Manappuram Finance Limited (531213) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Manappuram Finance Q2 FY '24 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir.

Thank you, Sagar. Good evening, everyone. Welcome to the earnings call of Manappuram Finance. We have with us today the senior management of Manappuram Finance represented by Mr. VP Nandakumar, MD and CEO; Dr. Sumitha Nandan, Executive Director; Ms. Bindu A.L., CFO; Mr. B.N. Raveendra Babu, MD Asirvad; Mr. Rajesh Namboodiripad, CFO; Mr. Kamal Parmar, Head, Vehicle and Equipment Finance; Mr. Suveen P.S., CEO, Manappuram Home Finance; Mr. Robin Karuvely, CFO Manappuram Home Finance; and Mr. Basavaraj Shetty, Senior VP and Head IR, Asirvad. I now hand over the mic to Mr. Nandakumar and other members of the senior management for their opening remarks, post which we can open the floor for an interactive Q&A. Thank you, and over to you, sir.

Thank you. Good evening, ladies and gentlemen. Welcome to the conference call for the second quarter FY '24 financial. It gives me immense pleasure in presenting our results when India is continuing the growth momentum despite the global uncertainties and geopolitical tension. While IMF has downgraded global GDP growth by a notch, in its last outlook, India growth has been revised upward. In this backdrop of an optimistic environment, I present before you for Q2 FY '24 financial, a balanced and prudent growth strategy which I have been reiterating for many quarters is now going in full swing. In this quarter, we have achieved good growth in both AUM and profitability at the consolidated basis. I'm happy to share that we have recorded a net profit of INR 561 crores. It's an improvement of 37% year-on-year, driven by profitability in gold loan and microfinance business. Gold loan AUM was INR 20,809 crores, an improvement of 8.4% over the year ago quarter and 1% sequentially. We have maintained the pricing discipline in a very competitive environment and improved upon the profitability. We are committed to maintain the momentum on the gold loan business while standalone AUM of the entity at INR 26,696 crore grew by 20.2% year-on-year. The consolidated AUM has reached INR 38,950 crore, representing an increase of 27% over a year ago quarter. Asset quality, in standalone book is comfortable at an NPA of 1.56%. Company's microfinance subsidiary, Asirvad has posted an AUM of INR 10,950 crore, recording a growth of 43% year-on-year and a profit of INR 118 crore, which is up by 109% year-on-year. Both in the gold loan sector as well as microfinance, unmet credit gains are huge and therefore, there is enough headroom to coexist for all players, whether it be bank, NBFCs or fintech. Continuing with the trend in the previous quarter, we have posted a maximum growth in the vehicle finance business recording 66.7% increase year-on-year with an AUM of INR 3,143 crore followed by home loan with an AUM of INR 1,305 crore, we have seen 41.6% increase over the corresponding quarter in FY '23. For the vehicle business, we are increasing the penetration in rural and semi-urban locations apart from using digital lending platforms and automated approval processes. MSME and Personal Loan segments are another area where we want to increase our presence by increasing the number of branches. And as of now, we are making a steady progress. As mentioned earlier, the strategy of diversifying into other sectors is gaining pace. The share of nongold vertical in our total assets under management now stands at 47% and is in line with objective of achieving a 50-50 portfolio between gold and nongold segment. Given the strong growth in AUM and excellent earnings, the Board is happy to announce an increase in dividends and raising payout to INR 0.85 during this quarter. We are confident of achieving both top line and bottom line growth as we continue to maintain a comfortable liquidity position by keeping the cost of funds reasonable. For a more comprehensive review of our financial performance, I hand the floor to our CFO, Mrs. Bindu A.L.

Thank you, sir. Good evening, ladies and gentlemen, and thank you all for joining us. As you are aware of, Asirvad Microfinance filed DRHP on October 5, 2023. We are not in a position to give more numbers for Asirvad except those which are in the public domain relating to results. We request our participants to restrict their questions on Asirvad to published numbers. Coming to the operational overview, our consolidated AUM was INR 38,950 crores, representing 5.1 percentage sequential growth and 27 percentage Y-o-Y growth. Consolidated profit after tax was INR 561 crores, which was up by 12.6 percentage Q-on-Q, and 37 percentage increase Y-o-Y. ROE on a consolidated basis was 21.6 percentage and ROA was 5.3 percentage. Our leverage is currently at 3x. Cash and cash equivalents on a consolidated basis was INR 4,871 crores and undrawn bank line was INR 4,253 crores. Our CP exposure is 2.9 percentage in the stand-alone entity. Stand-alone cost of borrowing has gone up by 21 basis points during the quarter. About the gold loan business, which constitutes 53% of the consolidated AUM, there is the remaining 47 percentage comprises microfinance, vehicle finance, housing and MSME finance. Gold loan AUM at INR 20,809 crore, an increase of Q-on-Q 1 percentage and up by 8.4 percentage Y-o-Y and the number of live customers stood at 24.63 lakhs. During the quarter, we were able to add 4.03 lakh new customers. Our average LTV is 66 percentage. Online book accounts were 56 percentage of the total gold loan book. Our stand-alone PAT was INR 420 crore, up by 10.2 percentage sequentially and up by 20.4 percentage Y-o-Y. Our stand-alone PAT for the half year was INR 801 crore, up by 25.4 percentage Y-o-Y. Coming to the microfinance business, Asirvad Microfinance AUM stands at INR 10,950 crores, including gold loan AUM of INR 815 crore, up by 8 percentage Q-on-Q and up by 43 percentage Y-o-Y. PAT for the MFI business has increased to INR 2, INR 118 crore in Q2 FY '24 versus INR 111 crore in Q1 FY '24. For the half year, the profit increased to INR 230 crore versus INR 48 crore in the last year. The NPA stands at 1.44 percentage and the CRAR at 24.47 percentage. Vehicle finance, we have reported an AUM of INR 3,143 crore which is up by 13 percentage Q-on-Q and up by 66.6 percentage Y-o-Y. ROA for the business is around 1.5 percentage for this quarter, collection efficiency 100%. GNPA reduced to 2.5 percentage. Home loan business with a book of INR 1,305 crore, Q-on-Q growth of 8.5 percentage, 41 percentage Y-o-Y growth, operating from 65 branches and reported a profit of INR 4.5 crore. ROA at 1.4 percentage; collection efficiency, 96%; and GNPA, 1.75%. Loan to MSME and allied businesses INR 2,639 crore and the ROA 2.2 percentage, collection efficiency 96 percentage and GNPA at 1.9 percentage. Lending to NBFCs, AUM stands at INR 920 crore, ROA is around 5 percentage during the quarter. Provisions and write-offs for the stand-alone entity during the quarter stood at INR 31 crore compared to INR 21 crore in the previous quarter. Our capital position is strong, and the company is capitalized at a capital adequacy ratio of 30.7 percentage. And the consol net worth stands at INR 10,572 crore and the book value at INR 124.90. Thank you. Now we can go for the Q&A session.

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

Congrats on the strong numbers. Just a few questions. Firstly, we did an assignment this quarter. What exactly was it? Like we have assigned gold loans or vehicle or other loans?

So we did assignment for MSME and vehicle finance book to banks.

Okay. And what percentage of the book did we sell-down, like what is the quantum of sell-down rather?

So we did in the earlier quarter also. Put together, it is around INR 700 crore. It is a normal standard book, which is also line of liquidity.

Okay. But why are we doing this when our Tier 1 is at 30%?

Yes. So we should have -- we have to maintain the relationship with the bank. So sometimes, this will help them to meet their PSL requirements also. So it is not very big. So sometimes we have to do that. We have to open different line of sourcing. Gold loan, to some extent, assignment is not possible. But as we are into nongold businesses, we are opening up these lines also.

Got it. Okay. Okay. That makes sense. Secondly, I noticed in the stand-alone and consol statements, our employee expense has gone down, but the other expenses have gone up a lot. So have we moved some employees to off-roll or something like that?

No. So the reduction in the employee cost on account of -- it depends on the growth asset quality. So sometimes, we will give more weightage to asset quality like that. So to some extent, it is on account of reduction in incentives. Otherwise, the number of employees we are adding based on the employee productivity. Admin expenses, we had to add the communication lines more to the branch, et cetera, those were the reasons.

Got it. Got it. And just lastly, you can give some broad comments on the gold loan space in terms of competitiveness of the environment? Because we are seeing you all are able to pass on 50 bps of yield hike this quarter. Muthoot, on the other hand, had to shed yields by about 40, 50 bps. So just overall, how the environment is in terms of competitive scenario, both on growth and pricing, that would be helpful?

So as I mentioned in the opening remarks, we want to maintain the price discipline at around 22%-plus. And yes, we believe that the market also will gradually realize that. Peers also will gradually realize the need because the funding cost, yes, is going up and the trend is not reversed now. So that's our policy. And we expect the coming quarters to be -- to remain good as far as gold loan is concerned as a usual scenario.

No, are banks being as aggressive as they used to be or less aggressive? Have you seen that competition taper down?

So yes, when their credit growth goes up, and their credit deposit growth is at 8 -- if they are comfortable, naturally, their preference for small ticket loans will come down, and that is happening now.

The next question is from the line of Shubhranshu Mishra from PhillipCapital.

Just some data-keeping questions. If you can spell out what was the percentage of AUM less than 3 months of tenor as a percentage of the book? And if we can split the book into less than INR 1 lakh, INR 1 lakh to INR 3 lakh and INR 3 lakh and above? And what was the auction number this quarter? And if we can get the weighted average LTV in rupees?

The auction, it is INR 15 crore, last quarter -- this quarter. On the LTV, percentage is 66 percentage on INR 5,300.

Say that again, INR 5,300?

Of old price 66 percentage, average LTV.

In rupees, sir, what was it?

Yes, we'll come back. On the portfolio prices, we are up to INR 1 lakh, 44 percentage. INR 1 lakh to INR 5 lakh, we have prices like that, INR 1 lakh to INR 5 lakh, 41 percentage and the balance above INR 5 lakh, 15 percentage.

Okay. And what was this -- and...

INR 3,512 is in rupee terms.

3,500?

INR 3,512.

Understood, sir. And sir, what has been the accrued interest in this quarter versus last quarter, sir?

3.7 percentage is for the quarter, to around similar in the...

Same level.

Understood. Understood. And ma'am, if we can give out the split of the book last quarter as well, less than INR 1 lakh, INR 1 lakh to INR 5 lakh and INR 5 lakh and above?

We will send you separately.

The next question is from the line of Pratik Kothari from Unique PMS.

Sir, my first question on the microfinance side, I mean our expectation was the credit cost -- we did some write-offs last quarter and credit cost was expected to come down, which we haven't seen. So anything to call out, if you can highlight?

See, microfinance, as we filed the DRHP, we can talk only the numbers in the public domain. So the quality in the book has improved. So we will come back with the detailed numbers when we are allowed to do that.

The next question is from the line of Rati J. Pandit from Nirmal Bang Institutional Equities.

Yes. Can you hear me?

Yes.

My first question is with respect to your auction surplus, which you had mentioned in the first quarter, it was around INR 36 crores. So has the effect reduced further? And if any update from RBI on the branch expansion with respect to gold loan branches? This is my first question. And my second question is what is your outlook on the gold loan business growth? I mean, if we look at, I mean, over FY '24. I mean, in the past 1 or 2 months, we all have seen at a macro level, if the geopolitical tensions, they extend a bit. So do you think that, I mean, there could be better chances for growth on the core business? These are my two questions.

The auction surplus, as you have said, which was around INR 38 crores has come down to around nearly INR 30 crores now, and it is coming down. But the RBI is looking forward for a couple of quarters whether we are able to bring it down, and we have demonstrated that we are able to do that. And we hope that the RBI will be very happy with that. And there won't be any problem getting bank's permission. And regarding the gold loan opportunity, as I have said, yes, we are maintaining the price discipline at around 22%-plus. That is our -- with that, we have got the growth of 8% Y-o-Y, and the coming quarters are generally good for gold loan, so we hope to take up the advantage of that.

Okay. Auction surplus, I'm sorry, how much you said, you said it has come down. So...

We hope it will come down by around INR 2 crores to INR 3 crores every quarter. And it is in line with the plan that we have shared with RBI verbally.

The next question is from the line of Mona Khetan from Dolat Capital.

So firstly, on the MFI group, while we've seen an 8% sequential growth, if I look at the revenue from operations on Slide 21, it has declined Q-on-Q, so what explains that?

So if you see the DA income, it depends on how much direct segment transactions we have done during the quarter. So if you compare Q1, we have done a larger amount of DA and our upfronting of income was INR 55 crore, which reduced to INR 28 crore during the quarter. Other than that, the yield has gone up. Interest income has gone up. Only the difference is on account of less DA transaction during the quarter.

Got you. Secondly, if you could just share again the breakup of loan book by ticket size up to INR 1 lakh and between? I just missed that.

Yes, up to INR 1 lakh, 44 percentage; INR 1 lakh to 5 lakh, 41 percentage; and above INR 5 lakh, 15 percentage.

Got it. And just finally, though I understand the LGDs in the gold business are near nil, if I put together the auctioning and the rise in NPA, it seems that -- and also the higher credit cost, it seems that you are seeing rise in NPAs in this business, unlike, say, in MFI and stuff. So if you could highlight what you're seeing in the ground that is resulting in higher delinquencies in the business?

So your question on the credit cost of gold loan, you are right, the LGDs are very less. And credit cost -- during the quarter, we had done an auction of only INR 15 crores, and we have not incurred any loss on account of that.

Right. What I wanted to understand is if anything you can highlight on why the delinquencies are higher in this business? We've seen something like this for other NBFCs as well. So if you could just share what you're seeing on the ground, that will be helpful?

See, as per contract, gold loans, if the customer is not redeeming, we have the option to sell the gold and recover the money before becoming NPA. But sometimes, considering the request from customers, we may give some more time to the borrowers. As the underlying collateral and our receivable is secured based on the request from customers, we may give some more time to the customer. That is the only reason. Otherwise, for the NPA, before becoming NPA also, we can sell as per the contract.

The next question is from the line of Rajiv Mehta from Yes Securities.

Congratulations on good numbers. So my first question is on gold loan growth. So we are talking about pricing discipline and we have seen our yields also improving the last 2 quarters. So with this kind of pricing discipline, what kind of growth we can expect coming through? And for that kind of a growth, what kind of actions are we taking on the ground in terms of more advertising, client outreach, old client reactivation? Can you just throw more light? Because I can see that the new customer acquisition number has been pretty stable over the past few quarters. Are we -- is there a plan to accelerate that number and stop the attrition?

So on an average, we are acquiring around 5,000 new customers which remains stable and the Y-o-Y gold loan growth was around 8%. And we hope that it will be maintained. As I mentioned earlier, the coming quarters, some quarters, it may be slightly dull, but in the coming quarters, it may improve. So we are expecting the same momentum as far as growth is concerned.

And sir, when you say same momentum, are we looking at annual growth of 7%, 8% every year?

Yes.

Okay. And this is without any gold price benefit?

Yes, yes.

Okay. Okay. And the second...

Even when the gold price was down by -- to some extent, the portfolio has grown.

Okay. Okay. And on microfinance, ma'am, if you can tell us what is the collection efficiency on the X bucket on the current bucket?

So that is what the collections was similar to that of Q1, we can say. But as these numbers to be certified in future, we are not allowed to give these numbers. So you can see from the profit number everywhere we can see improvements. But at the same time, those specific numbers, which will be going into these, so we have to wait for that.

Okay. Sure, sure. And just lastly, again, on Asirvad, now since that we have filed a DRHP for raising money and it will take some time, and we are running slightly higher on leverage. How do you plan to manage growth in the interim? Do we slowdown on growth? Or do we do more assignments in the current quarter?

So our Asirvad Microfinance current CRAR at 24 percentage and [ every quarter flowback ] is over INR 100 crore profit. So this is sufficient to support the growth for this year. This fund raising is more on account of the growth capital in the coming years.

Okay. Okay. So one should not expect any slowdown in momentum?

Yes.

The next question is from the line of Ketan Athavale from RoboCapital.

I wanted to know the consolidated loan book growth guidance and the credit cost guidance for FY '24 and the next 2 years?

Yes, yes. So whatever has been already spelt out, we remain by that.

The next question is from the line of Pratik Kothari from Unique PMS.

Sir, on the MFI side, again, we were expecting a rundown in our credit cost. We did some write-offs last quarter, and we expected that to come down, you can highlight what happened this quarter?

Yes. So the portfolio quality, all those specific numbers, we will come when we file the DRHP. At this point of time, you can see from the financials, so something relating to ARP also, we took a small write-off. So these are the broad numbers.

No, ma'am, I'm just asking from what you have reported. So last quarter, we had said that we did some INR 60 crores of write-off and which shouldn't continue going forward and your credit cost should come down. But I mean, provisioning, again, this quarter is about INR 90 crores, INR 92 crores, so...

So if you compare last quarter...

I'm not asking for any numbers, but quantitatively what is not going right?

So one element of P&L debit is on account of increasing AUM also because last quarter the book was flat and standard assets provision was not there in the earlier quarters. So this quarter, the growth was there. So if you compare between last quarter, INR 96 crores and this quarter INR 91 crores, these are the difference. One is this increase in standard assets provision, one on account of ARP provisioning. And on the normal book, we are seeing improvement in asset quality.

Okay. Fair enough. My second question on gold loan. So in a quest to maintain this 21%, 22% yield, is it fair to assume that we have let go of growth? Because I mean, our peers, maybe they have let go of yield to capture growth, but we seem to have done the reverse. So I mean, we do say that the competition has come down, but this balance between growth and yield doesn't seem to play out together. So some comments there, if you can?

So our internal decision is, as an NBFC, we are serving a certain section of the community where the ticket size is relatively smaller around 50,000, and the belief is -- the duration is around 3 months, where the OpEx is very high and the about -- the borrowing cost also whatever uncertainty is there in the market, so yes, that is there. So we believe that as an NBFC, it will be always good to have that discipline of maintaining around 22 percentage and we maintain that. We expect a growth of around 8% to 10% even with this because in the coming quarters from our target audience, the demand is expected to have some momentum. We don't want to compete in the market and bring down their level, which is not much affordable.

All right. Fair enough. And this gain in direct assignment that we have booked of about INR 75 crores in H1 of this year, how much was it last year or say, first half of last year?

So last year, it was INR 42 crores.

In H1 or full year?

It is there in the results, net gain on deregulation of financial instruments. So half year ended 30th September 2022 was 0. Consol in the first half was 0. Okay, so we will come back with the...

Yes, we will share with you.

Sure. Sure. And my last question. Ma'am in the last quarter, we had highlighted that we didn't face any issue with funding per se, but there were some apprehension from borrowers, they're asking a few more questions with the ED issue. Now that has been solved, are we back to normal in terms of credit lines, in terms of our access to liquidity, cost of capital?

Yes, yes. So we have included in the presentation also, we are having almost INR 4,800 crore liquidity at the end of -- cash and cash equivalents at the end of the quarter around INR 5,000 crores, INR 4,871 crores exactly and undrawn lines also.

No, correct. My question was, I mean, there were some apprehensions which we were facing. So is that all resolved or...

Yes. Completely resolved. We got the final order. And even the lenders were aware, this is a temporary issue. Only the court matter, it will take some time. So in our case, we were able to resolve everything in 3, 4 months' time. And we are getting enough liquidity. And the pricing also, we have seen some reduction at the end of the quarter.

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

Just two questions. One is on the cost of funds trajectory, what's our expectation both stand-alone and consol? And second thing, just wanted to know more about your secured PL product. Like what is the security that you are taking? Why does that person not just take a gold loan instead of a secured PL because the rate is same. Interest rate you're charging is 21%?

See, the cost of borrowing, we expect -- we don't expect much increase as the CFO has said. Regarding the secured PL products, this is -- yes, the liquidity is the mortgage, where the marking -- since we lend up to 60% of our valuation of collateral which is the mortgage. So your question, why we taken? The gold loans are meant for short term for them. These are -- the average life is around 100 days or 90 days or 100 days, and average ticket size is around 50,000. So this is our range. Primarily, these are seen as short-term loan because these are some customers from the lower end of the pyramid, where this is very precious for them, and they wanted to wear for family festivals, family celebrations, festivals, et cetera. Whereas against this mortgage, it is for 10 years. So that's why the customers go for secured PL even though they also avail sometimes gold loan.

So then why are we not doing from the home loan subsidiary? There also we have a LAP product and what you said sounds very much like a LAP product. That is also INR 5.5 lakh ticket size. So the parent and subsidiary both are doing the same business.

No. There is one reason. There are limitations for a home loan company, there are some limitation with regard to how much the LAP can be, whereas here we have enough headroom. Yes. Portfolio is around INR 2,500 crores now over...

[Operator Instructions] The next question is from the line of Rajiv Mehta from Yes Securities.

Sir, just one follow-up on other income -- sorry, on the fee income. So when I look at the fee income standalone as well as consol, so on the stand-alone book, the fee income remains negligible, when the consol numbers have seen some growth up to INR 31 crore and this number was, again, very marginal number in the previous quarter. So this entire delta of fee income has come from Asirvad Microfinance. So what is the fee income, fee and commission income?

So we are getting a referral fee when we are able to sell the products to the borrowers. So if they need some household equipment, we will be selling those products to borrowers.

What are these kind of products? Is this an recurring ongoing arrangement? How should we look at this business income?

Yes. It will be like a pressure cooker, gas stove or solar -- small kind of solar light, et cetera.

Okay. So these are cross-sell. And the quantum that we got this quarter was it pertaining to this quarter or was it a pent-up number? Or can this run rate -- because it's a sizable run rate in terms of our quarterly profitability. Can we expect this kind of income to happen every quarter? Or is there a seasonality? How should we look at this number?

So as you're aware, Q1 MFI disbursement was slow. So we got some pent up demand in Q2. And so it will continue. It may not be like Q2 because Q1 disbursements were slow because we were waiting for the PD to include liquidity issue, et cetera. So Q2 is not exactly comparable, but this fee income will be there in the coming quarters.

The next question is from the line of Utsav, who is an individual investor.

Congratulations on the great set of numbers, sir. I just like to inquire on the growth we can see this quarter because we have the festive season and the marriage season also. So what kind of growth can we expect this quarter?

Yes. We are expecting a similar growth.

So like around 8% in gold and nongold around 10%, 15%?

No, no. Y-on-Y growth is 8 percentage gold.

More than 8%, right?

Yes. Gold Y-on-Y is 8%. Yes, Q-on-Q is 1%.

And nongold business, what kind of growth can we see this quarter -- coming quarter?

The same, we are expecting the same amount of growth.

The next question is from the line of Suraj Navandar from Sampada Investments.

Sir, just wanted to understand why we are doing gold loans in Asirvad Microfinance and not through our main holding company?

See, MFI can do 25% of their balance sheet in other loans other than MFI also, they have the option. And it's quite natural that we thought we will do secure lending as the other 75% of the balance sheet is unsecured. So among secured loans, we have the preference and we sought RBI whether we can do gold loan. And these branches are in such a geography that there is no competition between the parent and the subsidiaries. So that is the reason.

Okay. In this geography, Asirvad is strong where Manappuram is not present for the gold loan?

See, in a country like India where 1/5 of the world population are living and the middle Indian growth is growing and even the bottom line, they are also growing, there's an opportunity to have the omni brand. So there are many unserved places in India. And Asirvad is taking that as an opportunity to do gold loans. And as I mentioned to give you a percent of balance sheet sales, loans of unsecured nature or whatever...

Okay. So you are saying that conflict of interest will not come even if Asirvad is listed separately in future?

Yes, yes, there is plenty of opportunity.

The next question is from the line of Shubhranshu Mishra from PhillipCapital.

Two questions. When you're talking about this 8% gold loan growth what would be split that should come from South India versus non-South geographies? And second, just the question on fee income at a consol level moving forward. Given the fact that we're doing these household products, do we have certain KRAs which are assigned to the sales of these household products at the MFI branches for employees?

See, the opportunity is there across India. And India is annually importing around 1,000 tonnes of gold. So opportunity is there. And some quarters, we will see some geographies growing. Other quarters in other geographies. All these are dependent upon conditions there like harvest season or festival season in different geographies. About the fee income, yes, these are sold to MFI customers who wanted to buy household articles, et cetera. So these are -- the advantage for them is these are delivered to them at a price much lower than the MRP and they are happy about it. And depending upon the need in different geographies, different categories of customers around -- we have around 20-plus products. So from there we are getting an income, a commission from the supplier. And of course, this is at a discount much lower than the market, much higher -- discount higher than the market, that is price much lower than the market. About KRA, yes, the employees will have some incentive, which is normally given. This, what we call it as product sales is the sale of consumer durable, yes, this is -- there the MFI industry for a very long time and most of the companies provide this service to its customers.

Sir, first question is not very clear, sir, because it's been almost close to 2 years that we're not giving out the regional AUM mix. South AUM was upwards of 60% as of March quarter FY '22. So we don't have a number because we have not been publishing it for the last 2 years for some reason, I guess. Then having said that, South should really weigh on our growth if it is upwards -- even upwards of 50%. So that's the specific question I am asking. What would be South versus non-South growth? So I understand that India is a large geography and we have a large opportunity. But a very specific question is South versus non-South, if you can specify.

So around 65% of the branches are in South and 35% is in the non-South. So what I said is the growth in these places are cyclical, depending upon the festivals in various geographies, harvest seasons in different geography, climatic conditions in different geographies, it is going like that. If you want to have the data, yes, we can share with you over the last few quarters.

Doesn't answer my question as much, sir, but sure, I'll take this offline.

Okay.

The next question is from the line of Jigar Jani from B&K Securities.

I just wanted to understand on your consolidated financial results, there are 3 line items. One is net gain on fair value changes. Second is net gain on derecognition of financial instruments? And third is the fee other income line item. So I believe you're reporting the DA in the net gain on derecognition of financial instruments. Is that correct? Hello? Hello, am I audible?

Yes. Yes. One minute. Yes. So this is on upfronting of DA income that INR 82 crore for the half year and INR 64 crores in the -- INR 82 crore for this second half of the year, and last year, it was INR 64.55 crore.

So that is the DA income, right, upfronting?

Yes.

And what is the net gain on derecognition of financial instruments, INR 42 crores?

So the bifurcation, we will send to you based on the unrealized accounting. So I will share with you.

Sure, sure. No worries. And this product selling that you do, so this is -- you don't give any loans for it, right? This is paid sale and you just get commission, right? Or do you give loans also for buying these products?

We grant loans for the purchase of these customer durables.

And what would be that quantum of the AUM right now? Could you share that number?

INR 350 crores.

INR 350 crores. Okay. And ma'am, I know Asirvad, you cannot comment on specific numbers. But just directionally, has stage 2 numbers for Asirvad gone up this quarter sequentially compared to last quarter?

We will not be able to comment.

The next question is from the line of Mr. Abhijit Tibrewal.

Sir, just last two questions. One is, I mean, I think earlier some participants had asked that one of your larger peers is seeing some stress in gold loans. So when I say stress, they are seeing their Stage 2, Stage 3 numbers go up for the last maybe 2, 3 quarters. Are we also seeing something similar in our gold loan portfolio? I mean, customers not being able to kind of come back, repay and take their gold jewelry back?

We don't see any stress in Stage 2, Stage 3 in gold loan.

Got it. Got it. And one last question for, Rajesh, sir. Sir, we've already seen gold loan yields improve to 22.1% now. We've in the past always indicated that gold loan yields will be between 22%, 22.5%. So fair to assume that gold loan yields will now stabilize? Or is there some more room for increase in yields or maybe the next 1 or 2 quarters?

Yes, we expect that to remain somewhere around this range.

Yes. One data point, which I missed out to the earlier participants. So these 2 line items in consolidation, the fourth one, net gain on fair value changes that is relating to Asirvad. So INR 27 crore in Q2 FY '24. And in June, it was INR 55 crore. And the next line item is by Manappuram Finance Limited, INR 37 crore in this quarter and INR 5 crore in the previous quarter.

We would take that as a last question. I would now like to hand the conference over to the management for closing comments.

So thank you all the participants for this analyst call. We expect your support. Thank you.

Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.