give these teaser loans at 7.5%, 8%, what percentage of our loan book would be at these teaser loans?

So the teaser loan is around 20%. Yes.

Got it. Got it. Sir, and also, why have we not seen any growth in Asirvad because in 2Q, we grew the book 15% Q-o-Q. 3Q, we've not grown the book while our peers, all other MFIs have seen good growth. So it's like it seems to be a bit of flip flop in strategy here and therefore, could you just clarify exactly what we are planning to do?

See, we have seen uncertain times, particularly with onset of this micron variant sorry, -- Omicron variant, we have seen some sort of uncertainty. Then we thought of emphasizing on collection and remaining very prudent in the lends. So we -- our underwritings have been made tighter. And our preference was existing good customers. So when the things improve, situation improves, we will increase the speed of disbursal. So here, I want to add 1 more sentence. Our collections inclusive of, yes, the restructured portfolio and other loans, emergency loans all put together, all inclusive, the collections have come to a level of 97%, 98%. Hopefully, this month, it may improve to 99%, next month it will cross 100%, this after billing. So the collection 100% is including arrears. But in our accounting of these EMIs whatever comes first, if at all, any arrears is there, it goes to the arrears first. Only if it clears the -- if a customer clears full arrears, it is coming to the current billing. What I understand is some of them -- many of them are the practices whatever comes -- whatever money comes, it goes to the current EMI first. Only if it is -- any excess it is going to the arrears. Our treatment in the MIS is whatever is coming, it goes to arrears first that is how we report our billing collection.

Understood. And just one last data point, what percentage of our loan book is at a 3-month tenure? Last quarter it was 53%.

Yes. It's more on the same only 50-50 kind of thing, 50% in 3 month and balance in our tenure.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

So I mean, we said that going forward, operating expenses could moderate and we would expect that advertising and promotion expenses to come down. And the same on impact, maybe we also added that maybe because the competition is offering gold loans at 17%, and we want to maintain our current yields of 20%, 21%. So we probably see moderate loan growth over the next few months. But sir, wouldn't it be fair to say that a large part of the growth that we saw during Q2 and Q3 was driven by, I mean, this higher OpEx that you had in terms of advertising, promotions or incentive structure for the employees. And now that we are kind of moderating that, we are also seeing a moderation in loan growth.

See, it is more on account of offering a lower rate to high ticket customers. So that is the reason why our yield has been -- has come down. So 9 months performance because of that, if you take from the data available in the markets, in 9 months collateral growth we have grown by 6.28%. Whereas the other players, other gold loan companies in the market, their collateral growth was 4.09%. And our AUM growth, volume growth stood at 6.37%, whereas they stood at 4.41%. So the yield on the portfolio is -- it has remained somewhere nearly around 20.5% for both the companies. So now at the rate what they have started offering in the recent past, it appears to me their yield may translate into the average yield of 17%. And if they maintain the same interest rate for a very longer time, it appears to be.

Sir, to that extent, I mean you said that, I mean, October, November months were really good. We saw the same kind of momentum that you saw in Q2 and then in December, we saw that the momentum dipped because of concerns around Omicron. So sir, I mean just -- I mean, I understand times are really different the third wave and the first wave -- but I mean, if that were to be true, I mean, would you have seen better momentum in the months of, let's say, in January and early February, when concerns around Omicron receded. And just like in Q2 of FY '21, when everyone did record levels of disbursements, are you seeing momentum really pick up in gold loans? Would you say that the demand in gold loans continue to remain tepid?

So in January also, we are not seeing much increase in the momentum -- to that extent, February also we couldn't see that. But now I hope that things will get better. Why? Because the schools start opening, the other educational institutions, et cetera. So I hope all this will create some momentum.

The next question is from the line of Ashwani Agarwalla from JM Financial.

Sir, just want to know the reason that why would a borrower come to Manappuram Finance to take a loan rather than going at another NBFC or a bank who is lending at a cheaper rate?

See one -- for the borrowers also there will be some connect with some NBFCs, regular connect with some NBFCs. That sort of affinity is there. And see for those customers pledging for a very short duration even though the rate of interest may differ by 2%, 3%, that may not be a big issue, and many of our customers are short-term borrowers. So for a long-term borrower, yes. Okay. So that's why when -- if the competition offers at 17% and we offer at 21%, we expect a growth of 1.5% to 2% per month only. So -- but then what we feel is going below even 21%, like what I see in the market from the NBFCs players will not be prudent.

Sir, just wanted to know, with the timing of [ the cases that ] and how much time do you disburse the loan and what's the time taken by the competition and the banks? And the other NBFC, which is giving loans at 17%?

We disburse within 15 minutes. We disburse within 15 minutes. If it is totally new customers, it might take another 5 minutes more, 20 minutes. That is the case with many of the NBFCs. Banks, they may take 1 or 2 hours, et cetera because their procedures are more, they are available only for a lesser number of days in a week, and their timing also mostly between 10 to 2 or 10 to 3 only whereas we are available from 8:30 to 5:30 every day, including Saturday. These are the advantages. And we have a strong client base. That is maintained. That is why somebody offers at the 17%, there may not be an erosion of our small ticket customers. Large ticket customers there may be, that's why I'm expecting a growth of 1.5%, 2% per month. That is my expectation.

Okay. And sir, because since our turnaround time is much shorter, is there any chance of any high slippage or slippage in asset quality or where we may be not able to check the quality of the material properly?

So we have not faced that problem in the past. Throughout our life as a gold loan NBFC, we were able to do that. This is nothing new.

Sir, last question from my side. We have seen our advertising expense growing substantially. What is the additional loan book which we have garnered or the additional profitability on advertising, which we have made?

See, during the second quarter -- sorry, during the first quarter, you'll see our portfolio down to INR 16,000 crores plus. Now we are nearly INR 20,500 crores. So this is from INR 16,000 crores to INR 20,000 crores plus. So a growth of around 23%. So this is the result of that activity. Because we are seeing the demand getting [indiscernible] people -- so just to energize the market, we had to do a few things. One, an advertisement campaign. Second thing, our employees are not ready to go out on the fear of this COVID, the higher incentive motivated them. These are only because of that, and these will get motivated in the coming quarters.

The next question is from the line of Sanket Chheda from B&K Securities.

So my question was if we compare the interest income Y-o-Y, that is the last year's Q3 and this year's Q3, last year's Q3 also our interest rate or the yield was about 26%. So from that, we have taken about 20% but into the yield, but at the same time, our loan book -- gold loan book is up by 10% from last time. So the net impact on the income should have been closer to 10%, but the gap still remains at 20%. It's like we are reporting 21% yield, but the impact is similar to what it could have been if the yield had fallen down to 19% or so. So why is that gap? That's one. And second, that is we have taken a sharp cut into the yield and have reported this 8% growth and last quarter was we had reported 13%, 14% growth. Why suddenly we are now losing confidence on the growth trend going ahead, if we were to maintain it now at a level at which we are currently after taking such a high fall?

So we have seen -- we're losing customers at a yield of around 25%. That's the reason why we thought of bringing it down to around 20%. So the results are seen -- no, but as I mentioned, we have seen a decline to around INR 16,000 crores from INR 19,000 crores in the Q1. Then we have come to INR 20,500 crores. So now the other -- then why now we want to moderate? Because we feel like going below this 20%, 21% will not be for a gold loan increase. If other players are doing that, let them do. And we believe that it's not our cup of tea. We can maintain a growth of 1% or 2% monthly. So even in this range, maintaining a higher yield than them and that is our strategy. Other data you ask, our CFO will share.

Yes. So if we compare last December, we were at almost INR 20,000 crores gold-loan portfolio, and we have seen declines in Q4 and Q1. So our portfolio from INR 20,000 crores has come down to INR 16,000 crores. Then from there we see the average, the main decline in yield happened during this quarter only. Q2, we have seen a 1% decline in yield because this low-yield product to high ticket customers effectively, we started in Q2. So the impact was lesser in Q2 and maximum impact happened during this quarter. So the calculation is maybe because of the year-end numbers are not the average numbers because we have seen 2 quarters decline in the portfolio. Then only we were able to build this INR 20,000 crores.

The next question is from the line of Manan Tijoriwala from ICICI Prudential AMC.

What is the proportion of disbursement above 3 lakh ticket size that will balance in Q3? And what is the proportion in the AUM as on date?

So we used to track above 1 lakh ticket size. We have seen 3, 4 percentage increase during the quarter.

Okay. And sir, do you see that the customer base will remain the flattish quarter-on-quarter and the AUM has increased so then we are acquiring higher ticket, so are we seeing that there is less demand in the lower ticket size customers? .

Yes, yes. See, this COVID has impacted the bottom of the pyramid highest. So the demand has come down from their end. And the agriculture et cetera, et cetera. So the activities have come down because less and other construction activities were particularly private construction. So we think as the rural economy has come down. And this has pulled down the demand at the -- for lower ticket.

And sir, how rate sensitive are customers in the larger versus smaller ticket prices? And are we expecting yield to remain at 20%? Or can you go back to the 25% number at some point? .

See, it all depends upon the market conditions. The RBI policy, the government's policy, et cetera, market liquidity. All these are the factors driving the date of interest.

Okay. So I mean going back to the 25%, 26% yield is not completely ruled out, right? Or are we going to now look at different yields going forward?

I'm not able to rule out that.

And how far out may be possible, how it might be possible?

Yes, I'm not able to answer that in the present situation. One thing what I want to highlight see, we always maintain asset quality high. Our NPA, yes, percentage is growing 9% only.

The next question is from the line of Nihar Shah from New Mark Capital.

Just a couple of questions from my side. You mentioned about the cost normalizing going ahead for the investments that you've made. If you had to think about it from a cost to income or a cost to AUM perspective, what do you think is the steady state levels that you would like to operate at going ahead?

So the cost-to-income ratio -- so the cost is -- cost will definitely come down. Because whether income goes up, the cost in HR may not grow so much. So it will remain more or less at this level. In the other parts like advertisement et cetera yes, which I feel it's only temporary. So all this will get moderated. High incentive to employees, et cetera, all this will get moderated. So the cost to income ratio, yes, it will come down, cost will definitely come down.

And if you are to just -- when you give us some qualitative understanding of what the competitors are doing, if I have to understand who are these competitors, is it some of the online gold loan players who've come in, the VC-funded guys? Is it some of the newer NBFCs who entered and been aggressively going in this segment, one of the more established players, banks. Where is the -- exactly the competition come from or are there multiple sources of competitive pressure?

Mainly from the conventional NBFCs. Not the new generation digital players. Banks, yes, they offer competition. But I feel like it is the -- I don't see in this situation of competition from banks several times in the past. In bad times, when the avenues for other lending comes down, banks used to be active in gold loan. When the opportunity comes for the others, their focus gets shifted to larger tickets, loans like the INR 10 crore, INR 50 crores or INR 100 crores, INR 200 crores like that. This is -- this I have seen several times in the past. You can also look at the last 10 years at times is all the banks including largest banks were aggressive, then slowed down. Yes, during this time, yes, they have become active now also to some extent they are active. But I don't think they will turn out to be a perpetual [ format ] leader.

The next question is from the line of Dhaval Gada from DSP .

Sir, just a couple of follow-ups. First is on growth for next year. So do you see -- still see the visibility of achieving 15% to 20% kind of AUM growth?

Yes. That -- I foresee that opportunity. Yes.

Understood. And the second part was on the credit cost. So overall, we've seen now for almost 8-odd quarters in the MFI business, the elevated level of credit cost, what is your expectation from that business in terms of profitability, normalization and overall credit cost moderation. Any thoughts around that?

Yes. See, for the next 2, 3 quarters, I expect some impact. After that, it will go to pre-COVID levels, provided there is no more variants of this COVID and lockdown et cetera, et cetera. I don't foresee that also because the world has learned how to live with this COVID. So I foresee the situation will come back to pre-COVID level towards the fourth quarter of next year, means that 99% collection, et cetera, et cetera. Now also, we are getting -- I hope this month we may touch 99% or even 100%, this is including arrears. This collection is all inclusive, means emergency or NBFC loans, all restructured loans have come out of that, including everything. Yes. Nothing is stopped under these as far as collection is concerned.

Understood. So basically, you're saying that the sort of normal 2% kind of pre-COVID credit cost run rate that we used to have, so that we should see from fourth quarter of next year?

Yes, at that level yes. But see, the disburse of new disbursals, the collection efficiency is around [ 100 ], 99-plus percentage. So the problem is in the pre-COVID portfolio.

Understood. Understood. And sir, just one last point on the OpEx, sort of clarification part. So overall, if you see the trajectory for a fairly long period pre-COVID we used to be in that INR 300 crores to INR 350 crores, INR 360 crore kind of a band, and that sort of continued till fourth quarter of '21. And thereafter, we started seeing this delta because of incentivization to employees, higher advertisement expenses and depreciation changes, et cetera. Just directionally, given that the growth is likely to sort of be moderate in the next few quarters, how do you see the absolute level of OpEx sort of stabilize? If you could give some perspective around -- it was about INR 522 crores, INR 523 crores, will it be in that same level in absolute terms or come down? Some color there would be useful to just get full clarity.

See we have reasons to do that. The first quarter, there was a decline of gold loan portfolio from INR 19,000 crores portfolio to INR 16,000 crores portfolio. So we have seen that the employees are not going to the field. They are not in the field. We are always on the fear of this contracting this COVID, et cetera, et cetera. So that's the reason why just to reinstate their thing will be for spend this -- sort of we have entered into immersive and advertisement and also incentivization. This will not be continued. We have reduced that once the market is okay, we are slowly reducing that. So it will definitely get moderated going forward. So the growth, we don't want to -- we don't need to add more people because the branches remain -- the number of branches remain the same. The capacity that the business could be even doubled without increasing the headcount, et cetera, et cetera. So all these are pointers towards lowering the OpEx to AUM going forward.

The next question from the line of Manju Oberoi from Yes Securities.

This is Rajiv Mehta from Yes Securities. Sir, a few questions on gold loan book. So this 1 lakh ticket size and more you said that the proportion of the book has gone up by 3%, 4% in the past quarters, what will be the overall proportion now more than 1 lakh ticket size in the AUM?

54%.

Okay. So 54% of the AUM will have a ticket size of more than 1 lakh?

Yes.

Okay. And can you assume that most of it will be a teaser loan? So you said 20% is a loan will be here, right, within this 54%?

Yes. It will be. Yes, let's see usually our 1 lakh plus -- lower than 1 lakh used to be in the same proportion, 50-50. So on the one side, the demand has come down. Small tickets below 1 lakh, the demand has come down. Whereas yes, for growth, we need to more rely on this higher ticket sized customers. That's the reason. And I think even when we increase the number of customers, going forward, we'll be able to reach the small ticket size borrowers also as the demand in the rural economy picks up.

Okay. And can I get the metro, non-metro split of the gold loan AUM book?

So you have the data?

Yes. So metro used to be 22%, Urban around 28%, and semi-urban 32% and the balance is in rural category, these are in general. Metro means Bangalore, Chennai, Delhi, Mumbai et cetera.

Okay. Yes. And just lastly on this interest rate schemes, which we were running and which we changed the interest rate stance and we went for high-value segment. We also lowered our interest rates starting from 6, 7-odd percent for higher value loans. Any changes, any reversals in the recent months, have we kind of raised the lowest interest rate now? Or are we now making it applicable to higher value loan segment as compared to just about 1 lakh before? Any tweaking that we have done recently to protect our yields or margins on an incremental basis, say, in December or January?

Yes, yes. So we have made some tweaking in some categories like yes, less than 50,000 -- between INR 50,000 to INR 1 lakhs, INR 1 lakh to INR 2 lakhs, et cetera, so. Just to ensure the yield going up to around 21% in the next 1 or 2 quarters. So which we have done, so the growth projection and expecting around 2% to 4% per month only. Yes, as long as the competition is, earlier as I read from the market, so they are disbursing where their yield may go down by around 1% or 2%, 3%. This is what I believe.

Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. Over to you.

So thank you for the questions. Any details required, we are available. Any -- because of the constraint in time, we are not able to share the in-detail data We are available and any questions anytime, you are welcome.

Thank you. Ladies and gentlemen, on behalf of Monarch Network Capital, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.