Muthoot Finance Limited (MUTHOOTFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Muthoot Finance Q1 FY 2025 Earnings Conference Call hosted by DAM Capital Advisors Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanket Chheda. Thank you, and over to you, sir.

Good evening. I welcome you all to the Muthoot Finance Q1 FY '25 Conference Call. We have with us the entire Management team today. We will start with George Alexander Muthoot, who is the Managing Director; Alexander George, who is a Whole Time Director; George M. Alexander, who is Whole Time Director; George M. George, Whole Time Director; George M. Jacob, Whole Time Director; Mr. Eapen Alexander, who is our Executive Director; Mr. K.R. Bijimon, who is Executive Director; and Mr. Oommen Mammen, who is our CFO. Without further ado, I'll hand the call over to the MD sir, who'll follow that up by question and answers. Over to you, sir.

Thank you, and good evening. Good evening to all of you. Okay, we're happy. We just had the board meeting this morning -- this afternoon. So most of the family directors are here with us. I am George Alexander Muthoot, Managing Director. I have with me the other directors and also Mr. K.R. Bijimon, Executive Director; Mr. Oommen K. Mammen, CFO also along with the directors, they're also here. So this has been a good quarter for us. The consolidated loan assets under management has crossed INR 98, 000 -- INR 98,000 crores and the stand-alone loan assets under management stands at INR 84,324 crores, both historic highest for the growth in gold loan assets of 14,000 in the last 1 year, which records up to 23% and highest ever stand-alone profit after tax of INR 1,079 crores and highest ever consolidated profit after tax of INR 1,196 crores for this quarter. Other highlights. We have raised [ $650 million ] through the global issuance of bonds, opened 280 new branches by the group as Muthoot Finance has been -- has become the only Indian NBFC selected for the FATF, Financial Action Task Force's on-site Mutual Evaluation Report on India, conducted in November where India received outstanding outcome in place. It is a regular follow-up category. Muthoot Finance also launched 2 new ad films as part of its Bharosa India Ka brand. The subsidiaries have also done well. Belstar Microfinance has increased its profit after tax to INR 90 crores, and the gross AUM stands at INR 9,952 crores compared to INR 7,000 crores in the Q1 of last year. Muthoot Home Finance, the loan assets stands at INR 2,199 crores against INR 1,501 crores in the same quarter last year. Disbursed loan approved INR 221 crores in Q1 compared to INR 109 crores in Q1 of last year. GNPA stood at 1.75% in Q1 versus 3.97% in Q1 of last year. The NNPA stood at 0.52% in Q1 of this year compared to 1.21% of last year. Muthoot Money, the loan assets stands at INR 1,657 crores, which was INR 496 crores in the same quarter last year. The continued decline in NPA through the physical collections is witnessed consistently throughout the year. GNPA decreased to 1.63% in Q1 from 2.43%. The branch network also increased to 674 from 470 during this quarter. The other subsidiaries, Muthoot Insurance Brokers have done good business and the premium collection of INR 148 crores, and the total revenue stood at INR 44 crores. Asia asset finance, the listed subsidiary based in Sri Lanka, where Muthoot holds 72%, our loan portfolio stood at LKR 2,335 crores as against INR 2,000 crores in the same quarter of last year. We have been able to do good business in this quarter and during this -- additionally, the union budget also emphasized many things and that we are sure that the emphasis given in the union budget also will help us in growing the company further. We see good prospects for the business in the coming years, and we expect to do well in the coming years also. So with that, I would thank -- I would like to close, and I would like to open the floor for any classifications, doubts or queries.

[Operator Instructions] First question is from the line of Mahrukh from Nuvama.

Congratulations. Sir, I had a couple of questions. Firstly, on the gold loan growth, if you see last quarter also, tonnage growth was around 3%. This quarter also, it's that. So of course, the total AUM growth is much higher. So going ahead, should you expect the same run rate in tonnage for the next 3 to 4 quarters? And then my next question is on top-up loan. So why is the regulator so worried about top-up loans? First of all, if you could share your top-up loans in terms of what percentage of disbursements were towards top-up. And do you think any segment of competition is doing this aggressively, which has worried RBI? And also in terms of your guidance now for AUM growth for the year, what do you -- where do you see it settles?

Sorry to interrupt you, sir, the line from your side is not clear. I'll disconnect you and reconnect again. Ladies and gentlemen, wait for a moment, we'll connect the management line. Ladies and gentlemen, we have the management connection back on call.

If you can hear now, I can continue. So you had asked 3 or 4 questions, 1 of them about the tonnage. The tonnage is directly proportional to the gold price. If the gold price is high on incremental growth, the customer needs to bring only lesser quantity of gold. So the tonnage will definitely be proportional to the gold price. So if the gold price keeps steady or keeps rising, the tonnage will be in the same proportion. So I think that should answer the first question. The second question was about your top-up loans, yes. Customers take top-up loans because it is not actually top-up loans. A customer who has taken only INR 50,000 earlier, now he sees some -- the eligibility for him has gone to INR 60,000. He takes more money on that. We have not -- we expect -- we understand that he may take more money on that, but as long as it is within the 75% LTV, we're not concerned. So as far as it is below the LTV cap of 75%, we are not concerned. And your question about -- we have not heard anything from the RBI about top-up loans -- about gold loan's top-up, I have not heard anything. Of course, RBI cautions many things, but probably we have not heard anything from the RBI about this. Today -- as of today, the average loan-to-value for our gold loan is only 63%. So that means that the customers who have taken loan, only 63% of the loans of the amount has been taken by them, but is still much below the 75%. There is one more guidance. We have been consistently giving guidance of 15%. So probably, we will continue with that and probably take a call after H1. This is Q1 only. After Q2, we'll see how the things are panning out, and if there is correction to be made, we'll do it at H1.

The next question is from the line of Sumit Sarda from Compound Everyday Capital.

I've just one question about impairment of financial instruments from line item, which has grown significantly sequentially as well as year-on-year. Can you explain the nature of this and why should it not be included in the cost of funds?

We did not understand that what you -- can you illustrate just which item is it?

Which item is it?

Impairment of financial instruments, around INR 375 crores.

Okay. So on the impairment, it is nothing but the ECL provision. So as you are aware, we have grown this quarter by about 11%. So that is roughly around INR 8,400-odd crores. So we make initial provision as per the PD and LGD percentage which we have devised. So generally, we fix the PD and LGD percent in March in the fourth quarter, and we retain that percentage throughout the year and we review it probably at the next year-end. So we calculated the provisions based on the PD and LGD accordingly, because there is a growth of INR 8,000-odd crores. We announced there is a ECL provision on the growth element. Now there is also an increase in the Stage 3 assets by about INR 1,000 crores, for which we make a provision of about 10%. As you know, on gold loan, the NPAs are technical NPAs. We don't incur any loss because of the collateral. And no, we don't see any loss also coming on that NPA book. If you look at the average LTV of the Stage 3 gold loan assets, it is only around 54% at the principal amount. So -- because it's an accounting requirement as well as the RBI requirement, we had to make ECL provision about 10 percentage. So because of these 2, the impairment amount is higher this quarter. But no, we don't incur any cash loss on this impairment provision.

To keep things a little more in perspective that we usually see it every year, every time is that the NPA which we see is only a technical NPA because it has crossed the threshold time limit of 12 months plus 90 days. But all these loans, we are in the money. And especially now because the gold price is also high, when customers come and request for time, we give them debt. That is why you see them as NPA. We can, of course, be little harsh on the customer and maybe auction the gold and make it into a 0 NPA, but then I don't -- we felt it's not in customer's interest and also the company's interest to auction the gold even when there is -- we earn the money. So when we earn the money, the customer requests at times, we don't mind giving them more time to raise it. That is definitely a customer-friendly approach, which Muthoot has been practicing overall.

Sorry, I think I misunderstood. What I wanted to understand was, is there any impact of foreign exchange translation on the ForEx borrowing that you've taken? And are you also recording each year?

No. So no, the -- so of course, we have done a dollar bond fund raise of about $650 million in the first quarter. But that will not have an impact in the impairment. Those hedge costs, et cetera, will come as a part of the finance cost.

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

Two or three questions. So first is, what is the accrued interest in this quarter? Second is, can you please give us the AUM split of less than INR 1 lakh, INR 1 lakh to INR 3 lakh and more than INR 3 lakh? And the growth guidance that we had given are from 16%, so what's the portion of that would come from South, what's it from South?

Yes. I think the South versus North, it is growing equally -- almost equally. South is today about 48%, and the North is 58%. So proportional growth will be there for the guidance also, that is what we have been doing. And the second question was about the impairment.

Accrued interest. Accrued interest is INR 1,980 crores.

INR 1,980 crores is the accrued interest and one more point...

So South and non-South, both will grow at 15%. Fair understanding here?

Yes, yes, yes.

Okay.

Less than INR 1 lakh is 32%; INR 1 lakh to INR 3 lakh is 37%; about INR 3 lakhs is 31%. So 32%, 37%, 31%.

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

Congrats on a very strong set of numbers. Sir, we have seen a clear uptick in new customer acquisition volume, even the fresh loans to inactive customers, even that volume has increased. So if you can elaborate on the drivers of this better numbers coming through in this quarter. Is it one of the competitors not being present that has helped us? Or is it some competition moderation from banks or do you see that demand is coming because there is lesser availability of secured credit for the borrowers?

I think you answered all the questions. All the 3 are reasons good enough. Maybe the credit also -- credit requirement is also going up. So probably, there has been some caution from the Reserve Bank also with regard to unsecured loans, et cetera. So probably people are now coming back more to gold loans, that is one. The second, of course, the competition from the banks. It is probably -- it is always there, we won't say competition, it's always there, but probably it has come down. So -- but -- as always, we say companies like Muthoot, which are always focused on gold loan, we always have room for good growth in gold loan. So that is what we have been able to do. Muthoot has always been focused very much on gold loan and we have been able to get the advantages of probably the lesser competition or decreased intensity of competition from banks as well as some other NBFC.

And sir, what is the reason for holding back revising the guidance upward after this stellar show? Because from March to June, we've already seen 11% growth in the gold loan portfolio. We're still guiding for overall 16% for the year. So I mean, have we seen the trends slightly moderate a bit on the growth side in July and August? And if not, then what is holding us back from revising the guidance because out of 15-odd percent, 11% is already done in the first quarter?

I think we didn't want to give a very -- we want to revise the guidance as early as in Q1. So we thought we will do it after Q2. That's all. Nothing more than that.

Yes. So July, August trends have continued in terms of growth and customer acquisition?

I think that this is continuing just like before.

The next question is from the line of Ashish from Infinity Alternatives.

Congratulations, sir, for the stellar set of numbers. A couple of questions which I just wanted to understand on the NPA, especially the Stage 3. Now that we have a very large number, do we expect over the next couple of quarters the NPA number, Stage 3 number to come down? I know you guys started to try and be customer-friendly, but the number is getting very large. And related to that, sir, we had done on the ARC transaction, I think, 3 or 4 quarters back. So if you can just update as to how much returns have we got beyond the principal? And if you can help us understand if we are -- if you're thinking of another ARC transaction on our books.

So I think, as we said, we are definitely in the money. We have -- as a stated principle or stated policy of Muthoot, we would like to accommodate the customer wherever possible. So as we've also said, if our numbers are going beyond level, then we'll have to take some actions, maybe auction little more frequently is that's what is required. But then we would, of course, pursue it on the customers to come and close the loan and probably take a new loan. That is something which we are starting to do now also, persuading them to close the loan and probably take a new loan that will also change the NPA status, et cetera. So we are taking steps to that. Finally, we would like to accommodate the customer as far as possible. Regarding the ARC, which we did 6 months back, we did transactions for about 80,000 customers. And today, we are so happy that out of the 80,000, more than 80% of them have taken back their gold. So probably, we were able to -- what should I say, prevent auctions or maybe not do auctions in 60,000 cases, where 60,000 customers, I'm sure they are definitely ever grateful to us for saving their gold and giving them a little more time, 3, 4 months' time, so that they were able to take back their gold. So to answer your question of the ARC, ARC was done for about INR 700 crores. I think about INR 200 crores is still outstanding as principal receivable from them.

Right. And are we planning another ARC transaction so that we -- as you said, we are in the money, so are we looking at giving another ARC transaction? And on the ARC transaction, are we expecting any upside beyond the principal because, obviously, it was done at 100% principal is what I remember.

Definitely, we expect upside on the principal, definitely. As soon as this principal is received, the balance which we are going to receive would be the interest and that will come in the second quarter. So we have not considered doing another ARC at the moment.

The next question is from the line of Pranav from Bernstein.

My question is again on the Phase 3 assets. While I understand there is no cash loss for the company, can we see this as a decline in the repayment ability of the customers? We are seeing a general pickup in credit costs across various lenders. Is this a continuation of that trend? Some color on that would be really helpful.

Personally, I don't think it is that reason because the other option would have been for us to auction the gold. So if you look at our auctions, auctions have been very minimal in this quarter and last quarter also. This is because we were accommodating customers without auction. So, if you look at the overall, the number -- the NPA customers or the Stage 3 customers are almost the same. It is just that we thought, because we are not auctioning, many of them are now remaining in our books as Stage 3. And that's all, because these are all small, small customers. It's not that there is some trust in the market for these people, et cetera, and such a small ticket size all around the whole geography of India. We don't see any such stress, et cetera. But the fact here is that we are able to accommodate them and prevent the auctions. So if you look at our auctions, auction should have been much lesser in the last 2 quarters.

Understood. Understood. So just so I understand the side. So you're saying that the number of customers who have fallen behind on payments hasn't really changed. Only thing that has changed is lesser number of auctions, which is driving this higher number. Is that fair?

You're almost right there.

See, customers also are very well aware the value of this collateral has given. So he can very well request for some extra time. So if we are not giving extra time, he can go to somebody else and borrow the same amount. So it is not -- as MD sir said, is not due to any trust across any particular segment. It's just that, he's postponing that repayment. We send an auction notice, he will come and repay the loan. A majority of them will come and repay the loan. But as a prudent practice, we give some extra time to these customers, especially for the fact that the average LTV of these loans at origination is around 54% at the current price.

The next question is from the line of [ Pavan Kumar ] from RatnaTraya Capital.

Sir, can you give me some auction number for...

Sorry to interrupt you, sir. May I request you to please use your handset.

Give me the auction -- can you hear me now?

Yes, sir.

Can you give me the auction numbers for this quarter and last quarter?

So [ Pavan ], this quarter is INR 68 crores.

And last quarter, how much was it, sir?

Last quarter, just give me a second. Last quarter was about INR 162 crores.

Okay. And did I hear rightly we are saying nothing -- I mean, we are not seeing any kind of difference in the amount of stress we are seeing on the ground on the customer, but it is more because of us doing not much auction that the...

Yes, yes, you're almost right.

Okay. And from here on, what is the kind of credit cost we should expect for the rest of the year?

There is no credit cost for this. So as per ECL calculation, we have fixed for gold loan. The PD we have kept is 8.59% and LGD is 9.96%. So this will continue to apply for the growth element. And on the NPA assets, the loss given default will be applied for the entire NPA assets at 9.96%. So that is the impact. So it is a mathematical formula. No, I can't do much about it till it is revised.

Sir, to clarify something, none of these NPA results in a loan loss. That is what you want to know? None of this, 0. Loan loss on this is 0.

No, no, sir. I do understand that, sir, but I was trying to more figure out why would these customers. Actually I understand why you are 54% for LTV, but I was just trying to understand why would -- I mean, is it just stressing -- the lending segment as a whole that this is happening? Or why is that the GMPs have suddenly gone up?

I told you, because customers know that their gold is worth much more, but they request for a little more 3 months, 6 months' time to maybe to keep it because -- we just accommodate them, that's all.

In fact, compared to last June, NPA percentage now has come down from 4.26% to 3.98%. But it doesn't mean anything as far as we are concerned.

The next question is from the line of [indiscernible] from [ Schoenfeld ].

Just wanted to understand, post the budget, there's a pretty sharp drop in the domestic gold prices. Are you seeing demand side being impacted post the budget because of that?

Yes. There was a fall in the domestic price by about 8%, 9% because there was a 9% fall in the customs duty. But of late, if you look at today's price also, the international price has actually gone up. It has actually reached $4,500 up. So international price is actually covering. And today, the peak decrease in the price compared to pre-budget, it's only about 4%.

Sorry, I missed an earlier answer, but in July and August, is the momentum that we saw in the first quarter largely continued so far in terms of the growth?

I think the gold price is still going up only. The momentum, there may be spots of very high growth, very high pricing 1 month. But if you look at overall in the last 1, 2 years, 3 years, the price has been steadily going up only, mainly probably because of the geopolitical tensions, et cetera.

No, sorry, just I'm referring to gold AUM growth in July, August.

So we are continuing to see a good level of disbursement. Of course, we can give a quantification for that, but no, we are seeing a good disbursement as far as gold loan is concerned.

The next question is from the line of Digant Haria from GreenEdge Wealth.

Sir, one question I had that even in South India, which is continued as a matured market for gold, I hear so much talk on growth, all the small, small banks, cooperative banks. So this somehow -- this entire gold loan industry seems very, very vibrant growth. Any reason you can point out for this, sir? The gold price is one reason, but anything else you can tell us?

Digant, good to hear your voice once again. I think what is happening is also, companies who are very focused on gold loan, they will continue to grow. The others who come in a bit, maybe come here, focus -- after 1 quarter focus on this, after 3 quarters, reduce their focus, for them, the growth may not come as well. So those who were focused gold loan players, probably we can take -- I can say only about Muthoot. We would definitely continue to see growth momentum, whether to South or North, et cetera, even with regard to, as you say, mature market. Mature market is also -- there are so many people still who have not definitely made use of the gold loan model for their funding requirements. So the market is very huge. There are so many people still there who have not used this opportunity. So we see new customers also coming. And in the last several quarters in 1 year, 2 years, many if the banks have also been doing well are doing. So doing gold loan well. So the -- what should I say, the knowledge of people that the gold loan is a good borrowing vehicle is also increasing. So more and more people, who earlier were not taking gold has -- are trying to take this. And in a mature market also, there are repeat customers. We always say, 80% -- 75%, 80% of our customers are repeat customers, so they take a loan now. After some time, they came again and close their loan. After 3, 4 months, they come again. So as long as we are focused there, as long as people feel that Muthoot is a reasonable company where they are getting good service and also, of course, always their gold is also safe and not auctioned very quickly, et cetera, we get lot of repeat customers.

Right. Very good to hear. Sir, but in that case, sir, shouldn't you revise our guidance? I know you just said that after H1, you will do, but you start the year with 15% guidance. This year, we started the quarter with 15% growth in just 1 quarter. So maybe is it time or you just want to be cautious because maybe the competition will bounce back again and whatever?

It's not that because I think if we look back also, all the years, we have always revised only after second quarter, et cetera. We've never revised after first quarter. So just going by that, all the precedent -- but definitely, we would take the maximum -- we will use the maximum opportunity for gold loan growth. We will leave no stone unturned to get the maximum possible gold loan business. So that is our main focus. And wherever there is an opportunity for gold loan growth or AUM growth, we will do it and we will use it to the maximum. So it's just that we don't want to give a revising solution after only 1 quarter. Probably next quarter, we will be able to give a better guidance. Not that we see anything in the horizon that is negative, we don't see anything like that. But just that we don't want -- we wanted to do it after 2 quarters. That's all. Nothing more than that.

Perfect. Perfect, sir. Sir, and one more thing, which I wanted to ask is that in 2020, '21, '22, when a lot of these banks were getting aggressive, we had to take that trade-off of growth versus lending yields. Now I see at least our lending yields have been stable despite such high growth. So that whole growth versus margin trade-off, do you think that is over now and we should at least get this stable margin, which we have been getting for the last 4, 5 quarters?

The margins are reasonable now. And of course, we see -- occasionally, we see the overall cost also going up slightly. So as the border cost is going up, we will -- whatever we can absorb ourselves, we will do, plus, we'll have to pass on to customers. So we'll take a call on that maybe in the coming months, we'll take a call in the borrowing costs, et cetera. Incremental borrowing cost is going up. We'll have to take a call on that. For some time, we will try to absorb the cost. But afterwards, we have to take care of our margins also, NIMs also. If required, we will do a yield evolution also. As far as possible, maximum it will -- we would like to do the best ways to these customers.

Got it. Got it. Got it, sir. Sir, and this is safe to assume that this 20,000 disburse -- we disbursed everything in bank accounts. There's more than 20,000. So it was in that way and operationally very heavy quarter, but as I can see, there is no disruption. So that all that thing went very smoothly this quarter?

I think, yes, there was such a big commotion and confusion because everybody is carrying cash and that 20,000, et cetera, it was so small that -- most of our customers have bank accounts. They come and they see in the branch, "Can I give you INR 60,000 cash we used to give?" But now he'll say, "We can't give." We just transfer it to their account. Everybody has some Google Pay or UPI or something is there for everybody. So nobody has found it difficult nowadays. No issue has come because of that.

Sir, that is great to know. I wish you great for this year and the coming years.

The next question is from the line of [ Prolin Nandu ] from Edelweiss Public Alternatives.

This is [ Prolin ] here. One, just a bookkeeping kind of question. While I understand that our NPAs are more technical in nature, but this assumption that we changed at the start of the year for LGD and PD, has that changed versus last year?

So from -- ever since repairs have implemented, we normally revise the PD/LGD only in March, in March quarter.

So then in March quarter of -- March of '24, we must have revised it upward, right? What -- I mean is it -- I mean, has it changed towards is March '23 quarter, the assumption of LGD and PD?

Yes. It has come down a little bit lower compared to March '23.

Which means that the incidents in terms of asset quality is better than what we were building in. Am I correct?

Yes.

Right. Okay. Secondly, sir, just extending Digant's question a little bit further, now you -- I mean, Muthoot has always been focused on gold loan. And it's like a fair weather -- it's like an all-weather friend for its customer. It's always there, right? I mean competition comes and goes. And you are very optimistic in terms of loan growth also going forward. So I'm just trying to link the gold loan growth with the margin part. So is it fair to assume that maybe in near past, right, for a couple of years when competition was high, the -- our decision on pricing was not purely based on the cost of the fund, but it was also based on what the competition does? But going ahead, will it purely be based on cost of funds? Is that a fair assumption to make?

So I think one thing is that we have to look at the customers also. The customers is our first priority. So when customers are ramping for very low interest, they are getting low interest somewhere else, we have to definitely take care of our customers at the cost of probably some profits. But then after sometimes, customers also realize that what they saw is getting low rates from somewhere else is not -- is having its own difficulties, et cetera. They started coming back to us. So today, we have it. So it's not that now because the customers have started coming back, we can just -- we need to simply increase our lending rates. No, I think we look at the customers first. So that is why -- because any other company, nearest competitor, NBFC, et cetera, we have much more, more than 2x, 3x [indiscernible] because customers feel that we are more reasonable of the company. So whenever we have an opportunity, we support the customer, whether it's just through lessor auctions, less frequent auctions or maybe not increasing the rates to -- or increasing the rates only to maintain our room, et cetera. So that gives customers more choice because these are mainly walk-in customers, they have to come back and decide to come to Muthoot. That is what is most important here. They are big customers. The customers who have taken a loan, closed it, should come back to us for the second loan. And that we are definitely seeing and that is where we have been able to score our [indiscernible]. So to answer your question, now that there is no competition, et cetera, it's not that we want to increase the rates. We will try to maintain our means, et cetera, reasonable profit, good profit and then we will continue with that rate.

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

So just a follow-up on the margin part. So earlier our guidance of $0.11 to $0.02 kind of NIMs that you'll be maintaining, you would still be maintaining those targets? Or do you think there is enough upside or downside risk to this?

Sorry, can you repeat? Can you just -- we did not quite understand your question. We didn't quite understand your question.

Mr. Jigar, may I request you to please repeat your question.

Yes. Is this better?

Yes.

Yes, yes. So what I was asking was on your margin guidance, earlier, we have been guiding for $0.11 to [Technical Difficulty] then about 11.5%. So you'll be still sticking to that margin guidance?

Maybe 0.5%, 1% here and there. We generally try to stick to that, sir.

Okay. And any risk that you see to this margin given that maybe one of our competitors who will sell them embargo -- when they come back, they might revert back to aggressive pricing to regain market share, so what would be our strategy? Would you -- would we still kind of sacrifice on margins to maintain market share or would be like prefer to maintain margins at current levels and grow at a slightly slower pace because we have seen this play out before in terms of teaser rates. I just wanted to understand if a scenario like this comes in, what would be our likely strategy?

Actually, Muthoot Finance, we have our own strategy for business and growth. We are not very much concerned of -- dictated by what others do. But then we don't -- we don't want to comment on the other companies, et cetera. We would like to grow our company in the way we like, and I think we have been able to do that well and should -- we will try to stick on to that.

I think somebody asked you the quantum of the top-up loans that we do. Would it be possible to share?

There is nothing like top-up. As we said, the average LTV of the loans is around 63%. Now a customer who had taken a loan earlier, if he has a requirement, he will come and take an additional one. If I am not giving that loan, he can go to somebody else and take a loan. So I don't think that is a top-up. It is purely based on which requirement. Top-up really, meaning when somebody has taken the maximum amount of a loan and then on top of that, they are getting an additional loan. In today's environment, especially when the average threshold is 63%, the question of top-up doesn't arise. It is purely based on his needs at different points of time.

Okay. So we won't have a separate number on these type of loans that we are giving. We'll be tracking on how much of our AUM would be there. Customers are coming and taking an additional loan, discuss anything is available...

See, if you look at our customer -- the number of loan accounts is around 90-odd lakhs, whereas loan number of active customers is around INR 59 lakhs. So which means that every customer has maybe more than one loan, which also explains the fact that I mentioned. Some people, when they have a requirement, they will come and take an additional loan. So we don't want to call that as a top-up. No, it's a wrong terminology to use for that situations.

The next question is from the line of Nischint from Kotak Institutional Equities.

I'm looking at Slide 42. You give gold price per gram of INR 6,518 jewel. What exactly prices is? I mean, is it like a 23-carat, 22-carat price? What is it?

Which slide are you referring to?

That is 22 carat.

22 carat. The ornament gold is all 22 carats.

Okay. And what would be the price today? I believe this is [indiscernible].

I think it has come down by around INR 6,200 or so, then again, now it is INR 6,500.

INR 6,700. Just 1 minute.

Today, the price has again -- it has come back. So after the budget...

Today, price is INR 6,565. [indiscernible] cash.

And today's loan book in that sense would be greater than the loan book as on June or would it be more or less a similar level?

So no, 1.5 months have passed, still June 30. So the newer loans will be happening at the newer LTV. Probably the older loans would have been closed, which has happened at lower LTV would have got closed. So I can't comment on the exact LTV at this point of time. So you visualize on that basis. As and when we progress, it will -- newer loan will happen at newer LTV. Not necessarily that every customer is going to take at the maximum LTV.

No, no, but it's fair to say that your AUM is higher than the INR 81,000 crores that you have reported in June.

No, no. Nischint don't ask me that question right now. We already discussed that. Disbursements have been good in the current quarter. So that's all we can explain.

And just LTV on NPAs, I think you mentioned this number, but I'm not sure, if I picked it up.

54%.

And just one last one, and this is actually on the microfinance business, where we have fairly -- seen fairly sharp price on a sequential basis on Stage 3 loans. So if you have any commentary on that? And how do we see the tradition for that?

Yes. For the Stage 3s, yes, definitely, it is not -- it is across the board, across the industry. Let's [indiscernible] and we are actually much better off than majority of the similar companies.

Are you planning to put -- invest any capital -- further capital in the microfinance business?

I think they are looking for an IPO.

Okay. So nothing from our side?

As of now, nothing. Because I think they can manage it. And for now, there is also an IPO which is planned. It all depends on the outcome of that.

The next question is from the line of [indiscernible] Shah from JPMorgan.

Sir, I think earlier in the call, you had mentioned the competition in general. You're seeing some moderation. On the NBFC front, I can understand that one of the competitors in there. But you also mentioned that bank competition is coming off. So what is driving that?

It is not that bank competition. It is -- the focus of banks are not -- maybe not as aggressive as it was maybe 6 months, 8 months back.

Okay. I understand. But like, in the case like earlier banks are also giving other unsecured loans. So because of the RBI scrutiny increasing on that, I would assume that even the banks would focus more towards that secured gold loans and put focus towards these set of loans for smaller ticket sizes. So that is not the case?

I wouldn't want to comment on that because banks have always been doing gold loans and unsecured loans. Both are always there. I'm sure banks get a much higher yield on unsecured loans than the gold loans. Some decisions if they have to take I think in offside, what we are seeing is that the competition -- the aggressive competition from some banks have actually waned, that's it.

Understood. Understood. And sir, just one more thing. Sorry, coming back to your auction and your Stage 2 plus 3. Like if I look at the Stage 2 plus 3 book, that is higher even on a year-over-year basis by around 80 basis points. So generally, for how long would you wait before you start sending auction notices again to customers waiting on that [indiscernible], can you help us understand?

We will try to keep that NPA within some limits. So we would have wanted to go very high. But then we are right away taking some efforts to ask the customers to come and close the loan and probably take a new loan, that's what we are focusing now so that they are able to save their gold. Our focus is mainly to save the gold of the customer. So probably -- we have been having -- last year this quarter, Stage 3 was 4.2%. Last quarter, it was 3.8%. Now it is 3.98%. So if you look at the quarter of similar quarters in last year, the Stage 3 was 4.6%, today it is only 3.98%.

Understood. Actually, I was looking at both Stage 2 plus Stage 3. All right, I get the point.

The next question is from the line of Raghav Garg from Ambit Capital.

Just one question from my side in terms of bank competition. Sir, in the past, we've observed that there has been some miss utilization of the interest subvention subsidiary from banks, which is one of the reasons why they were able to give lower rates on gold loan. Another thing is that also very recently one of the largest PSU banks said that they were turning down on agri gold loan. So just connecting these 2, 3 things. Is that the reason why banks have toned out their gold loan effort? I think in the past, you have also commented at some point in time that banks were not really playing a fair game. Just some of your observations or commentary on that will be very useful.

We have been always -- earlier, we were always putting up to the regulator that this is happening. Probably, they themselves would have realized some of these things can change. I wouldn't want to comment anything on that because we have been always saying that there was something unfair, et cetera, happening. Probably, some of the banks which have been given some instructions to do that, I'm not sure about that. What I feel is that, that aggressiveness has toned out.

Understood. And sir, another question. When I look at the data, clearly, you've gained quite a bit of market share in this quarter. Can you provide any insight in terms of what percentage of your customers, which were acquired this quarter? They were earlier taking loans from, say, another gold loan lender. Is that a data point that you would have handy?

So actually, customers don't come and tell us that I have been -- I have taken the loan from X company and they're bringing it to you. They come with their gold. You don't ask them from -- whether is that plastic anywhere else. We don't have any data on from where they have taken this loan, et cetera. Usually, what happens is somebody takes a loan. When he gets the money, he repays that loan, keeps the loan, he keeps the gold with him. Next time he wants, he goes to X company. So usually, what we see is most of our customers come back to us and new customers also come. So it is not that he is taking gold from X company and giving it to Muthoot. No, nobody does that. They take the gold, they keep it at home. Whenever they want, because when they get the money, only they can repay the loan from the other company. X company, they will repay the loan when they get the money. They'll keep the gold at home. Next time, after 1 month, 2 months when they want the money, they'll come back. Instead of going to X company, they may come to us. That's all what can happen.

Understood. And sir, how much more can the cost of funds increase from here?

So now, this quarter, it is around 8.75%. I think probably another 25 bps.

Understood.

So we've also taken the equity borrowing where the average cost will be around 9.6% on a monthly basis. So that also will increase the overall funding cost.

Mr. Raghav, does that answer your question?

Yes.

The next question is from the line of Jignesh Shial from InCred Capital.

Sir, just a couple of questions. One, you have been saying that gold prices have been moving up and down. So how frequently do you revise your -- the pricing or is it remaining fixed or over a period of time, you revise the gold pricing? Or for 1 gram or it is regularly being revised based on day-to-day price movement?

That is your question, any more questions?

Yes. Secondly, I also wanted to check your personal loan portfolio. It's right now around INR 32 billion, if I'm seeing it correct. How much of would we cross-sell to our existing customer? Or will it be a completely fresh set of customers? That is second. Third, you have guided for 15% growth...

I can't understand question, what is it?

So your personal loan portfolio, what kind of customer profile is it? So is it same like gold loan customers, additional loans or -- your 15%, you're giving a gold -- your loan guidance right now, but you're saying South and North would be equal, right? So can you guide us something on the branch expansion side? Are you planning any more branch expansion? And where exactly will it be happening? That is something I wanted to understand. And fourth, lastly, you had given that up to INR 1 lakh, INR 1 lakh to INR 3 and INR 3 lakh and above percentages for the quarter. Can you give us the same number for last year? Is it possible? That's my 4 questions.

The LTV rate is everyday dynamically. So it depends on the daily price movement. So every day, the LTV is fixed. Every day, it is fixed based on the price movement. Actually, the price movement is taken last 30 days average. But then every day it is fixed, every day, it moves. It is INR 4,900 today. Tomorrow, it may be INR 4,902 or INR 4,903. So that is the number one. Number two question is about our branch expansion. Yes, we have been growing our branches, yes. We have been growing branches wherever the regional office comes and says there is good potential in this place, we open the branch. So probably last quarter also, we opened some branch. Going forward, this year, we may open another 100, 150 branch in this year. Another question you asked was about...

Personal loan customer profile?

That's the ticket size you have asked, no, for last year. So last year, up to 1 lakh, it was 35%; INR 1 lakh to INR 3 lakh, it is 38%; and above INR 3 lakhs, it is 27%.

All in the 30% range.

Yes. So basically, we are seeing that more than 3 lakh customer base has -- basically has increased Y-o-Y. Is it correct? Or it's almost similar?

I'm sorry, 27% to 31%.

People are getting more [indiscernible].

Understood. Okay. And just a follow-up on what you answered. So also, I wanted to check your personal loan customer profile, if you can tell me that one, that will also be useful.

We wanted to do all this personal loan and all to actually give loans to our existing customers because when we looked at our existing customer profile, we found that they were taking home loans, they were taking personal loans, they were taking vehicle loans from elsewhere. We thought we can do that. So of course, to start with, we put into that alone. We went into market. So we have an open market probably today, it will be about 50-50 or 50%, 60% should be open market and other are cross-sell to our customers. So cross-sell is just a lead generation customer, who we feel has taken a loan from fixed company, personal loan. We can always ask why don't they take the personal loan from us also. I think all the banks also do the same thing, vehicle loan, et cetera, all their gold loans and personal loans, et cetera, and is also trying to do those things.

Understood. So just to follow-up quickly. Since you are saying branch expansion, wherever it is possible, you will be doing it up, but I think in North, you will be less penetrated compared to South? Or is my understanding incorrect? So the...

Whenever, there is a requirement in North or South, we just opens, sir. That's all.

Okay. Understood. Understood. Perfectly understood. And yes, I guess -- yes, that's it from my side. And just sorry, one last thing. When you are saying it is really 30 days moving average and then based on LTV, so if there is a steep correction in gold prices, then it might happen that LTVs might even inch up, right? That is possible. I mean if the gold prices moving down suddenly.

It will start moving because that is a RBI's instruction. It's not that we do it, it is the Reserve Bank of India's instruction that the Bombay Bullion rate, average of 30 days should be taken and that should be the LTV fixed every day. The moving average of 30 days.

The next question is from the line of Bunty Chawla from IDBI Capital.

Congrats on a good set of numbers. Sir, on the Slide 51, as we have seen operational efficiency, in fact, this quarter was one of the best quarters in terms of sequential growth in the AUM, but still cost to assets or you say operating expense to average loan assets still going -- incing up in Q1 itself. Is there any one-off in operating expenses or how one should see this numbers going?

No, that reduction is primarily because of the 11% growth on a Q-o-Q basis in AUM. So otherwise, operational expenses continue to increase in absolute amount-wise.

Rent goes up, salary goes up, everything goes up, probably.

No, no, I was saying that if you -- you have operational efficiency number, which has inched up from 4.1% to 4.24%. So though there has been an increase in the AUM growth sequentially, but still operating expenses has increased. So any one-off or this number, how should see?

Yes. So the operational numbers, pure operational expenses, which is 3.12% and 1.12% is actually because of the impairment provision. So that increase is actually because of the impairment provision, which we explained it earlier, because of the loan growth, there is around INR 100 crores of impact. And because of the increase in the NPA process, NPA, there is another increase of around INR 100 crores. So that is the reason why the total percentage, which we have put is slightly higher.

Okay. Sir, secondly, in the RBI monetary policy, they have asked to be the monitoring of end use of funds to be done by the NBFCs or banks as such. Generally, in gold loan, we generally don't focus on the end use where the customer is using. Do we have to now do that thing? Or if -- will it have some bit of impact, how one should see that?

I have not gone through that requirement. I will look at that and then come back to you.

Okay. Okay. Okay. Then lastly, on Belstar Microfinance, we have already filed the DRHP. So -- and this quarter, it has been slightly harsh for MFI portfolio. We have seen in our portfolio as well. How one should see this IPO time line or how it is going in place?

We don't have any definite guideline, et cetera. As and when the market is right and when the approvals come, we will go for it. That's all. We don't have any hard and fast rule that it should be done in the next month or this month or last quarter, et cetera. Whenever, in fact, the approval comes and the market is right, we should go for the IPO.

Sir, lastly, on the MFI, this Belstar Microfinance, how the industry -- this quarter, I know it has been hard. How you are seeing this in just about any improvement in asset quality or growth, how one should see?

I think overall, the industry is growing reasonably okay. We also have sometimes ups and downs. Elections come -- some impact will be there for election. So those are all geographical factors which affects us, so the microfinance industry, an industry in itself is developing in itself. They have their own challenges, they have their own disadvantages, et cetera. There is nothing much. We can also do that. It is a -- we are also one among the industry, not the biggest player also -- a reasonable player.

Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.

It has always been a pleasure interacting with our investors and our well wishers. I'm sure Muthoot, we, on our part, assure you that we will do our best to do the best in all fields of the business, whether it is quality of business, whether it is governance and all said, we will put in our best. We are thankful to our support for all these quarters, all these years, and we would request your support in the coming days also. From our part, we will do our best to keep all our stakeholders happy. Thank you, and good day. Happy Independence Day to everybody.

On behalf of DAM Capital Advisors Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.