Manappuram Finance Limited (531213) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Manappuram Finance Q1 FY '23 Earnings Conference Call hosted by Elara Securities Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Shweta Daptardar from Elara Securities. Thank you, and over to you, ma'am.

Thank you, Kathy. Good evening, everyone. On behalf of Elara Capital, we welcome you all to the earnings conference call of Manappuram Finance Limited to discuss the Q1 FY '23 performance. From the esteemed management, we have with us today, Mr. V.P. Nandakumar, MD and CEO; Ms. Bindu A.L., CFO; Mr. B.N. Raveendra Babu, MD Asirvad Microfinance Limited; Mr. Rajesh Namboodiripad, CFO Asirvad Microfinance Limited; Mr. K. Senthil Kumar, Head, Vehicle and Equipment Finance; Mr. Suveen P.S., CEO, Manappuram Home Finance; Mr. Bikash Kumar Mishra, CFO Manappuram Home Finance. Without further ado, I now hand over the call to Mr. Nandakumar for his opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Thank you, Ms. Shweta. Good evening, ladies and gentlemen. Welcome to our Q1 FY '23 conference call. In our last con-call, I made a reference to whether [indiscernible] to process the economy and its impact on our books. We have now been able to see a momentum catching up and we hope to capitalize on the [indiscernible] mood in the coming quarters. However, a discussion of the [ macro economy scenario ] is to take [indiscernible] speculation about the possible downturn in the U.S. economy [indiscernible] and the concerns on the rupee exchange rate. But going by recent indicators, there is very likely [indiscernible] will be able to [indiscernible] and come out of this space as an outlier. In an important decision that came on July 1 of Central Bank hiked the customs duty of gold from 7.8% to 12.3% to create more fiscal headroom, and we don't foresee any negative impact on gold prices or the gold loan business [indiscernible] going up. And the digital penetration reaching unprecedented level, even though the inflation's slowing down the recovery process to an extent. In the last con-call, I also talked about the competition among NBFCs [indiscernible] and we decided to take more prudent approach rather than engaging in noneconomical market phenomena. The gold loan portfolio of the company stands at INR 50,471 crores. It represents a growth of 23.6% when compared with the first quarter of FY '22. Overall, the consolidated assets under management, AUM, have reached INR 30,750 crores raising an increase of 24.3% over a year ago quarter and up by 1.6% quarter-on-quarter. The consolidated net profit of INR 282 crore is an improvement of 8% over the preceding quarter. There is more competition now in the gold loan sector. But we are not unduly worried because there is still a lot of untapped potential. At Manappuram, we met long-term growth and not short-term [indiscernible]. We are very optimistic about long-term prospects for the company's microfinance subsidiary, Asirvad. [indiscernible] INR 7,013 crores, showing a growth of 15.8% year-on-year. [indiscernible] plans with our [indiscernible] for MFI, especially the renewal of the 10% [indiscernible] have created level playing fields and expand the market for all players in gold loan. We have seen maximum growth in the [indiscernible] business. [indiscernible] 15% increase year-on-year with an AUM of INR 1,755 [indiscernible] crores. The home loan business assets reached INR 875 crores. It is still 3.49% increase over [ corresponding ] quarter in FY '22. MSME and [indiscernible] AUM have increased to INR 1,113 crores, that's on 30 June 2022. For a more comprehensive review of our financial performance, I hand the floor over to our CFO, Ms. Bindu L.

Thank you, sir. Good evening, ladies and gentlemen, and thank you all for joining us. Now coming to the operational overview. Our consolidated AUM for Q1 FY '23 was INR [ 30,760 ] crores, up by 1.6% Q-on-Q and up by 24.3% Y-o-Y. Consolidated profit after tax was INR 282 crores for Q1 FY '23, which was up by 8% Q-o-Q. ROE on a consolidated basis was 13%, and ROA was 3.3% for the quarter ended June 2022. Our current -- leverage is currently only 2.8x. As guided in our last con-call, our GNPA as on 30th June 2022 at 1.43% versus 2.95% during the previous quarter. We are carrying surplus liquidity across all businesses. Cash and cash equivalents on hand on a consolidated basis was INR 2,152 crores and undrawn bank line was INR 3,195 crores. Our CP exposure is only 1 percentage of total borrowing in the standalone entity. Our ALM is well positioned across all the buckets. Standalone borrowing cost has gone up to 7.47% compared to 7.15% in Q4 FY '22 due to the repo rate hike of 90 basis points. Talking about the gold loan business, which constitutes 67% of consolidated areas, the remaining 33% comprises of microfinance, medical, housing and SME finance. Gold loan AUM increased by 1.5% Q-on-Q and up by 23.6% Y-o-Y. Gold loan yield improved to 19.4% in Q1 and thereafter to 21.7% in July compared to 18.8% in Q4 FY '22. During the quarter, we were able to add 4.2 lakh new customers. Gold loan average ticket size and average duration was INR 56,272 and 84 days [indiscernible]. Our standalone PAT was INR 290 crore, up by 9.4% Q-on-Q and down by 31.8% Y-o-Y. ROE at 14.4% versus 13.5% in March 2022. Total number of gold loan customers at 24.5 lakh, gold loan book at INR 20,471 crores. Our weighted average LTV stands at INR 3,051 per gram or 65% of the gold price as on 30th June 2022. Coming to micro finance. Asirvad AUM stands at INR 7,013 crores, flat Q-on-Q and up by 16% Y-o-Y. Due to process changes and transition to revised RBI guidelines, in April '22, disbursements were low. Since May 2022 onwards, monthly run rate of growth in MFI business is around INR 150 crores at an improved yield of 24% compared to 20.3% up to March 2022. Our collection efficiency from MFI business at 102% and disbursements during the quarter was INR 1,098 crore. In the light of new MFI regulations, we are in the process of building a higher secure gold loan book in Asirvad. The gold loan AUM as on 30 June 2022 in Asirvad stands at INR 421 crore. Cumulative ECL provision in Asirvad is INR 463 crore. Net NPA stands at 1.91%. Coming to Vehicle Finance business. Reported -- we have reported an AUM of INR 1,765 crores, which is up by 6.8% Q-on-Q and up by 68% Y-o-Y. Collection efficiency for the quarter was 100%. The [indiscernible] come down to 4% from 6.7%. The home loan business had a total book of INR 875 crores, which is up by 3.5% Q-o-Q and 30.9% Y-o-Y. This business reported a profit of INR 5.2 crore during the quarter. Collection efficiencies at 97%. GNPA maintained at 5.9%. Loan to MSME and others INR 1,113 crore, collection efficiency 107% and GNPA at 1.6%. Provisions and write-offs for the standalone entity at INR 8.8 crore compared to INR 23.6 crore in Q4 FY '22. The Board declared an interim dividend of 75 paise for this quarter. Our capital position is strong, and the company is well capitalized with a capital adequacy ratio of 31.4%. Consolidated net worth stands at INR 8,576 crore, book value at INR 101.3 [indiscernible] . We can now go for Q&A. Thank you.

[Operator Instructions] The first question is from the line of Piran Engineer from CLSA.

So my first question is what percentage of the book is still in [indiscernible] loan? Hello? Am I audible.

Yes. Yes, Piran. It is around 10 percentage of our book.

And which would mature in 2Q? Or when does this sort of run down?

So it will be the maturity up to December '22.

Okay. And how do we really think about [ yields ] going forward right now, it's 21.7%? Does it go back to the 25% level or does it settle around 22%, 23%?

I hope [indiscernible] around 21%, 21.5%.

Okay. So July yields is what is indicative of the future?

Yes, yes. This is the indicator of the future. But -- yes, [indiscernible] move for the references move further and borrowing [indiscernible] et cetera to that extent it may go up at this level, at the current level, even at 50 bps increase policy rates, I think it may settle somewhere around 21% and 22%.

Got it. Got it. And sir, second question on your Slide 17, where you talk about Q-o-Q growth of gold loans for bank, this is only personal gold loans, right? You're not taking [indiscernible]?

Yes. [indiscernible]

Yes.

It's only personal gold loan.

Yes.

[indiscernible] only.

Okay. Okay. So banks you are saying or becoming less competitive. What about competition within the NBFC space from either the standalone gold financials or the multi-product NBFCs who also do gold loans, how is competition from them?

So the competition is there for any product complication would be the -- what I have said is, even though there is competition and the competitive landscape may large also. But in India, we have a vast custody of gold. And in India there is gold import also to the tune of around 800 to 1,000 tonnes annually. And major portion is still going for jewelry households jewelry, et cetera. While the competition landscape increases, widens, so the family would also increase. So yes, we can expect competition more players would come, but the possibilities are also -- opportunities are also increasing.

No. But I mean, are there more competitors today than there was 6 months back of competition has gone down a bit from then? I understand competition will always be there, but is it more or is it less?

The competition is similar to 6 months back. The current situation is from the lower segment, the demand has to come to the level of pre-COVID. So it is -- this is every evident from other segments also like small ticket borrowing, whether it is small ticket borrowing for housing finance or 2-wheeler, small cars. So the demand is yet to pick up to the level of pre-COVID. But at the same time, it is showing improvement, consistent improvement. Particularly for gold loan, the demand starts from school reopening season, et cetera, we have seen some demand. And the real demand comes when the agrees sowing season starts. It starts post monsoon from September onwards, it will start. So we hope by that time, the segment where the demand we've seen less now also will catch up.

Okay. Okay. And sir, just one other thing that if growth remains sluggish, as we are delivering 1%, 2% Q-o-Q, will the industry not again reintroduce loans to gain -- to get some growth? Like it can happen again in Diwali, right? Or is that...

Yes. What we look at is, yes, we have also introduced some [indiscernible] . Now after doing that what we see is, we should always have an eye on to the profitability. So with that, with an eye on profitability, we want to give importance to the yield now. So we want to see a stable yield in the sense that it will not go down below 20% or 21%. This is -- yes. And within that, whatever is the growth possible, we feel like growth is possible. So we hope the situation should improve. Another big picture for us is Asirvad coming back particularly in the background of the regulatory changes are moving in cars and allowing these companies to have up [ to 28% ] of the [indiscernible] portfolio which we are utilizing to build [indiscernible] portfolio that we have started that. And it has crossed around INR 400 crores [indiscernible] this quarter we will see a significant growth there. And other businesses like [indiscernible] these are also showing a good rate of growth. So the things are going to improve here onwards. And things should come back very soon.

Got it, sir. Sir, just lastly, [indiscernible] got RBI approval to open 150 new branches last month, any update for us?

Yes. So we are also awaiting. Yes, we are awaiting that.

Okay. Okay. Anything more you can say on that front?

Yes. No, they have contracted an inspection. And there are some action points which we can do during this quarter. And I hope once these are completed, we will also get the branch opening permission.

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

So my question was on [indiscernible]. We are seeing that in July [indiscernible] have moved up to the [indiscernible] and we are seeing that going ahead in could stay at 20%, 21%. Then how should we look at rupee growth in the gold loan book? What point do we aspire for this year, [indiscernible] ?

Yes. So today, the growth is flat. But where I see is -- where I hope the improvement will take place is when the demand from the lower segment really catches up. I hope this will catch up soon because sowing season which starts just after so we are waiting for that. Some things should improve from September, et cetera. So gold loan is stagnant now as of now. But I see the other segments already growing like commercial vehicle segment, MSME segment, et cetera, et cetera, are showing quality growth. And also your MFI also will perform well in the coming quarters. And I expect [indiscernible] are able to clear for the pre-COVID portfolio, which is not very significant now. So this will happen next 2 quarters fully, then it will come back to a model of around 5% ROA. So this will significantly support the consolidated balance sheet and P&L.

Okay. Sir, so as of now, you are not putting any numbers on, say, gold or overall [indiscernible] right?

Yes, no, gold loan, I have said around 10% growth, is this quarter, you have seen we could achieve a figure around less than 2%. So I have the hope that in the coming quarters, it will pick up. I'm not saying the growth will not be achieved. It will pick up, this is my hope. Whereas in all other segments, we will achieve a growth of much more than 20%.

Okay. Okay. And while sir, competition from banks you're saying it is similar to what it was say 6 months back, but then are we seeing any traction from the unorganized space if there are any signs of that shift happening from unorganized to organized? Because now the differential has widened though even if we are at 20%, 21% versus 26% earlier, the differential has widened. So are we seeing anything on that front?

So for the mortgage sector as well as the NBFCs or even for improving the yield, the demand should come from lower middle class. Lower middle class in the sense who borrow an average of INR 1 lakh or below INR 1 lakh. This is [indiscernible] . Yes, which will definitely help us on 2 things: one, push the AUM up and also the yield up. That segment is yet to catch up fully. So this is what I have said in this segments across all businesses the demand is here. So post monsoon, I hope things will pick up. We expected that to pick up when the school reopening reason starts. There was some growth, but after that, this year, [indiscernible] segment or less, but post COVID -- post monsoon, when they go for purchasing fertilizers, sowing, et cetera, et cetera, they have no other way but to have the working capital. And by that time, I hope it will catch up. So that the targeted growth would be possible in the coming months.

Then last question from my side, have we provided anything as a contingency on our exposure out of our MFI book? Or do we see a potential [ paying out ] in the coming quarters?

So the collection in the MFI segment [indiscernible] around 102%. So we are able to collect beyond the billing, so on an average [indiscernible]. And specifically to Assam, we -- first of all, we have small portfolio. And we don't have -- we didn't have the portfolio in branches, which actually saw a serious recurring problem. So in Assam also, the collection -- our collections have come back to similar to the other states, it's only a marginal decline compared to the [indiscernible]

The next question is from the line of Alpesh from IIFL Securities.

First question is on the Slide #18. When I see the portfolio...

This is the operator. Alpesh, we are not able to hear you clearly. Audio is like muffled, can you please check?

Is it better now? .

Yes, slightly better. Request you to use your -- I mean, if you're using your phone or speaker just to avoid those.

I'm not using those. So sir, Slide #18, when I see the 1Q auction which were at almost INR 1,550 crores. And when I see the 4Q auctions, we were at around INR 920 crores, but however, the impact on [indiscernible] in March was significantly higher as compared to the numbers that you have reported in 1Q. What were the specific reasons, one, you have mentioned that there is a onetime auction [indiscernible] was that exactly and why the loss was relatively less in 1Q of last year?

So Slide 18, I thing you are talking about the yield slide, right?

Yield slide, yes, that's right.

Yes. So March '22, the yield has come down due to the auctions. You are aware...

Bindu, what was the auction amount in March, the onetime loss related to that auction?

So that I will come back. It is -- it was around INR 1,000 crores. Q4 was INR 900 crore...

No, auction for the March month, you have mentioned INR 618 crores, but there is no specific amount given for the losses related to that.

Yes. So overall, there was an impact on the overall yield due to 2 reasons. One is the low yield product plus this auction loss. On the specific number of auctions on account of this INR 618 crore auction, I will come back to you.

Okay. And then if I correlate this auction from 4Q versus 1Q of last year, the yields were not impacted so much in 1Q FY '22, but they got impacted significantly in 4Q FY '22.

Okay. So if we compare the auctions in Q1 of FY '22, we were at on this side 26% yield.

Yes. But the auctions were almost INR 1,550 crore, whereas when you look at the 4Q FY '22 yield, yield was 18.8%, but the auctions were 2/3 of what was there in 1Q FY '22. I understand there was obviously pricing pressure related to the product, but it seems to be auction-related losses seems to be significantly higher.

Yes. So 2 reasons. One is the low-yielding product. We were at a low yield. Every month it was coming down. So I will get back with the details how much relating to the yield issue and the auction loss.

Okay. The second question is on gold loan. So now -- on the gold loan branches so to say. In Asirvad, we have opened 320 branches which are dedicated specifically to gold loans. So do we have to go through the RBI to get the approval related to that or once we cross the threshold of 1,000 branches after that [indiscernible]?

See, 1,000 branches alone is not the criteria, it's one of the criteria. So Asirvad, even if it crosses INR 1,000 crores, we need not move. Because there is another criteria which is applicable only for gold loan companies. As long as Asirvad's portfolio is below 80%, it is not defined as a gold loan company. Anyway, for an MFI, there is a cap of 25% [indiscernible] beyond 25% non-MFI portfolios cannot [indiscernible] so the question doesn't arise.

Okay. So basically, we can open the gold loan specific branches in Asirvad without doing the RBI [indiscernible] ?

Yes, [indiscernible] so without prior approval.

And the branch reclassification, which has not the number of branches reduced in the previous quarter, this is on Slide #27 related to Asirvad. Is it because of this reclassification?

Branch decline?

So when I look at Slide #27, the Asirvad branches reported for FY '22 is 1,062, whereas in the previous quarter, it was 1,500-plus. Is there any reclassification here?

No, no. So [indiscernible] MFI branches and [indiscernible] including gold loan branches.

Okay. So earlier we used to report including gold loan branches, now with specific or dedicated [indiscernible] ?

Yes. Yes.

[indiscernible] they are not paid branches, they are gold loan branches.

Okay. And just the last question. The Asirvad AUM, which you reported on Slide #26, which is INR 7,000 crores, whereas in the earlier slides, the MFI-related AUM is around INR 6,400 crores, so difference is the gold loan AUM in Asirvad?

Yes. INR 421 crore gold loan and INR 6,500 crore odd number in MFI.

Okay. And in case of Asirvad, our cost of funds have declined by almost 30 basis points, whereas I see for the standalone operations which has gone up, and any high-yielding borrowing that does mature in Asirvad or any -- or some [ PSL ]-related [indiscernible]?

So with the mid cap removal, we are taking a lot of efforts to reduce the cost of borrowing in Asirvad and [indiscernible] borrowing cost plus 10 percentage. So we are negotiating with the lenders and that is the reason -- and some high-cost borrowing, it's a surplus liquidity they were able to repay. And that is the reason we were able to maintain the borrowing cost [indiscernible].

Okay. And sir, what is your experience related to this RBI new guidelines related to the calculation of the household income in the MFI business? Are you seeing any impact on your business or the -- what percentage of your portfolio is already qualifying [indiscernible]? Any experience based on the implementation of the [indiscernible]?

Yes, yes. Yes, household income, see, the RBI guidelines accordingly, we have changed our software and our [indiscernible]. So we started doing like that from the very beginning.

Okay. So was entire...

[indiscernible] in the household income, et cetera, and we are capping to the maxim of flow at 50% towards EMI repayments, et cetera. Whatever has been -- whatever amendments have been made in the regulation has been implemented and controlled using the software.

Any impact on our outstanding portfolio because of this implementation?

No, not outstanding. So it is the incremental portfolio only, no, that the only fact is possible there's no impact on the outstanding portfolio.

[Operator Instructions] The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

Ma'am, [indiscernible] , the first thing, rather than talking about yields, I would say, can you kind of guide on the spreads that you'll be looking to maintain? Because I understand this could be a function of how interest rates kind of behave or how -- what actions RBI takes. So if you could just help us understand, I mean, why the spreads have improved on a sequential basis? Why you have already shared [indiscernible] 21.7% as in July? Can you help us understand, I mean, where would cost of borrowing been put at? Just to understand what kind of spread are you looking now?

Okay. So we were at 19.4% goal on Q1. And our overall AUM is around 19.7% after 7.47% is our cost of borrowing. But the increase in yield is higher than the cost of -- increasing cost of borrowing. And that is the reason we expect an improvement in the spread.

So then 7.47% is for the cost of borrowing as on let's say, June quarter, what is the cost of borrowing as on July? So comparable number for 21.7% yields that you reported as in July?

So this July, it is not very different. It depends on the new [indiscernible] which we are doing. So during the quarter, we expect another 25 to 30 basis points increase in the cost of borrowing.

Got it. Secondly, I mean, I was seeing except for the first 20 days of April, where, I mean, the gold prices had actually spiked, there was not a very significant change in gold prices at least during the first quarter. So I mean, how do we kind of explain the sequential decline in your gold holdings?

See, the gold holding decline when the price was going up because the people are borrowing to meet their [ requirements ]. And they have -- they know the necessity of the [indiscernible] which is the timeframe. So they daily have their calculation both their cash flow and affordability to borrow as far as gold loan is concerned, unlike many other loan. So the -- so when the gold price goes up, the LTV is absolute amount goes up. So the tonnage will decrease. The reverse is the case with gold price going up.

Okay. Okay. And sir, on Slide #6, where you have given the commentary for the quarter, you talked about pruning the lower yielding, higher ticket size, 6.9% in gold loan portfolio, which you also suggested is about 10% of our book and is expected to run off by December this year. Two questions here. I mean one is how are you saying that we're looking to prune this portfolio? Are you talking about the rundown that happens in the normal course or something that we have to kind of hear that I mean, during the quarter, a lot of other gold finance companies are actually reached out to customers and was costing them to kind of increase the rates basically moved from 6.9% to maybe 9.9% or a 10.9%?

So you [indiscernible] natural duration [indiscernible] they are postponing a redemption not based on interest rates. So the average life of the loan is around -- compared to a [indiscernible]. So there's a natural reduction process, not being taken over by the other NBFCs.

Okay. Sir, my last question is on your MFI business. I don't know if I'm kind of [indiscernible] right, I mean is the Stage 3 increase from 1.7% to 7.7%?

Yes. MFI Stage 3, as you are aware, last year, there were resolution plans available to the customers. And [indiscernible] we had a higher restructuring book. And we were continuously for [indiscernible] but expecting that only we keep providing something extra. And now that in their building and they are not paying for 3 months [indiscernible] to flip to Stage 3. So this structured book, whatever stress is there that is materialized during this quarter.

Okay. So ma'am, just a last follow-up question here, which means that the stress which was there and [indiscernible] talking about in the restructured pool of your MFI business, that's all reflecting in the 7.7% now?

Yes.

So ma'am, now the follow-up question here was that, I mean, I think somewhere on Slide #6, we've also talked about credit cost now expected to decline going forward from your MFI business. So I mean what we've been seeing over the last 3 to 4 quarters is we've been doing credit cost of about INR 100 crores to INR 120-odd crores in MFI business. So what could be the run rate like in terms of credit cost in the MFI business going ahead, assuming what you suggested last part of the stress has already slipped to Stage 3 now?

Okay. So we expect a substantial reduction in the credit costs in the coming quarters. So we will see -- we expect improvement in September to some extent and I things should be much better in the second half of the year. So we are expecting some kind of 1%, 1.5% ROA for this year is our expectation. So that is the reason we feel that on whatever the stress in the [indiscernible] to get to Stage 3. And because of this provisioning, we were able to match debt in this quarter. So going forward, we expect the credit cost to come down, and we will see a better ROA in the second half of the year.

See, [indiscernible] portfolio is somewhere around 88% now. So it is only 88% [indiscernible] and there the collection efficiency is nearly 99% there. Whereas pre-COVID portfolio has come down to around 12%. So there also the collections we hope will improve even [indiscernible] portfolio.

Got it. [indiscernible] to it?

Yes. And now for incremental disbursal [indiscernible] around about 15% [indiscernible] increased from 10% using the relaxed regulation with regard to the new [indiscernible].

The next question is from the line of Alpesh from IIFL Securities.

Sir, if I see your home loans, there has been a continuous reduction in the average ticket size related to the home loan segment [indiscernible]

So the reason is we focused on high-yielding loans, small ticket loans to improve on the yield. So that's the reason. So now we started focusing on slightly more higher ticket so we hope it will grow slowly, and we are expecting that to touch around 10 lakhs in another 4, 5 quarters, 4, 5 [indiscernible] loss.

Okay. So what would be the average yield on the incremental disbursement [indiscernible]?

Now it is on the incremental portfolio, we are getting a yield of around 16%.

And what was it [indiscernible]?

Earlier, -- yes, earlier it was hovering around 14-plus percentage. So it has improved by 150%. On the incremental portfolio, it has gone up by 200 bps from 3 quarters past.

Because these numbers are not reflected into the yields that you report on the outstanding portfolio. The outstanding portfolio home loan yields remain at around 14% since many quarters.

IT is 16% now.

In the home construction, it's 16%, but outstanding portfolio, at least what is reported in the PPT is around 13%, if I'm not wrong. Whereas, the share of home loan has gone up, average ticket size has come down, but the average yields remain more or less similar at around 20%.

The average yield has improved quarter-on-quarter, earlier it was like around 15%, now it is 16.09% around.

Okay. Because what is reported in the PPT is [indiscernible] it's Slide #30.

No, there are 3 bifurcations: home loan, home construction and lap.

Yes. So the home loan is showing 14%.

The home loan are basically like purchase ready property, where like we give 14% around and home construction is construction property where like the stage-wise construction funding we are doing, that is 16%. And for lap portfolio, other than housing loan, that is 18%.

Weighted average.

Weighted average overall is 16.09%.

All right. So I'm talking about the home loans segment right?

Home loan includes construction, home construction [indiscernible] This is just bifurcation we have given what is construction pool, what is the [indiscernible] property?

Yes, sir. I understand that. But when you look at this 40% portfolio within the home loan housing finance. Which is the pure home loan business average ticket size is INR 6.5 lakh, this needs to be INR 10 lakh-plus a few quarters back. And the yields that we have been reporting on this business is 14% constant. So I'm just trying to understand what [indiscernible].

We will come back on that.

The next question is from the line of Aalok Shah from Monarch Networth.

Sir, a couple of questions on the microfinance book. One is, can you kind of help us understand the targeted trajectory on the Stage 3 assets? Where do we see that by end of this fiscal? And an extension of that, what is the guided credit cost for FY '23?

Yes. So whatever restructured book [indiscernible] to this quarter. And if you see the break up our Stage 1 is almost 87% and Stage 2, Stage 3 is 13%. So we believe that there will be much addition and we are holding nearly INR 462 crore provision against this Stage 2 and 3. So going forward, I think for the whole year, we are expecting a much lesser credit cost. FY '22, we had almost INR 400 crore P&L impact on account of credit growth. And this year, we expect much reduction making after the first quarter, in fact, I think the numbers should come down.

Yes. So do you want to put a number to it, ma'am or [indiscernible] tell the trajectory for going back to where we started?

[indiscernible]

Rajesh?

Yes. Sir, in this regard, I think most of it is already crystallized. So slight increase is only expected on this. So the number should hover somewhere around this actually. This would more or less stay as it was.

So that is the credit cost number. Will that kind of remain sticky for the coming quarters?

No, for the current live book, it would be, but going forward, as the book -- I mean, we closed on some of it, it would come down in the -- by the margins.

Okay. My other question is on the capital positioning Asirvad Microfinance. We are at 19.8% capital adequacy. So what is the thought through on augmenting capital in this business?

So see, our capital adequacy is very high. Our leverage is around 2.8x. So we have plenty of room to play around. But at the same time, if the environment is good, valuations are good, we are open to the capital from the market also. So that idea is always open, but we [indiscernible] to ensure that the growth is not shortened or impactful anyway. We will come [indiscernible]

Sure. And just one bookkeeping question. If I heard it right, May onwards, disbursements are at INR 150 [indiscernible]

[indiscernible]

Yes, that is the net growth. Yes, if you see...

It is around 550, 600.

550 to 600. Yes.

The next question is from the line of Ankit Patel from L&T Mutual Fund.

Sir, again, sorry to continue on this subject. This -- you said that some of this book will run down the MFI book, which will result in reducing credit costs and improvement of the Stage 1, Stage 2, Stage 3 split. But unlike gold, some of -- what will be the tenure over here that we are looking at? And again, could be unsecured kind of facility. So do you believe that there would be losses on these accounts? Or what is the recoverability on these restructured accounts?

See, the restructured accounts in different buckets with our collection efficiency is around [indiscernible]. We hope it will further improve to around 40% plus, yes, in the coming days because why we are saying that it was lower than lesser than that. So it is improving, it is showing month-on-month improvement. So this is something [indiscernible] portfolio. The portfolio is around 88% now, nearly 87%, 88% now. There, the recovery is around 99%. And so the pre-COVID total portfolio is around 12%. There also, the recovery is to the extent of 1/3 now. It is improving. So sufficient provisions have been taken in the past. And during the next quarters, it will be over. And we expect to report an ROA from the business of around 1.5% during this year itself -- last quarter, yes.

And the average tenure is around 24 months. And so the pre-COVID book, March '20 book will be maturing now. And because of this resolution plan, customer also not getting that impact because their bureau record will be proper as we have the restructuring also helps them to keep their bureau record clean. But the asset is getting matured and split NPA, now I think customers are also showing more interest to close the launch and so that they can continue as a [indiscernible].

We take the last question from the line of Sanket Chheda from B&K Securities.

Yes, sir, sorry, I lost [indiscernible] So what was the guidance on provision on the overall book and also on the MFI book for this year?

So this year -- so the MFI book, we took about INR 120 crore in the first quarter. So in the coming quarters, our expectation is much lesser credit cost. I think the overall provisions, half of last year is our expectation.

So last year, we did about INR 490 crores. You are saying INR 250 crores, of which INR 130 crores we have already taken?

So last year, MFI loan was INR 400 crores. And all other portfolios also temporary there was a spike in NPA number. So now all other businesses settle down almost with pre-COVID NPA levels. In the case of MFI, we expect half of last year.

So 200 MFI, maybe 100 and other businesses should not exit INR 300 crores, is that right assumption to go?

[indiscernible] businesses, we are not expecting that because we are seeing stability.

Okay. So what you have provided this quarter in totality that much only you will provide in next 3 quarters put together.

Yes. So maybe an increase in the second quarter, then I think will normalize in second half.

Okay. Okay.

Ladies and gentlemen, with this, I now hand the conference over to Shweta Daptardar for closing comments. Over to you, ma'am.

Thank you. On behalf of Elara Capital, we thank the management of Manappuram Finance to give us the opportunity to host the earnings call. Thank you all.

Thank you. Thank you.

Thank you.

Thank you, members of the management. Ladies and gentlemen, on behalf of Elara Securities Private Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.