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

Ladies and gentlemen, good day, and welcome to Muthoot Capital Q4 FY '22 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, Linda. Good afternoon, everyone. We have with us the management of Muthoot Capital Services Limited, represented by Mr. Madhu Alexiouse, Chief Operating Officer; and Mr. Vinod Panicker, who is the Chief Financial Officer. Without further ado, I shall now hand over to Mr. Vinod Panicker, for opening -- over to you sir.

Thanks a lot, Vidhi. Good afternoon, again. Appreciate [ being with all of you ]. We are here to share the financials that was approved by the Audit Committee and the Board yesterday, and which we have we published yesterday on the stock exchanges and today in the newspaper. And wanted to share some of that and then maybe once we produce that we will want to take your questions and address all the questions that you ask to the best of our ability and whatever we can't directly answer, we'll directly -- we'll completely reply to you after the call ends. Maybe on a mail or something or on a direct call. Maybe to begin with at the end of the year, we were in [ over ] 20 states. We had an overall loan book of over INR 2,056 crores During the fourth quarter, we had a total increase in customer base. The new customers that came in was about 49,529, which went during the entire year we had a total number of 145,000 customers that came in the press. So taking us to the total retail customer -- line customer base about 516,000. During the year, maybe just to mention, during the quarter, we had a total disbursement of over INR 368 crores. And for the year, about INR 1,147 crores. Start the financial performance, which we have uploaded sometime that on the website. During the current quarter, we have done a total [ disposal ] of [ INR 368 crores ] versus about INR 332 crores that we didn't [ deliver ] to India, and towards the INR 90 crores that we give to the same quarter last year. So versus the last year, there is an increase of about 21% and versus the current year, there is an increase of about 10% to 12%. That led to us taking our AUM, including [ the talent ] of INR 2,056 crores versus about INR 2,011 crores that we had in the immediately preceding quarter. And it was about INR 2,071 crores in the same quarter last year. [ Market ] ending, we were at INR 2,071 crores. The income out of the current cost automotive has generated INR 708 crores. So we gave a higher than the immediately preceding quarter then it was INR 93 crores and in the same quarter last year, which was slightly higher at about INR 109.6 crores. So compared to the same quarter last year, there's a 3% drop. On the finance expenses, we have been very lucky [indiscernible] credibility that the group has these lenders and anyone that everybody which will be in the group are working with the proper [ turn group ] has a lot of credibility. This is in spite of the senior reasonably bad year, we were able to maintain our interest rate. So we have been able to actually bring down the cost. Same quarter last year the cost was about INR 42 crores. This time, it gives us about INR 34 crores in the same -- immediately preceding quarter it was about INR 36.3 crores. So the drop is on account of both reduction in the utilization of fund and also because of the reduction in the interest rate. Both being there, [ about 75:25 ratio in total ]. Investment and net interest income was at about INR 73.7 crores. It's about [ INR 50.7 crores ] in the immediately preceding quarter and INR 67.7 crores in the same quarter last year. Operating expenses over in the current quarter, in the immediately preceding quarter and in the same quarter of last year was roughly the same at about INR 42.3 crores in the current quarter and INR 43.3 crores in the immediately preceding quarter and INR 44.3 crores in the same quarter last year. It is on the loan loss provision, there we have taken maybe when I go into this particular [indiscernible] in detail in the next sheet. Then I will elaborate on that. We have taken a total provision and write-off of about INR 236 crores, leading to a profit -- or loss before tax of over INR 205 crores and a loss after tax of about INR 154 crores. On a full year basis, as a total disbursement of about INR 1,147 crores, leading to a book of INR 2,056 crores. The full year income was up about INR 398 crores. That was about INR 505 crores last financial year. The interest cost is lower by about INR 37 crores in the immediately preceding quarter. INR 31 crores [ concept ] versus the interest cost that is the last year, was down to about INR 27 crores, INR 25 crores because of reduction in the utilization and INR 12 crores because the reduction in interest rates. And operating expenses was broadly the same was in the last 3 years and this year is still around INR 133.7 crores last year And INR 152.7 crores in the current financial year. Its loan loss provision, which was at about INR 95 crores last year. And this year, it's about INR 324 crores for the full year, which led to an overall loss of over INR 229 crores. And a loss after tax of about INR 172 crores. It is here that I would want to elaborate on the loss figure and the [ perfectly to create some more time ]. We were looking at the normal accounting. We were looking at a normal year where there were no -- now there are 2 obvious [ factors that I would not be talking about asking after this ]. Then we would have possibly, in the fourth quarter, INR 108 crores reported an income of about INR 116.5 crores or INR 117 crores. And we would have had a loan loss provision, our overall provision plus other hits also together of about INR 22 crores, and we would have possibly reported a bottom line positive of INR 13.5 crores after that. That would have been the scenario, the other 2 circulars that I'm now going to talk about is gross number. So on a full year basis, we would have possibly reported a loss of about INR 4.6 crores that would have been the normal business. The provisioning that we are talking about is based on the ECL provision that we follow, and we have been consistently following and something which we have been doing. This is the trend over the last several years. We are taken the trend from 2014 onwards to determine what is the equal provisioning. Now the [indiscernible] which I will now talk about is one is the [indiscernible] now based on the figures that we -- I told you just now with the bottom line of about INR 13.5 crores for the quarter and the negative bottom line of INR 4.6 crores for the quarter. The GNPA was -- at the current year is at about 18.7%, down from 20.5% in the immediately preceding quarter, but higher from the 11.7% that was in the same quarter last year. So versus after making the provision, the NNPA came to about 9.9%. And because it was 9.9% to ensure that we don't come between the utilization, it's meant to get collections added to the -- I mean, provisioning has to be well to ensure that we don't come in the PCA categorization. I also wanted to mention that on a regular basis, capital adequacy was at about INR 27.7 crores. [indiscernible] ratio of about INR 24.7 crores. Now to get out of the PCA on a normal basis, we had to make an additional provision of about INR 81.3 crores. We have made a provision of about INR 81.3 crores. Taking the current quarter's profit to negative from out of -- negative of over INR 63 crores and a profit after tax -- not after tax of over INR 47 crores. On a full year basis, the figure became negative of INR 87.6 crores before that INR 64.6 crores after tax. At this stage also, the intention was to come below 6% where [ MMTA ] has to come below 6%. Our [ MMTA ] was at about 5.8%. So capital [ deficiency ] was at about [ 26.3% ]. Then there was the other circle of the tradeoff number whereby RBI has said that any account, which moves to 90 plus has to come back to 0 for it to be called a standard number. So last quarter, we had very clearly mentioned and I'm including that we had reported a total gross NPA of 27.7%. But basis the time that we took and whatever is permitted [ in there ], there was no additional provisioning required because everybody -- all other companies have done the same. The provisioning basis, the bucket in which we actually sell because while they were in F3 as far as reporting, [ I mean to take that were treated as NPA concern ]. Strictly speaking, they were in S1 or S2. The provisioning of S1 and S2 is [indiscernible]. Subsequently, RBI came with a [indiscernible] saying that they would want -- that they give kind of 2 [indiscernible] of September for companies to implement it. Assertively implementation [indiscernible] for companies were given sufficient time to go to the market and get the customers to make the payments and do everything else that needed to be done to ensure that you implement it. We decided -- there are different stance taken to other NDS. We thought that it was prudent to offer and recognize it as an NPA and then character over the next couple of quarters, next 2, 3 quarters and therefore, bringing down that rate. And that is the reason we took an additional EBIT of about INR 141.5 crores. Additionally, it would mean that the provision would be higher, but then because you already made some provision on these accounts. This is the lower bucket that would get netted out. So the total hit of about INR 141.5 crores was taken, which was including [indiscernible] income reversal of INR 8.7 crores. Based on that, we reported a figure of INR 204 crores negative for the quarter and INR 229 crores negative for the year and INR 153.5 crores negative after tax for the quarter and INR 121.8 crores after tax for the full year basis. The entire provision that we have now done, the capital [indiscernible] was at about 19.8%. And the NPA while it was 25.9% because we took this additional INR 148 crores of NPA. The NPA has now come down after the provision to 5.7%. I will pause over here for a minute, and I would -- maybe wanted to -- have Madhu probably comment before we take questions from you.

Good morning to all of you. Thank you, Vinod, for your initial presentation. I think I'll give a big brief perspective on how the 2-wheeler market has behaved last year, what are the expectations in the ensuing year and briefly and then probably after that, we'll open up for Q&A because it would make sense in picking up the questions and giving more depth insight. Last year, after the second wave, we have witnessed 2-wheeler industry actually bouncing back. And until December, October and thus the festive season, we saw sales touching about 15 lakhs per month. Subsequently, we saw that around Q4, the industry has similar to 12 lakh unit sales per month. And Q4 sales, if I look at wholesale number was about 34 lakh to 35 lakh unit. And Europe still the work from home and a lot of schools, colleges are yet to open. So that impact was seen during the Q4. Retail registrations had been stabilizing around 12 lakhs and in Q4, retail registration was about 32 lakhs. As we go forward, we expect the sentiment to improve in the ensuing months, especially from the fact that -- and I had been giving this in my earlier commentaries as well, schools, colleges need to open and which has happened across the country. and work-from-home facility is being withdrawn in a lot of organizations. So these are the initial spark, which is now seen in the industry. It is now slightly moving on the Northern side. We also see there are challenges related to geopolitical crisis in terms of inflation, and we -- everyone offers -- read every day in the newspaper, but that I believe is a temporary issue because there is impending demand of last 2 years, which consumers have kind of kept on hold. They would have repaired the case and use it again and again because the usage would have been less. We believe that with opening up of the market, I think as we go forward, numbers should look better as far as industry sales is concerned. I've always mentioned that India is the largest 2-wheeler market and also it's a primary mode of transport for common man. And we believe that this is the low. I mean last year was the lowest where the overall sales was about 145 lakh unit. And India has about 102 wheelers of every 1,000 people, which is very low compared to even developing nations. So we believe that this has to go double given the bottlenecks in terms of commutation, that is in our country. From NCFL perspective, our overall disbursement was about INR 309 crores for Q4, which is about 39,000 units. We have been benchmarking ourselves for the year 2020. I think this was the first step of closing -- crossing INR 300 crore, which we have been, for the last almost 3 quarters, we've been doing more than INR 300 crore disbursement. And also, I mentioned that with the opening up of the market, we had been able to reactivate a lot of business touch points, lot of dealers. And of course, our own in-house NFL branch network that would actually help this year. For the year, 2-wheeler disbursement was INR 1,080 crores, which is about 1.42 lakh unit, which comes to about 1.18% market share of the retail registration for the country, retail registration of 2-wheelers in the country, which is about an improvement of close to 0.35% from last year. So we are seeing that the numbers are bouncing back positively. It is about this year when things open up and the sales start picking up from, let's say, INR 35 lakhs and it crosses INR 40, INR 45 lakhs, I think things should look much better. From a collection perspective, we have seen collection picking up across all buckets. If I were to tell about generally x bucket, collection for two-wheeler industry, it is about 93%. We were around 97% of the collection efficiency. We were also about 100%, which is very welcome sign. And when we look at our March soft bucket collections, we were 90 plus. So these are positive signs for us. As far as bouncing back is concerned, it is a onetime hit that Vinod mentioned that we had to take and being conservative and being an organization, which has believed in being upfront, we have done that. But if you look at the trajectory that last 3 quarters that we have shown, we have been kind of improving quarter-on-quarter. I think we open it up for Q&A. We can get into more insights as the participants want. So over to you, Vinod, we can open up -- Vinod, if we are okay, if there's nothing more to add, then we can open.

No, I think we will address the queries and right now first and then subsequently anybody who has any other queries, additional queries, they are free to call us [indiscernible].

Sure. Sir, please go ahead with, [ it ]. Thank you.

[Operator Instructions] We have the first question from the line of [ Vinej Advani ], an Individual Investor.

Actually, I'm highly disappointed with the results. As is other companies have also struggling, but our performance are really bad, I think. And from 2017, the company opted not to pay dividend so that it can retain it for future growth. That also didn't work well. So in between others are also paying dividend and still have better base. So then could we see a real turnaround and back to create a kind of a performance and how much conviction you're having on the turnaround? Since we are listening to the con call from last 1 year, feeling a little bit of hope, but still, the performance has not been thriving. So how -- and the second question is how much could be recovered from the amount, which has been written off in this quarter? These are the main points.

Thanks for your call. Honestly, we are equally disappointed. And obviously, when we put it up to you and it is our company because we are the shareholders, [ we ] are not. So obviously, we feel far more disappointed as to even present these numbers to you. Having said that, let me try and put it into perspective. First and foremost, the major hit on us came after the second wave. By then the NPA shot up and then NPA continue to shoot up for the next 3 to 6 months. Between the last quarter and the current quarter, the NPA, the [ VP ] has come down. GNP has come down, in fact, in between we reported a negative of INR 15 crores at the bottom in the first quarter about INR 8 crores or INR 10 crores in the second quarter. And then we showed a positive of INR 4 crores in the third quarter. Fourth quarter, on a normal basis, we would have reported a INR 13 crores positive. And on an overall basis, we have reflected negative of INR 4 crores or INR 5 crores. So that would not possibly disappointed view or for us for that matter because we said our -- the way we look at it is we are improving on a quarter-on-quarter basis. But then obviously, the periods were not good to satisfy you or us and we are definitely not satisfied with the business. But then there was these 2 circulars, which we had to adapt to. Last quarter after the results also in fact, we have been following -- we have been working with our team very closely over the last several months saying that even before the PPA now actually kicks in, saying that some of this number, NPA sales will go down -- have to go down. And then while December was a month and the NPA did down a little bit. January, again -- January was also a good month. February was a bad month. And because of this toxic kind of a ride, the [indiscernible] at the end of the year remained at about 18.7%. And because this is a normal [indiscernible] longer term. And when you consider longer term, the provision is basic that longer term. And therefore, quarter provisioning period to resume, we were doing some for management overlay also we were providing even in the last quarter because -- and the team was always confident that we will bring down the NPA to the threshold demanded by RBS. But they were not able to do that in spite of their businesses. And then that happened at the end of it, like I pointed out in the presentation that we had to actually charge of INR 81 crores purely on account of just getting out of business. On the second part, which is the [indiscernible], RBI had [indiscernible] but the company management part is appropriate that we don't take the benefit of the relaxation given. And we actually made provision for us to tell the regulators and everybody [ in spite of the provisioning deliver ] and we agreed to that threshold of 6%, which the regulator has demanded. Even on the capital efficiency, we are already comfortable or close to 20%. And then work on the next couple of quarters to recover the amounts, especially the ones which is about INR 148 crores, which has gone beyond 90 plus and then come below 90 plus. But the base is the old number for there to be called an NPA. And when they're called as NPA, then to remain out of PCA, we need to make provision of that. So that has been the issue. But let me assure you, the team has -- actually the team had several [ 15% lever ]. Obviously, this is [indiscernible] the future going to be and the team has taken robust target which was not the case maybe immediately after COVID. They were slightly after the second wave. That was not the case. So then now the [indiscernible] has taken robust target. Things have opened up. They are telling that the industry will see an 8% to 10% to 12% kind of growth. And obviously, the prices have gone up. Therefore, all together this benefits entities like us, which are fully focused on this. But I think that businesses is definitely were our biggest challenge would be to first bring down the INR 148 crores, which additionally went into the NPA bracket because of the close number circular. And separately, bring down the [indiscernible] down the other accounts which are in NPA to -- below [indiscernible] project and then go. The team is confident that they will bring down the NPA to a considerable level. It was [indiscernible] to a certain extent that we'll be reporting decent or, I would say, attractive number for the currency FY '23 financial year.

Okay. So just to take some more clarification, how much would be recovered from the amount which has been written off and by then that would be [indiscernible] an exit time line or exit amount, but a ballpark kind of figure?

We have written off in the [indiscernible] clarify this provision, which I am talking about is not written off. The written off amount is about INR 18.7 crores only. Out of the personal loan loss provision, everything else is nearly provisioned. We are saying that we are just making a provision. The write off is of INR 18.7 crores only. And out of that write off, normally, over a 1- to 2-year period, we get back over 20%, 25%. But this...

This is not -- this is only a provision.

Yes, regarding provision only, how much could we recover from the 148 you're mentioning and when it could happen?

Let me maybe give you a different way to -- let us look at it differently. All these accounts, enter INR 148 crore book, these are the sector guys who are paying on a month-on-month basis that then sometime after [indiscernible] number, there then gone into a 90 plus and then come back below 90 plus. Now [ regulation phase ] comes back to 0. You cannot take it as a standard, substandard account. So they are paying on a month-on-month basis, probably defaulting because these are the accounts, which are less than 90. And that means there's been interest -- in fact, if you look at the website where we have presentation and you look specifically at the NPA movement, you will realize that we -- the amount which is collected in the NPA accounts in the current quarter, with about INR 8.36 crores, which is -- from about 59,000 customers. So sorry -- the total amount collected is INR 36 crores from about 59,000 customers in the current quarter. So obviously we have ways of paying. So maybe there is -- even if they continue to be NPA, these accounts, they will continue to paying and maybe complete the payment maybe between 2, 3 months after [ the end ] is over.

Okay. So it means you are provisioning will be recoverable in the next 5 to 8 months, we could expect that?

Yes. The intention is that the data low-ending fruits because we sell resonate payer the teams have been actually mobilized to attend to each one of them to think that you currently pay the 3 months due immediately. So that the account goes out of NPA because -- and we have given immediate targets to the template when the accounts should come down every month out of the INR 148 crores. So the intention, and now the second half is -- to ensure there's a lot of control in the 0 to 60 kind of buckets. So that the guys don't actually go into 60 to 90 or beyond 90. So when [indiscernible] installments has become critical for them to pay. And we understand. People are coming off of COVID and [indiscernible] circulars, which actually half on the customer could pay is definitely tough [indiscernible].

So finally, could we presume that the worst is over by FY '22 and from FY '23, which would only see better and better things ahead to be...

That is [ an issue ] that FY '23 will be far, far significantly better than what FY '22, '21 or '20 -- year '20 was. That's not an assurance which we will want to give.

Our next question is from the line of Vidhi Shah from Antique Stock Broking.

Sir, firstly, just one -- and so we have [ leverages ] around INR 60 crores every quarter. So do we expect this number to come down going ahead? That is first question.

We think that we are now in to remain think I was saying the same thing. That we would want to and we are having 2 sets of teams. One is specifically to handle the accounts, which is INR 148 crores, which went to NPA and then came down below that [indiscernible]. That is [ one thing we are ] following. The second thing, [ the accounts ] which are in 0, 1, 2, 3 [ and that ] has gone to 90%. Their job is to ensure that it doesn't go to 90% [indiscernible] and that is one part to them. And the third part is under the accounts. And it has [indiscernible] past to ensure has a robust collection process significantly better than [indiscernible]. And amounts [indiscernible]. So [ INR 165 crores ] was actually added in the last quarter, [indiscernible] and only INR 23 crores out of that buildout. Usually the reason we will ensure that the addition over subsequent quarters are significantly lower. So we actually expecting that this -- those numbers percolate fully ever to without waiting for the relapse in the last recent period. It is the terms of [indiscernible] that we ensure that [indiscernible].

Sir, first dating back from Q1, it implies from the next quarter onwards the end of slippages will be significantly lower compared to these past few quarters?

It will be significantly lower as a team. The project that we have taken is also indicating with them and regular meetings that the team [indiscernible] superiors that we with the Chief Operating Officer and [indiscernible] Director. These are indicating towards us and all have taken into the challenge because obviously, 1 year or 2 years or 2 values is definitely there is not something which we would want to [ show without segment ].

Vidhi, let me kind of dive into this. So if we look at the -- if we look at the performance of -- as of March, and let's divide this problem into 2 pieces. One is the softer buckets, how they are going to perform. And one, the NPAs, how we are going to roll it back to 0 so that we can have the reversal of the provisioning. Bucket X performance. So it was about 97%. It was highest over the last almost 1.5 years, okay? 97% means only 3% slippage from the 0 bucket or X bucket, which generally in the industry is 93% to 94%. So we have kind of improved on that. So of course, the kind of cash flow -- improvement in cash flow for the customer would have happened, and that's why we are getting the payment on time. Bucket 1 and 2 also performed the best over the last many months. Bucket 3, that is 60, 90 because of which we have taken additional provisioning, which Vinod mentioned. The performance was 90%, which means that out of INR 100 post principal outstanding, 90% of the cases, we were able to get at least 1 installment and that did not flow into 90 plus. The issue is that in this 90%, if we bring it back to 0, then we need not provide it in our books. So 90% performance in that bucket has to be pushed back to bucket 2, that is [ 31 60 ]. So what we are seeing is across bucket, we are getting the cash flow of customer has improved, and our performance still has improved. So this is a stage where we can say that we'll be able to field the slippages from all the buckets, I mean, it's very important because 60-plus is where we want to bring down our portfolio. So from all buckets, we see that the performance has improved and rolled forward, has been in control. And once we continue this, I think we'll see significant improvement and reduction in the NPA.

Okay. Okay. And sir, just data driven question. What will be the coverage on Page 1 and Page 2 assets?

One second. On Page 1, Page 2 on a total outstanding of [indiscernible], the provision that we have taken is about [ INR 30.36 crores ]. So coverage is about 3,000.

No, I wanted separately. Like Page 1 separate and then Page 2 separate.

Can I make a note of it and mail it to you [ instead ]?

No problem, sir. And lastly, sir, do you have any disbursement target for FY '23?

The team has taken a [indiscernible]. We are currently working on that same [indiscernible]. But our only -- we monitor on a daily basis and our request is move -- as all the quarter using to enter that you raised the question business. So that [indiscernible].

[Operator Instructions] Our next question is from the line of Akhil from RoboCapital.

Am I audible.

Yes, Akhil, you are.

Just regarding the last question that was asked, since you mentioned the target of 2,300. I just wanted to know, so going in FY '23, what would be the ticket size in the number of loans that you will be doing? Would it be around INR 76,000 only and, let's say, approximate 2 lakh loans?

Yes, just a second.

Can I reply? [indiscernible] is the figure.

We had 73,000 loans is what we're talking about. Last year -- this year we did talking about last year. This year, we did 143,000. We are going to be close to double.

So close to INR 2 lakh 73?

2 lakhs 73,000 is the figure [indiscernible].

Okay. And the ticket size year around?

Roughly 76,000.

76,000, okay. Okay, fine. And so regarding the provision, so since it will take time for you to reduce the provisions going ahead. I just want to know what would be the credit cost for FY '23? It will be much higher, right?

The credit cost would be much lower in a sense. The focus will be first on is INR 148 crores, which are low hanging fruits. It should definitely ensure the credit costs will keep coming down on a month-on-month basis. On a full year basis, we will want to target about 2.5%.

2.5%?

Yes, because we believe that the bad times are over. Collections have improved. It is only improving. In fact, the slides that we have put up, which shows actually that between the quarter-to-quarter, the numbers have gone up. It's going up for the quarter to quarter, not sufficient to -- for the GP in the current year, but definitely, numbers are increasing on a quarter-to-quarter basis, and it will only improve as we go forward.

Our next question is from the line of [ Saravanan Balakrishnan ], an individual investor.

The first question, the current borrowing mix, like how is the current liabilities are looking like half of today?

Give me a second, I'll just show you. The currency and overall borrowing cost was up about 8.2%. -- just about 9.32% last year. So obviously, in the current year, the cost has come down significantly. In fact, I made a mention about it in my opening remarks, saying that has nothing to do with the credibility that the group has. And definitely, in spite of our lackluster performance, we have been able to bring down the court, which is definitely, we feel it's a bit [ traditional ] for the company and the group company. Regarding the kind of loans that we have. Roughly 68% of our loans, on our borrowings are in the form of bank loans. Roughly about 2% in the form of subordinated debt, about 4% in the form of public [indiscernible] and actually as of 31st March [ 17% and other aspects in 1% ]. The CDs are being paid up. In fact, we have taken about INR 275 crores last year or the year before last. About INR [ 125 crores ] was tailored by 31st of March and has been paid yesterday and today. So NCD would also come down. Our total -- majority of the [indiscernible] is from PTC NDA and NCD is 9%. So that NCD will come down. We plan to do a lot of [ transaction ], which will take it back to the [ 25%, 30% level ]. So that would be the broad mix in the current financial year.

So is it something like which we will have it consistent in the coming year come from a liability mix strategy [ percent ].

It would be when we would keep looking for [indiscernible], I mean, borrowing [indiscernible] other things that we also would do or we are speaking to. The way people are [indiscernible] banks about it. One would be following [indiscernible] for some years. So obviously, compression of it remains on our -- some portion remains on the book shelf. A larger portion [indiscernible] so that would be, while it is not exactly we're borrowing, it's sort of we taking money from somebody and sourcing and handling [indiscernible]. So I would call it a hybrid variety of GDP. So that should be there. And maybe we look at bonds and things like that, which will also having the PSC [indiscernible] marketing the first store definitely in the percent quarter.

So with the interest rates going up like what's quite conscious direction that we had been taking like now [indiscernible] in last year, so we just about -- like also being -- recovering a bit? But it seems like now with rates going up and [indiscernible]. Like will we see a further impact in terms of -- from a disbursement and growth standpoint, primarily from a vehicle launch standpoint?

So the last [indiscernible]?

Yes, the last question was on the [ rate ]. So I remember like 1 year back, we anticipated like the auto loans would sort of recover right? So [ a lot of it in ] recovering and so disbursement and good opportunities coming there. But with interest rates going up like the cost of capital also goes. So we have a significant impact on the metal loan prospects?

[indiscernible] point that the interest rates will go and definitely, that will have an impact on the cost of fund 8.8% it is purely the interest cost. In fact, I have budgeted a much higher figure for the next financial year. This is the interest is going up. And definitely, this is the kind of [indiscernible] the put up before the lender. So obviously, that's taken[indiscernible]. But when the interest rates are going up, being a part of the larger group, we are confident that the industry will take cognizance of the fact that it's a one-off and they'll give us a benefit of doubt as far as the performance goes and definitely because of the compound that we have with the group, we will not be shipped as a [indiscernible], number one. Number two, obviously, when the interest rate goes up because of factors other than my own performance, my cost will also go up. And when my cost goes up, we can cater to the segment where possibly raising my cost, my way higher on the yield front will not be that much of the difficulty. So we are certainly confident that cost will go up the headwind, but then we have confirmed that my fleets would go up, which was a compensated for any increase in cost. [indiscernible] which will be the concern.

And in terms of geographical presence, like how is the split looking now? Is it like South being 50%, 60% and like the other segments is I think 30%, is it? Or like will this number significantly [ figure ] across multiple zones?

Currently, South is about 66% and we are looking [ at 34% ]. We are looking at growing Northeast best significantly. But then I would say that there could possibly go down from 60% to 63%, where it has gone to 2, 3 years back. And that then we had pushed aggressively Northeast and East. So I'm not very [indiscernible] would call possibly go [indiscernible].

So what I have noticed historically in all the micro finance businesses aspect. Usually, the NPAs are higher in the last [indiscernible]? Is there any particular like reason like why rate days higher in these 2 zones? And like do we have any threshold percentage that we'll again disclose to each -- between each zones? Like any controls on that side?

Madhu, you would want to take this question.

Yes, sure, sure. So North and West, because the market is like that, in a sense that it's a very competitive market. And it's a volume in a market as well. And for the larger markets, these kinds of issues are there. But key is how we manage our portfolio, and that is where -- and I have mentioned that many times during such calls that we have our way of assessing at dealer level, at location level, each and every market where we are performing. And is there anything wrong in terms of collections, and we try to adjust or pull out of those locations or either and continue with profitable dealers. This was like cold weather. It impacted across. I mean it was not that certain pin code or certain city or a certain town was impacted. It was across everywhere. So it would not be right to pinpoint certain things. But our own risk management system tells us that, okay, these are the areas where we should focus and not focus. So within those areas, North or West or East or anywhere in the country, if our metrics say that do the business we'll continue doing there. And wherever we see any kind of issues we'll curtail our disbursement. It can be through reduction of the funding quantum or reduction of volume or exiting the dealer. These are the things that currency steps happen. So while in the market -- any market can be a problem, okay? The risk management metrics has to be strong, and that is what we try to do when we grow our business.

Got it. So are we looking for any capital base in the mid-terms?

I think in the current year, these will go after the first or second quarter, we'll definitely look at that because [indiscernible] capital is needed because we are looking at good growth or mature growth. And before that, in the past, we have always been doing securitization and the direct segment to ensure that we don't need to go and ask for more capital from the equity investors. But then I would distance my feeling is that the need to find balance between the 2. So I believe that [indiscernible] with the promoter directors that conference, we will definitely want to look at some equity.

[Operator Instructions] We have the next question from the line of Vidhi Shah from Antique Stock Broking.

Sir, just one last question from my side. So basically, that because of COVID from there either your GNP levels have shot up pretty high. But if you can just ensure that -- or you can just give some understanding that going ahead, what risk management practices or corrective actions you have taken so that just in case even if any event happens or -- there is no more also tighten asset quality where in, whatever growth that comes.

Madhu, you want to take it?

Yes, yes. So Vidhi, I mentioned just before this, that we will continue our risk management metrics. Nevertheless, with a bit more oversight into the ground. We have enough information what is happening at the local level, which has impacted due to COVID and not because of COVID. So both things we are -- earlier we used to have a natural market where we have to only just decide this is the figures now we have something which has impacted by COVID across. Okay, so there are 2 factors that we bring into play. But I believe that whatever impact of COVID was to happen has happened and it is over by Q4, okay? So whatever impact of cash flow that customer would have had and they would have bounced back. Some of them bounced back, some of them did not bounce back, some of them are taking more time to -- and that's what we are hoping that while customer is an NPA is paying one, one installment, two, two installments, [ but is an NPA ] is active customer, okay? So we recover money from them and bring them back to 0 bucket and come out of NPA. So these are the things that could happen. But the cash flow impact, we believe whatever has to come in front over has come. And from here, it improves. So we will come back to our normal risk management metrics. Of course, we have tightened our credit in terms of specific locations where we feel that besides COVID, these markets are not functioning well because of various reasons. So that would continue. And we believe that maybe next 6 to 9 months, we'll come as a business as usual risk management metrics. So whatever we had tightened when the COVID started. And so we were talking about top line as well. In FY '21, hardly we had 6 months to function. We did about 1 lakh unit. And in FY '22, still, let's say, July, it was like impact of second lockdown and July, August was also impacted. So we had close to 6 or 7 months. We did about 1 lakh 42,000 units, okay? And we believe this full year would be something where we can see what we have done in '19, '20. So we are benchmarking ourselves to '19/'20. So when we are benchmarking to our numbers to a normal year, risk management metrics would be akin to that. But we had a lot of new learnings, okay? So those learnings would become part of risk management metrics. Very importantly, we use a proprietary scorecard. It is getting recalibrated with the events that have happened past a couple of years or 3 years, that would get recalibrated. And so we'll have a set of metrics, which would be relevant for as we go forward. So we can give you more inputs if we can get into a separate call where the risk management team can be there and they can explain what exactly they have done because these are all data-driven, analytics-driven. It needs more discussion and insights.

Ladies and gentlemen, that was the last question. I would now like to hand the conference back to the management for closing comments. Over to you, sir.

It was nice of all of you to be on the call and [indiscernible] and also rate queries that you had. We all agree that last year was a very turbulent year for us. Like maybe even worse than the FY '21. But we are confident that it was a bad dream, which has ended and therefore, we are back on our [ track ] and the team have taken specific targets for [indiscernible]. They have taken aggressive targets for themselves that they will achieve whatever needs to see to ensure that we are out of this and we started becoming a profitable entity once again. FY '23 will be the turnaround year. We are very confident about that. We would want to -- we have put up our presentation on the website. We can share any more information that you see that you want. If you see that there is something that we are doing wrong, we are going wrong, from there by request please call us separately and inform us. The intention is we want to ensure that we come back to you [ about our process ] showing better and better performance as we go along. Thanks once again. We are [ hopeful ] that things will improve and improve for good, and we need support from all of you in this hard time. Thank you.

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