MAS Financial Services Limited (MASFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to MAS Financial Limited 2Q FY '24 Results Conference Call hosted by Equirus Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Shreepal Doshi from Equirus Securities Private Limited. Thank you, and over to you, Mr. Doshi.

Thank you, Yusuf. Good evening, everyone. I welcome you all to the earnings conference call of MAS Financial Services to discuss the Q2 and H1 FY '24 performance of the company, discuss industry trends and also the outlook. We have the senior management team of MAS Financial with us, represented by Mr. Kamlesh Gandhi, Chairman and Managing Director; Mrs. Darshana Pandya, Director and CEO; Mr. Ankit Jain, Chief Financial Officer; and other members from the senior management team. I would now like to hand over the call to Mr. Kamlesh for his opening comments, post which we can open the floor for question and answer. Over to you, sir.

Thank you, Shreepal, and good evening to everyone. I'm very happy to connect with all of you once again. So you might be aware that we had a very strong Q2 for the year, and this is our 114th quarter of consistent performance. And the growth in AUM is 27% on a consolidated basis for the quarter, taking our consolidated AUM to INR 9,500 crores. That gives us the confidence to cross INR 10,000 crores in AUM by the next quarter, that is Q3 as shared with you earlier and during the starting of the year, we had forecasted that we should cross a very important milestone in our journey of INR 10,000 crores. And that to backed up by very strong fundamentals in terms of asset quality, capitalization and liquidity management. If I brief you on a few of the vital things happening in this quarter that we consolidated our distribution network to 171 branches and a formidable reach of more than 10,000 centers contribute, and this is contributing around 67% of our total AUM, and this is slated to increase going forward. Our distribution through NBFC partners is also very robust, and that contributes close to 36% of our AUM. So both our distribution channels are working very nicely, and we are tendering both of them. And going forward, we see the momentum to be maintained. Very importantly, we will continue to focus on digitalization and building up a very strong team for the same, along with focusing and nurturing and grooming our human resources, with stand are strong -- stands as a strong team of 3,000 as on 30th September. I'll take you through some of the basics of this company while Darshana and my colleague, Ankit, will take you through the detailing as far as the numbers are concerned, while numbers are already with you. But friends, just to share with you what differentiates us throughout this growth story is a major growth, which is non-dilutive and mainly through internal accruals. If I just refresh the memory we went to Capital Market Day back in 2017, when we are close to INR 3,000 crores in AUM as compared to almost INR 10,000 crores currently, and this growth has been accrued mainly through internal accruals. And that creates a nondilutive growth and value -- and tremendous value for the investors. On our subsidiary, as far as our housing finance subsidiary is concerned, that also registered a very strong growth of more than 30% and is poised to grow at 30% to 35% going forward, thus it will contribute very positively to the overall growth of the company. So all in all, it was a very good quarter for us, and it is building up the right momentum at the right time to capitalize on this growth, and we see no reason why we have not been in a position going forward and are confident that we should be in a position to register a growth of around 25% with very extremely strong fundamentals as demonstrated over the last 28 years. If you say MAS, we have delivered a very consistent CAGR. If you plot it on a CAGR -- if you plot our journey of 28 years on CAGR, it translates into a 36% growth in AUM and 40% growth in profitability, having started with a very low base of INR 2 crores way back in 1995. And throughout the cycles, we have grown very consistently. And if you take the last 10 years growth also, is at INR 1,000 crores in 2013. And I'd like to take the liberty of keeping it as a time year horizon that '23 December we have exactly INR 10,000 crores translating a 10x growth in our AUM and also corresponding growth in our profitability. So all in all, we are very confident and we believe that what we have been doing for the last 28 years will continue to grow. We are at a very strategic inflection point. And now we are -- we have the critical mass also, INR 10,000 crores is a good number. to take this forward and to make this company a very formidable company in terms of size. But nevertheless, not only size but with very strong fundamentals. So with this opening remarks, I would like to hand over to Darshana behen to take it forward on -- to take you through the basic numbers for the quarter and the half year growth. Over to you, Darshana behen.

Thank you, sir. Good evening, everyone. And I'm happy to share the results of 114th quarter, and that is well within the thing with our strategy of growing at 20% to 25%. If we -- and I'll share with you the stand-alone numbers. So first for the parent company. If we look at the AUM, we closed at INR 9,046 crores in September '23, which was INR 7,138 crores, which is 26.73% growth in AUM. Our portfolio consists of total 5 products. Out of that, SME and micro enterprise loan is 83%, and wheels is contributing around 13% and salaried personal loan is 4%. If we look at the individual numbers, micro enterprise loan grew at 18.68% from INR 3,589 crores to INR 4,260 crores. SME loan, there is a growth of 21% from INR 2,671 crores to INR 3,232 crores. Two-wheeler grew by 32.80% from INR 470 crores to INR 623 crores. There is a growth in commercial vehicle of 103%, from INR 273 crores to INR 556 crores. And salaried personal loans being the new product, it grew by 179% from INR 133 crores to INR 372 crores. Our total income on a quarterly basis grew by 30% from INR 229 crores to INR 298 crores. Profit before tax, there is a growth of 23.11% from INR 65 crores to INR 80 crores, and profit after tax, there is a growth of 23% from INR 49 crores to INR 60 crores. If we look at the half yearly numbers, our total income there is a growth of 35.30% from INR 427 crores to INR 578 crores. Profit before tax, there is a growth of 23%, from INR 127 crores to INR 156 crores. Profit after tax 23.61% growth, from INR 95 crores to INR 117 crores. . While we grew by around 26%, we could maintain the quality of the portfolio. Our broad Stage 3 asset is now 2.17% as compared to 2.13% in June '23. And net Stage 3 asset is 1.47% as compared to -- it was 1.47% in June '23. And we still hold on to INR 18.79 crore as a management which is 0.27% of our total on book asset. Now coming to the housing numbers. Here also, we could register the growth of 31.83% in AUM. So now the portfolio is at -- we crossed the milestone of INR 500 crores, which was last year, INR 380 crores. And total income is now from INR 11 crores to INR 14.74 crores. There is a contraction of just INR 60 lakhs impact due to our expansion mode. We are on expansion mode. We have increased our team strength. So that has resulted into this. So now the profit is down to INR 90 lakhs as on September '23. And if we look at the half yearly figures, total income, there is a growth of 38.69% from INR 20 crores to INR 28 crores, and PAT as on September '23 INR 3.49 crores as compared to INR 3.54 crores, which is just INR 5 lakhs less than earlier period. And here also, the portfolio quality is still very good. Our gross Stage 3 asset 0.79% as compared to 0.55%, and net Stage 3 asset is now 0.55% as compared to 0.50%. So this was about the housing finance company. Now I request Ankit to take you through the capital and liability management.

Thank you, ma'am and sir. Hello, all. In terms of capital liability management, the company through its efficient liability management was able to maintain average cash and cash equivalents of around INR 800 crores during the quarter, and unutilized cash facility of around INR 375 crores. In addition, the company has as of 30 September had cash on hand to tune of INR 1,770 crores in the form of term loan direct assignment and co-lending. In the second quarter, company did around INR 489 crores, direct transaction. And further, we have more than INR 1,000 crores sanctioned on hand, which will be utilized during the current year. Our strategy, we aim to maintain around 20% to 25% of AUM as our booked through direct assignment and co-lending transactions. The company has available cash facility of INR 1,765 crores, out of which we utilized -- our utilization level is around 65% to 70%, rest is always kept as a liquidity buffer. We successfully ruled over around INR 1,350 crores, short-term working capital loans, which are sublimit to these cash base limits. In the quarter, we raised around INR 1,085 crores term loan, which had an average maturity of 3 to 5 years. This helped us to further strengthen the asset liability maturity patterns. In terms of our asset liability maturity pattern, there is no negative impact and all the liquidity buckets seem positive. The capital remains strong at 25.17% with Tier 1 capital of 21.17% and debt equity of 4.12x. The cost of borrowing for the quarter was at 9.79%. The cost of borrowing quarter -- in last September quarter was 8.9%. We see that the cost of borrowing has sped up, and we settle around 9.75% to 9.85% in the current year. As per the tariff sanctions on hand through various instruments, we have already tied up for the fund requirement of the whole year. And so in the next half of the financial year, our main objective in terms of liability management, will be to focus on the further verification of sources of funds and to reduce or maintain the cost of borrowing. So I will hand over the mic to Kamlesh sir for the closing remarks, and then we'll be open for Q&A.

Thank you, Ankit and Darshana behen. So this is from us. We are open to take the questions now.

[Operator Instructions] Our first question is from the line of Omkar Kamtekar from Bonanza Portfolio.

So the first question is the salaried personal loans that we have tied a new product. It is currently, I think, close to 4%, if I heard it correct. And it has shown a phenomenal growth on a Y-o-Y basis. So what is the traction in that segment? And what is the overall percentage that we are targeting for this to be a part of the total AUM size?

I think to answer your question on what we target, this is a very huge market to be served, but we are very cautious because they're unsecured, and it's a new product for us. So we'll be keeping it below 10%, and that 10% will be achieved over a few quarters. Let's just say that we are now stable at around 3% to 4%. So with the next few quarters, we will be reaching not more than 10%. So the idea is to keep it less than 10%.

Okay. Okay. And secondly, I was not able to find a number of number on the spread. The overall spend for the entity as a whole. If you could help me understand what is the spread of the entity as a whole?

So we maintain 7% as in Q2, our net interest margin was 7%.

7%, okay. And finally, with respect to the co-lending space. What -- so are we going to aggressively go ahead with that? Or are we fair because it has been stable, it's around 25% to 15% over quite a few while. So is this continuing to be the same? Or will this increase as we go ahead?

So co-lending has shown operational issues, which have to be sorted out. In terms of alignment of understanding between the banks and NBFCs and at the ground level. So once that gets sorted out, we will be having around close to 10% to 15% as co-lending and over a period of time. And overall, on delisting on off book, we would like to maintain anywhere between 20% to 25% on off book.

20% to 25%. Great. And on the housing finance company, so we can see on a year-over-year basis, there has been an increase in the net and the gross Stage 3 assets, although it's marginal, it's like from 0.43% to 0.55% and 0.59% to 0.79%. But because it's -- what is the target range or how -- what is the upper band that you're looking at that recap NPAs at? And specifically, what is the reason for this jump in the asset quality -- the working in the asset quality?

So 0.55% or 0.79%, they're all range bond figures, that is -- when you are so low on your GNPA, you have to talk about range bonds. So it is range bond. And on a vintage basis, as there portfolio matures and as the portfolio grows, we will see this net NPA ranging anywhere between 1% to 1.5% as we go forward as per the industry standard. Right now, because of the low base and more focus on quality, we are in a position to maintain it at half the level of the industry standard, especially in the affordable housing space.

Okay. I was going to come on to that question only. What is the exact vintage of the portfolio -- average vintage of the portfolio?

Average vintage of the portfolio on critical mass mostly around, say 36 to 48 months on a critical mass. Because they started growing post-COVID -- they started growing the portfolio post-COVID. So I just say that safely, you can say that about 36 months of vintage on a critical mass.

Okay. Okay. Any targets on the AUM that we are targeting for the housing finance company, long-term, medium-term targets?

So as I shared in the opening remarks, we see this company growing between 30% to 35% in visible future. So within -- we would -- if I give you another medium term by '25, we should be touching INR 1,000 crores. We as a team are working to reach at INR 1,000 crores by 2025. Maybe a quarter here or there because we always prioritize quality, profitability and growth. But having said that, the way the things are stacked up currently, we see that happening by '25 March, maybe a quarter here or there.

[Operator Instructions] Next question is from the line of Nikhil from SIMPL.

Yes. And congrats on good set of numbers. I hope I'm audible?

Yes, go ahead.

Sir, one question. If I look at over the last 3 quarters, our cost of funds have actually been reducing while the mix has -- in terms of the sourcing mix or the assignment and the term loan has risen. And if we look at it on the assignment side, the yields on assignments have gone down. So in a rising environment, are we getting term loans at a very attractive rate, which is helping us keep our borrowing costs low or...

So just correct the data, I think our cost of borrowing is increasing because it is -- because as you are aware that there is a repo rate rise of 2.25% last year and the transition started happening from Q4 last year. And we think that it has picked up right now because our borrowing is MCLR-backed borrowing. So as per the MCLR reset in Q4, Q1 and Q2, our cost of borrowing increased corresponding to the rising MCLR. In terms of the various sources of fund, I think we borrow term loan anywhere between 9% to 9.75%. Whereas assignment is without recourse to us, it is between 9.5% to 10% because there we don't have to bare any credit cost. So effectively, if you see from a business point of view, assignment works out to be a cheaper as a new product as compared to term loans. And we are trying to maintain that in the range of around 20%, 25%.

Yes. Sorry, my mistake. So the point which I was trying to understand is that if we look at sequentially, the NIMs have actually risen for us while the product mix -- the loan mix between MEL, SME has been largely similar. So what is helping us, is it repricing of most of the loans which has helped us improve the trends?

So last time also we shared with all of you that since our loans are shorter in nature, we get an opportunity to reprice it. And since we could reprice it and the strategy of the company is to maintain NIMs at around 6.75% to 7%, that helps us maintain our NIM or grow it marginally depending upon the product configuration which changes from time to time. So this is a reason for maintaining the NIMs.

And most of the loan book would be repriced by now. So this 6.97% can sustain from second half or how should we think about it?

So that is how we plan our capital and debt allocation, that we are a multiproduct company, and we plan our allocations among every product in such a manner that we maintain around 7% -- 6.75% to 7% NIM, and that translates into ROA post-tax anywhere between 2.75% to 3% is the conscious effort and endeavors of the company from time to time.

Okay. And last question on the branch addition. So what is the total branch addition we are looking at for this year? And as a result, would the cost to income will remain around that 31.5% to 32% range or...

I think we -- in Q3 and Q4, we should see another 15 branches being added. So from 175, it can be around 185, between 185 to 187 branches. And since we have a lean structure at the branches, it does not entail much cost in terms of infrastructure. The only cost is of the manpower. And already branches which are opened will also have critical mass. So we are confident that the operating expenditure will be a range bond between 30% to 33%.

Next question is from the line of Madhuchanda Dey from MC Pro.

Congratulations on very performance. My question is on the housing finance subsidiary. So we have seen some early signs of growth picking up. But as ma'am alluded to the kind of INR 60 lakhs kind of an impact due to network expansion. So I really wanted to understand what is the road ahead? What kind of branch expansion are you looking at? What could be the steady-state ROA of this business once it reaches that INR 1,000 crore mark? A little more color on the housing finance business.

I think on a steady state basis, to start with your last question, on a steady-state basis, like INR 1,000 crores and INR 4,000 crores, we see ROA settling between 2% to 2.5%. And we have predominantly housing finance company with a limited portion of LAP, that is a very conscious decision by us to concentrate more on housing and construction finance, and back to semi-urban and rural. So given that business model, we anticipate ROA to settle anywhere between 2% to 2.5% given the fact that we get the right type of operational efficiencies. And a slight contraction in profitability by INR 60 lakhs on a Q-on-Q basis or INR 5 lakhs on H1-to-H1 basis is because of the work in progress in terms of building up the portfolio. So I don't read much into that. But over a period of time, we will settle at around between 2% to 2.5% as of now.

So this kind of network expansion that you have embarked on to really accelerate the business, for how many more quarters do you think the business will be in this buildup phase.

I think by -- until we build up a critical mass of INR 1,000 crores. So it will be for at least next for -- around 6 quarters, it should be in a build-up phase. Thereby, we'll be making different ROIs and different profitability, but not at the optimum level of around 2% to 2.5%. Currently, it is between 1.5% to 1.6%. Certainly, that range bound during this 6 to 8 quarters. But later on, we can see that building up between 2% to 2.5%.

Great. I have my last question, which is like everything seems to be kind of touchwood working well for us in terms of growth, albeit the rise in the cost of borrowings, we have been able to maintain the NIM. So what are the things that makes you cautious at this stage? And what is your take on the competitive intensity now that you are reaching a critical size? What are the headwinds that you see in the coming 1 or 2 years? What makes you kind of cautious?

See, as far as lending is concerned, caution is the name of the game. So we have been cautious right from the word go. Actually credit where it is due, prioritizing quality, profitability over growth. Having said that, we were fortunate to register the 36% growth even though with this approach. So given the market size, I personally believe in the practitioner for 28 years, that it is very important for you to have the right intent in creating various products and addressing the credit demand of the market and neither to over-excited or worried about the competition. So this is what we saw during all these 28 years, we have seen a lot of competitors coming and changing their products or changing the businesses. So we're not worried about the competition given the market size and our niche expertise. The marketplace is huge. It is very -- it's incumbent on us how we really address it, what are our strategic intent in terms of building up a quality portfolio and whether we are courageous to be patient or not. In an atmosphere where you can find a 3-year-old company going from INR 100 crores to INR 5,000 crores, the question is -- the question you have to ask to yourself is that are you feeling the flow? And if the answer is no, you are safe. So we personally believe that this is not a business to get overexcited. When you are working -- where you have your INR 100 invested and another INR 400 is coming from the other investors and the debt provider, which is incumbent on us to be very cautious. So this is what we work on the philosophy, have done good for ourselves from INR 2 crores to INR 10,000 crores and are confident to take this forward in the same manner.

Next question is from the line of Shrishti Jagati from Ambit Capital.

Congrats on the good set of numbers. A few questions gotten answered. Just a couple more. Even in terms of the newer geographies that we are looking at the expansion and the newer branches that we've opened. One is, are we rolling out the entire suite of products that we have from each of these branches? Secondly, what sort of customer engagement are we seeing in the salaried personal loans and CVs? And if you could talk a bit more about the competitive intensity and the customer profiling that we are looking at here?

Yes. On our expansion of branches, if you see, currently, we work at around 8 states now. 4 are the Western states, which are congruent that is Gujarat, Rajasthan, Maharashtra, MP. 3 in South, that is Tamil Nadu, Karnataka and AP/Telangana. And 1 in North that is Delhi and periphery of Delhi. On the type of products we introduce, it depends upon the scope of -- we file for each product. Say, for example, currently, if we talk about our Southern penetration is more concentrated on commercial vehicle and SME. So is the case with our northern penetration, where we have started with SME branches and soon we'll be introducing commercial vehicle and other products from time to time. So depending upon the scope we signed from time to time and our strategic intent to grow our product, so we'll start with those products and gradually introduce more -- a few more products as we get the confidence about the understanding of the demography and we have the right team at place. And in terms of customer profiling, in terms of salaried personal loan, I think we serve the ones between INR 25,000 to INR 70,000 of income. As I shared earlier, we are very cautious to increase our share here in terms of our AUM. We are currently at 4%, and we see ourselves in going to 10% in the next 4 to 6 quarters. And we'll wait and watch about the performance of the portfolio, how we generate risk-adjusted returns for us. So far, it has been satisfactory and there's a lot of learning also. In terms of commercial vehicles, with the economy is stabilizing and registering a continuous good growth post-COVID, commercial vehicle is a business which is directly linked to the economic growth that is the GDP growth. That is where we are seeing a lot of traction, and we have focused there also. And as you see, we have registered a good growth, maybe on a very small base of just INR 270 crores as on September '22 to taking to a good mass of INR 500 crores. I see presuming that the economy is going to perform in a benign manner and at a continuous and a steady-state manner, I think there will be a lot of scope to expand our commercial vehicle business. We are focusing there also.

Right. Makes sense. Sir, just to confirm, the -- what would be your ideal product mix? Currently, with micro enterprise loans and SME loans forming 82%, you mentioned salaried personal loans, which is currently 4%, would scale up to a 10%. So I'm just wanting to understand what is the ideal product mix that we are looking at?

On a 3- to 5-year basis, I shared in bonding of -- with one of the channels that we would like to have around 20% to 25% from housing, 20% to 25% coming from wheels, so close to 10% coming from SPL, around 35% coming -- 35% to 40% coming from SME and the rest from MEL. So MEL will -- MSME will form around 40 -- around 50% to 60%, and the rest will be coming from the other products. So that is -- this will make us a well-diversified asset company.

[Operator Instructions] Next question is from the line of Dhwanil Desai from Turtle Capital.

So first of all, congratulations for a very good set of numbers and a fantastic journey so far. So my question is that now since we have reached INR 10,000 crores or close to that INR 10,000 crores mark, we are at a scale which is from where to grow at 20%, 25% may require slightly different approach. So -- or isn't going to be the same, if you can talk a bit about it, how do you think about next INR 10,000 crores, INR 20,000 crores? Are you feeding new businesses to kind of go to that level, or the existing products can take you to that new geographies? You can lay out a road map for that.

So at max 10 years is a medium-term reason. And we envisage that within the next 10 years, we should on an average grow at around 20% -- between 20% to 25%. How we intend to go there is the -- first of all, the strategic intent. The strategic intent will remain the same. So we would like to add INR 2 crores value add -- INR 10,000 crores. I personally believe this journey was more difficult from INR 2 crores to INR 10,000 crores as compared to INR 10,000 crores to next -- whatever it happens in the next 10 years say INR 50,000, INR 60,000 crores. Because of the critical mass, what we have and the learnings what we have overall this 28 years. So the strategic -- it does start with the strategic intent and the fundamentals which we need to follow, whereby we prioritize quality of assets, profitability and growth. We'll be courageous to be patient at times. We have demonstrated that during COVID. We degrew our balance sheet by 11% because these are not very confident. Lending is all about confidence. So first is the strategic intent. We'd like to carry the same strategic intent and priority as we have been doing since last 28 years. On the strong enablers, there's a very huge market size to be served. Each of our products has a potentiality to individually -- if I give the ballpark figure of around INR 50,000 crores 10 years down the line, each of the product has potentiality to reach individually there. So with around 5, 7 products around, including housing, market size should not be a problem. As I shared in an earlier query, that market size and competitive scenarios are all to be navigated according to our strategic intent. And that is what we have witnessed being a smaller company also. So this is one of the strongest enabler, there are multiple assets and other multiple products, the huge market size, the experience. And as I shared in my opening remarks, this -- we have run the company on a self-propelling capital requirement model, whereby to grow at around, say, 20%, we do not have to raise capital now and then. Having said that, we'll definitely raise capital over a period of time. But it's not incumbent on us to raise capital for that growth. So that gives us the room to grow the way we have in alignment with our strategic intent. So the huge market size, experience, self-propelling capital model and the strategic intent at place. I think we are more than confident but not complacent nevertheless, and learning and unlearning to be very sharp, and that is what we have demonstrated over all these years, and we think that will take us to there. And having said that on execution, we look at one link of a chain at a time. And that is how we prepare ourselves for the next link and the next phase of growth.

Okay. Very useful, sir. Sir, second question is, what is the overall proportion of fintech plus co-lending in the book? And where do we see that over the next 2, 3 years?

Fintech with co-lending, I think must be very less, less than 5% of our total AUM. And we are still watching that space closely in terms of -- I think regulations have settled now. Now based on the new regulations, how the quality pans out over a period of time per the fintech that we are working with. So we would not like to rush in, in terms of our increase in proportion of assets created through fintech, which is currently 5%, we'll grow gradually as and when we get the opportunity and as and when we are confident about the asset quality over a period of time.

Okay. So this 5% maybe close to 7%, 8%, but not a large proportion. That's a right way to think of.

Difficult to give a number to that, but it will not be significant.

Okay. Okay. And sir, off late with post-COVID, what we have seen is that we have grown quite handsomely on the two-wheeler and on the wheel side of our portfolio. So one reason, of course, you mentioned the economy is doing well. So we are kind of -- I think that one. Prior to COVID, I think we have slowed down on the two-wheeler side and the wheel side. So what has changed? Are we kind of bringing these products to more geographies? Are we reaching out to more dealers? Why this portfolio has started growing at a very decent pace? And how do we see that? Do we see them growing at 25% numbers at the company average number?

So certainly from time to time, we evaluate the risk-adjusted return that the product can offer. So pre-COVID, if you remember the economy was -- had slowed down and all the commercial vehicle lenders also had some problems pre-COVID. So at that time, we were not focused on increasing that book. But post-COVID and after 4 to 6 quarters of COVID and continuous economic growth and the assumption that this will continue for -- during the visible time, we have started focusing more on our wheels portfolio. And the reason for increasing the AUM is our more focused on wheels portfolio and our more focus on wheels portfolio is because of our confidence on getting the desired risk-adjusted return while allocating capital and back to these products.

Okay. And sir, last question. So we have entered this new segment of personal loan, salaried personal loans, but from whatever we have observed this segment, a lot of players have entered and that market is getting crowded. Of course, the opportunity can be very large. But what is our thought process of entering this, what kind of customers we are targeting? Why don't we be in spite of slightly higher cost of borrowing than banks, why would we be able to tackle this segment without taking undue risk? If you can talk a bit about that.

So as I told -- as I shared earlier with one -- in one of the query that we serve the segment anywhere between 25,000 to 70,000. It's a very huge market to be served. And as India is concerned, we have to be ready to become a consumption economy. And we were always there on the livelihood side of the economy when we were missing the consumption side. So we would like to understand this space better because this is going to give a lot of opportunity. There will be a lot of hiccups for the players who want to grow very fast or the ones who have looked the other way on the basis of the credit extension and growing the group very fast. But if you extend credit where it is due, while if you understand and manage the way and grow your book in accordance to your management capabilities and risk-taking capabilities, it's a very good product to have in your basket. So we are confident that this product will contribute close to 10% -- will contribute profitably, but it will take its own time. And the reason for entering this is that this is a very huge market size to be ignored. And India, as we know that the story of India depends upon its domestic consumption. And domestic consumption automatically will lead to more in-depth business. And we'll have to understand and live with that. So we think there's a lot of opportunity, but good players and the players who do it with caution will definitely have a good -- will have a good experience from this phase.

So what would be the typical view from this product, 12%, 13%? What will be the yield to -- the average yield on this product?

The average yield ranges from 14% to 16%.

[Operator Instructions] We have our next follow-up question from the line of Omkar Kamtekar from Bonanza Portfolio.

Firstly, I would want to know what is the average yield of the stand-alone entity and the ex HFC if that could be shared -- the average yield from the entire portfolio?

The average yield for the entire portfolio is close to 16%. And for housing finance, it is 14% to 14.5%.

14% to 14.5%, okay. And what is the marginal cost of borrowing for the both the entities separate, if it is possible to share both separately? Is it possible?

It is both in the range of around 9.5% to 9.75%.

9.5% to 9.75%. And with respect to disbursements. What was the disbursement for the quarter for MAS and the HFC disbursement numbers? And what are we targeting for end of FY '24 and '25? Are we placing targets in that aspect?

As usual, we don't have targets for disbursement. It is a target for AUM because there are major metrics to disbursement to AUM depending upon the product. So difficult to give the target for disbursement. We target an AUM of -- a positive AUM of exceeding INR 10,000 crores by December. And in terms of disbursement, I think we were close to INR 24 crores, INR 50 crores -- approximately INR 24 crores, INR 50 crores in our and close to around INR 80 crores -- INR 70 crores of disbursement in housing side.

Okay. And the mix of the housing finance portfolio, what is it more Q2? Is it more towards the salaried individuals or self employed ones?

It is split 50-50.

Split 50-50. Okay. Okay. And I would want to understand with respect to how do we geographically expand. So now we are concentrating more towards in the western and central parts of the country. Most of the branches are in Gujarat, Maharashtra and Madhya Pradesh. So how do we expand? So what is the route that we take expansion through? And could you please explain that so we can have it.

Expansion is the function of a well-defined process. It starts from the potentiality that a center can offer, then the credit behavior is examined and then there is a lot of recce done through various department that is sales, credit, collections, site visit guys. And then we come to a conclusion on the risk assessment of a demography. And then we start with a product which is allied to a strategic intent for a particular center. And this is how we start working in a center, and gradually, we introduce more and more products. And then once we enter a new state, we take some time to build up the team and understand the demography. So we are slow in disbursements during the first few quarters of our entering a new states. And then as we get the experience, we expand.

Okay. Okay. So how do we -- so how is the decision with respect to entering a new state arrived at -- do we have a framework as to how do we finance. So my question is comes from the point of where are we going to expand further? Are we going North? Are we going South? Where?

I think, as I said, we are there in the Western side, Gujarat Rajasthan, Maharashtra, MP. We're already there on the North with Delhi. So the next expansion can be Haryana as well from Delhi. And then in South, we are already there in Tamil Nadu, Karnataka, we have expanded to AP/Telangana. So in the visible future, I think we would like to make deeper penetration in all these states of operation because we have covered good number of states in terms of our initial entry through various products.

Okay. Okay. And finally, with respect to new products in pipeline, do you have anything new in the pipeline with respect to any specific product that you might introduce?

I think we -- currently, we do used cars, but it is clubbed with our commercial vehicles business because the business is not substantial. And we are trying to gain a foothold in the used car market since last 2, 3 quarters. And -- now we have built a reasonable team. So within the next 2, 3 quarters, we'll see used car being held off as a separate product in wheels, where once it reaches a critical mass in terms of AUM of INR 100 crores, INR 150 crores plus. So that doesn't reckon it as a new addition, while we are already working on the same.

Okay. So can I say the used car is clubbed in the CV, but it would then become a separate entity on its own.

Yes. Yes. Yes.

Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Shreepal Doshi for closing comments. Mr. Shreepal, your line is unmuted.

Am I audible now?

Yes, sir, you're audible.

Yes. Thank you, Yusuf. I would like to thank all the participants for being part of the call. A special thanks to the management of MAS Financial for giving this opportunity to host this call. Thank you all.

Thank you.

Thank you.

Thank you, everyone.

Thank you. On behalf of Equirus Securities Private Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.