Muthoot Finance Ltd
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Muthoot Finance Ltd
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Thanks, Ayesha. Good evening to all of you. Today, we have with us from Muthoot Finance, Mr. George Alexander Muthoot, MD and CEO; Mr. Oommen Mammen, CFO; and Mr. Eapen Muthoot, Executive Director. We are sitting at a very interesting situation where gold prices are at all-time high. Demand is also very strong, and RBI has increased the LTV only for banks to 90%. So without any further discussion on this, I will hand over to Mr. George sir to take us through the quarter and what the environment looks like. Over to you, sir.
Thank you. Good evening. This is George Alexander Muthoot, Managing Director. I have with me our CFO, Mr. Oommen K. Mammen; our Chief General Manager, Mr. K. R. Bijimon; the Executive Directors, George M. Jacob, and also Eapen Alexander here in Cochin. Some of the other directors probably would be joining from their own locations.So good evening, once again. This morning, we had our Board of Directors meeting, and we are pleased to present the results for the quarter 1. The consolidated AUM has increased by 16% year-on-year to INR 46,501 crores, and the consolidated PAT has increased by 52% year-on-year to INR 858 crores.As far as the stand-alone is concerned, it has increased from -- by 15% and stands at INR 41,296 crores, and the stand-alone profit has increased by 59% and stands at INR 841 crores for this quarter. The consolidated assets under management, I said we have increased by 16%. And our branch network continues to be the same, 5,330. And Muthoot Finance has contributed 40,000 of -- Muthoot Finance's gross loan assets under management is INR 40,906 crores and the subsidiaries constituted INR 5,595 crores. As far as the profit of the company is concerned, Muthoot Finance contributed INR 834 crores and the subsidiaries INR 23 crores. The Muthoot Finance, we plan -- we have given a growth indication of 15% for this current year. Although the first month was not very good, rather the last 10 days of March and also the April month we were closed -- most of the branches were closed. But from 1st of May or rather end of April onwards, our branches got opened as of April last day. So now in the last 2 months -- 3 months, all our branches are functioning. All our staff are coming to the office and things are back to normal. So we have given a 15% growth projections for the 2020-'21. So we are sure that we will be able to achieve that 15% growth for the whole year. And as far as the target is concerned, because of this COVID issue, we combined the target of -- the internal target of growth. That's not for this, but the internal growth target, et cetera, we combined the Q1 and Q2 and made the H1 target, and we feel as it stands now, because we see very good growth in the AUM in the gold loan business, we will be achieving the H1 target also by the end of next month. So as far as Muthoot Finance is concerned, the growth is on target. The profits and incomes and collections, et cetera, are normal. Since we don't have any EMI problem, we have not had any issues with the people asking for moratorium. So that is behind us now. But as far as the moratorium is concerned, what we have done for our customers is those loans which have crossed the 12 months and which should have actually become an NPA -- would have become an NPA, et cetera, we have not been doing any auctions. But having said that, there is no point in doing any auctions now because all these loans, which you see as an NPA today, which is beyond 12 months or 15 -- 12 months plus 90 days, if you auction the gold today, we will get much more than what is realizable, what is due to us, and we'll have to do a refund, so in that case, we also felt that we did not do -- even without the moratorium, we did not do an auction now because having to auction the gold and then returning money to the borrower looks very painful. The first question he would ask is, why did you then auction my gold? So as long as we are in the money, we don't -- we have not done the auctioning. And that is -- that takes care of the moratorium issues also. So that's as far as the gold loan business is concerned.As far as the subsidiaries are concerned, where we have around 12% of our portfolio in the 3 main subsidiaries of the microfinance, the home finance, and the vehicle finance. As far as vehicle finance and home finance are concerned, we are going slow, rather our disbursals are almost near 0. Only collections have been happening in these -- home finance. Probably, we will wait for the end of the moratorium and see how customers are behaving after the moratorium in September, October and then start -- slowly restart the lending. So as far as today, all the staff available with us are into the collections, they have -- doing -- actually, in this period also, they are doing reasonably good collections in both these subsidiaries.As far as the microfinance is concerned, they have already started slowly lending. And probably in the next 2, 3 months, they will be back to normal and from what reports I hear from not only our microfinance, from the microfinance industry as a whole, is that next 2 months, 3 months, disbursements will also -- will come back to normal. So these are the subsidiaries. So hopefully, by the end of this year, our gold loan growth should be very good, and that will bring down the proportion of the other loans. So other business, which is today 12%, I think may come down to about 10% or 9% by the end of the year because gold loan will be growing well. The others may have very, very slow growth, et cetera. So that is the growth prospects. Otherwise, we have been able to do well in the digital space. We have been able to convert quite a lot of our customers into online transactions.Earlier before the lockdown and the pandemic, we had about 19-plus -- 19% of our customers transacting online. Today, it is more than 40%. We have actually doubled our customers who are transacting online, either for payment of an interest or payment of some part of the principle or taking more money on their loans. Please remember that our customers are very small value customers, average of INR 50,000 only, there are INR 10,000 customers, INR 15,000 customers. But our staff, during the COVID period, were able to actually, sitting in their home, et cetera, they were able to link the bank accounts to the company's bank account and the loan accounts so that it made transactions easier. So we were able to link about 10 lakh accounts during this period, which was one of the reasons we were able to increase our online business.Today, even other than that we have -- so today, for a customer to take a gold loan, he has to come to the branch. Once he has to come to the branch with the gold, and for taking it back also, he has to come to the branch. All other things, actually he can do online. But again taking the business more to the customers' house or customers' place, we have started a new vertical, which is loan at home. So if a customer wants our people to go and meet them in their house or business place, generally it is the house, and collect their gold, et cetera, we will go there, our people will go, our appraisal staff, our managers, et cetera, will go to the house, collect the gold, check everything and bring it in sealed package to the branch. And before leaving the branch -- before leaving the house, they would be able to transfer the money also to the customer. That has now started. It is having good traction. Of course, that we will be doing only for bigger customers. Probably, at present, we look at it only for customers with more than 2 lakh, it should be -- because it's a little expensive also from our side. But still, it is a good service we are doing for the customers. So we have also launched another product, which is the Gold UNLOCKER. That means the gold which you have kept locked in your locker, somewhere in your house or in some banks, we are actually encouraging customers to bring it to us, we will valuate for them. We will test it for them, and we will keep it in our locker, which is also insured. The money is -- the gold which they keep in the house or bank locker is not insured, here it is insured, we can keep it, and they can take loans, avail loans whenever they want on this. These were the 2 new initiatives, which we did. And the third -- the last one, which we did recently, in the last couple of days, was giving a free insurance cover to all the gold loans -- new gold loan customers. So that we are giving free, probably charging a INR 1 nominal money, but then it is giving free. We give a -- up to 1 lakh cover for COVID people who get -- who are affected by COVID. We have tied up with insurance companies for that. It is started from Monday, and it is definitely being well appreciated by all our customers, and we feel that during this pandemic, it is one of the best things we could have done for our customers. I'm sure this will go a long way in endearing the customers to Muthoot as a longtime customer and we are giving back to them something which we are also doing. Also -- on our CSR side also, we have continued to do quite a lot of CSR work for the pandemic -- COVID-affected people, not only near our branches, elsewhere also, we are doing quite a lot of things and we feel happy and, of course, satisfied that we are able to do these things. So these are the things which have happened. And finally, we feel that our growth, et cetera, should be on track, and next 3 quarters should be fine for us. And our business and our branches are normal. Our staff are also coming -- able to come to the branch and do their business and work and serve the customers. So with that, I would like to conclude, and I think we should be open for question and answers. Thank you.
[Operator Instructions] The first question is from the line of Prakash Goel from ICICI Prudential Asset Management.
Congratulations on a good set of numbers. I have 3 questions. First, what is the impact of competition on large ticket loan, primarily because of the change in regulation on the bank side? Will it impact the margin or volume growth in future?
Okay. Please ask your full questions, all the 3.
This is my first question, sir. Then I'll ask -- the other 2 questions are not related with this.
Okay. Please ask, I'll answer together.
Okay. Fine. Sir, second question is that in the -- you have a nice presentation, which discussed about the administrative expenses coming down. How much of the -- say, for example, there's a good saving of rent of about INR 98 crores. How much of those savings are sustainable? And third question is with respect to dividend payout policy, there's a continuous drop in the dividend payout ratio. How should we look at that number, given you are already underlevered, which is a good thing from a balance sheet perspective, but we want to have clarity with respect to your dividend policy. So these are the 3 questions, which I wanted to ask.
Okay. Thank you. Competition. See, competition has always been there for Muthoot and for the gold loan companies. Competition hurts some, especially when there is a good movement in the price and there is a lot of talk about gold and gold prices. This also happened in 2008 and '09 -- '08, '09, '10, when the gold prices went up and the gold loan companies were doing well. Quite a lot of NBFCs, banks, et cetera, came for competition. But they were not focused or serious players at that time. After a year, around -- after a year, most of them got back to their old business, and the focused players continued. Now also, we see the same thing because gold prices have gone up. All other forms of lending, et cetera, are in difficulty. And today, banks are also definitely in the field for gold loans. But even otherwise, probably, we cannot compete with the bank on the rate. But certainly, we can compete with anybody else on the goodwill, trust and also the speed of service, which is very critical for this, and that has been our mainstay for all these days. So banks giving -- having permission to lend up to 90%, et cetera, probably, they may lend, they may not lend. It's their call decision. For us, we are comfortable with the 75%. But then we are only -- this has pained that we were treated differently than a bank by the regulator. Other than that, we wouldn't want a 90% LTV because as far as our risk appetite is concerned, I don't think 90% is advisable. But then even today, our average AUM (sic) [ LTV ] is only 54%. The AUM (sic) [ LTV ] on the book today related to the price today, the average LTV is only -- not AUM, sorry, LTV is only 54%. So we still have big margins because any price which goes up can fall down also, which is only which goes up can come down. So since it is at a high price today, we have sufficient margin to take care of a receivable or a good fall in the price. So as far as the competition is concerned, we are not very much concerned with that. About the...
Yes, about the rent, because in the first quarter there was lockdown, et cetera, so we did some negotiations with the landlords and there is some reduction in the rent which was paid for the quarter. But from a long-term perspective, I don't think that is sustainable. On the dividend, if you look at -- the company has consistently been paying dividend since 2011 when we became listed and every year, the absolute amount has consistently increased, and dividend per share has consistently increased. But of course, as a percentage of the profit, it is only -- it is around 20 percentage. The Board has felt that this is a fair payout at this point of time, nothing prevents us from considering a higher payout in the future, but that is up to the Board to take a decision.
[Operator Instructions] The next question is from the line of Anand Bhavnani from Unifi Capital.
I have 2 questions. My first question is on the level of liquidity. Now the press release mentions that we had excess liquidity of around INR 8,500 crores at the end of June. Can you share the number for the quarter as a whole, the average number, because this is last date, I just wanted to understand what's the average liquidity for the quarter? And what was the average number for corresponding quarter last year? So I just want to assess how the COVID situation led to higher liquidity than in the past. So that is the first question. And second is, if you could give me the breakup of our microfinance book into JLG and at self-help group. And whether you are seeing different levels of collection, efficiency and stress in the JLG versus SHG side of the microfinance model?
Okay. On the liquidity front, definitely compared to last year, same quarter, we are at least 3 or 4x in a better position in terms of liquidity because the way the things were happening, we also felt the need to have -- maintain more higher level of liquidity. So compared to last year, certainly, the liquidity levels are higher.
Sir, by how much? Would -- can you quantify a bit like, you said 3 or 4. So generally the liquidity levels is INR 2,000 crores, INR 3,000 crores, and currently we are like INR 8,500, crores. Is that...
Yes. So it was somewhere around that level in the last year. But now it is around INR 8,000 crores, we have maintained as of June. During the quarter, average -- there were outflows and inflows. So if you look at our presentation, we have been able to raise funding through NCDs as well as bank loans. So there has been a corresponding inflow as well as outflow in terms of fund raise.
Regarding the microfinance?
Regarding the microfinance, we have more than 60% of the portfolio is SHG and the remaining is JLG also. Actually, we have renamed it as Pragathi because we took a year back itself, some of the features of this SHG has been taken and that has been merged into the JLG scheme. So today, our JLG is called Pragathi scheme which has got most of the features of SHG. So that's why -- but we don't see a big difference in collections actually. It's more or less same.
What would be the collection efficiency as of June end?
We have 70 -- in the initial month, it was lower, but I think the last month, July, it was 70%.
Consistently, the collections in subsidiaries, especially on Belstar. Consistently, the collections have increased. April, it was quite low, but May and June and even in July, it has consistently been increasing.
July, it was 76%.
76% in July. Did I hear you correct?
Yes. Yes.
The next question is from the line of Chirag Sureka from DSP Mutual Fund.
Sir, I have 2 questions. This is [ Vivek ] here. My first question is, you had gone up on the strategy of diversification into other businesses because it was -- it was seen that the growth in gold loan cannot be so sustainable. But now the other businesses are slowing down, so let's say, leave this year, in another 2, 3 years, how do you expect the company be? That's question number one. Question number two is, you said something interesting about the value of gold, which you have with the customer is so high that even if they're not paid after 12 months, you've not auctioned the goal. Now when would it be a decision to auction or not auction? Is it based on your relationship with the underlying customers? Or is it dependent on gold price? Sir, for example, let's say, the gold price has come down by 20%, would you change your behavior? That's the second question, sir.
Okay. Thank you. But I need to correct you when saying that we have never felt that gold loan business is not sustainable or growable. We are always bullish on gold loan. We always felt that the gold loan business will grow. Why we took up diversification is mainly because these are our set of customers. Our set of customers need home loan, our set of customers need a personal loan, our set of customers need a vehicle loan, that is so that we can retain the customers with us is that reason. It's not that because there was no growth prospects in gold loan. So our -- today, when the going is not that good for non-gold loan business, we will certainly not aggressively grow this portfolio. As and when things -- economy picks up and things move because it is -- nobody feels that home loans or vehicle loans or personal loans are dead and gone. No, after some time when the economy picks up, it will come up. That day, we will grow them. Now it is the time for -- not a time to do that. That is why. So corrections, number one is that we have never felt -- never said or felt that gold loan business is not sustainable, and that is why we are going into other things. Number two, about the auction, today, we are in the money. So we always keep a track on what is the gold price and what is the realizable value. At any point we feel that the realizable value is getting closer to the due, we can either force the customers to take it or persuade him to take it or auction it. But then having said that, we are now actually persuading all the customers to come and pay up the interest and renew the loan, and so that they don't lose the gold. So this is a practice, which is actually very well perfected by Muthoot. And we have -- I think we are the masters in that. We have never had any issues on that side. So you can be confident of that. Thank you.
So fair enough, sir. So I stand corrected, and thank you for that. So you're saying there's no target, you look at each business in terms of the prospects and growth accordingly. That's what you're saying, sir, right?
Yes, right.
The next question is from the line of Gaurav Kochar from Mirae Asset.
A few questions from my side. Firstly, what has been the renewal rate in 1Q? And has it fallen versus, say, last 12 months?
So we have encouraged top-ups in a large way in the first quarter because, especially when there are strains in terms of funding, and there is an opportunity for customers who need more money, we have encouraged top-ups, there were special schemes for giving more top-ups. So top-ups have been at a higher, but that doesn't mean that all loans got rolled over. It's just that those who need more money, we have given more money through a raise.As MD mentioned earlier, the average LTV on the portfolio is only about 54 percentage. So there are so many customers who have not taken the full loan amount. There is always a mix of top-up customers and fresh customers in our portfolio.
Right. Sure. So there is no drop in renewal rate, is that a right assumption? Hello?
Yes, right.
Yes. Okay. Sure. And coming to the decline in the tonnage, I mean the gold value -- the gold tonnage that we have has declined by around 6 percentage points. So how do you explain that?
See, there is nothing to be explained. When the people need the same amount of money for new loans, they need to bring only lesser quantity of gold. That's what is happening.
It's a function of gold price.
Function of the gold price.
If the gold price...
Gold value today is much higher than what it was 3 months back.
Right. So we have not seen cases of customer pledging more gold given that the gold prices have gone up?
Yes, because he need not. Today, if he wants INR 50,000, earlier he needs to bring 50 grams, today, he needs to bring only 40 grams.
But suppose if the customer needs INR l lakh, certainly, he will bring it. So we don't track that part. We don't need to actually track how much quantity of gold someone is giving because everything is centralized.
Sure. Sure. And on the margins, we saw roughly 160 bps sort of spread decline. How much would you attribute that to the yields that have fallen? And any explanation to that?
See, as we said in the previous calls, there have been a higher level of collection because of the overdue interest in the previous quarters. I think 22% is a very reasonable rate which we should look at on a regular basis going forward.
Okay. Okay. Sir, you -- this sort of NIM would sustain? You don't see any sort of NIM improving from here?
At least for the time being, we should see a stable level of NIM. And we are generating about 6 to 8 percentage of return on asset, which is fairly a good return for the shareholders.
Sure. Sure. And sir, last question is on OpEx. In this quarter, the OpEx in absolute terms is around INR 374 crores. Roughly, the run rate has been around INR 500 crores. So going forward, given that business normalization has kind of happened, what kind of run rate shall we see on a quarterly basis?
See, OpEx, which has come down last quarter was because of some places we got reduction in the rent from the landlords, but that is only for a month or so. After that, now everything is back to normal. The number of staff is the same. We have the same number of staff. Everybody is coming to office. The premises are working. So...
Advertisement expenses.
Advertisement expenses. Everything has now started. So what you saw earlier as a reduction is not sustainable. It will be the average expenditure, OpEx every quarter going forward.
Sure. So these would be back to pre-COVID level?
Yes, yes, yes. Correct, correct. Pre-COVID crisis.
The next question is from the line of Deepak Gupta from Reliance Nippon Life Insurance.
Sir, I just wanted to understand this correctly. As of March end, you had 176 tonnes of gold kept at security, which has come down to 165 tonnes. So what do you attribute this fall in gold kept as security for given the fact that your disbursements -- you have disbursed loans in the quarter and your loan book is flattish on a quarter-on-quarter basis?
See, we just answered the question 1 minute back. It is the new customers having a fixed -- they come to the branch, thinking that I want INR 10,000 or INR 50,000. For that, earlier, he had to give 6 bangles. Today, he need to give only 5 bangles. So that is why the tonnage is lesser. So the new loans -- because the price is moving up, that's what.
I understand that, sir, but...
See, every month, we are having about INR 6,000 crores to INR 7,000 crores of repayments. And similar amount gets dispersed also. So the repayments happens with a higher gold weight. Fresh disbursement happens with a lower quantity of gold. That is purely a function of gold price movement and at what rate we are lending.
Understand, sir. And so basically, the fresh disbursement that has happened, that would have been largely to existing customers who have collateral with the company. And therefore, he does not need to give further incremental gold.
And also, typically, a gold loan customer -- very seldom does the gold loan customer comes with a set of jewelry and asks how much can I get. When they walk into our branch, they have an amount in mind. And with that amount in mind, they will accordingly give how much ever jewelry is required. So 9 out of 10 cases, the customer already has an amount in mind when they come to our branch. So very rarely, do you find a customer coming and asking what is the maximum I can get for this piece of jewelry.
Understand. Understand. And sir, my second question is on borrowing mix. I see that you have increased your commercial paper exposure, your overall borrowing mix. So it would be to take advantage of competitive rates in the last quarter. Do you see CP sustaining at these levels in terms of your total percentage of borrowings? Or you think CP can grow as a percentage of borrowings?
So our commercial paper rating has remained at INR 5,000 crores for the last 3 or 4 years. We have not changed -- so since 2018, we have not changed it. So the last change happened from INR 4,000 crores to INR 5,000 crores happened in November 2018. After that we have not changed the proportion. So there's no change in the level of borrowing through commercial paper.
The next question is from the line of Nischint Chawathe from Kotak Securities.
Hello? Am I audible?
Yes.
Yes, Nischint.
Just trying to understand what was the reason for higher cost of borrowings on a quarter-on-quarter basis?
It's not material, but one could be the impact -- the full impact of the ECB cost, which we did on March 1. So March 1, a 1-month cost only would have got added. For this quarter, the full impact would have come. So that is one. And it could be because of the averaging impact in the last quarter or in the current quarter.
But on the ForEx side, now how are you accounting the MTM impact? I believe you are hedged, but how are you really accounting for it? Is there any MTM hit on the ForEx side, which is getting reflected over here?
So MTM hit is taken to other comprehensive income. It doesn't have a direct hit on the profits for the period.
Sure, sure. And what explains the decline in derivative financial instruments? I think on a quarter-on-quarter basis, it has gone down from INR 3,500 crores to around INR 1,500-odd crores.
So that is purely because of the movement in the exchange rates. That's what I said, those fair value changes because of the foreign exchange fluctuations, it impacts the OCA as well as the balance sheet items of derivative instruments.
And your funding cost on the ForEx side is higher than the weighted average funding cost? I mean, the reason why it's impacting your funding cost.
Yes. As of now, the ECB borrowing cost is higher than the current borrowing cost.
And that would be by how much?
See the first ECB transaction we did, the overall cost came in double digits. Second, we were able to -- the overall cost was in single digits. And at that point of time, it was -- the cost structure was slightly better than the rupee cost, but now the domestic rates have significantly come down. So currently, the USD borrowing cost is higher than what we are borrowing in the domestic INR rates.
The next question is from the line of Alpesh Mehta from Motilal Oswal Services.
Am I audible?
Yes. You can go ahead.
Sir, first question is, just hypothetically, if the gold prices were to correct by 15%, 20% from the current levels, would you be changing your AUM guidance or the LTV will take care of the AUM growth since the tonnage growth is not happening and the new customer addition seems to be very low? So what's your sense on that? And the second, 2 data keeping questions. What would be our average duration of the portfolio? And what percentage of our customers would be the repeat customers? Hello?
Sorry, could you repeat your first question, please?
The first question is, hypothetically, if the gold prices were to correct by 15%, 20% from the current levels, would you be changing your full year AUM guidance or your LTV will take care of the AUM guidance that you have given, that's the first part? And what kind of a customer addition growth that you are seeing from the current levels? And other 2 are the data keeping questions. What's the average duration of the portfolio? And what percentage of our customers are the repeat customers?
So whenever we give a guidance, we don't consider the gold price movement. So how it happens is, if the gold price increases, the customer may pledge a lower quantity of gold. If the gold price falls, the customer will be pledging more quantity of gold. Of course, there will be a certain portion of the customer base who takes advantage of higher gold prices. Since -- considering all the 3 factors, we generally don't depend too much on the gold price factor. We generally give a guidance without taking into consideration a stable price scenario. So this 15% growth is something which we have guided based on stable gold prices. This is something which we want to achieve. Of course, when the gold prices improves, certainly, it is an extra boost on the entire business. But sometimes, it impacts only the gold tonnage. And the second on the...
Okay. Sir, just related to this. So if the gold prices were to correct by 15%, 20%, so would you be confident that the LTV will take care of your AUM growth guidance?
See, based on the experience, that's what we have seen. It's -- see, if you look at, as we said earlier also, the average LTV is only 54 percentage. So all customers are not depending on the higher gold prices to borrow. So some customers are going willing to pledge more gold. Some customers are willing to want to have -- borrow more. So it's always a mix. So we cannot go deeper into it and give a projection. So we assume that 15% growth is we want to achieve on a stable gold price scenario. And in terms of the duration, the average duration, again, it remains 3 to 5 months only. You can see that from the disbursement numbers, which we have provided in our presentation. Third point on the repeat customers, certainly, the repeat customers are more. We should assume that 80% or more of repeat customers. But that doesn't mean that the same customer is rolling over the loan every 3 months. Some -- new customers -- existing customers who was not having a loan earlier will come and take a fresh loan. By that time, the existing customers will exit. So if you look at the current -- the last quarter, we almost -- though there was a decline in the portfolio, we have seen about 4 percentage of customers -- the customer base, they are actually new customers who have taken a loan from us, even though there is a dip in gold loan portfolio by about INR 300 crores.
Please also understand that repeat customers doesn't mean renewal customers. Repeat customers means somebody has taken a loan, he has taken back the loan after 1 month. After 3 months, he wants a loan again, he comes again. That is what we call repeat customer because there is no entry load or exit load. So people take loan in there because the interest is also on the actual number of days. So whenever he has the money, he takes it back. And he knows if I want it after 2 months, in 10 minutes time, I'll get the loan. That's it. That is what we call as a repeat customer. Customer coming again and again for loan, not renewal customers. I just wanted to correct that.
Perfect. And what percentage of our customers would be at around 75% LTV -- the peak LTV right now?
No. First of all, LTV is moving. To us, as on a day, maybe 10% or 20% of the customers only take the maximum LTV because we have different schemes. We give lower -- recharge lower interest for customers who take lower LTV. For somebody who is taking a bigger loan, we have a lower interest rate. All those things are there. Permutations and combinations are there. As Mr. Oommen earlier said, it's not that everybody takes the maximum value. If you really want maximum value, they'll go to the jeweler and sell the gold. That is what -- who is very much interested in the maximum value, he will go and take 100% from the jeweler instead of taking it as a loan. Why he is taking the loan is because he feels sure that he will get some money from somewhere and be able to take back the gold and give it to the family.
The next question is from the line of Prateek Agrawal from ASK Investments.
Sir, I have a simple question. Just like to be a bit humorous here. NBFCs can do personal loans and make some losses. They can do vehicle loans and even small homes and make some losses. Why is it -- as a part of business, of course, why are regulators so protective towards gold companies? Why is the decision on LTV not left to the judgment of the gold companies?
Actually, we have not understood your question, sir.
Sir, what I was asking is, if NBFCs are allowed to do personal loans, vehicle loans, small home loans in every category where there is an ability or a propensity to have losses, even microfinance. Why are they so protective towards gold companies that they have to dictate our LTV and ensure that 0 losses are made? It should be left to the judgment of the gold companies.
Yes, yes. I agree, sir. I think you should also come with us once to meet the RBI. You should come with us. We also sometimes say, why only we should be restricted. Our company can give 100%. Personal loan, he can give what he likes. I agree with you, but I don't think regulators understand that. Anyway, it's only on the lighter side, sir.
Yes, yes, that was on the lighter side, but then you represented for equal treatment versus banks. So what happened to that, any update?
We're dealing with our Reserve Bank also. They don't take quick decisions. They take very considerate decisions with very -- with -- after long thought. So we will wait for some more time for them to come back with a response. It's not that you send a letter today, tomorrow, unless it is a rejection, it will take some more time to consider. If it is a rejection, it will come in 1 hours' time.
The next question is from the line of Kunal Shah from ICICI Securities.
So firstly, in terms of -- are we seeing banks reacting to this rising LTV in any of the locations or any particular banks, regional banks reacting to this, in the early phase? Definitely, it's quite early, but have we seen any kind of reaction from the banks or they are still holding back?
If I was the Chairman of some of these banks, I wouldn't do 90%.
Okay. Okay. So it's not really happening is what you are indicating. And secondly, in terms of delays, obviously, you highlighted that we are well covered in terms of the collateral, but what could be like in terms of our proportion of customers, how much are not actually repaying? We are seeing the trends in terms of the disbursements and the collections given on average monthly basis, there is some decline. So is it like fair to assume that whatever is the difference, those are the customers who are not repaying as of now?
So the question can be answered by saying how much of gold had to be auctioned. So last year, we would have lend about INR 100,000 crores of gold, and we would have auctioned about INR 500 crores of gold. So that is 0.5% is what we had to auction. We would have lend INR 100,000 crores of gold and finally had to auction only INR 500 crores of gold. So that is the number of people who are abandoning their gold.
[Operator Instructions] The next question is from the line of Vaibhav Badjatya from H&I Investment.
I had a question from a longer-term perspective. We have seen that in microfinance sector, there is a gap of, I think, around 10% over the cost of fund in terms of lending rate. So do you think any such move in gold -- in other words, in my assessment, if such kind of things comes in our sector as well with gold loan, it would be beneficial to us. So why don't we just go and pitch to the regulator to do such kind of move as well in gold loans particularly?
We would request the participants to please stay connected as the line for the management got disconnected. [Technical Difficulty] Thank you for patiently waiting. We have the management reconnected. Vaibhav, could you please repeat your question?
Sure. So yes, so I was asking a question from a longer-term perspective that I think if there is a cap on the lending rate, which is like within the same model is what is there in the microfinance business, why don't we go and pitch to the RBI to have a similar kind of a cap in gold loan business as well? Do you think it would be beneficial for us? Because in my assessment, I think it could be beneficial for us.
Anyway, we'll discuss it internally and probably take a decision on that whether to go to RBI and talk about that gap of interest, et cetera. I think we'd like to take an internal decision on that side. We heard you.
Do you think it would be beneficial for Muthoot?
I don't think we need to comment on that now. These are all speculative questions.
The next question is from the line of SivaKumar K. from Unifi Capital.
Sir, can you give us the incremental LTV at which you are issuing loans currently? Basically, I want to know whether you have tweaked the LTV in response to the RBI regulation.
So we are strictly following the RBI norms of 75 percentage of the last 30 days average gold price. That is the maximum LTV we can give. And all AGLOC members are following that practice.
AGLOC is association of gold loan companies. All members follow that. We have a daily rate and nobody gives any rate more than that fixed rate of 75%.
Okay. Sir, second question, just wanted to understand with respect to our subsidiaries, we have made a provision of INR 32 crores in Q1. Do you anticipate similar kind of provision for rest of the quarters in this year? If you can just comment a bit on provisions in each of the subsidiaries and what's the outlook for rest of the quarters from a provision perspective?
I think the provisions in the subsidiaries were mainly because of the moratorium given. When you give a moratorium, we have to do a provision. Actually, we were a little more conservative and gave more provisions for those loans which were given moratorium in the vehicle finance and microfinance and home finance. That is why it's a provision. So whether it will be there in the next quarter, we don't expect a big increase, but then we'd like to see how things are coming up by end of next month, end of September, if things require a provision. But as it looks, I don't think we may need additional provision. But if that is required, we'll do it.
Sure. And sir, with respect to our microfinance business, can you comment a bit on how our book is doing as compared to broadly the industry? Is our book doing better -- and if you can -- or worse or same as industry, can you comment a bit and quantify a bit?
We have an AUM of INR 2,600 crores. In terms of collections, there were some presentations by the department. They say that we are at the better end of the collections. As I said, last month, the collections were -- July was 76 percentage for our company. But at the same time, there were some companies at 40 percentage also. And the average is also something like 60 percentage. So we are at the better end of the spectrum as far as collections is concerned.
And sir, in terms of disbursement, have we started disbursement in all the microfinance branches or we have been like selective, if you can comment how the disbursement plan is going forth?
Selectively, we have started disbursement. We have disbursed INR 100 crores or so in the month of July. And that's, again, good customers. We are looking at our own existing customers, and looking at their repayment track record, including whether they have availed moratorium, that's the factor we are looking, and we have slowly started disbursing, and careful.
And sir, disbursement -- disbursal in CV and home finance, any guidance on when would you start disbursing again? Or have you already started? Can you comment a bit?
Actually, I had commented on that in my opening remarks that in the last quarter we have not done disbursals in housing finance as well as the CV sector. And we'll wait for the September moratorium to actually have its play, have its impact and play after August and September. We will see how the customers are reacting to this after the moratorium is over. And generally go forward with the new lending -- selectively new lending, both in home finance and the vehicle finance.
[Operator Instructions] The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.
Congrats on the quarter. I just have one question. So I understand that our gold tonnage has gone down because prices are up, but the number of accounts has also gone down Q-o-Q. So is this a phenomenon you're seeing where they're taking back the gold and selling it off rather than keeping the loan account continuing? Or does this concern you?
So as I said in one of the previous questions, see, during the quarter, though there is a dip of about INR 300 crores in gold loan AUM, we actually saw about 5% of the customer base, new set of customers have come in. Even if you look at the last year also, though we achieved a 22 percentage, we actually saw about close to about 27% of our customers' loan accounts were new customers. So because it's a pure, pure retail, there have been a lot of cases where customers have closed their loan and has not come back again because he doesn't have a need. But another set of new customers is coming and taking a loan. That's the way we should see it.
Okay. Because, I mean, on a net basis, your accounts are down 5%. On a gross basis, they are down 5 plus 4, 9%. So in one quarter, 9% of your customers are retreating, I don't know, is this normal generally? Is this business as usual in just in terms of attrition rate of customers? I understand the disbursements are muted, and that's why AUM is down.
So the loan account numbers keeps varying. We always look at whether we are able to generate a new customer base. So the new customer base has certainly been increasing. Last year, also, we saw that the new customer base is increasing. Because it's a pure retail, some customers may need a higher level of loan, some customers may not need a loan. So that keeps changing.
To answer your point, nothing unusual.
[Operator Instructions] The next question is from the line of Anand Laddha from HDFC Mutual Fund.
Hello?
Yes. We can hear you.
Sir, if you can give some color on the different schemes you have in the gold loan like what -- how many different schemes you have for the customers, at least each LTV, how much is rate of interest charged?
So Anand, the details are there in the website. But to give a broad view, there are so many schemes, which we have created over in the last couple of years. There will always be some portfolio outstanding in each and every scheme. But a basic principle is that, we have a scheme for 75% at X rate. Sometimes, we have a 75 percentage at Y rate also, depending upon the geography. So the number of schemes keeps varying according to geographies and according to the LTV also.
We actually need to give choice to the customer. Some customers are interest sensitive. Some customers want more money. Some customers need only very little money. Some customers need large amount. So in every case, there is some difference. If it's a large loan means, we can give -- we can offer a lower rate of interest. If it's a smaller ticket size, we give you higher loan. If the LTV is higher, we give a different rate. So we have at least probably 10, 12 schemes are always there.
Okay. Okay. Sir, what is the lowest rate of interest that you give to the customer? And what is the highest rate?
Our rate -- the lowest rate should be 11.9%, that's INR 0.99. And the highest rate should be in the region of 23%.
Okay. And sir, what proportion of our customer will be at low -- loan book will be at lowest interest rate?
It depends also, but our average yield comes to 21%. So I think that should answer that question.
[Operator Instructions] The next question is from the line of Vikash Agarwalla from Bank of America Merrill Lynch.
Just a couple of quick questions from my side. First, you had mentioned earlier in the call that there were some customers who had not paid for 12 months and instead of auctioning, given the LTV, it's -- you have not auctioned the gold. Is there -- can I check 2 things related to that. One, is there any increase in amount disbursed to them just given the headroom in the gold collaterals they have? And what is the proportion of customers, either as a number of customers or number of -- proportion of AUM that you have? So that's my first question. And second is, if you can also share some color on the debt maturities or liquidity requirement for the remaining 9 months of FY '21?
See -- thank you. The customers who are more than 12 months, I think we call it the NPA, it's about 2.5% or about INR 1,000 crores. All those customers today, they are in the money actually. They are in the money means, if we auction that gold. But then we are giving a little more time to the customer. Suppose he is able to salvage his ornaments, we would rather give it back to him. So that is our policy there, and then we have not had any loss, et cetera, because of that. And that has been one of the reasons why customers still keep coming back to us that we don't mind having INR 1,000 crores as NPA and not recognizing the interest also in our books and still maintain a healthy profit. So we can afford to maintain that NPA, and we are further customer-friendly in not auctioning the gold very quickly. That has been our principle and we have not -- we've only gained by that customer comfort. And also, we have not lost anything financially because of that. The second question about borrowing, I think CFO can answer.
So see, our primary major short-term borrowing is on account of commercial paper. So as I said, INR 5,000 crores is the CP limit. So every month, about INR 1,500 crores will be maturing. That is a major repayment for the next 3 months. But definitely, we are hopeful about placing fresh CPs and raise fresh money because in the past so many months we have done that exercise. And clearly, the market is confident about our credit. Second is on the borrowings from banks, we have working capital limits from banks. Mostly, it is for a short duration, though it is a regular limit.So these loans are taken for 3 months, 6 months. So it keeps maturing, but we are able to draw it again after a cooling period of 1 or 2 days. So that forms another thing. Other than that, we don't have any major repayment at least in the next 6 months.
[Operator Instructions] The next question is from the line of Utsav Gogirwar from Investec.
Just a couple of questions from my side. Can you just help me with the collection appreciation number for the other 2 segments that is home finance and vehicle finance for the month of June and July? And second question is with respect to the legal and professional charges, which are doubled on a Y-o-Y basis. So I just want to understand why it has increased because we have not done any auctions or anything. So I just need color on that part?
So what was the second question?
Legal and professional charges actually more than doubled on a Y-o-Y basis, if you look at expenses?
Periodically, we engage various persons for various services. So that could be maybe a one-off item -- that could be for one of the professional charges we have in case because at the recent points in time for fundraising, et cetera, we might use some consultants, et cetera. So probably it is because of that. The other one was on the collection efficiency in vehicle finance and home finance. See, as we said earlier, there has been a significant improvement in terms of the collections month-on-month. So in fact, for housing finance, it has almost reached 87% of their scheduled collections in the month of July. So for vehicle finance also, it has almost reached 75% of their scheduled collections in July. So every month, we are seeing improvement. So we are hopeful about that things will stabilize in the coming months.
[Operator Instructions] The next question is from the line of Sakshi Goenka from Alchemy Capital.
I just had one question. So your presentation says that you're sitting on excess provisions of INR 295 crores, sir. Sir, what do these provisions are linked to given that we have such a big asset collateral? I just wanted to understand what are these excess provisions for?
So at the time of transition from the old I-GAAP to Ind AS, there is a provision which was excess -- the provisions which were carried as a part of Ind AS was lower than what was already there in the balance sheet. So the difference in provision, we carried in the balance sheet as excess provision, primarily for the reason that we were not clear in terms of what RBI is going to stipulate in terms of the provision requirement. Some clarifications have come in the month of March. But since we are expecting some more changes in future. Probably, we should keep those provisions we made in the past as excess provisions in the balance sheet. Right now, we are not planning to use that. We intend to keep it as a excess provision.
Sir, despite you have such a -- your collateral being so strong, you still think that there is no question of writing back these provisions, you will keep it in your books?
See these are provisions that we paid in the past. So we felt that let's not bring it back to P&L, so currently we are retaining in the balance sheet that excess provision. Probably in case RBI -- RBI is still insisting on comparing the old RBI -- provisions as per RBI norms as well as under the Ind AS and the differential, if there is any shortfall, it is carved out of the reserves. So tomorrow if RBI is going to make any changes, we can certainly use this excess portion for utilizing that.
[Operator Instructions] The next question is from the line of Arvind Chetty from Max Life Insurance.
So basis the demand that we are seeing, do you plan to open any new branches during the year?
I think we had answered. Somebody has asked and we had answered. We plan to open about 250 branches in the next 12 months.
The next question is from the line of Abhiram Iyer from Deutsche CIB Center.
First of all, congratulations for the results. My query is regarding the cash balance that you carry. It's obviously 3 to 4x the amount of cash that you carried in the previous year. So is there any plan for early retirement of debt or early retirement of bonds using this capital -- using this cash?
So this excess cash is for shoring up the liquidity buffer we've required for our growth and especially, in future, RBI is going to bring the LCR coverage ratio. So necessarily, our balance sheet has to keep this kind of a liquidity going forward. It is a part of our -- going to be a part of our business model going forward.
The next question is from the line of Shubhranshu Mishra from BOB Capital Markets.
Two questions. The first one is it seems very counterintuitive in this credit crunch environment still repeat customers are 80% and new customers are only around 20%. So if you can expand on that. That's the first level question. Of course, you've answered the excess cash, but we are roughly sitting at around 15% of the balance sheet. And now the bond markets are thawing. And almost every kind of -- every rating of NBFC is getting money because of the liquidity at PSU banks. So why is it that you are sitting at such high levels of cash liquidity? We can reduce it to around 10%, maybe 8% to 10%. So if you could expand on both these questions.
See, I don't know how many NBFCs are looking at growing their balance sheet. We have already guided the market for about 15% growth. So certainly, we require funds to grow our balance sheet. In addition to that, we have to ensure that there is adequate liquidity to take care of any sudden uncertain events that might crop up in future, maybe because of the COVID or because of any other kind of liquidity scenarios. So as I said earlier, it is going to be part of our business model to have excess liquidity in our balance sheet.
So excess means, how much of excess? I mean, why is it 15, why not 10? That's my question.
No, it has to keep -- it will certainly keep varying. We don't want to say it as a policy. But certainly, we'll have to maintain about 10% of the balance sheet minimum as a liquid cash.
[Operator Instructions] Due to time constraints, that was the last question. I would now like to hand the conference over to the management for closing comments.
Managing Director, George Alexander here. We as a team here in the head office in Cochin, very happy to have had this interaction today. Happy that all of you were able to understand more of the company through our interaction. Definitely, thanking all of you for the great support you have given till now and requesting your continued support in future also. Wish you all the best. And since we are in from Kerala, wish you all a happy Onam. Onam is coming next week. So wish you a happy Onam.