Muthoot Capital Services Limited (511766) Earnings Call Transcript & Summary

Ladies and gentlemen, again, welcome to Q2 FY '22 Muthoot Capital Services Limited Earnings Conference Call, hosted by Antique Stock Broking. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Vidhi Shah from Antique Stock Broking. Thank you, and over to you, ma'am.

Thanks, Angie. Good afternoon to all of you, and thank you for participating in the call. We have with us the management of Muthoot Capital, Mr. Madhu Alexiouse, Chief Operating Officer; and Mr. Vinod Panicker, Chief Financial Officer. Without further ado, I should now hand over to Mr. Vinod sir for opening remarks. Over to you, sir.

Good afternoon, friends. Nice speaking to all of you once again. Very happy to present the financials for the second quarter, which went by. And we're very happy to point out that things have started improving and the after the month of September, even October was better than what -- than what we saw in September. And we are fairly confident that things will keep on improving as we go forward. We came out with the financials -- our [indiscernible] on Saturday and the broad number is what we wanted to highlight, and we will just stress upon them before we -- before I hand over to Madhu and then we will hear from what -- hear what queries you have and answer that. On an overall basis, in the second quarter, we had a total disbursement of about INR 310 crores. which is definitely a significant improvement over the last quarter. But the last quarter about the month and tough, we had no business happening. So 300 -- last month, we did about INR 130 crores last quarter, same quarter last -- [Indiscernible] in the Q3 quarter, we did INR 136 crore. This time we [ added ] INR 310 crores. Same quarter last year was also -- can -- we were just coming back to business, we started our business only sometime in the middle of August last year, and we did about INR 116 crores. So while the percentages of growth looks high, I would say it's more because this is the quarter when we actually got 3, 4 months to do this. Based on that, the AUM was at about INR 1,992 crores, including the outlook of about INR 12 crores, and which is down by -- which is actually, again, a growth in the immediately preceding quarter, first time after 5, 6 quarters that we are actually seeing a growth in the area. But down versus the same quarter of last year, when we were at about INR 2 crores to INR 3 crores, INR 5 crores that is a drop of about 11%. Interest income at about INR 99 crores was broadly in line with the immediate preceding quarter slightly above, but about 31% lower than the same quarter last year, but that's about what do with the higher AUM. I did mention that AUM dropped by about 11%. The average AUM dropped by about 16%. So that was the one aspect. And second was desperately protect that. In the current quarter, there was whatever growth of NPA was that there was a reversal in terms of income that we had booked last time. Any increase in income because the delay of moratorium was going on and then subsequently the Supreme Court judgment was saying that it cannot be considered as NPA, we were not looking at -- we were not making it of against income. We were showing it as an IR provision in the books. And therefore, based on these 2, 3 reasons, immediately in the same quarter last year, there was a drop of about 31%, and we reported an income of INR 99 crores in the current quarter. Finance expenses have gone down versus the same quarter last year and also again the immediately preceding quarter. The finance expense of over INR 39 crores that we have reported is including finance cost on about INR 350-odd crores of amount that we had drawn from banks to ensure that we meet the minimum requirement of sanctioned limit, the terms of the sanction limit, and that cost us about INR 7-odd crores. And that's not been there, and we would have actually not taken this money, the reduction in the cost would have been about INR 7 crores versus INR 39 crores that we have now reported. The net interest income of INR 60 crores was slightly above the executive preceding quarter and about 37% lower than the same quarter of last year. Operating expenses grew versus immediately preceding quarters from about INR 27 crores went about close to INR 40 crores. I mean that was expected because [ big teams are ] getting an opportunity to go out and collect the money. Collection agencies were brought in, other outside outsourced agencies were brought in, which increased the cost actually the main gap between the two would be the increase in the collection cost, which went up from over INR 5 crores to close to INR 15 crores. So it's just slightly above INR 15 crores. The loan loss provisioning, in the current year, we have booked -- current quarter, we have booked about INR 30.7 crores, versus about INR 50 crores that we booked last time and INR 38.5 crores that we booked in the same quarter last year. In the loan loss provisioning, because we had a reasonably, I would say, terrible August -- July, after which we saw the NPA number coming down and remaining -- in the month of August and remaining steady in the month of September, the overall NPA provisions of, I would say, contained less than about [ INR 24.7 ] crores and then subsequently we thought that it was prudent for us to make additional provisioning of about INR 10 crores. And therefore, we made an additional provision of INR 10 crores and therefore, book a total provision of about INR 30.7 crores. This led to the provision taking before tax being a negative INR 10.6 crores and after tax negative INR 8.1 crores. On a half year basis, the total disbursement that we have done with about INR 446 crores. And I would say, compares very well with the same quarter last year. As we know, half year last year, where we did only INR 133 crores. Book [Indiscernible] about INR 1,981 crores on book, including off-book over INR 192 crores versus the INR 2 crores to INR 3 crores that we reported last time. overall income is at about INR 197 crores versus INR 274 crores, but last year's INR 274 crores [Indiscernible] it is 28% higher has a lot to do with higher AUM. And in the last quarter, we had this interest-on-interest income, which was getting accounted because of the moratorium period. And therefore, that figure was higher. So those were the two reasons. And like I mentioned, the income reversal on NPA was not actually booked against the net against income, but to show support in the provisioning only. And total finance expenditure did go down by about 21%, down by about -- from about INR 100 crores to INR 80 crores and net interest income stood at about INR 118 crores or at INR 174 crores. Operating expenses were slightly higher, about 5% on a half yearly basis from INR 64 crores to INR 67 crores. Loan loss provision last time was about INR 72 crores. Now it is INR 81 crores, including the INR 10 crores extra, additional provisioning. We have reported a half yearly PBT of negative INR 30.6 crores and a PAT negative of about INR 22.8 crores. We have, like I said, at the initial stage that no, AUM has grown in the first time after about 5, 6 quarters, and we are fairly confident that it will continue to grow and this whatever disbursements are happening and whatever we have seen in the month of October -- We are confident that November December is going to be even better because we are getting into Diwali and other effective seasons, and things are improving on the ground. So we are certainly confident that it will boost the AUM, which will lead to higher interest income. And NPA, we are firmly confident will get contained in this quarter, and we will see some bit of reduction actually happen in the current quarter. I would possibly now hand it over to Madhu for his initial comments, we'll start hearing from you. Thank you.

Thank you, Vinod. Good noon to all of you once again, and thanks for being in the call with us today. I'll take through a broad numbers in terms of what is happening on the sales and how we have been placed after the second wave of lockdown was over. And then probably we can get into more details through a Q&A session. From a two-wheeler industry perspective, as we communicated last time that it would be somewhere close to what it had been in FY '21, about INR 1.5 crores. So we are seeing that happening actually H1 was about 65 lakh wholesale that happened in the industry. a very positive sign coming from the market in the sense that almost all dealers, all our touch points became active as July ended. And from August onwards, I think it was very good for all of us, August onwards, every month-on-month, like we've been disbursing more than INR 100 crores, which is a very positive sign. From industry perspective, again, we saw Q2 to be a very good jump from Q1, definitely not at par with Q2 last year, but there are certain areas in the country in the second -- sorry, third and fourth week of September, they have something called Shradh. So probably because of that, there could be a slight dip from Q2 last year. But definitely, the signs that we saw in October, especially with the Navaratras and then the Shiva and then as we move into Diwali, we have seen a very positive uptick as far as our two-wheeler sales are concerned. And we can see the dealer movement as well from touch point perspective, how the numbers are moving at each touch point. So from an industry perspective, a very positive Q2, and we are hoping that Q3 would be as good as it could be as far as Diwali and Dhanteras, these festivals are concerned. I mean next -- this week itself, it would start showing up. We saw a very good uptick in East during the puja season in the month of September, that is another positive point for us in the sense that we went in the East in a big way, and that really helped us as far as Q2 is concerned. We hope that with Diwali, all these non-South areas in -- sorry, non-Kerala areas across the country should do very well. From touch point perspective, as of July, we started moving very aggressively across the country wherever we were active, close to 70%, 75% of the touch points we are active now. And as we go forward, and Vinod mentioned in his initial comment that a lot of fear related to COVID is now not there. And I believe that we should be in all our touch points by mid of November. And as we close December, I think we should be active 100% of all our touch points. Right now, we are at around 75% to 80% which is a big movement as far as Q1 to Q2 is concerned. From a collection perspective, also because we were able to move physically and do a lot of collections. There had been very good improvement in collection efficiencies, especially from lower bucket, the collection efficiencies are at. In fact, what it was before Wave 2 and include -- there are certain areas which is doing a pre-COVID level. So we are seeing a very positive trend as far as collection efficiencies in each bucket is concerned. NPAs, we could contain that, at least the incremental NPA we could address that as far as Q2 is concerned. And as we get into Q3, and Vinod mentioned that as well that we should start reducing our NPA from absolute term basis. So this is the overall picture from my side on a broad level, but we can get into more details, into numbers and if there are more questions, we can delve deep into, certain numbers that you wish us to take us you through. So over to, Vidhi, if you can open up for Q&A.

[Operator Instructions] The first question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, first thing on the numbers. So you have sold some repossessed vehicles. So against your average ticket size per loan, how much are you able to recover when you are selling these repossessed vehicles?

The average recovery is around 50% of the amount [indiscernible] the estimate.

So if a loan of INR 50,000 has been given on an average, you are able to recover INR 25,000, please.

If the amount outstanding is INR 50,000 -- because, let us hope and pray that it doesn't happen in the customer base, which happens over a period of time. So let us say we been given a loan of INR 75,000, we have paid -- let me say, INR 20,000 to INR 25,000. And then subsequently, if the vehicle is repossessed because it doesn't continue to pay. And at that time, come from a time, Our average outstanding debt as we go towards the -- have when the vehicle is repossessed, on an average is around INR 35,000. So the average loss that we suffer is above 50% -- 50% to 52% is the average loss.

No. INR 75,000, he has paid INR 20,000. So that is INR 55,000. Now if you are saying you are able to recover 35,000, the loss is not 50%, right?

The loss will be calculated as a percentage of whatever is due at that point of time.

Yes. So the loss is INR 55,000, right?

Yes. So if it is INR 55,000 the vehicle would be of that quality. So we might end up collecting about INR 25,000 to INR 28,000, or INR 30,000.

Okay, okay. So understood. So that is 50%. Now in how many cases when you want repossession, you are able to actually physically do the job because in many cases, something else might be happening like a fraud or like the customer not being reachable or the vehicle not being -- if you are not able to repossess it because of a variety of reasons, right? So in how many percentage of cases where you want to repossess and you are able to repossess?

Vehicle repossession is normally looked upon as a nuclear option. If there are no other ways to collect the money from the person, then the vehicle is repossessed. So that's not the first option we exercise because we give a reasonably long rope to the customer, too. Obviously once the vehicle is repossessed, the responsibility of everybody ends and only the legal personas to then start the working. So we are not interested in that. So we do sufficiently long rope to the customer to pay. And...

Then what is the policy around that? How long rope can you give, like the 90 days is the [indiscernible] NPA, after that, many more days can it be given?

No, we normally go -- we will do -- everything depends on the attitude of the customers. There are times when we go even up to 9 months. That answers your question.

Let me pitch in, Sarvesh. Vinod mentioned that repossession is not the first option we use for the simple reason that -- As a group, we believe that customer engagement is very important and mostly customer being in Tier 3, Tier 4 centers and cash transaction is high -- It is worthwhile to connect with customers and do all possible activities to collect the money. And generally, the success rate in that is higher compared to repossessing and selling where you incur 50% loss on sale, okay? So the repossession, we don't have a very watertight policy that this is when you repossess. So our team. So we have our internal team as well who does a collection. They review -- so for every case, we have feedback. What is customers saying, whether he's reachable, not reachable. You rightly mentioned the vehicle is skipped or customers. So we have those feedback and basis that than the respective, the regional managers or the state as they decide which are the vehicles we are going to repossess. Average, we repossess close to 1000 two-wheelers per month. And that is after a proper scrutiny by the collection team, okay. This is a case where we are not going to get money, so we shouldn't repossess.

Yes, yes. That is understandable. Of course, you will give a long rope and everything. Now between 3 to 9 months when that account is NPA, the question is very simple that, let's say, once you decide that this customer is not going to pay, right? You're not able to collect it from whatever means whether be it characteristics, you are not able to collect. Then in what percentage of cases as per your experience, you are able to repossess. Where you want to repossess, but you are able to repossess. What is that ratio?

Okay. Okay. That could be, I think most of the cases, we are able to repossess. The skip -- the point that you are mentioning, whether the cases escape or customer not reachable, the percentage could be very low.

Okay. So does that mean that in case you want to repossess the 20% of your book, which has gone bad, you will be able to collect 10%. Is that the right assumption? Or because what I was trying to arrive is that what's your maximum losses because of this?

So actually, what we mentioned, 5% loss on sale is average. Average in the sense, there would be a lot of vehicles where we'll recover some time...

Yes, yes. Of course, average figure only, sir. I'm talking about average figure only. On an average, you feel that you will be able to recover 50% of outstanding. If you were to repossess the vehicles after giving sufficient due time and consideration as per case to case, right?

See, mathematically, fine, but in this 90-plus cases, we'll have many cases where the pause would be, let's say, 10% of the loan amount or 20% of the loan amount, which customer is gradually paying. All of them may not end up into repossession or loss. Okay. So what happens is once the customers or is reaching, let's say, 20%, 30% of his overall loan value. And when they are paying 1 or 2 installments due to whatever difficulty they are facing, we are also comfortable in the sense that because pause is there, I can repossess any day and I would not incur the loss.

Okay. Understood, sir. But ultimately, what you are telling me that when you want to repossess after giving sufficient time, if you want to repossess, you are able to repossess the vehicles, and these vehicles are not sort of going out of your hand only.

Yes. Yes.

So that is one. Second thing, which was very surprising in this quarter is that this quarter, we were expecting your gross NPA. I'm not aware of your percentage terms. Absolute amount would have gone down. That's been the case everywhere. -- even in your competitors in all NBFCs. So why such a starkly downward performance on the NPA front, even in this quarter, you were not able to better than the last quarter?

July this year, a substantial increase in the NPA number, it is -- it came down from the month of August. In fact, it came down in the month of August, it remains constant or steady in the month of September.

No, no. Sir, from June quarter to September quarter, I think you have been -- I mean, there is hardly any company which has reported increase in NPA like this continuing trend. Even your auto finance shares two-wheelers, they have all reduced their NPA while growing the book. In our case, the reverse has happened.

So the increase happened in the month of July, okay? After -- if you're comparing Q1 and Q2, it was actually July where, again, half of the July, people could not move out and collect. So I don't know about others, but definitely, July was a month where things were not in proper this thing. Movements were restricted, a lot of areas movements were restricted, including Kerala, including Kerala. So that is the thing. I mean it was not that customers, they were not there or things like that, we could not reach a lot of areas.

And most of the -- most of the dates are by the fifth of the month, and once it actually chips into 90-plus, then obviously its a Herculean task, pushing it back. So the -- even in July itself, there was a lot of pushback, which was done in that the rollback which happen for 90-plus to bring it down. In general it should happen, but then the numbers, which actually went into the 90-plus bucket on the fifth of July was significantly high. So therefore, that's the reason why in July, we did see an increase, but then the team got, I would say, they rallied quickly and then, sure, that in the month of August and again in the month of September, it was a -- once it bringdown and then they actually contained at certain level. So we are seeing improved performance even in the month of October, and we are confident that with things opening up, with people having more cash in their pocket and really a bit to do with the current category of customers that we deal with. Things are coming back to normal, and we are probably confident that we would surely see under 115% kind of collection versus the dealing that we do, which would mean a lot of collection would be from the previous month overdue. So we are confident [indiscernible].

For December quarter and March quarter for the gross NPA numbers?

Now let's talk absolute numbers and not the percentages because percentages will go down because the disbursements are there -- disbursements are increasing. So in terms of absolute numbers, we are certainly confident that on a much larger book, the NPAs will start going down. I'm not saying that it will go down by INR 30 crores or INR 50 crores. But then I'm saying that you'll see that kind of reduction happening maybe about -- in terms of absolute numbers, you will see the numbers going down by about 10%. I'm talking absolute numbers, again, and percentages will definitely go down because of the disbursements are there and therefore the AUM, which has started going up first time after the -- after 6, 7 quarters, that will keep on going up in the coming quarters.

10% every quarter?

Sir, request you to please come back in the queue.

Sarvesh, what we can always do is now we can do a longer call post this call. Maybe we can do a separate call. You can address all your queries.

Yes, sir. Sir, I have actually pushed him back in the queue. Yes. We have the next question from the line of Rishikesh Oza from RoboCapital.

Am I audible?

Yes. Now you're audible.

Yes, Rishikesh.

Yes. I was asking what is our loan book currently?

INR 1992 crores. That was the figure as of end of September.

Okay. And sir, what growth are we looking at for this year and for FY '23?

We are expecting the disbursements to go up. In fact, we hope to be -- in fact, let us say, looking at decent growth in the AUM in the next couple of quarters. And I would say that we should possibly be at around INR 2,400 crores or something at the end of the year.

INR 2,400 crores end of the year?

INR 2,300 crores to INR 2,400 crores, that range.

Okay. And for FY '23, do we continue this run rate, sir?

We would want to possibly respond to that at the end of the next quarter because we will want to see this actually run rate continuing and then we would want to respond to that. Permit us time to the end of next quarter. If things improve, definitely that number, that this kind of run rate will continue in the next quarter also.

Okay. Okay. And sir, regarding our credit cost, what credit costs are we looking at for this year?

Q1, we had a credit cost of about 11%. This can include in the INR 10 crores extra provision that we did, we had a credit cost of about 7.2%. We see this credit cost coming down on a quarter-on-quarter basis. And we are currently hoping that on full year basis, it should be in the around 4.5% kind of figures. Last time, I remember telling that it would be about the 3% to 3.5% range, but I see that being slightly higher at about 4.5%.

And for FY '22, sir, are we looking to get back to 2020 levels or even more than that?

FY '23, I'm firmly confident in this current momentum of strength, we should be in the range of about 2.5% to 3%. 2.5% is a normal number that we used to have pre-COVID. I believe we should go back to those levels.

Okay. Okay. Also last question, sir, if you could share the slippages data for this quarter and year-on-year and quarter-on-quarter number.

The slippage is the total number of accounts which got slipped in the current quarter was about [ 27,000 ] number, accounts of which about 10,000 reverse returned back to -- rolled back to being standard. So that's what has happened in the current quarter. [ 27,860 ] and [ 10, 400 ], those are the real actual numbers. So from our 140,000 NPA numbers, [indiscernible].

[Operator Instructions]

I just have a question. So when you said you are targeting some INR 2,300 crores to INR 2,400 crores of disbursements for the year. And up til now...

No, I said INR 2,300 crores to INR 2,400 crores book -- I think Rishikesh's question was what would be the book size at the end of the year? I replied to the book size, I said that about INR 2,300 crores to INR 2,400 crores of book, [indiscernible]

Of the AUM, sorry. Sir, so basically, but are we -- I'm guessing we're anticipating some collections also to increase in the second half -- And so will we be able to see such a growth happening in AUM, despite the higher collections and repayments. So you know the number of disbursements will nullify the collection future happening?

No. When we are saying that from INR 1,992 crores to from INR 2,000 crores, we go to INR 2,300 crores to INR 2,400 crores, we are definitely saying that the disbursement outstood the collection, which is -- And whatever collection is happening, definitely it will be towards improving our overall quality of the portfolio. And with the disbursement increasing, we are confident because we are not saying that collections will not happen before the AUM will go up because that's not the kind of growth we'll want because then we are actually talking that the quality of the fact will be bad. We don't -- we are not saying this. [Indiscernible] I separately mentioned about the NPA will come down more, actually about 10% on a quarter-on-quarter basis.

Got it. Sir, if you can just give an idea actually more on the numbers, like how much of accounts were in NPA by June end and how much of slippage in July? And from there, how do we see the numbers now in September. So if you can give those numbers so we can understand how deterioration happened in July and how much recovery has happened in the last 2 months?

What I have with me currently are the quarterly numbers, which is as I told [Indiscernible], actually went up from about 140 to some [ 27,000 ] accounts got added in the current quarter and subsequently, against the 27,000, 10,000 got -- was made out of NPA. Therefore, the total figure was about [ 157,000 ]. Month-on-month figures, I will need to possibly take out. I'm not really sure -- I can possibly give it to you separately -- will be on a separate compete call or something.

Sure, sir. No problem. And sir, with the macro environment, still very subdue for two-wheeler sales. And how do we see growth -- what strategy do we see applying on the growth that, with such disbursements happening?

Madhu, you want to take it?

Yes, yes, sure. Thanks, Vinod. See, when we say things are opening up. One of the things what is very critical is there are various other section of the society that need to open, okay? Like, let's say, schools need to be fully functional, colleges need to be fully functional. And of course, a lot of other things, restaurants and your theaters and other social activities need to go up, which we are very sure is going up. And two-wheeler is linked to the shortest piece of commuting to the longest piece of commuting. Now when all these things open up naturally, the bounce happens. The sale bounce happens. Now without that, without this, we are at, somewhere close to what a normal quarter should have happened around, let's say, 40 to 45 lakh per quarter sale that is happening. And once this opens up, which I believe, November would be a month where we'll see a significant change in the way, people move around and physical movement and physical activity happens, starting with the festive season of Diwali. I think that should set a new benchmark for the sale for whatever happened during the last 1.5 years. So we are fairly confident that the industry sales would pick up as people move around. And that is where our confidence comes, for example, I mentioned about our touch points, which we -- month-on-month, we have increased our touch points. Then we had very clearly identified at the beginning of the year that about -- we are right now operational at about 250 districts across the country. We have clearly identified which are the districts and counters where we'll consolidate our position, not that we lost the counter, but where we used to have very high degree of business. But due to COVID, it went down, we were focused there, consolidated that position. We have identified growth areas as well. Plus all the expansion that we said will go slow that will open up from Q3 onwards. So all these things taken together would ensure our distribution network is fully calibrated, and then we are there across all the counters where we were there and also expand into new areas. So distribution network is taken care through this allowing all these physical movements. -- industry opens up, school, colleges and a lot of other things that would further give us a sale. And third and most important thing is from the marketing strategy. We were very active in all the festive seasons. Very actively, we have pursued our marketing initiatives from various campaigns physical campaign, digital campaigns and then southern states, we involved into radio campaigns. So that activity has continued without any stop on that. So from all perspective, in the sense, that whether you are there in the distribution piece, whether you are there in the go-to-market activity and whether you are there in the sales promo, we had been very active in this. And during the last 3, 4 months, it has given us huge rewards. So from a number of perspectives, we are really not worried. From a market share perspective, we have seen our market share really improving from, let's say, approximately -- last time, we were below 1% as far as Q1 is concerned, against the total industry volume. We are at around 1.4% from a retail sales perspective. And from a finance perspective, we were at around 2.4%. We are at around 3.9%. So we are seeing significant inroads into all the areas where we said these are our consolidated concentration areas. These are growth areas. We have made significant progress there. So we are fairly confident as the dealer numbers move up, as the demand and customer walk-in improves and more and more sectors open up, we should be having the first write-off rejection of these cases in the sense that we should be the counter where we get the case first and then it goes elsewhere. So we are very confident that we should be able to maintain a better run rate than it was before.

Sure, sir. That's helpful. And sir, lastly, on hard bucket collections. So this year quarter, we saw the numbers improving. So can you please explain how did -- how does the collections come from the hard buckets, what strategy do we see? And how do we see that going ahead?

So there are certain states where we have a separate team for the -- lower bucket separate team for the hard bucket separate team. So there is a very clear cut focus there. Then we also organized a lot of collection miles, whereby, through the notices and through the communication with the customer. We bring them to the negotiation table. They come to our offices, wherever we call them, whether it can be collection agencies' office or our own office or our Muthoot Fincorp branch. We call them, negotiate there. We did close to 150 collection dealers in the month of September, we saw a very good response there. During the course of this call, we were mentioning that we believe that customer engagement is very important. That's what we are trying to do, because there is no fixed formula that do ABC and you'll get these numbers. It is not like that. We need to engage with customers. These were difficult times for everyone, including our customers. So we believe that if they need some extra time, fine, but meet them, understand whether they are there or not, identify clearly, customer is traceable, vehicle is traceable, reach an understanding that he make the payment partially or breaks it into 2 or 3, like that. So basically, across the board, we have kind of engaged with customers in a very positive way. We have been able to meet customers regularly. That is the key, unlike, just giving it to collection agencies and drive for either repossession or collection, we did not do that. Of course, that is there collection plus repossession is there. But between that, there are a lot of things that we are doing and basically engaging with the customers. Secondly, with our Muthoot Fincorp branches, a lot of customers go to branch inquire and pay there. So there are customers in 90 plus who would voluntarily come and make the payment. That is also there. So -- As we go forward, we are going to intensify our -- if you want to know that sir, we are going to intensify our collection [ milas ]. That is how more and more customers would engage and I know that if I repossess the vehicle today, I'll incur a huge loss. So I would rather talk to the customer, help him out in the difficult time, collect as much money as possible and reduce my pause against that asset. So this is what we are -- on a broader way, we are doing. Vinod, if you would like to add something on this.

I think, what we have covered everything, but like Madhu rightly said that the collection in the quarter on the hard bucket has been significantly higher than what we have seen in the 5 quarters before that. I said about 9% of the total collection was in the harder bucket. And we see these numbers going up as we get into the third quarter and begin in the fourth quarter. Our intention is to ensure that we come out of -- we reduce our absolute numbers in terms of GNPA, and this is where I said that no we see a 10% kind of reduction likely to happen in the third and the fourth quarter. And we are fairly confident that this will happen and the strategies that the team has in place and the buoyancy that the one is seeing on the ground that makes us all confident that whatever we are hoping and praying this [Indiscernible] will actually happen.

Got it. And lastly, sir, on almost 157,000 accounts, how many customers have not paid a single EMI yet after COVID?

You're talking to put it differently. I will say that roughly about -- out of the 157,000 customers, there are about 30,000-odd customers who have paid something in the -- may not be one full EMI, but they have paid something, which -- but they have not paid enough to move out of NPA. Let us say some 5 installments are outstanding, the person would have possibly paid 1 installment or 1.5 installment. So in fact, in the presentation that we offloaded, we said that the amount collected is roughly about INR 7.16 crores from these kind of accounts and that figure is stand over close to 30,000 customers, and they would have also paid. Now the number of people who have not paid post the COVID would be a separate amount as we can possibly share that with you separately.

[Operator Instructions] The next question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, on this 10% reduction on NPA, so you are talking about 10% reduction in Q3 and then a further 10% reduction in Q4 on the absolute gross NPA pool?

So we are talking about roughly a close -- being close to about INR 300-odd crores with INR 300 crores, INR 310 crores by the end of the year.

Okay. Understood. Secondly, I had one general question, maybe Madhu can answer this, is we are also seeing a huge disruption in two-wheeler space by the EVs, right now for example, Ola has plans of selling whatever [ 2 million ] vehicles and the stat. So companies are coming up with a huge plan to sort of disturb the two-wheeler market. And so what is the role of financers like you in that EV game plan? Because if that were to become a significant share of this space. And given that a lot of these startups have the propensity to not be aware of losing money, they can even finance these vehicles on their own or they can set up their own dealerships rather than going through third-party dealerships. So how is that space evolving? And how do you see your roll in that sort of space.

See, I can divide your question into 2. One that what kind of strategy maybe EV OEMs are doing? And then the second piece is what would happen to the financers, okay? From EV OEM perspective, I think one of the key things would be how they set up the dealership, maybe they can sell through a platform or online or whatever it is. But putting up a dealership network and competing with the current OEMs is a big task, okay? So any OEM, any manufacturer who is into cars or commercial vehicles or two-wheelers, any vehicle-related OEM, the biggest challenges are distribution, okay, because it involves a lot of investment by the dealers and plus match-the-standards of services. So it's a big investment, which is kind of what we call it entry barrier for people to come and just manufacture vehicle and sell. There's a big entry barrier. From the perspective that how much EV is going to replace the combustion engine two-wheelers? It's difficult to predict right now because we need to look at the price point, okay? Price point, one. Second, the charging capabilities. And third and most important is about the battery, which a lot of research is happening, how the battery efficiency can be improved and a lot of activities happening on that front. I would focus on the price point because the other two things are more of infrastructure-related issues, which, of course, this OEM need to address if they have to be successful. Price point right now, the vehicle that has been launched are on a very high price segment. And given our two-wheeler customers who are very price sensitive, I think that is where a key challenge would come in EV. But we have seen the way Hero Electric or many other OEMs, they have come with segments where they can compete with the current market. So that price range is where the game would be, and that's where the financials come into play because evaluating that segment of customer, having the distribution I mentioned about distribution, the kind of reach that finance companies can give is huge. That's the added advantage for the OEMs in the sense that with finances reach, it is easy to sell the vehicle because the finance is available in that area. And I'm not talking about Mumbai and Delhi, I'm talking about Tier 3, Tier 4 centers, where you may not find many dealers, you'll find some dealers or brokers operating there. So if financiers are able to provide you that distribution, which is happening currently. And that is where the dependence on finance company happens. With the current relationship, for example, we will be -- we would be having a database of more than 18 lakh customers, okay, whom we have funded over the years and who have paid as well. So it would be more than INR 18 lakhs. Similarly, a lot of other finance companies has this customer base. So any new company comes to get that kind of base is a challenge, and that is where the finance companies can contribute to any OEM who comes into the market, and it's a win-win situation is created. So I think that between the current industry and the new challenge that comes, I think it is more of a partnership model that is going to happen. And all working together would bring the right mix of the winning proposition. And to that extent, MCSL, we had been open in terms of tying up with a lot of companies, one of them publicly available in Hero Electric that we tied up. We are there across like 100-plus dealers. We are operational in about 80 district, okay, as far as their reach and our reach is concerned, which is common and we provide them services there. It has started well last year, but immediately after the auto expo, and just after the COVID hit, first lockdown happened. Now it is improving. I believe that as we go forward, we should be able to have a couple of more OEM partnerships. We are talking to a couple of them who are in the price range where we want to operate. So this is a -- electric two-wheeler is something which we are very actively and aggressively pursuing MCSL would be there in this product. And I see that not a formidable threat right now for the other OEMs when the EV comes up. My belief is that it is going to be more of a coexistence rather than competition for various reasons that I mentioned. And once the technology becomes good in the sense that batteries become efficient, charging becomes available across, dealerships are there, service capabilities provided across the country, although EV doesn't have much to service besides battery and motor and not much is there in that. Once that happens, I think then the competition would heat up. And I see at least 1, 1.5 years that this should kind of come into play. But as of now, as far as MCSL is concerned, we are very bullish, positive and this is one of our key projects that we are pursuing.

Thank you. As there are no further questions, I now hand the conference over to management for closing comments.

Thanks all of you for being on the call with us. So we tried to present the numbers that we have actually achieved in the last quarter. And I tried to address all the queries that you actually came up with, and that most of -- if anybody else who are on the call or anybody who's not on the call if anybody has any queries, we'll be more than happy to address any of them. We are -- like we said at the beginning of the call, fairly confident about Q3 and even more confident about Q4. And we internally hope that we will come back to you at the end of the current quarter when we do the call to give -- to discuss about the Q3 financials. We are fairly confident that the numbers will be far, far superior to what we have seen in the second quarter, which was definitely, I would say, an improvement over the first quarter, and we are confident that we will end the year on a high note. Thank you very much.

Thank you, everyone, Madhu here. And as we discussed and Vinod also mentioned that we are seeing a U turn in the sense that whatever could have happened, Wave 2 is over. And we firmly believe that we should be on the road towards what would have happened in FY '20, benchmarking that and then growing further. As we meet in the next quarter, I think we should be able to give a very positive and good result to all of you. But just to assure you that we are there now in full action, and very confident. The confidence level itself is very high and the recent festive seasons also kind of gave us that confidence. How the OEM grows, how the industry grows is secondary, but as far as MCSL is concerned and with our flagship that is Muthoot Fincorp Limited branches across the country, I think we have we are very solidly placed very close to customer, and we should be able to tap each and every two-wheeler customers. We have improved our market share. We are very confident that we'll continue to do that. Thank you all once again. And in advance, happy Diwali, Happy Dhanteras. Happy Diwali to all of you. God Bless. Thank you very much.

Thank you very much. On behalf of Antique Stock Broking, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.