Muthoot Finance Limited (MUTHOOTFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Muthoot Finance Limited Q4 and FY '25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Rati Pandit from Nirmal Bang Equities. Thank you, and over to you, ma'am.

Thank you, Anshad. A very good evening to everyone. On behalf of Nirmal Bang Institutional Equities, we welcome you all to the 4Q FY '25 Earnings Conference Call of Muthoot Finance Limited. We are pleased to host the senior management of the company represented by Mr. George Alexander Muthoot, Managing Director; Mr. Alexander George, Whole-Time Director; Mr. George M. Alexander, Whole-Time Director; Mr. George M. George, Whole-Time Director; Mr. George M. Jacob, Whole-Time Director; Mr. Eapen Alexander, Executive Director; Mr. K.R. Bijimon, Executive Director; and Mr. Oommen K. Mammen, Chief Financial Officer. I now hand over the call to MD sir, Mr. George Alexander Muthoot for his opening remarks, post which we can have the floor open for Q&A. Thank you, and over to you, sir.

Thank you, and good evening to all. Today, Muthoot Finance held its Board meeting for the financial year '24-'25 as well as for the quarter 4 of the last year. The Board meeting has just got over, and we have declared the results, and I'm sure it is available for you all. I would like to speak of some of the highlights of this year's performance. We have had the highest ever consolidated loan AUM of INR 1,22,000 crores as on March and also the highest year-on-year growth in AUM of INR 33,000 crores, which is about -- which is 37%. The consolidated profit after tax stands at INR 5,352 crores in this year, which is up by 20% year-on-year. The stand-alone AUM stands at INR 1,08,000 crores and the historic year-on-year growth in loan AUM of INR 32,800 crores. The stand-alone profit after tax stands at INR 5,200 crores. It is up by 28% year-on-year. Regarding the gold loan per se, the gold loan AUM of Muthoot Finance stands at INR 1,02,956 crores, which is certainly a historic moment for us since we have reached the INR 1 lakh crore market, and the highest year-on-year growth of gold loan of INR 30,000 crores, which is again 41% of the previous year's growth. Muthoot Finance has declared a dividend for the year, which is 260% on the face value of INR 26 per equity share. During the year, the group opened 850 new branches and S&P Global Rating has upgraded Muthoot Finance Limited's long-term issuer credit rating from BB to BB+ with a stable outlook. Moody's rating has also upgraded the long-term issuer rating of Muthoot Finance from Ba2 to Ba1 with a stable outlook. We have had 1.5 crore downloads in the iMuthoot app. And Muthoot Finance is the only pure-play gold loan NBFC in the upper layer NBFCs classification of Reserve Bank of India for 3 years in a row. We have received many other recognitions, et cetera. Coming to the subsidiaries. The Belstar Finance has opened 57 branches in the last year and the business and has generated a profit after tax of INR 46 crores in spite of the turbulent year for the microfinance sector. Stage 3 loans assets at 4.98% is in line with the peers. Muthoot Home Finance. The loan AUM stands at INR 2,985 crores versus INR 2,000 crores in the last year, a growth of 47%. The loan disbursal of INR 1,242 crores in this year compares with INR 815 crores of the previous year. The interest income also increased to INR 273 crores from INR 178 crores, and the profit after tax stood at INR 39 crores for this year versus INR 18 crores in the previous year. The GNPA at 1.1% in financial year versus 1.88% in the previous year and the net NPA at 0.46% versus 0.57% in the previous year. Muthoot Money, the loan AUM stands at INR 3,903 crores versus INR 1,100 crores last year, a growth of 248%. The branch network increased to 992 from 470 last year. We are proud to announce that this year we crossed the historic milestone of INR 1 lakh crores gold loan AUM reaching INR 102 lakh crores. And all other things, which I said definitely has been good for the company. And we see good performance, we should see good performance in continuing years also. So with that, I think I will close my opening remarks, and we will -- sorry, the Sri Lanka company has also done well. As on March, the total holding in the total business has stood -- our total holding is at 9.6 crores equity shares, representing 72% of the company. And the company has also done well. The company's profit has been quite good last year also. AUM stands at LKR 3,133, with a total revenue of -- Asia Asset Finance, we hold 72% stake. The total revenue increased to INR 689 crores... [Technical Difficulty]

Ladies and gentlemen, we have the management back online with us. Sir, you may proceed.

For Belstar Micro Finance Limited, the total revenue increased to INR 2,125 crores as against INR 1,851 crores previous year with a year-on-year increase of 15%. The loan AUM stands at INR 7,970 crores and it achieved a net profit after tax of INR 46 crores in the financial year. Muthoot Insurance Brokers also had a premium collection of INR 589 crores and a profit after tax of INR 166 crores for this year. Asia Asset Finance has also done well. It has achieved a profit after tax of LKR 44 crores in the last year. Muthoot Money, which is also a wholly-owned subsidiary of Muthoot Finance has a total revenue of INR 432 crores as against INR 126 crores in the previous year, and it achieved a profit after tax of INR 12 crores for this year. I think with that, I will conclude my opening remarks and leave the floor open for your questions and clarifications.

[Operator Instructions] The first question is from the line of Abhijit from Motilal Oswal.

Sir, first of all, congratulations on a very strong year. So my question also lies there. Obviously, the gold prices I mean have held during this year but not to take any credit away but just trying to understand, 2 very, very strong years FY '24 and FY '25, how would you look at gold loan growth for this year and the next year? And a related question on gold loans, sir, what we have seen in this quarter is I think I mean the entire industry has done well because of which there has been no aggressive competition or at least it is not reflecting in the yields. So just trying to understand, I mean, if you could just explain the competitive landscape as well. Is there enough for everyone or is the pie itself becomes so big that everyone can comfortably chew at that and there is no need for, I would say, aggressive pricing [indiscernible]?

So regarding your question on the next year's guidance, year-on-year, we have always been giving a guidance of 15%. I don't think we want to change that. We will continue to do the minimum growth guidance of 15% for this year also. But going forward, after quarter 2, we should think of maybe if there is any need to revising the guidance. So we have been always guiding at 15%. Of course, last year, we have grown by 41%. But that apart, we, from our side, would like to -- a very conservative guidance of 15%. Now you yourself said the competitive landscape is there. But yes, I agree with you, the pie is increasing. It is increasing because more and more people are now looking at using the gold or monetizing their ornaments to take a gold loan. And that is what is attracting new players into this market. And I'm sure many of the gold loan companies have grown business and also the bank. So the pie is increasing. Nobody has degrown. Everybody has grown only, the banks have grown, NBFCs have grown. I think the market is mature, the market is widening, I think, I agree with you.

Got it, sir. And sir, I mean, then the other thing I wanted to understand is you would have all gone through the draft gold lending guidelines that came out. One of the key things which was highlighted in this co-lending guidelines was also the fact that LTV needs to be maintained at 75% throughout the tenure of the loan, which most of the NBFCs, I would say, were not doing earlier because there was no regulatory requirement to do that. Now if this draft guidelines, if it actually translates into final guidelines, just trying to understand if you have had a chance to work on this, trying to understand what would disbursement LTVs look like going ahead if these draft guidelines actually translate into final guidelines.

Okay. First of all, the draft guidelines have come. Everybody has gone through it. I'm sure everybody has read it and also have got their own opinions on it. The last date for submitting the last guidelines was yesterday. So we, along with many others, have given their suggestions. We should wait for the regulator to come up with the final guidelines. Having said that, our take on this or my take on this, our company's take on this would be, I feel that there is a lot of things happening in the gold and gold loan market. Gold prices are shooting up. In the last 1 year, it has gone up by more than 50%. So that, again, the gold price and the jewelry price and the gold price is one factor of it. Second factor, we have seen in the last 1 year quite a few players have started coming into this. Most of the banks who were not very keen on this in the last 1, 2 years have started becoming very keen. So there is a lot of activity in the gold loan sector from the NBFCs from quite a few new players coming into this. So new players coming into this has always attracted regulatory oversight or regulatory concern. [Technical Difficulty] Can't hear at all?

Now I can hear you sir.

So the regulatory guidelines are definitely a reaction or action from the regulator when many new players start coming into this. So a good part of the new draft guidelines are to harmonize the processes which are followed -- which are to be followed by the NBFCs. So gold loan NBFCs, maybe the old gold loan NBFCs like us have been following all these things, but I'm sure the regulator is not sure whether all the new players coming in are following or will be following... [Technical Difficulty]

Ladies and gentlemen, we have the management back online with us. Sir, you may proceed.

So the question was about the regulatory -- new regulatory draft guidelines. Can you hear now?

Yes, sir, loud and clear.

So the new regulatory guidelines, we feel or Muthoot feels is mainly coming from the RBI or the regulator because new players are entering into the market and the gold price is also going up very fast, in fact, 50% in the last 1 year. This is certainly raising some red flag or maybe concerns with the regulator as to how this is going to pan out. A similar thing happened in 2012 when many new players started coming into this gold loan market. And that time also, the regulator came out with some regulations or similar regulations, which finally culminated in a guideline or a report from the commission, the KUB Rao Commission (sic) [ KUB Rao Committee ], which was again implemented, and that is -- that implemented regulation is what is happening now. But what is happening is the new players who are coming may not be familiar with the processes, nuances of gold loan, and that is what this regulation mainly tries to harmonize. The second question is why when the gold prices, et cetera, are going up and new players are also going up, whether the regulators should look at maybe tweaking the LTV, et cetera So they have given some guidelines on that, some draft guidelines on that. There are a few pain points there, especially with the LTV, et cetera, which is different for NBFCs and banks, which as an association of gold loan companies the association has taken up with the Reserve Bank of India and certainly asked for a personal hearing also on this, and we are yet to hear from there. Other than that, the regulations are quite good, quite useful for the sector. And I'm sure with these regulations being coming into place and the few concerns which we see being set right by the regulator, I think this is going to be a good time for the NBFC gold loans.

Got it, sir. This is useful. And just one last follow-up. So in Muthoot Money, we started doing gold loans now, and we're seeing good traction as well. Just trying to understand, is there anything differently we are doing in Muthoot Money or this is more an extension of the parent entity, Muthoot Finance?

No Muthoot Money started as a hire purchase, number of hire purchase used vehicles, 4-wheelers, 2-wheelers, et cetera We had a portfolio of about INR 600 crores to INR 700 crores at onetime. 3 years -- soon after that, pandemic came. And thereafter also, we started seeing stress in that. And finally, we were not able to really jack up that business. Now we are slowly winding down that business. And at that time, when the business was coming down, we started foraying into gold loan, which is certainly the group's strength. And today, we are doing, concentrating mainly on gold loan and the hire purchase portfolio is actually running down. Today, we have -- so you asked about the processes, no, the processes are the same because the management is the same, but different set of CEOs, different set of branches, different set of people. But of course, the Muthoot brand is there and the processes are same as Muthoot Finance.

[Operator Instructions] The next question is from the line of Harshit from PremjiInvest.

Sir, the first question was on the Stage 3 and the credit cost. If you can help us break through the Stage 3 within the gold and in the non-gold loan portfolio.

Stage 3 loans on gold loan will be about INR 3,400 crores, balance will be non-gold. About INR 300 crores will be non-gold.

Understood. Understood, sir. Sir, I think the question was that when we look at this year's credit cost, I think it's slightly elevated versus the previous few years. And if you try to strictly break down, then 50% of the credit cost would be from non-gold loan, if I'm reading it correctly. Then I wanted to just get your thoughts that going forward, how should we look at this book, it's already 5% of the portfolio. Will the mix keep on increasing? And if yes, then how should we look at the credit cost? Should we look at it that since these are the same customers for which we have gold loan, ultimately, this money will be coming back? So there's even the unsecured in nature, but that might not be the risk. And I'll just ask the second question also, sir, on the branch piece, do we have any approvals right now? Or are we expecting any approvals for branch expansion? And the other is, on Muthoot Money, why aren't we expanding the branches much faster over there? Or are we restricted on branch expansion there also?

Okay. So on the first question is on the ECL, on the impairment, total impairment for the whole year is about INR 766 crores. Out of that, INR 130 crores will be about write-off. The remaining INR 630-odd crores will be because of the incremental provisions required because of the growth in the loan book on Stage 1 and Stage 2, both on the gold loan -- primarily on the gold loan...

Gold. Okay. You're saying all the increase in provision is with respect to the gold loan itself.

Yes, because we have not increased the non-gold in a significant manner. Probably we would have increased by about INR 2,000 crores in the last 1 year. So primarily the impairment provisions has increased because of the increase in the gold loan because we have increased the total loans by about INR 30,000 crores-plus. So on that itself, the ECL provisions would have gone up.

Sir, my question was that because over there, whatever Stage 3 has happened in the non-gold loan, I remember in the last call, you said that we provide 100% as soon as it slips to Stage 3. And if I go by that, then of the INR 760 crores, INR 780 crores of impairment/credit cost this year, my assumption was more like around INR 200 crores, INR 300 crores has been from the new business. Is that right? Because I think the write-offs of INR 130 crores are from new business you are seeing. But beyond that, another INR 100 crores, INR 150 crores would be provisions on the new business.

So I don't know what you intend by the new business because like in the last call...

Non-gold loan business, sorry.

Yes, so in the last call, we had mentioned about the personal loan business where we have done through our branches, there is a rise in the NPA problem because of some weakness in terms of collections, et cetera So because of that, there is an increase in that. So that would have certainly factored in the increase in the ECL provisions. That is one thing. And second thing is the write-off, that is the INR 130 crores. You ask me, what was the gold loan NPA last year? Last year was about INR 2,400 crores out of INR 2,484 crores. This year, out of total INR 3,700 crores, the gold loan book is INR 3,350-odd crores and the balance, how much, INR 350-odd crores is because of the non-gold business. So there is an increase of around INR 250 crores in non-gold business, which we would have certainly -- we would have included in the impairment, which I had explained in the last quarterly call that there is a specific increase in the NPA in the branch-based personal loan business. So that is more of a one-off kind of impact where we are stabilizing the collection mechanism, et cetera.

Your second question about the branches. We already have approval for...

115 branches.

115 branches, which we are going to open this year. So branch opening, we do either in Muthoot Money or in Muthoot Finance, which is happening in the normal course. It's not that we are starved of branches. The branches are growing and the business also is growing. So branch opening is not an issue for us.

Got it. Sir, just one clarification. This 115 is for Muthoot stand-alone...

[indiscernible].

Okay. This is consolidated, we have an option to open 115 more branches.

Yes, yes. We will go at that later. Once we open this Muthoot Finance branch, we will think of the Muthoot Money branches also.

The next question is from the line of Shreya Shivani from CLSA.

My first question is again on the asset quality. Just wanted to understand that for the quarter, if I take the INR 74 crores of write-off and if I just balance with the provisions and the gross stage you've given, there seems to be some upgrades and recoveries that have happened in the quarter. Can you help us understand about that? And also, what is the auction number for the quarter, for the year and for the previous -- for fourth quarter '24 and for FY '24 as well, if you can share that number?

So in December end, the Stage 3 portfolio on gold loan was INR 3,700-plus crores. This has come down to INR 3,347 crores. December total NPA was INR 4,170 crores. March, it has come down to INR 3,700 crores. So to the extent of around INR 400 crores has happened, mainly it is in the gold loan book. In terms of auctions, we had auctioned about INR 400 crores during last year, INR 461 crores last year.

Last full year is INR 461 crores.

This was, INR 461 crores is in FY '25. What was in FY '24?

[indiscernible].

Okay, that I can get from the annual report. Yes, it's fine, yes. Sir, just wanted to check one thing from the annual report...

[indiscernible] INR 960-odd crores. Yes, go ahead.

Sir, I just wanted to check, sometimes the auction number that you mentioned on the con calls and when we check with the annual report, it tends to not match. So does it not include the interest outstanding? Or what is the difference in the number that you give in the con call? Interest -- yes.

The number which I -- we always talk about in the con call is the principal amount, principal amount of loans. In RBI reporting in the annual report, it is talking about the realized price and the total dues.

Sorry, could you repeat, in annual report, what do you talk about?

The total dues and the auction realization.

Principal plus interest.

The next question is from the line of Shweta from Elara Capital.

Congratulations on a good quarter. Sir, my question pertains to the draft norms only. And 2 sets of questions there. One is, if the draft norms were to go in similar state through, then will we see change in business mix or shift more towards non-gold lending? Is the business mix changing? Or even outside these draft norms implementation, do we have any strategy plans or thought process for business mix tilting now towards non-gold? That's question number one. Question number 2, so while you explained that the draft norms more from the regulatory and competition and overall landscape perspective, I want to understand more from Muthoot Finance business model perspective. So just to deep dive slightly more into especially the LTV norms wherein -- so we were also just talking about principal plus interest. So now the new LTV calculation will be on principal plus interest, plus there are requirements of internal limits on gold loan portfolios to manage risk, which might potentially constrain your gold loan volumes, plus there is now have to be a clear bifurcation on consumption versus income generation loans. And there will be stricter sort of monitoring across periods. So if we put together these kind of restrictions and the implementation or the draft norm implementation were to happen in current state of affairs, then do we see any interim impact on disbursements? And this is outside what is happening on the gold price action. And therefore, do you see any changes in your practices or a need for customer awareness? Yes, those are my 2 questions.

Very lengthy question. You gave most of the answers to the questions also. So the draft guidelines is still the draft guideline. We have to wait for the final guidelines. That is number one. The guideline mainly talks about the processes, which have to be harmonized, that is number 2. The only thing which we, as an association of gold loan companies are -- would like to bring to the attention of the regulator is that the LTV, which is being tweaked is not -- would not be in the interest of the customer because if the NBFCs are placed at a disadvantage, most of the customers may go back to the money lenders. So in the last 20, 30 years, with a lot of effort, NBFCs have been able to bring the customers from the unorganized sector into the organized sector through the NBFCs. And as a result of that, the sector has become corporatized. And because of that, banks are also finding it easy and good portfolio to lend. So a lot of efforts. These people have come from the unorganized sector. But if the NBFCs are limited through tweaks in the LTV as suggested in the draft guidelines, it will take back these customers to [indiscernible], which I don't think would be in the interest of the country, interest of the regulator. So we have definitely flagged this to the regulator and our association of gold loan companies have given a presentation on this aspect to them. All the other aspects are quite good, quite good as strengthening the sector, especially in respect of new players coming into this sector, process, et cetera, harmonization and the process, what should we say, clarity for the new sectors [indiscernible] interest also is good. So this we have taken up with the regulator and let us hear from the regulator what is their views, our views not to disturb the sector and probably take back the customers to the unorganized sector. We have given our presentation, so we'll wait for the final guidelines.

Sir, second question was change in business mix or maybe more tilt towards non-gold?

No, we have not thought about that as yet. We have a plan. Our core business is gold loan. We will continue to do gold loan.

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

Sir, when I look at the quarterly run rate of new customer acquisition and existing customer reactivation, in the last 2 quarters, the run rate has seems to have fallen versus what it was in the first 2 quarters of the year. There can be some seasonality. But are we seeing that -- because as you pointed out that there is increase in competition because of increase in gold prices that many players are entering the industry. Are we seeing some pressure in terms of customer acquisition, old customer reactivation and which is why we need to step up on the A&P spend, business promotion expenditure, maybe even employee variables in that case? So is it slightly becoming a trade-off between keeping growth high and giving away some cost?

I think new customer additions in the last 4 quarters was around 4.5, 4.3, 4.17, 4.17. There's not much -- not many material...

All quarters, we are increasing by about 4 lakhs, new customers. New customers are increasing.

Yes, they are increasing, but the rate at which they were increasing in the first 2 quarters, that seems to slightly come down.

That is only marginal. See, when somebody comes and takes a loan, sometimes a customer might be borrowing for INR 10,000 and sometimes he might be coming and taking for INR 2 lakh also.

Anyway, there is good growth in the new customer acquisition quarter-on-quarter. But of course, as you say, the first quarter, second quarter, third quarter, almost INR 4 crores every quarter, we should have done INR 4 crores and plus extra. At least we are able to do that with a higher base also. We are quite happy with that.

No. And the second part of my question was whether to keep up with this current run rate of new customer acquisition, do you feel the need to step up the OpEx in terms of A&P spend, promotion expenditure, maybe even employee variable? Do you see that scenario? Or you would want to reserve your comment because you would want to also see whether what kind of draft guidelines come into play?

No, not because of the guidelines. So we definitely would like to always like to increase our customer base. We have regular marketing activities. We have regular campaigns, et cetera, going, and that is bringing this business because you should understand that gold loan is a very short period loan, and we have to be very quick to get newer and newer customers. Otherwise, the active customer base will not increase. So customers take back their gold, we get new customers also. So we have advertisement, we have campaigns, et cetera, which constantly we run. There is nothing cutting back on that or maybe nothing to do extraordinary also now.

Okay. And can you share Stage 2 for Belstar? And what is the collection efficiency trend with Belstar?

I can come back later.

The next question is from the line of Nidhesh Jain from Investec.

On the yields, how should we think about next year given that competitive intensity is increasing? At the same time, interest rates are also likely to decline. So how do you see yields panning out next year and interest spreads panning out next year? And also, if you can share what is the incremental yield for Q4 FY '25 on the gold loan business?

Yes. Our interest spread has always been in the range of 9% to 10%, and we would continue to maintain that. If the cost of borrowing comes down, after a while, after a quarter or so, we will reduce our yields. If the cost of borrowing is going up, we will increase our yield. But we will try to maintain our spread at between 9% and 10%. That is what we always do. We have been always doing that, and we continue to do that. So if the cost comes down, we will transfer the -- we will pass on the benefit to customers. If the cost of borrowing goes up, we'll have -- for some time, we'll try to absorb it. After that, we'll have to increase our rates. So I think the interest spread would be constant, sir.

Sure, sir. And sir, yields are broadly similar for Q4 also, Q4, the incremental yields that -- loans that we...

Yes, around 18.5%.

Yes, 18.5% is what has been for all the quarters.

Okay. And the second data keeping question is on Belstar, if you can share par zero plus as of March '25 for Belstar?

Yes, I'll come back on the Belstar numbers.

The next question is from the line of Kunal Shah from Citigroup.

So, again, getting on to the draft regulations. Based on your assessment, if you have to look at it may be on the LTV side, have we done any analysis in terms of where actually we would have been breaching this norms of interest accrual plus the principal at 75-odd percent given that draft guidelines are there? No doubt it is still draft, but any internal assessment being done. And given your experience, is it like customers take a particular value of money whatever they need and they would be more willing to come and pledge the gold further rather than lowering the quantum of money required? Would that be the case based on your experience over so many years? And second question, again, on the operational part of it, maybe in terms of the customer assessment, which I don't think we have done till date, maybe in terms of analyzing the repayment capability of the customers and even the documents with respect to the end use of the gold loans. So would -- operationally, how would these things pan out? Would it be more like the documentation, mere documentation and the self-declaration that would be required? Or we would have a separate procedure to assess the customers as well? Yes.

Only 2 questions.

Yes.

Okay. So the first question is about the draft guidelines and whether we have done a calculation on the impact assessment. I don't think there is something great in that, and I would also like to say that as of date, you also asked whether borrowers are -- as of date, our loan-to-value on the current price is only 62%. It's only 62%, less than 62%. So today also, all the borrowers have not borrowed the whole 75%. They have all borrowed only 62%. So there is...

No, sir, that's what the question was, maybe average is 62%. But if we look at it, maybe any particular proportion of customers who will be still more than 70-odd percent.

Impact assessment is simple. Somebody who was getting INR 75 earlier, under the new guidelines, he'll be able to get only INR 55. And there will not be any standardization in the industry. Somebody who is lending at 20%, his -- it will be at INR 55, somebody who is lending at 10%, it will be INR 65. So there will not -- finally, the consumers are going to get affected. He will not be clear where he will get an appropriate value for his ornament.

That's what we have put up to the regulator. We have raised these concerns. Let us wait for that.

So looking at our yield, we believe like it should settle somewhere around 55% to 60-odd percent is what eventually it would settle at, maybe if you have to lend at the -- on an incremental basis.

Let the final guidelines come and then we'll take a call. Anyway, you know what is the impact, right? Let's wait and see in which direction it goes.

What is the second question?

No, on the operational part because now customer assessment will also be required apart from collateral...

I understood -- I understood that. So, yes, day-by-day, the compliance and the operational costs are going up, not only for us, for all NBFCs, not only gold loan NBFCs, any NBFC. So operational expenses, operational costs, compliance costs will go up. So we'll have to comply with that, compliance costs will go up. That's all. What else can we do?

No, my question was, would it be like the self-declaration from the customer that suppose if we have to require the customer assessment, we will just take that this is the income which they are having or this is the end use or we will be deploying people to give the evidence of it, yes?

Sir, let the regulations come, whatever it is, we'll have to comply it. If it comes, we'll comply. Only the compliance cost will go up. That's all. We'll have to comply it. So at that time -- we will cross that bridge at that time. Whatever it is, it will be compliant. We'll wait for the final regulations. But the point is all this will add to compliance cost. That's all.

As well as customer unsatisfaction.

Customer irritation. What you said, it's actually irritation. Yes, definitely.

So there was a question on Stage 2 in Belstar.

Somebody else previously asked.

Belstar, the Stage 2 percentage is 3.17% and NPA is Stage 3 is 4.98%.

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

First one is on Muthoot Money. In terms of the branch expansion, we have just stopped short of 1,000 beyond which you might require regulatory approval. So I just want to understand what kind of gold loans we are doing. What is the total gold loan capacity in each of the branches that we have built out? What's the AUM per branch here? What kind of teams have we built in at Muthoot Money? And if the regulator might look at this as saying that, look, you don't get regulatory approval hence you have increased branches here, can there be some kind of a regulatory oversight or action on Muthoot Money increasing branches rapidly? The second question is a data keeping question. What is the accrued interest? And what will be the AUM split less than INR 1 lakh, INR 1 lakh to INR 3 lakhs and more than INR 3 lakhs.

So Muthoot Money...

The AUM -- Muthoot Money gold loan AUM is INR 3,500 crores.

INR 3,500 crores. I think we explained all in details earlier also why we started the hire purchase and we started the gold loan. It is around 980 or 990 branches and the AUM is INR 3,700 crores. So -- because these are young branches, the business should be going up -- per branch business should be going up year-on-year. So we don't see any regulatory concerns in this. So that is the first part of it. The second part is your...

Interest accrued is INR 1,740 crores.

INR 1,740 crores.

Ticket size breakup above INR 3 lakhs is 38%, INR 1 lakh to INR 3 lakh is 35%, and INR 50,000 to INR 1 lakh is 15% and the remaining, the balance below INR 50,000 is 13%.

Sure. What is the AUM per branch at Muthoot Money now?

I think we....

INR 3.5 crores.

INR 3.5 crores...

What's the maximum level it can go to?

You know what is the average in Muthoot Finance, right? So it can go up to that level.

Why shouldn't it?

It can go higher also.

Should average...

[indiscernible] difference between the branches and -- there's no difference between branches of Muthoot Money. Only the management is different. The operational team is same. Management is different, operation is the same. [indiscernible] operational team is different.

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

Firstly, on the...

A little louder please, a little louder please.

Yes, is it better?

Yes.

Firstly, on the other income, it's a lot higher this quarter. So any particular thing that's driving it?

I don't think...

Non-interest income.

Not really, maybe some odd...

Is it driven by the ARC?

Yes. So ARC is there, then the investments in mutual funds, et cetera, fair value changes, then yes, that's all.

So is that transaction complete? I mean, are the entire recoveries from the ARC sales now reflected in the P&L in our case?

No, some more, some more is...

Some more is outstanding.

Okay. And coming to Muthoot Money, what is the gold AUM of this INR 3,700 crores or so? And what was the same last year, if you could highlight?

Last year, it was INR 1,000 crores. Today, it is INR 3,700 crores.

So the entire AUM consists of gold loan only?

No, no. There was AUM in hire purchase, which was about INR 500 crores at its peak. It is running down. And probably today, it's about INR 150 crores.

Okay. So INR 500 crores last year and INR 150 crores as on today, as on March end is the non-gold portfolio in the Muthoot Money book.

The next question is from the line of Varun from Kotak Securities.

I just had 2 questions. First one was with regard to our different products at different LTVs. So what is the yield difference that we offer to the borrower for the different LTVs, like the 75% was 65% and 50%? And the other question was with regard to Belstar's collections in Tamil Nadu. We have a large portfolio over there. Are we seeing any impact of the new bill or act that has been passed in the Tamil Nadu assembly?

So yield difference, we have schemes right from 10% to 22%. So there's no hard and fast rule. It operates in different geographies in different schemes, et cetera. There's no particular principle being followed. It is mainly dependent on the schemes which have been decided to run. The second thing is on the impact on Belstar. I think that ordinance will...

It started with Karnataka. Now it is in Tamil Nadu.

No, there will be some impact in the initial stages, but then it becomes applicable to everybody in the sector. So we'll have to wait and see. These are not applicable to NBFC MFI...

Technically, this act is not applicable to NBFC MFIs. So it is actually exempted technically, but then it is only the perception, people on the ground may feel this is applicable for everybody and people may delay payments. But after some time, it has to come. As per the rule, as per the act, both in Tamil Nadu and in Karnataka, the NBFCs, regulated NBFC MFIs are exempted. But ground level is always a problem.

Yes. I was just asking about the collections trend in April or is there any change [indiscernible]?

That's what Oommen said. Initially, there will be some hiccups. After some time, it has to straighten out. Today, there is a hiccup.

The next question is from the line of Harshit from PremjiInvest.

This was just on cost of funds. Sir, if we look at sequentially, our cost of funds increased, but I'm assuming that the rate cut narrative has started building up. So just wanted to get some sense on the trajectory of cost of funds and the quantum broad guidance, if you can.

I think there is a significant reduction post-March, we are seeing a significant drop in the borrowing costs. So I think now we should see, get the benefit of that fall in interest cost unless there is a reversal of the trend.

Okay. Got it. And so some bit of spread improvement we should probably see from next quarter onwards as it...

Yes. Again, the same thing I used to mention when there is an increase, 50 basis points increase and all doesn't make much of a difference in our return asset. The same thing. When there is a decrease in cost of borrowing, it's not going to make a significant change in our return on assets. 5%, 5.5% return on asset, this is not going to make a material impact.

Understood. Okay, sir. And if I can just clarify one more time. It was not clear on this part that our restriction of 115 approval is in both Muthoot Money and Muthoot Finance?

No, that 115 is for Muthoot Finance.

115 permission branches for Muthoot Finance.

Muthoot Money, we just completed 1,000 branches, allow it to grow because it has a long way to go with the 1,000 branches. And probably at a later stage, we can always seek approvals from RBI.

The next question is from the line of Bhavesh Kanani from Svan Investments.

First one was on the stand-alone P&L where we have seen provisions going up materially. And in a scenario where gold prices are favorable, one, just want to understand the reasoning behind that. And if you can provide some sense that whether the provisions that we hold today that will be sufficient to kind of handle a possible correction in gold price and -- or will continue to provide significantly in '26 as well. The second one, sir, was on Belstar. If it is possible to share some par zero data for last couple of months, that would be helpful.

So on first question on provisioning, see provisioning is based on Ind AS 109. So there we consider the historical losses, et cetera. And based on that, we make provisions. Now we believe that there will be an adequate provision. But whether there could be a very large, that is not the way in which we are looking at gold prices. So from that perspective, I think -- we feel that the provisions are adequate. What is the second question?

Belstar, monthly collection.

We don't have.

Monthly we don't have, but as on date, we have.

I mentioned earlier, Stage 2 percentage on Belstar is -- as on March 31 is 3.17%. Stage 3 is 4.98%.

Any numbers you can share for par zero levels?

No, I don't have the par zero numbers right now.

Okay. Sir, going back to your response on provisions for '24, the provisions translated to something like 30 basis points, whereas for '25 full year, it translates to around 80 basis points. And you mentioned that we are following the ECL method. So what are those key changes in the ECL assumptions which led to this kind of increase?

So I think I gave -- earlier I gave a breakup of ECL provision. Out of INR 766 crores of ECL provision, INR 130 crores is because of the write-off and the remaining is because of the increase in ECL provisions as well as increase in NPAs of the non-gold book. So increase in provisions because of the non-gold book is about INR 200 crores. The remaining is because of the increase in the loan book.

The next question is from the line of Nikhil S. John from GYR Capital Advisors.

Congratulations on crossing INR 1 lakh crores milestone. So my first question [indiscernible] with the gold loan AUM of 41% year-on-year and interest income [indiscernible], do you think any structural margin expansion in the [ FY '26 ] especially with operating leverage kicking in some of the 850 branches [indiscernible]?

That's your question. So I think we have been -- we have said that our interest spread is about 9.5% -- last all quarters, it has been 9.5%. If our cost, et cetera, borrowing cost comes down, we will reduce our yield, but of course, maintaining the interest spread. Operating cost, yes, it cannot -- it will come down because of the -- per branch this is going up. But as you know, inflation is also there. So everything will go up, the rent will go up, salaries will go up. On one side, that will go up, but then that is compensated by more per bar basis. So I think operating costs, et cetera, would also remain almost the same.

Okay. And I have one more question. And is there any internal benchmark that you have set to improve this metric further before adding more branches?

Benchmark? I didn't understand the question, please.

Any internal benchmarks or KPIs that you have implemented in every branch to be followed?

Benchmark is that we ask them to do more per branch business. I think that's the benchmark we give to the branches. Branch -- individual branch business should go up. That's the benchmark.

The next question is from the line of [ Jino Thomas from IND Invest ].

Congratulations for a great performance. I'm very happy to see Slide #20 to 25. Probably I myself have spoken about this for a couple of quarters back. And I request you to give some color on these analytics initiatives, centralized many, many innovations coming there in the company, maybe on for cross-sell, cost efficiency, etc, it would be the objective. It would be great help if you can give some color on that.

So I think it is already colored red. That is one. That's on the lighter side. Of course, these are all steps we are taking to improve the performance of the branch to improve the customers, more customers coming to the branch. These are just steps we are already taken. Some of them are in process. Some of them we have already implemented. I'm sure going forward, these steps should certainly give more customer footfalls in the branch and definitely improve the business. So everything, almost what we said is self-explanatory that we have done. I don't want to go into each detail because I don't have each detail, et cetera, but understand that these are things which we have been implementing for the last 1 or 2 years. It's just that we just put it on paper now. So these are all meant to get more customers to the branch.

Ladies and gentlemen, in the interest of time, this would be our last question. I would now like to hand the conference over to the management for closing comments.

Thank you. We had a good interaction with all the team members -- all the investors and our supporters. Sorry that there was some connection -- disruption in the connection. I think it was mainly because there is some problem in the Airtel total network in Tamil Nadu and Kerala. But I think we took a second alternative, and it has gone well. We are happy that we were able to report good numbers, and we are again happy that we are able to support our customers and also our investors. We will continue to do that going forward, continue to work in the best interest of all our stakeholders, including our borrowers, lenders, our investors and be confident that Muthoot will stand by all its values and principles and see that we grow from strength-to-strength so that all our stakeholders are benefited. Thank you. Goodbye from Muthoot Group here. Thank you.

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