Ladies and gentlemen, good day, and welcome to the Muthoot Finance Q1 FY 2025 earnings conference call, hosted by DAM Capital Advisors Limited. As a reminder, all participant line will be in listen-only mode, and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. 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.
Yeah. Hi, all. Good evening. I welcome you all to the Muthoot Finance Q1 FY25 conference call. We have with us the entire management team today. We'll start with George Alexander Muthoot, who is our Managing Director. Alexander George is a Whole-time Director. George M. Alexander, a Whole-time Director. George M. George, Whole-time Director. George M. Jacob, Whole-time Director. Mr. Eapen Alexander, who's our Executive Director. Mr. K.R. Bijimon, who is our Executive Director, and Mr. Oommen K. Mammen, who is our CFO. Without further ado, I will hand the call over to the MD, sir. We'll follow that up with question and answers. Over to you, sir.
Thank you, and good evening. Good evening to all of you. Okay, we are glad, we are happy. We just had the board meeting this morning, this afternoon, so the 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 are also here. So this has been a good quarter for us. The consolidated loan assets under management has crossed INR 98,000 crore, and the standalone loan assets under management stands at INR 84,324 crore.
Both a historic highest for the growth in gold loan assets of 14,000 in the last one year, which records up to 23% and highest ever standalone profit after tax of INR 1,079 crore, 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, and Muthoot Finance has been, has become the only Indian NBFC selected for the FATF, Financial Action Task Force, on-site mutual evaluation report on India, conducted in November, where India received outstanding outcome and placed it in the 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 crore and the growth AUM stands at 9,952 crore, compared to 7,000 crore in the Q1 of last year. Muthoot Homefin, the loan assets stands at 2,199 crore against 1,501 crore in the same quarter last year. Disbursed loan of 2,021 crore in Q1, compared to 109 crore 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, versus INR 496 crores in the same quarter last year. The continued decline in NPA through the fiscal collection is witnessed consistently throughout the year. GNPA decreased to 1.663 in Q1 from 2.43. The branch network also increased to 674 from 470 during this quarter. The other subsidiaries, Muthoot Homefin, Muthoot Insurance Brokers have done good business, and their 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%, and loan portfolio stood at LKR 2,335 crores as against LKR 2,000 crores in the same quarter last year.
We have been able to do good business this quarter, and during this, additionally, the Union Budget also emphasized many things, and we are, we are sure that the impact is 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, I would like to close, and I would like to open the floor for any clarifications, doubts, or queries. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.... The first question is from the line of Mahrukh from Nuvama. Please go ahead.
Yeah, hello. Congratulations. So 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, would, 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 loans. So why is the regulator so worried about top-up loans? First of all, if you could share your top-up loans, you know, 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 of, of our AUM growth for the year, what do you, where do you see it settle?
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.
So if you can hear now, I'll continue. So you had asked three or four questions. One was about the tonnage. The tonnage is directly proportional to the with 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 would 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, 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 had taken only INR 50,000 earlier, now, if he comes and if the eligibility for him has gone to INR 60,000, he takes, he takes more money on that. We expect, we, we understand that he will take more money on that, but as long as it is within the 75% LTV, we are not concerned. So as far as it is below, below the, 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 loans top-up. I've not heard anything. So of course, RBI cautions many things, and, probably we have not heard anything about, 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. That is still much below the 75. There was one more guidance, you know, that's with guidance. We had been consistently giving guidance of 15%, so probably we will continue with that. We'll probably take a call after H1, which is Q1 only. After Q2, we'll see how the things are panning out, and if there is a guidance correction to be made, we'll do it at H1. Thank you.
Okay. Thank you, sir. Thank you.
Thank you. The next question is from the line of Sumit Sarda from Compound Everyday Capital. Please go ahead.
Thank you for this opportunity. I just one question about impairment of financial instruments and 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 your cost of funds? Thank you.
Sorry, I did not understand that. Can you-
Which item is that?
Which item is it?
Impairment of financial instruments.
Okay.
Around INR 375 crore.
Okay. So on the impairment, no, it is nothing but the, the ECL provisions. You know, so as you are aware, I know we have grown this quarter by about 11%, so that is roughly around INR 8,400 crore. So we make ECL provision as per the PD and LGD percentage, which we have determined. So, generally we fix the PD and LGD percent in March, every, you know, in the fourth quarter, and we retain that percentage throughout the year, and we review it only at the next year end. So we calculated the provisions based on the PD and LGD. Accordingly, because there is a growth of eight thousand odd crores, we, you know, the, you know, there is a ECL provision on the growth element.
Now, there is also an increase in the Stage Three assets by about INR 1,000 crore, for which we make a provision of about 10%. As you know, on gold loan, NPAs are technical NPAs. We don't incur any no loss because of the collateral.
... and no, we don't see any loss also coming on that, you know, NPA book. If you look at the average LTV of the Stage Three gold loan assets, it is only around 54% at the principal amount. So, no, because it's a accounting requirement as well as RBI requirement, we have made, we have to make, ECL provision about 10%. So because of these two, the impairment amount is higher this quarter, but, you know, we don't incur any cash loss on this impairment provision.
To keep things in 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-plus 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 time. That is why you see them as NPA. We can of course be little harsh on this customer and maybe auction the gold and make it into a zero NPA, but then we felt it's not in customer's interest and also the company's interest to auction the gold even when we are in the money.
So when we are in the money, and the customer requests for time, we don't mind giving them more time to repay. That is definitely a customer-friendly approach, which has been practicing all around.
Yeah. Thank you, sir. Sorry, I, I think I misunderstood. What I wanted to understand was, is there any impact of foreign exchange translation on the foreign borrowing that we taken, and are you also recording it here?
No. So of course, we have done a dollar bond fundraise of about $650 million in the first quarter, but that will not have an impact in the impairment, you know. Those hedge costs, et cetera, will come as a part of the finance cost.
Okay. Understood. Very clear. Thank you, sir. All the best.
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi. Thanks for the opportunity. 2 or 3 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 1 lakh, 1 to 3 lakh and more than 3 lakhs? And, the growth guidance that we are giving of around 16%, what proportion of that would come from south versus north, south? Thanks.
Yeah, I think, the south versus north, it is growing equally, almost equally. South is today about 48% and 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.
No, accrued interest. Accrued interest is INR 1,980 crore.
INR 1,980 crore is the accrued interest. And, one more point-
Sir, can you give me a second?
Okay. INR 1 lakh or INR 2 lakh, give 2 minutes.
South and North, both will grow at 15%. Fair understanding, sir?
Yeah, yeah, yeah.
Okay.
Less than INR 1 lakh is 32%. INR 1 lakh to INR 3 lakh is 37%. Above INR 3 lakhs is 31%. So 32, 37-
Right.
Thirty-one.
Got it. Thanks.
Thank you. The next question is from the line of Rajiv Mehta from YES Securities. Please go ahead.
Hi, good evening. 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 you can elaborate on the drivers of, you know, 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 unsecured credit for the borrowers?
I think you have answered all the questions. So all the three are reasons good enough. Maybe the credit requirement is also going up, so probably there has been some caution from the certain 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. You wouldn't say competition is 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 a 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 advantage of probably the lesser competition or the decreased intensity of competition from banks as well, as well as from other NBFCs.
Mm-hmm. Sir, what is the reason for holding back, you know, revising the guidance upward, you know, after this stellar show? Because from March to June, we have already seen 11% growth in the gold loan portfolio. We're still guiding for overall 16%, you know, 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%, 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'll do it after Q2. That's all. It's nothing more than that.
Yeah. So July, August, trends have continued in terms of growth and customer acquisition?
I think, this is continuing just like before.
Okay, sir. Thank you so much.
Thank you. The next question is from the line of Ashish from Infinity Alternatives. Please go ahead.
Thank you, and congratulations, sir, for a stellar set of numbers. A couple of questions which I just wanted to understand on the NPA, especially the stage three. Now that we have a very large number, do we expect over the next couple of quarters the NPA number, stage three number to come down? I know you guys historically try and be customer friendly, but the number is getting very large. And related to that, sir, if we had done an ARC transaction, I think three or four quarters back, so if you can just update as to how much returns have you got beyond the principal, and if you can help us understand if you are thinking of another ARC transaction on our books.
So I think, as you said, we are definitely in the money. We have as a, as a stated principle or stated policy of Muthoot, we would like to accommodate the customer wherever possible. So, as you also, you also said, if the numbers are going beyond a level, then we'll have to take some action, maybe, auction little more, more frequently, if that what is required. But then we would, of course, persuade on the customer 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 six 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 about to, what should I say? Prevent auctions or maybe not do auctions in 60,000 cases, where 60,000 customers are, I am sure they are definitely ever grateful to us for saving their gold and giving them little more time, 3-4 months time, so that they were able to take back the gold. So to answer your question, of the ARC, the ARC was done for about INR 700 crore. I think about INR 200 crore 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's, it was done at 100% risk, is what I remember.
Definitely we expect upside on the principal, definitely. As soon as this principal receives the balance, which we are going to receive, would be the interest, and that will come in the next quarters. So we have not considered doing another ARC at the moment.
Okay. Thanks, sir, and wish you all the best.
Thank you.
Thank you. The next question is from the line of Pranav from Goldman Sachs. Please go ahead.
Okay, good afternoon. Thanks for taking my question. My question is again on the Stage Three asset. While I understand there is no cash loss for the company, can we see this as a decline in the repayment ability of the customer? We are seeing a general pickup in credit card across, you know, various lenders. Do you see a continuation of that trend? Some color from that would be very helpful. Thank you.
So 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. That is because we were accommodating customers without auction. So if you look at the overall, the number, the NPA customers or the Stage Three 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 Three. And that's all. Because these are all small, small customers, it is not that there is some stress in the market for these people, et cetera.
Such a small ticket size, so 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 auctions. So if you look at our auctions, auctions would have been much lesser in the last two quarters.
Understood. Understood. So, just so I understand the slide, 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 the lesser number of auctions, which is driving this higher number. Is that fair?
Oh, oh, you are almost, almost right there.
The customer is also very well aware the value of this collateral he has given, so he can very well, you know, request, request for some extra time. So if we are not giving extra time, he can go to somebody else and borrow the same amount.
Ah!
So it is not, it is not, as Nischint sir said, it is not due to any stress across any particular segment. It's just that he's postponing that repayment. Now, we send an auction notice, he will come and, you know, repay the loan. You know, 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, you know, the average LTV on these loans at origination is around 54% range at the current price.
...Understood. Thank you very much. Super helpful. Thank you.
Thank you. The next question is from the line of Pranav Kumar from Ratnabali Capital Markets. Please go ahead.
Sir, can you give me the auction numbers?
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. Please go ahead.
Can you give me the auction numbers for this quarter and last quarter?
Sir, for now, this quarter is INR 68 crore.
Last quarter, how much was it, sir?
Last quarter, just give me a second.
Must be about INR 200 crore.
Last quarter was about INR 10,162 crore.
Okay. And, did I hear right, ki, 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 auctions that the GNPA has gone up?
Yeah, yeah. You are, you are almost right.
Okay. From here on, what is the kind of credit cost we should expect for the rest of the year?
So as per ECL calculation, yeah, it's for, no, gold loan. The PD we have kept is 8.59%, and LGD is 9.96. So this will continue to apply for the gold-growth element. And, you know, 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.
Okay.
Also, sir, to clarify something, none of these NPA results in a loan loss. That is, that is what you want to know? None of this. Zero. Loan loss on this is zero.
I do understand that, sir, but I was trying to more figure out why would these customers actually... I understand you have, you are 54% LTV, but I was just trying to understand why would, I mean, is it the stress in the lending segment as a whole that this is happening? Or, why, why is it that the GNPA have suddenly gone up, sir?
I told you, because customers know that their money, their gold is worth much more. When they request for little more, three months, six months time to maybe to keep it with us, we just accommodate them. That's all.
In fact, you know, compared to last June, NPA percentage, you know, has come down from 4.26% to 3.98%. But I know doesn't mean anything as far as we are concerned.
Right. Okay, sir. Okay, sir. Thank you.
Thank you. The next question is from the line of Gao Zhixuan from Schonfeld. Please go ahead.
Hey, sir. Just want to understand, you know, post the budget, there's a pretty sharp drop in the domestic gold prices. Are you seeing, you know, demand side being impacted post the budget because of that?
Yeah. 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 breached 2,000 kind of dollars of gold. So international price is actually covering, and today, the peak decrease in the price compared to pre-budget, it's only about 4%. Probably-
Got it. So sorry. Got it. Sorry, I missed your 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?
The gold price is still going up only. It's the momentum, there may be spurts of very high growth, very high price rise in 1 month. But if you look at overall in the last 1-2 years, the 3 years, the price has been steadily going up only. Mainly, probably because of the geopolitical tensions, et cetera.
No, sorry, sir, I'm referring to your gold AUM growth in Q2, August, right?
So we are continuing to see a good level of dispersal. Of course, we can give a quantification for that, but now we are seeing a good disbursements, you know, as far as gold loan is concerned.
Got it. Thank you.
Thank you. The next question is from the line of Digant Haria from Green Edge Wealth. Please go ahead.
Yeah, hi, sir. So one question I had that, you know, even in South, you know, South India, which is, you know, considered as a mature market for gold, I hear so much on, you know, talk on growth, you know, all the small, small banks, cooperative banks. So somehow, you know, this entire, you know, gold loan industry is seeing very, very vibrant growth. Any reasons you can point out for this, sir? The gold price is one reason, but anything else you can tell us?
Tikin, good to hear your voice once again. I think what is happening is also companies who are really focused on gold loan, they will continue to grow. The others who come in, maybe, come here, focus after 2, 1 quarter, focus on this, after 3 quarters, reduce their focus. For them, the growth may not come as well. So those who are focused gold loan players, probably we can take, I can say only about Muthoot. We would definitely continue to see growth in 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, 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. In the last several quarters, in one year, two years, many of the banks have also been doing well, are doing gold loan well. So 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, they are trying to take this. And in the mature market also, there are repeat customers. We always say 80%, 70%-80% of our customers are repeat customers.
So they take a loan now, after some time they come again and close the 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. Sir, that is very good to hear. Sir, but in that case, sir, shouldn't we revise our guidance? I know you just said that after H1 we will do, but you know, you start the year with 15% guidance. This year we started the quarter with 15% growth, you know, just one quarter. So maybe is it time or you just want to be cautious because you know, maybe the competition will bounce back again and whatever?
It's not, it's not that, because I think if you look back also, every, all the years we have always revised only after second quarter, et cetera. We have never revised after first quarter, so just, going by old precedence only. But definitely we would, we would, take 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 AM growth, we will do it, and we will use it to the maximum tilt. So it's just that we don't want to give a revision, revision after one, one quarter. Probably next quarter we will be able to give a better, better guidance.
Then, then, then-
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 two quarters. That's all. Nothing more than that.
Perfect. Perfect. Perfect, sir. Sir, and, and one more thing which I wanted to ask is that in 2020, '21 and '22, when a lot of these banks were getting aggressive, we had to take that trade-off of, you know, growth versus lending yields. Now I see at least, you know, our lending yields have been stable despite such high growth. So, so, you know, that whole growth versus margin trade-off, you think that is over now, and, and we should at least get this stable margin which we've been getting for last four, five quarters?
Yeah, I think the margins are reasonable now. And, of course, we see occasionally the borrowing costs also going up slightly. So as the borrowing 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 take a call on that. Maybe, in the coming months, we'll take a call. If the borrowing cost, et cetera, incremental borrowing cost is going up, we'll have to take a call on that. So sometime we will try to absorb the cost, but afterwards we have to take care of our margins also, yields also. So if required, we will do a yield revision also.
Yes.
As far as possible, maximum extent, we would like to give the best rates to the customers.
Got it. Got it. Got it, sir. Sir, and is it safe to assume that these 20,000 disbursed, you know, we disbursed everything in bank accounts, you know, there's more than 20,000. So, so it was 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 the INR 20,000, et cetera. It was so smooth. Most of our customers have bank accounts. They come, when they see in the branch, "Can I give you INR 60,000 cash?" We used to give, but now we say, "We can't give. We just transfer it to the account." Everybody has some Google Pay or UPI or something is there for everybody, so nobody has found it difficult nowadays. No, no issue has come because of that.
Right. Right. Right, sir. Sir, that's great to know. Thank you so much for the opportunity, and I wish you great for this year and the coming years.
Thank you. The next question is from the line of Parin Mehta from Edelweiss Public Alternatives. Please go ahead.
Yeah. Hi. This is Parin here. Thank you for giving me this opportunity. One, you know, just 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 towards since last year?
So, you know, from ever since IND AS has implemented, we normally revise the PD, LGD only in March, in March quarter.
So then, in March quarter of March of 2024, we were to have revised it upward, right? What... I mean, what is it, I mean, has it changed towards this March 2023 quarter, the assumption of NGD and PD, PD?
Yeah. It has come down a little bit lower compared to March 2023.
Which means that the incidence in terms of, you know, asset quality is better than what we were building in. Am I correct?
... Yes.
Right. Okay. Thank you for that clarification. Secondly, sir, you know, just extending Diane's question a little bit further. Now, you, I mean, George Muthoot has always been focused on gold loan, and it's like a fair-weather—it's like a, you know, 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, you know, going forward. So I'm just trying to, you know, link the gold loan growth with the margin part.
Is it fair to assume that maybe in near past, right, for a couple of years when competition was high, 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 fund? Is that a fair assumption to make?
Cost of funds. So actually, I think one thing is that we have to look at the customers also. The customers is our best, first priority. So when customers are demanding for very low interest, they are getting low interest from somewhere else, we have to definitely take care of our customers at the cost of probably some profit. But then, after some time, customers also realize that what they saw as getting a low rate from somewhere else is not, is having its own difficulties, et cetera. They started coming back to us. So now 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, any other company, nearest competitor, NDFC, et cetera, we have much more, more than 2 times, 3 times their AUM, because customers feel that, we are a more reasonable of the company. So whenever we have an opportunity, we support the customer, whether it is through lesser auctions, less frequent auctions, or maybe, not increasing the rates to the, or increasing the rates only to maintain our limits, et cetera. So that adheres customers more to us, because these are mainly walking customers. They have to come back and decide to come to Muthoot. That is what is most important here. They are repeat customers. The customers have taken a loan, closed it, should come back to us for the second one, and that we are definitely seeing.
And that is where we have been; we have been able to score over many other people. 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 limits, et cetera, reasonable profit, good profit, and then we will continue with that rate.
All right, sir. That's it from my side. Thank you for the answers and all the best.
Thank you. The next question is from the line of Jigar Jani from BNK Securities. Please go ahead.
Yeah, hi. Thanks for taking my question. So just a follow-up on the margin part. So earlier, our guidance was 11%-12% kind of loans that you'll be maintaining. Will you still be maintaining those targets? Or do you think there is an upside or downside risk to this?
Sorry, can you repeat? Can you just... We didn't quite understand your question. We didn't quite understand your question.
Mr. Jigar, are you there?
Mr. Jigar, may I request you to please repeat your question?
Yeah. Is this better?
Yeah.
Yeah. Yeah.
Yeah, yeah. So what I was asking was on your margin guidance. Earlier you have been guiding for 11 kind of margin, but it got down about 11.5%. So will you be still sticking to that margin guidance?
Yes, 10-11.
No, maybe, maybe, or 0.5%, 1% here and there. We, we generally try to stick to that, sir. Yeah.
Okay. Any risk that you see to this margin, given that maybe the comp, one of our competitors who is in embargo, when they come back, they might revert back to aggressive pricing to regain market share. So what would be our strategy? Would we still kind of sacrifice on margins to maintain market share? Or would we 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 want 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 or dictated by what others do. But then, 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 we should; we will try to stick on to that.
Right. I think somebody asked you the quantum of the top of loans that we do. Would it be possible to share?
See, there is nothing like a top up. As we said, the average LTV on 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 amount. If I am not giving that loan, you know, he can go to somebody else and take a loan. So, you know, you know, I don't think there is a top up, you know. It is purely based on his requirement. You know, top up really, you know, meaning when, you know, somebody has taken the maximum amount of a loan, and then on, on top of that, there he's getting an additional loan. Today's environment, especially when the average LTV is only 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? I mean, we don't. We won't be tracking on how much of our AUM would be where customers are coming and taking an additional loan because LTV is available for us.
If you look at our, you know, customer, pattern, the number of loan accounts is around 91 lakhs, whereas, you know, number of active customers is around 59 lakhs. So which means that every customer has maybe more than, you know, one loan. Which also explains, you know, the fact which I mentioned, you know. 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, you know? It is a, you know, wrong, terminology to use for that, situations.
Sure. Understood, sir. Thank you so much for answering my question. Thank you.
Thank you. The next question is from the line of Nischint from Kotak Institutional Equities. Please go ahead.
Am I audible?
Yes, sir, you're audible.
Thank you. I'm looking at slide 42. You know, you achieved gold price per gram of INR 6,580 in June. What exactly price is this?
Which slide?
So INR 6,580, I mean, is it like a 23-karat, 22-karat price? What is it?
Which slide? Which slide are you referring to?
That is, 22 karat.
22 karat, sorry. 22. The ornament gold is all 22 karats.
Okay. And what would be the price today? I believe this is June end, so.
I think, you know, it had come down to around INR 6,200 or so, then again, now it is INR 6,500.
6,500. Just one minute.
Today the price has again just come back. So after the budget-
Today's price is INR 6,565.
6,565.
22 karat. Yeah.
Today's loan book in that sense would be greater than the loan book you had in last June end or would it be more or less similar levels?
So, no, what about months are passed, you know, since June thirtieth, so the newer loans will be happening at the newer LTV. You know, probably the older loans would have got, which has happened at lower LTV, would have got closed, you know? So I can't comment on the exact LTV at this point of time. So, you know, you visualize on that basis, you know? As and when we progress, it will... the newer loans will happen at newer LTV. Not necessarily that every customer is going to take at the maximum LTV.
No, no, but fair to say that your, that your AUM is, you know, higher than the 81,000 loans that you reported in June?
But no, listen, don't ask me that question right now. You know, we already discussed that. Disbursements have been good in the current quarter. So that's all we can explain.
Okay. So, just LTV on NPA, I think you mentioned this number, but I'm not sure if I think it up.
It is 54%.
Fifty-four percent.
Fifty-four.
4%. And just one last one, and, this is actually on the microfinance business, where we have fairly seen fairly sharp rise on a sequential basis on Stage Three loans. So if you have any commentary on that, and how do we see the trajectory for that?
Yeah. The Stage Three is, yes, definitely, it is not, it is, across the board, across the industry, the Stage, Stage Three has gone up, and we are actually, much better off than majority of the, similar companies.
Are you planning to invest any capital, you know, further capital in the microfinance business?
I think, they are looking for an IPO.
Okay, so nothing from our side?
As of now, nothing. As of now, because I think they can manage it, and, you know, there is also an IPO which is planned. You know, it all depends on, you know, on the outcome of that.
Got it. Thank you very much, and all the best.
Thank you. The next question is from the line of Pranav Shah from J.P. Morgan. Please go ahead.
Hello.
Sure. Thank you for the opportunity. Sir, I think earlier in the call you had mentioned that competition in general is seeing some moderation. Now, on the NBFC front, I can understand that one of the competitor is in there, but you also mentioned that bank competition is coming off. So what is driving that?
It's not that bank competition. It is the focus of banks are not, maybe not as, as aggressive as it was maybe six months, eight months back.
Okay, I understand. But, like, in the case like earlier, banks were 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 the secured gold loans and would 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. If some deficiency, they have to take on our side. 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 Two plus Three. Like, if I look at a Stage Two plus Three book, that is higher even on a year-over-year basis by around 80 basis points.
... Generally, for how long would you wait before you start sending auction notices again to customers, or anything of that sort you can help us understand?
So, we will try to keep that NPA within some limits. Also, we wouldn't want it to go very high. But then we are actually taking some efforts to ask the customers to come and close the loan and maybe 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's quarter on Stage Three 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 NPA, the Stage Three was 4.6. Today, it is only 3.98.
Actually, I was looking at both stage two plus stage three, but, all right, I get the point. Thanks a lot, sir.
Thank you. The next question is from the line of Raghav Garg from Ambit Capital. Please go ahead.
Hi. Thanks for the opportunity, sir. Just one question from my side, you know, in terms of bank competition. So in the past, we've observed that there has been some misutilization of the interest subsidy subsidies from banks, which is, you know, one of the reasons why they were able to give lower rates on gold loans. Another thing is that also very recently, one of the largest PSU banks said that they were toning down on agri gold loans. So just connecting these two, three things, is that the reason why banks have toned down their gold loan efforts? I think in the past, you have also commented at some point in time that, you know, banks were not really playing playing a fair game.
You know, just some of your observations or commentary on that will be very useful.
Oh, we have been always. Earlier, we were, we were always putting up to the regulator that this is happening. Probably, they themselves would have realized some of these things and changed. 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 have been given some instructions to do that. I'm not sure about that. But, what I'm, what I'm, what I feel is that, that, aggressiveness has toned down.
Understood. And, sir, another question. You know, 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, you know, a data point that you would have handy?
So actually, customers don't come and tell us that I have taken the loan from X company and they are bringing it to you. They come with their gold. We don't ask them from where, 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 will keep the gold at home. Next time, after one month, two months, when they want the money, they 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?
Now, this quarter, it is around 8.75. I think, you know, probably another 35 bits.
Understood. That's-
We have also taken the ECB borrowing, where, you know, the average cost will be around, around 9.6, on a monthly basis. So, now that also will increase the, you know, overall funding cost.
Mr. Raghav, does that answer your question?
Yes. Yes. Yes.
Okay, thank you. The next question is from the line of Jignesh Shial from InCred Capital. Please go ahead.
Yeah, hi. Am I audible?
Yeah, yes, yes.
Yeah, perfect. Thanks. So just couple of questions. One, you know, you have been saying that, you know, gold prices have been moving up, up and down. So how frequently do you revise your, you know, the pricing? Or is it remaining fixed, or over a period of time, you revise the gold pricing, or for one gram, or it is regularly being revised based on day-to-day price movement?
That is your question. Any more questions?
Yeah. Secondly, I also wanted to check your personal portfolio is right now around INR 34 billion, if I, if I'm saying it correct. How much of it we cross-sell to, you know, our existing customer, or will it be a completely fresh set of customers? That is second. Third, you have guided for, you know, 15% growth-
I didn't understand that question. What is it?
So, your personal portfolio, what kind of customer profile is it?
Okay, yeah.
Yeah. So is it same like gold loan customers, additional loans or-
Say it again.
Yeah, your 15%, you're giving a gold 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 know, you had given that up to INR 1 lakh, INR 1-3 lakh 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 fixed every day dynamically. So it depends on the daily price movement. So every day, the LTV is fixed.
Okay.
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.
Okay.
It is INR 4,900 today, tomorrow it may be INR 4,902 or INR 903. So that is the number one.
Okay.
Number two question is about our branch expansion. Yes, we have been, we have been.
Yeah.
I'm sorry? Yeah, we have, we have been growing our branches, yes. Yeah, 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 branches. You know, going forward, this year we may open another 100-150 branches this year. Another question you asked was about?
Personal customer profile.
Ticket size you had asked, no, for last year?
Yes.
So last year, up to INR 1 lakh, it was, you know, 35%. One to three lakhs it is 38%, and above three lakhs it is 27%.
All in the 30-30% range. Yeah.
Yeah. So basically, we are seeing that more than 300,000 customer bases basically has increased YOY. Is it correct?
Yes.
Or it's almost similar?
From 27%-31%.
Yeah, people are getting more prosperous.
Understood. Okay, and just follow up on what you answered. So, also I wanted to check your personal customer profile. If you can tell me that one, that will also be useful.
Actually, 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. I thought, we thought we can do that. So of course, to start with, we couldn't do that alone. We went to the open market also. We have an open market. Probably today it will be about 50/50 or 50-60%, should be open market and the others are cross-sell to our customers. So cross-sell is just a lead generation.
A customer who we feel has taken a loan from X company, personal loan, we can always ask him, "Why don't you take the personal loan from us also?" I think all the banks also do the same thing.
Yeah.
When they give a vehicle loan, et cetera, all their gold loans and personal loans, et cetera, banks also try to do the same.
Understood. So just, just to follow up quickly, you know, since you're saying, you know, branch expansion, wherever it is, it is possible you'll be doing it up, but I think in North you'll be less penetrated compared to South, or is my understanding incorrect?
So the problem, you know, wherever there is a requirement in north also, we just open it, sir. That's all.
Oh, okay. Understood. Understood. Perfectly understood. And, yeah, I guess, yeah, that's, that's, that's it, that's it from my side. And just sorry, one last thing. When you are saying it is daily 30-day moving average and, you know, the, and then based on LTVs, 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-
Right.
in case of gold price moving down suddenly.
No, it will start moving because there's a, that is the RBI's instruction. It's not that we do it. It is the Reserve Bank of India's instruction that the Indian bullion rate, the Bombay bullion rate, average of 30 days should be taken, and that should be the LTV fixed every day. It's a moving average of 30 days.
Perfect. Perfect. Thanks. Thanks a lot, sir.
sir.
Perfect. That, that answers my question, sir. Thank you and all the best.
Thank you. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead.
Thank you, sir. Thank you for giving me the opportunity, and congrats on a good set of numbers. So on the slide 51, as we have seen the operational efficiency, in fact, this quarter was the 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 and inching up in Q1 itself. Is there any one-off in operating expenses, or how one should see this number going?
No, so, you know, that reduction is primarily because of, you know, the 11% growth on a QOQ basis in AUM. So, you know, otherwise, operational expenses continue to increase, you know, and absolute amount-wise.
Yeah, okay. Rent goes up, salary goes up, everything goes up only.
No, no. I was saying that if you have an 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?
Yeah. So, you know, so the operational numbers, you know, pure operational expenses, it is 3.12%, and the 1.12 is actually because of the impairment portion. So, you know, that increase is actually because of the impairment portion, which we explained it earlier. Because of the loan growth, you know, there is a, you know, around INR 100 crore of impact, and because of the increase in the NPA %, NPA, there is another increase of around INR 100 crore. So that is the reason why, you know, the total percentage which we have put is slightly higher.
Okay. So, secondly, in the RBI monetary policy, they have asked the, to be the monitoring of end user 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 a little bit of impact? How one should see that?
I have not gone through that requirement. I have to look at that and then come back to you.
... Okay, okay, okay. And lastly, on the 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 timeline or how it is going place?
So we don't have any definite timeline, et cetera. I think when the market is right and then 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 next month or, this month or next quarter, et cetera. Whenever things are, the approval comes and the market is right, we should go for the IPO.
So lastly, on the MFI, this Belstar Micro, how the industry, this quarter I know it has been hard, how you are seeing this industry, but any improvement in asset quality or growth, how one should see?
Well, I, I think, overall the industry is growing, you know, reasonably okay. They also have sometimes ups and downs. Elections come, some impact will be there for elections. So those are all geo-geographical factors which affect this. Otherwise, the microfinance industry is, an industry in itself, is a in itself. They have their own challenges, they have their own, advantages, et cetera. I think there is nothing much we can also do in that. It is a, we are also one among the industry, not the biggest player also, a reasonable player also.
Okay. Thank you. Thank you very much, sir. Best of luck.
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.
Okay. Thank you. We, it has always been a pleasure interacting with our investors and our, well-wishers. I'm sure, Muthoot has been, we on, on our part, assure you that we will do our best to do the best, in all, all the, all fields of the business, whether it is, quality of business, whether it is government and all, all sides, we will try, we will put in our best. We, we are thankful to your support for all these quarters, all these years, and, we, 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.