Ladies and gentlemen, good day and welcome to the Muthoot Finance Q1 FY2023 post results conference call hosted by Batlivala & Karani Securities India Private Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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 from Batlivala & Karani Securities India Private Limited. Thank you, and over to you, sir.
Hi, all. Welcome to Muthoot Finance 1Q post result conference call. We have with us today the entire management team, starting by George Alexander Muthoot, Alexander M. George M. Alexander, George M. George M. Jacob, Eapen Alexander, and the CFO Oommen Mammen. Without further ado, I would hand over the call to the MD, sir, for opening remarks, followed by which we will take up the Q&A session. Yeah. Over to you, sir.
Coming to the financial results of Muthoot Finance for this quarter, the consolidated assets under management stood at INR 63,444, which is up by 9% year-on-year, and the consolidated profit after tax stood at INR 825 crores for this quarter. Just as far as the standalone assets are concerned, it stood at INR 56,689. It is again up by 8% year-on-year, and the standalone profit after tax stood at INR 802 for this quarter. Few highlights which are there for this quarter, this quarter is that we have received RBI approval for opening of 150 new branches. Together with that, we have raised INR 643 crores through the 26th and 27th public issue of non-convertible debentures.
As far as the performance is concerned, although there is a dip in the loan assets under management during this quarter, it's a quarter dip of about just 2%, we have achieved a year-on-year growth of 9% in loan assets. The indicators suggest that there is recovery in the economic activity with strong urban demand and rural demand is still reviving. We are optimistic about steady demand conditions for gold loan, coupled with the untapped opportunity in the gold loan sector. There was an impact of the very low interest rate or teaser loans, which resulted in lower yields during this quarter. All the teaser loans have actually been migrated by 13th June, and we should see yields going up steadily from Q2 onwards.
The positive impact of the T-loans was that we were able to attract a set of new high-value customers into our gold loans. Efforts are on to retain these new customers even after discontinuing the T-loans. Growth has been lower by 10%, partly due to the branches focusing on migration of these T-loans, which were under very low rates to the higher rate scheme. It's only a temporary phenomenon, and our old customers will certainly come back to Muthoot for availing the loans, even though they are not T-loans, because of the quality of service we offer them. At the branch level also, efforts are initiated to win back our old customers.
Although our live customer base is about 50 lakhs, we have live active customers 50 lakhs. We have a customer base of more than 4x-5x this number who have earlier transacted with us. You'll be aware that we have not been opening new branches for the past 2 years, but recently, RBI has given us permission to open 150 branches. We have already opened a few branches in July itself and expect to complete it by October of this year. The additional business from these new branches will also help to increase the AUM in the coming quarters in this year. Overall, the yields have started improving and the AUM will also start moving upwards in the succeeding quarters.
The profit after tax for this quarter was INR 802 crore, which is about 71.8% less than what it was in the last quarter. Probably, when these teaser loans things are all behind us, now it is behind us, new loans are being generated at the better yielding. We should see in the next two, three quarters things becoming back to normal. Not normal, back to the old days, and we should be able to see higher yields and better performance. The same thing with regard to the AUM also. AUM on the gold loans will also start going up probably in the next two, three quarters. We should see it coming back with full vigor. The subsidiaries have the gold loan subsidiary home finance subsidiary had just started new lending only.
It will pick up in the months to come. The vehicle finance with Muthoot Money also is starting to pick up. The microfinance has actually received funding from the external new private equity investors and the assets have also grown considerably in the last quarter and last year also. It is showing good signs of recovery. The business in Sri Lanka is okay. There is no damage to any of the business there. The financial sector there is doing well. The branches are being opened. Business is transacting. It's only the country risk is there, but the country risk is not affecting the business there. Of course, the value of our investment has depreciated in the Sri Lankan rupee. The Muthoot Insurance Brokers are also running well.
It has reported a very good profit last year and also this quarter. With this, with an optimistic thought in mind, optimistic of the future, both in the profit side as well as the AUM side, I wish to conclude that we are optimistic of the future and we should be doing well. Thank you, and I think I will switch over now to questions or clarifications from the investors. Operator. Hello? Hello. Are you there?
Yeah, one second, sir.
Could you hear us?
Sir, I'm sorry. The operator is present. Ladies and gentlemen, we will now begin the question- and- answer session.
Thank you.
To ask a question, please enter star then one on your touchtone telephone. If your questions are answered, you may withdraw them from the question queue by entering star then two. Participants are requested to please use handsets while asking a question. We will wait for a moment while the question queue assembles. Our first question is from the line of Dhaval from DSP. Please go ahead.
Hi. Thanks for the opportunity, sir. My first question was relating to the teaser rate impact. Could you just quantify what you know, how much would be the impact that would get reversed from the second quarter? In a sense, sequentially how much yield improvement one should expect post the revision of the rate?
Okay. Thank you. The teaser rates we stopped in March itself, and we had been asking the branches and the customers to migrate to the higher rate, and we had given them two months' time for that. By 13th of June, all the teaser rates have been migrated to higher rates. The impact of these lower rates is what we saw in the last quarter that has affected the yields, but then we were able to get customers. As far as going forward in the next quarter is concerned, we should see the yields coming back to the better higher yields in this quarter, that is Q2 and Q3. By Q3, we should see the things fully on track.
Okay. The benefit or the normalization will happen in two parts, in Q2 and Q3. Is my understanding correct?
Yeah. See, the normalizations have happened. Now, the newer loans at newer rates should also start yielding income in the next two quarters.
Understood. Sir, the second question is relating to the cost of borrowing. On you know what is the expectation for the rest of the year in terms of borrowing and specifically in the next quarter? I mean, how should one think about cost of borrowing?
See, generally the borrowing cost has been going up across all the segments, you know, all the NCDs with a triple A rating or a double A + rating. Now, we have certain legacy borrowings. You know, some are at a lower cost and some are at higher cost. One such borrowing which was taken at a higher cost was the first tranche of external commercial borrowing, so which is going to get retired in October. You know, once we retire that, we should get some benefit. You know, we should see some increase in the borrowings also. Net-net, I think we should not expect a significantly higher increase in the overall cost of borrowing.
It's very difficult to quantify at this point of time because the last, you know, RBI has been increasing at a very frequent, you know.
Intervals.
Intervals. You know, it's very difficult to quantify how much increase can happen. You know, overall I think the borrowing cost should remain stable. That's what some new borrowing costs which may go up can be offset by some of the higher legacy borrowings going off the books.
Got it. Thank you, sir, and all the best.
Thank you.
Thank you very much. Our next question is from the line of Alpesh from IIFL Securities. Please go ahead.
Yeah. Hi. Thank you. Thank you for taking my question. Just taking forward to the Dhaval's question, sir. Just wanted to know what percentage of our portfolio was the teaser loan at the beginning of the quarter, and what were the yield differential between the normal portfolio and the teaser loan portfolio? What percentage of that teaser loan portfolio got shifted to the normal rate? That's the first question.
As N.B. sir explained, you know, see, as N.B. sir explained, you know, the teaser rate, no, we stopped in March, and, you know, in the first quarter the focus was on migrating these loans to higher rates. This exercise was completed as of June 13. All these loans are at a higher rate from July 1 onwards. We should see that, you know, the overall fees should improve from Q2 onwards.
Oommen Mammen, I understand that, but I'm just looking forward to some numbers. What was the percentage of the teaser loan portfolio at the end of March? And what was the yield differential between the normal portfolio and the teaser loan portfolio? This is just to get some sense about how the yields will move going forward.
Teaser loans were a sizable segment, you know, because we follow a rebate system. Some are at slightly higher rate, some are at the base rate. We can't quantify exactly what is the level of teaser rates.
Teaser rates started at 6.9%.
Yeah. Teaser loans starts at 6.99%. That is given as a rebate, you know, for prompt payment.
Okay. Let me just flip the question over here. What is the yield improvement do you see for the rest of FY2023 from the current levels based on your portfolio composition?
We try to, you know, maintain a spread of, you know, above 10% at all points of time. Now, this was a specific situation, and it was a strategic decision which was taken to launch the teaser rate. Now the rates have started improving, so which has also helped us in moving, you know, smoothly passing from the teaser rate to the higher rates. I think, you know, going forward, we should improve the spreads and the overall objective is to maintain a spread, you know, above 10% for the remaining part of the year.
Okay. Second question, sir. What's your view on the competition? Some of your large peers within the NBFC space are talking about competitive intensity coming down from banks as well and they have also withdrawn some of this teaser loan as you have done. For overall competitive intensity in the space. The related question to this, what percentage of our portfolio is related to the business purposes? For example, if the economy is recovering, do you see growth coming back strongly or it would be a gradual improvement in your view?
Yeah, I think the improvement will be gradual. The business has to pick up. It is not that it is going to come up all of a sudden in a jiffy. It'll come back. Competition is always there. Competition has always been there. It is now that many of the banks have just in the last two, three quarters focused more on this, and that is one of the reasons why this teaser rate, et cetera, had to come in. Now anyway, I think most of the NBFCs have stopped their teaser rates. I'm not sure about the banks, whether they have increased their rates or increased their focus. I'm not really sure. If you say that some people are saying that the banks have stepped off the accelerator, I am not aware. I'm not aware of that.
That's, uh, probably, uh, uh, that, that is-
That comment was related to the NBFC, not for the banks because the bank competitive intensity is similar. Okay. Is this the first tranche of branch approval from the RBI for FY 2023 or this is the overall branch approval for the entire year?
No, we ask for some branches and they give it. Once that is open, we ask for the next set. That's the usual practice. It is not that we go and ask for thousand branches and then tranche, et cetera. When we ask for some branches, they give the approval. Once it is open, we go again, go there and ask. That is the usual practice. It is only that in the last two years they did not give the approval. That's all.
Okay. Just the last one from my side to the CFO, sir. You mentioned spread, right? Not the net interest margin. We are talking about the-
Yeah. I mentioned the spread.
Okay.
It is a-
And that-
higher.
When you talk about 10% you try to achieve, that is for the entire year or for the quarters to come? Because there has been a different amount of spread compression for the first quarter. To make up for that, the second half of the spread should be higher than the 10%.
No, I was referring to the future quarters. Future quarters.
Okay. Great. Thanks and all the best, sir.
Thank you. Our next question is from the line of Ankit Patel from L&T Mutual Fund. Please go ahead.
Yeah. Good evening, sir. My question was regarding the
Sir, your voice is breaking up. Can you please adjust your connection?
Yeah. Please go to the next question. I'll come back in the queue. Thank you. Sorry.
Okay. Thank you. Our next question is from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, sir. Thanks for taking my question. Just couple of things. Firstly, were there any auctions this quarter? And if so, what was the quantum?
There was auctions which was around INR 1,334 crore.
Okay. Fair enough. Secondly, just wanted to understand this teaser loan thing better. If I took a loan in January, wouldn't it be for 12 months? Wouldn't it expire next year in January? Like, how is it run off by June?
See, the all loans are given for 12 months, but of course, we always have an option to increase the rates by informing the customer, giving him a month's notice, and that is what we have done.
Is that compliant in the sense that the customer has to agree to it, right? Why will the customer agree when he lost 7%?
It is in the contract, sir.
We can change the rates at our will.
Yeah. We have to inform the customer. That's it.
Sir, then, like, if we are given the 7% loans in January
Even without that, we actually were meeting the customers and actually they were coming forward to. Because everywhere the rates went up. They are also understanding the current scenario. We don't have any issue there.
Okay, when you say you migrated to higher lending rate loans, you went from 7% to 10%, which is the next bucket, is it?
No bucket like 10%, et cetera. It is a higher rate. That's all. Because it will be 10, 11, 12, 14, et cetera. It goes to the higher rate depending on various other parameters also.
Okay. Okay, sir. Just lastly, I noticed that you all have reduced liquidity after, you know, several quarters. Is this going to be like an ongoing exercise or is there some one-off and liquidity goes back to, you know, 15% of balance sheet?
Piran, that's because I know all of you are pestering me, you know. I'm maintaining a higher excess liquidity. I know we thought, no, we should reduce a little bit. We try it, you know. Hoping that you people will support us if there is a need.
Sure. Okay, then that's good. Okay, that's all from my end, sir. Thank you, sir.
Thank you. Our next question is from the line of Jignesh Desai. Please go ahead. Mr. Desai, your line has been unmuted. Can you please proceed with your question?
Hi. Good evening, sir. Thank you for this opportunity. I had a very simple question. You are mentioning in the opening remark that we have, you know, 5 million customers live with us and 4x of that, which is around 20 million customers which are, you know, dormant on our book, right? Do we have any plan for, you know, running some sort of analytics and, you know, any sort of cross-selling other high-yielding products to this set of customers from a future standpoint?
Okay. Yeah, that is the question. Fine. We have 5.4 million customers who have an account with us today. That is the people who are with us today. As you know, our loan period average is 3-4 months only. People take a loan, they come back after some time. That is why we say our customers 4x-5x these customers have already taken a loan from us. They are lying dormant. Some of them come next month, some of them come after six months, et cetera. Yes. We are actually doing a good service through our efforts are initiated from the branch level.
Actually, at the branch level to win back these customers, they can definitely be for gold loans, and we can also offer them the other products like a personal loan or a LAP or a home loan, et cetera, or all such loans we can offer them, or a vehicle loan we can offer them also, so that they become more sticky. That was the base on which we have done this. Of course, more than the analytics, the relationship at the branch is what we feel will bring back customers. Because we have the touch points, because we have the 5,000 branches, we are able to do that directly with the customers, and most of them can come to our branch and we can go and meet them also because of the branch network we have.
Of course, if we were a company with just a few branches and a lot of analytics and data and things only, probably it would have been different. Now that we have branches, we can always take advantage of our branches. That is what we would be doing in the coming days. We have actually the other departments to do this. The personal loan also has started, the vehicle, the home loans and the loan against property also is being started. We have more sticky customers, also the vehicle loans. As you said, yes, we will be diving deep into these customers, probably meeting many of them because our branch managers can go and meet them also. That is our plus point because, compared to others who don't have the branch network.
Okay. Thank you, sir. Wish you all the best.
Thank you. Our next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes. Thank you for taking my questions. Again, coming back to that question on auctions and when you shared the quantum of auctions, when I look at your 30+ DPD, which is your stage two and stage three, I mean, it typically used to be in that range of 1.5%-2% before I think it spiked to about 13%, sometime around the second quarter of the last fiscal year. Now we are again kind of seeing it moderate. It has been declining for the last 3 quarters and has now come below 3%. Fair to assume that going forward, I mean, now the trajectory in auctions will moderate over the remaining 3 quarters of this fiscal year?
Sir, please understand something. Auction is not a. We gave time to the customers even after the 12 months, even after the 30 days, 60 days, et cetera, were not coming, were not able to take. We have given sufficient time. Those are the things we auction. By auctioning actually we don't lose much. Probably a small part of the interest only we will lose, otherwise we'll get the principal plus maybe 90%-95% or 85% of the total interest we will receive. That's not an issue just because there is an auction.
Of course, as you said, when we had the 13% or 12% which you are saying as DPDs, et cetera, that was a time when we had given lot of money to customers during the COVID time, and some of the customers were unable to restart their business. Probably they tried their best for the next 12 months and still they were not able to get back the money which they expected to get. That is why it went in the auction. We auctioned it. It is behind us now. We auctioned, we realized money. Probably we did not lose any money. We got the interest, et cetera. That's all behind us. Now, going forward, such type of an issue we don't see. If another COVID or something comes and such things come, probably that is part of this business, sir.
Nothing unusual, part of this business. Now we don't have much of a DPD business, et cetera. Probably I can't say that after one year or two years it will not come again. That is only what I wanted to say. Looking at the present thing, I don't think in the next few quarters, et cetera, there'll be substantial auctions.
Okay. Essentially what I was trying to understand is while, I mean, it's known fact that you don't lose much in the auction, but it does lead to a runoff or a decline in your, so as to say loan book, whole loan book. What I was trying to get to is, sir, I mean, monthly disbursement run rate of about INR 127 billion during this quarter, which is the second-best monthly run rate ever for you.
Despite that, if there was a 2.4% sequential decline in gold loans, I mean, I would say what primarily attributable to either auctions or the second thing that I was trying to understand is while you have migrated customers from teaser rate gold loans to higher interest rates, has it kind of led to higher balance transfers to your competitors? Because while you're servicing your contract like you explained, but once you migrate customers from, let's say, 6.9%, it was a teaser rate gold loan to, let's say, 10.9%, 11.9%, of course there can be a balance transfer that these customers might do to your competitors. So did you see something like this? I mean, especially during the month of July.
No, sir. There is nothing like people coming to this and then going back to competitors, et cetera. Competitors also have only the same rates. Nobody has the lower rates than these. There is generally people who take back the gold in the normal course. People take back. It's not that all the releases and all the what came out they went off the books is because of teaser. Teaser loan is only a part of the book. The main book of the majority is not that everybody took a teaser rates or rather everybody. We didn't give teaser rates to everybody. That is done, migrated. Some of them, most of them, 90% of them, 95% of them migrated and came off. Some people took back their gold. That's
In the normal course also people take back the gold. Why should somebody. I told you the average tenure of a loan is only 3-4 months. Nobody keeps it for years together.
Sir, my last question was on-
Sorry to interrupt. May we request you to please return to the question queue? There are several participants waiting for their turn.
Sure. Thanks.
Thank you. Our next question is from the line of Amit Mantri from 2Point2 Capital. Please go ahead.
My question is on this INR 1,300 crores of auctions that were there. What was the interest loss? Can you give the amount?
Interest loss? I don't think there's any substantial prior to your interest loss. I don't think.
Mr. Mantri, do you have any more questions?
No. For example, last year, there were around INR 7,400 crore of auctions that happened, and we recovered around INR 6,500 crore against the INR 7,500 crore outstanding. There were around INR 900 crore of interest lost last year. In this quarter also there would have been maybe not principal loss, but there would have been some interest loss that would have happened as well, right?
I think the loss can only be the penal interest or the extra interest. That is the usual loss which happens. See, when it is coming into more than NPA accounts, the interest jumps or there is a penal interest of 2%, 3%, et cetera. That is what would have been the loss. For us, we know it, no? There's nothing lost like that. Those are not actually what should I say the normal interest.
Okay. How much was that penal interest loss that happened?
No. No, we don't have that figure right now. I know the auction realization was around INR 1,800 crore. In the auction, INR 1,300 crore, we recovered INR 1,800 crore.
The recovery was higher than the auction outstanding?
Sorry?
The recovery was higher than the total auction amount?
INR 1,374 is the loan amount and when we auction it, we recover the interest. Including, you know, the interest portion, we recovered INR 1,807 crores.
Okay, got it. Thank you. My last question in Belstar, now this, you would have shifted to the new RBI regulations. What has been the increase in the interest rates from the earlier regime to the new regime now?
I think they did it in two tranches. One interest increase was done in May and the second one is just now they have increased another 1.5%. Almost 3%, 300 basis points has been increased on fresh loans.
Okay, thank you very much.
Thank you. Our next question is from the line of Vaibhav Badjatya from Honesty and Integrity Investment. Please go ahead.
Yeah. Hi, sir. Thank you for giving the opportunity. I just have two questions. You know, in terms of acquiring customers and servicing customers, do you see any substantial difference in these costs, what banks have to incur and what NBFCs like you have to incur? Is there any advantage that banks enjoys there in terms of acquisition cost and servicing cost for the customer for similar ticket size of gold loans?
Actually we don't incur any interest cost or any acquisition cost at all. For us the customers are acquired through the branches, through our own channels so we don't have heavy. I know what you're referring to. We don't have such people to bring or book loans for us. That's a substantial cost which I think many of the banks may be incurring. I don't know how many of them, to what extent. If they are engaging an external agency, it's a very expensive cost. We don't have it, sir. That's your question.
Okay. I was just not talking about that is the acquisition cost, but in terms of servicing customer. I'm just trying to understand whether banks have any cost advantage apart from deposit, lower deposit cost that they have. Do the banks have any other advantage apart from that? Is what I'm trying to understand.
I don't know. I didn't exactly understand your question. Anyway, which is the acquisition cost means acquiring a customer cost is what I said. I didn't understand what you're saying about any other cost. What is that other cost?
Okay. I'll just move to the second question. Lastly, in terms of gearing, you know, we continue to kind of have reduction in our gearing now that it is reduced to 2.2 or from around 2.7 now to from 2.2-2.3. What's your thought on long-term gearing? I mean, do you want to increase it? And what is, because that also kind of impacts your return on equity to some extent. How do you want to use that lever to improve on or what's your thoughts on that?
The endeavor is to improve the gearing, of course, you know, it all depends on how much loan we are able to increase. Of course it takes time, but at the same time, you know, still in spite of kind of fall in profit this quarter still we have delivered a ROE of almost 18%. In normal times I think we are, you know, doing better than 20%.
Don't you want to kind of think about improving your dividend payout ratio and kind of arrest the falling spread in the meantime, you know, there's substantial growth pickup that happens?
This is a NBFC. We have to be quite well capitalized because there is nobody outside to help us or help an NBFC in times of a need. Having more capital is always advantageous to the overall stability of the NBFC. We always keep that in mind. Although we know that, the capital is not adequately being used but then for sustaining the company, for the long-term interest of the company, we are keeping this knowing fully well it is not being fully utilized. Anyway, as Oommen said, even if we take it out I don't know whether we can get a 17% ROE somewhere else.
Got it. Understand. That's it from my side. Thank you.
Thank you. Our next question is from the line of Prakhar Agarwal from Edelweiss Securities. Please go ahead.
Hi. Thank you so much for the opportunity. Just two questions. First, in terms of when you launched teaser loan, what was the reason or thought process behind launching the teaser loan and then probably focusing all the branches towards converting it to normal loan within a quarter or within a quarter? What was the thought process which decided these two actions?
It was a strategic call where many even competitors also started desperately offering very low teaser rates, etc. Being the market leader, actually we could not actually advertise that our rates were higher than all these things. We also, through some efforts we had to also see that we offered these low rates to them also. We did it for some time, but then the advantage we saw or the strategy we thought was to attract a new set of customers who hitherto would not have come to us because of the higher rates, etc. Some new customers came to us. We service them after a while when, after it is actually our smartness to see that we can migrate them into the higher rate.
We have been successful in that also. That came at a cost is what we see in the dip in growth. Finally, we were able to acquire some new set of customers. A good part of them are still continuing with us with a higher rate. Very few persons would have left. That's the advantage we had, but the thought process behind that.
Just a follow-up on this. Supposedly tomorrow the competition again introduces this sort of teaser loans, we probably will think again on those lines. Is that a fair assessment?
We will take a decision. We'll take a call at that stage, yeah, or follow a different strategy. We follow a different strategy.
Got it. Just one data point. I know that you guys are not sharing the AUM that is coming from teaser loan, but you made a statement that large part of customer base shifted from teaser loan to normal loan. What are the number of customers that availed the teaser loan, sir, and how many of them converted actually into a normal loan? That number of customers, that will be-
Not more than 5%-10% would have re-taken back their loan. All the others converted.
Got it. Thank you so much.
Thank you.
It has this rate somewhere else, sir. That is the problem. 6.9x plus is a rate which nobody is doing also.
Thank you, sir. Our next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead.
Thank you for the opportunity. I have two questions. How much incrementally does a new branch add to the AUM on annual basis? Now that you have 150 branch approvals in place from RBI after an uptick of two years, and you were focusing on existing branch productivity, does it change your overall AUM outlook for better? Because Q1 happened to be pretty sluggish in terms of build on AUM.
It takes about a year or two for a branch to mature. By two years, three years, a branch should reach about INR 46 crores, INR 70 crores. It takes some time for that. Initially, it will be slow, but after a while, when people come to know more about the branch, it will go up. Initially, yes, it will not, it will take some time to reach there. Finally, in two years plus, we should see the branches delivering at least INR 5 crores-INR 6 crores of portfolio. It's a minimum.
Okay. Your growth outlook, does it change for better?
Yeah, definitely. Actually, the opening also I said when new branches also come, we can get, we can go to new unbanked areas, maybe where we see lot of potential. That is where we'll be opening our branches. Certainly, it will help us to spread ourselves better and attract new and more customers also.
Sir, can you?
Yes.
Sir, can you quantify, please, what is the growth outlook you are looking at?
We have always been giving a guidance of 10% + or 10, 12, 15, depending on the business environment et cetera. We continue to do that 10%, 12%, 15%. If it is not very good, we at least at 10%. Otherwise, 12%-15%. That is what we have been always saying.
Sure. Thank you.
Thank you. Our next question is from the line of Bunty Chawla from IDBI. Please go ahead.
Yeah, sir. Thank you. Thank you for giving me the opportunity. My question has been answered. Just one data point, if you can share. Generally, in the annual report, we share interest accrued on the loans as of FY 2023. Can you share that data?
As on June?
Yeah, as on March as well as on June.
March, I think it is, INR 1,955 crores. June it is, INR 1,700 crores.
Okay. Thank you. That's all for now.
No problem at all.
Yeah. Yeah. Thank you, sir.
Thank you. Our next question is from the line of Alpesh from IIFL Securities. Please go ahead.
Thanks for the follow-up. Sir, just wanted to get some idea from you regarding the branch opening stuff, right? You were going to RBI in the past few years, but this is for the first time that you got the approval for 150 branches. What was the thought process, and what were the comments from the regulator regarding this?
See, actually, in the last two years, it's not fair to say that in the last two years we did not open any branch. We had good proposals and some of them got extended. It is only in the last four quarters, et cetera, that we did not open any branch. Prior to that, there were always some bits and pieces which was there, we opened. They just simply said, they just said, "Keep it on hold. Keep it on hold." That's all. There's nothing, no remarks, no adverse comments, et cetera. It is just that they kept it on hold. They kept it on hold. We can't say, we can't see anything more than that. Two months back, they just gave the permission for 150 branches.
Now since the competitive intensity being very high and large part of our branches have been matured, why not taking the approval of more than 150 branches where you see that it should be a very gradual process rather than, because we are sitting on the excess profitability, competitive intensity is increasing. What is the thought process of why not 300 or 400 branches and only 150 branches?
Sir, it is not the money which we have in our, as a, network which is prompting us to start branches. It is our feel in the market or feel in the field that there is business in some branches. We have asked for 150, we have got the 150. Once we open that 150, we will again ask. We will again find out how many branches we need to open. This is not dictated by the funds we have with us, et cetera. It's dictated by the potential we see in a branch. That is what dictates it. Today we have gone for the first one. Anyway, we can't open 150 branches just like, just in a jiffy.
It takes time to locate the premises, hire the people in place, open it, and then go for the next ones. Once we open this, we will again, of course, come, when we locate potential areas. Once we locate potential areas, we will again go forward for addition. As you said, yes, branch opening is also, important for this business. We will keep doing it also.
Sir, just a last question on the competitive intensity from the fintechs. Are you seeing any changes over the last 3, 4 months or it remains as aggressive as they were earlier?
Sir, I don't know. I mean, every quarter I've been talking about this fintech business, et cetera. We don't have any fintech business, et cetera, nor do we have any digital lending. What we do is only digital collection of money, proceeds. Either we give the proceeds of the loan digitally, or that means through a bank, et cetera, or collect the interest and proceeds through bank itself. That's what we do digitally. Digital lending, I don't know. Earlier everybody was talking about digital lending. Now it is seen as something very not very fancied by the regulators also. Anyway, we have not been doing that. We don't currently want to do that also. Ours is only loan against gold which we do.
Digital, if we say anything digital, it is just digital disbursement of money, digital collection of money. That's all.
No, sir, I'm not talking about you. I'm talking about the competition, someone like a Rupeek and other stores.
I know, sir. There are people who just I don't know exactly their business. They just look at some scores, et cetera, and give INR 10,000, INR 20,000 to people. That type of business we don't do. I think the regulator is not very comfortable on that, and I think many people have stopped that business also, it asking to be stopped. Finally, fintech, I don't know whether it will survive here. It touches the business. I don't know exactly. No, I am sure. I am exactly not sure about what these fintech people, what type of lending they do also.
Okay, great. Thanks. All the best.
Thank you very much. Our next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.
Sure. Hi, sir. Thank you for the opportunity. My question is regarding the growth versus margin play. Considering that it's a current competitive scenario persist for next couple of quarters, in that case, what would be your preference between growth and margin? How do we see both these different parameters coming up?
You said it right. One cannot be compromised over the other. We need to have both. We need to have reasonable yield. We need to have reasonable growth. It will be a balance of that, sir. Not that we will want to grow very aggressively and not have margins or the other way also, have only margins without growth. It will go hand in hand only. That is a balance which we have to take from our side. I think if you ask the policy in our mind, it will be a balanced growth, both able to a reasonable extent, yield to a reasonable extent.
Sure, sir. Thank you.
Thank you very much. Our next question is from the line of Hitesh Gulati from Haitong. Please go ahead.
Yeah, thank you for giving me the opportunity. Sir, what are the new number of customers you have added in this quarter, and what are the customers that have been written off?
We have added 3 lakh, 3.14 lakh customers during the quarter, new customers during the quarter.
Okay. Is there written-off customer?
What customer?
Sir, written off customers, sir.
Written off? There's no written off, sir. It is just customers taking, closing their loan and going. Their account closed. That is all.
Sir, this ROE that you have seen of 18%, can we assume this is the bottom that we are seeing? Because this is not, I mean, we have already generally reported much higher ROE. What is your view on that?
Sir, we would want it to be the bottom. We would like to see it go up only, just like you.
Okay. Thank you, sir. That's it from me.
Thank you. Our next question is from the line of Varun from Kotak Securities. Please go ahead. Varun, your line has been unmuted. If you have a question, please go ahead now.
Yeah. Hi, this is Nitin here. Am I audible?
Yes, you are, sir.
Yeah, this is Nitin here. Just one question. This is on the expenses line item. I was wondering what is the reason for such high growth in operating expenses, both on the employee side and more importantly on the other non-employee expense?
Actually employee expenses have come down.
Must be the annual increase.
Yeah.
If there is an increase, it should be on the annual increase. Just a second.
Yeah. Employee expenses have actually come down from last quarter, INR 313 crores to INR 282 crores.
That's right.
Other expenses have increased to INR 247 crore from INR 206 crore. Primarily other expenses have gone up because of increase in advertisement. You can see that in our presentation. You know, that is about INR 10 crore. CSR expense has increased compared to last quarter from, I think, INR 26 crore to about, you know, INR 55 crore or something. That is a major increase during the quarter.
Sure. Got it. Thank you.
Thank you. Our next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes, sir. Thank you for allowing me to follow. Sir, just one question. Has your advertisement and publicity expenses gone up sequentially during the quarter?
Yes, by about INR 10 crores. I think last quarter it was INR 32 crores. This quarter it is INR 46 crores or something, INR 52 crores.
Right. What was the reason? I mean, earlier, I mean, because there was a very high competitive intensity, I mean, lot of players talked about the need for higher advertising and publicity. What is kind of feeding into this INR 10 crore kind of a sequential increase? Any seasonality here or just in the normal course?
No, it's normal only because we have to advertise that Muthoot is still there in the business, in the market. That is also necessary. Even if there's no competition, people need advertising. That's what our marketing and advertising department also tells us, and that is what we also do. We need to be in the public mindset.
Last quarter you had shared one data point, I mean, for your AUM, gold loan AUM, what proportion of your AUM will be below INR 1 lakh and what proportion will be above INR 3 lakh? Can you please share that with us?
Above INR 1 lakh, above INR 3 lakh is 23%. Below INR 1 lakh is 42%.
Thank you so much, sir. This is very useful and all the very best.
Thank you very much. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for closing comments. Please go ahead.
Thank you all for supporting us till now, for actually participating in this conference call. One assurance from our side, we will leave no stone unturned to give better performance year or quarter- on- quarter, both in the yield as well as in the AUM. Thank you from me, Managing Director, George Alexander. We have the other directors also here, and also Mr. Oommen K. Mammen, our CFO, and our new AD, Mr. K. R. Bijimon, and team also here. Thank you all, and thank you for your patient hearing. Goodbye.
Thank you very much, sir.
Happy Independence Day. 75 years.
Thanks a lot.
Thank you, Sanket. Thank you for arranging the call.
Okay sir.
Thank you very much, members of the management team. Ladies and gentlemen, on behalf of Batlivala & Karani Securities, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.