Muthoot Finance Ltd
NSE:MUTHOOTFIN
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Muthoot Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Muthoot Finance Q1 FY '23 Post Results Conference Call hosted by Batlivala & Karani Securities India Private Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sanket Chheda from Batlivala and 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; George M. Alexander; George M. George; George M. Jacob; Eapen Alexander and the CFO, Oommen Mammen.
So 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. Over to you, sir.
Coming to the financial results of Muthoot Finance for this quarter. The consolidated assets under management stood at INR 63,440 crores, which is up by 9% year-on-year, and the consolidated profit after tax stood at INR 825 crores for this quarter. As far as the stand-alone assets are concerned, it stood at INR 56,689, which is again up by 8% year-on-year, and the stand-alone profit after tax stood at INR 802 crores for this quarter.
A few highlights which you could -- which are there for this quarter is that we have received RBI approval for opening of 150 new branches. Together with that, we have raised INR 643 crores to the 26th and 27th public issue of nonconvertible 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 asset. The indicators suggest that there is recovery in the economic activity to start urban demand and rural demand is still reviving.
We are optimistic about steady demand conditions for gold loan compelled with the untapped opportunity in the gold loan sector. The impact -- there was an impact of the very low interest rate or teaser loan, which resulted in a lower yields during this quarter. All the teaser loans have been actually migrated by 30 June, and we should see yields going up steadily from Q2 onwards.
The positive impact of the teaser rate was that we were able to attract a set new high-value customers into our gold loans. Now efforts on to retain these new customers even after discontinuing the teaser. Growth has been lower [indiscernible] partly due to the branches focusing on migration of these teaser loans, which were under very low rates to the higher-risk scheme. It's only a temporary phenomenon and our own customers certainly come back to -- for availing the loans even though they are not teaser loans because the quality of service we offer them.
At the branch level also, the efforts are initiated to win back our old customers. Although our live customer base is about 50 lakhs, we have a customer -- live active customers 50 lakhs, we have a customer base of more than 4 to 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 yield has started improving and the AUM will also start moving upwards in the succeeding quarters. The profit after tax for this quarter was INR 802 crores, which is about 17 -- 18% less than what it was in the last quarter. Probably when these teaser rates, things are all behind us -- now it is behind us, new loans are being generated at the better yielding. So we should see in the next 2, 3 quarters, things becoming back to a 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. The AUM on the goals are -- have also -- will also start going up. Probably in the next 2, 3 quarters we should see it coming back with full vigor. The subsidiaries have -- the gold loan subsidy -- the home finance subsidiary has just started new lending only. It will take up -- it will pick up in the days to come.
The vehicle finance, Muthoot Money, also is starting to pick up. The micro finance 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 reopened. Business is transacted. Only the currency risk of the -- the currency risk is there, but the currency risk has not affected the business there. Of course, the value of our investment [indiscernible] depreciation Sri Lankan rupee. The micro -- the Muthoot Insurance brokerage 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 [indiscernible] and we should be doing well. Thank you. And I think I will switch over now to questions or clarifications from the investor.
[Operator Instructions] Our first question is from the line of Dhaval from DSP.
My first question was relating to the teaser rate impact. Could you just quantify what -- how much would be the impact that would get reversed from the second quarter? So 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 have been asking the branches and the customers to migrate to the higher rate, and we had given them 2 months' time for that. And by 30th of June, all the teaser rates have been migrated to higher rates. So 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. But as far as ongoing 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. Sir, the benefit or the normalization will happen in 2 parts, in Q2 and Q3. Is the understanding correct?
Yes. See, the normalization is to happen. Now the newer loans -- newer rates should also start yielding income in the next 2 quarters.
Understood. And sir, the second question is relating to the cost of borrowing. So on -- what is the expectation for the rest of the year in terms of borrowing and specifically in next quarter? I mean, how should one think about cost of borrowing?
See, generally, the borrowing cost has been going up for across all the segments, all the indices with AAA rating or a AA+ rating. Now we have certain legacy borrowings. Some are at lower cost and some are at higher costs. One such borrowing, which has taken at a higher cost, was the first tranche of external commercial borrowing, which is going to get retired in October. So once we retire that, we should get some benefit. And we should see some increase in the borrowings also. So net-net, I think we should not expect a significantly higher increase in the overall cost of borrowing, but it's very difficult to quantify at this point of time because the last -- RBI has been increasing at frequent intervals. So it's very difficult to quantify how much increase can happen, but...
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.
Our next question is from the line of Alpesh from IIFL Securities.
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 differential between the normal portfolio and the teaser loan portfolio? And what percentage of that teaser loan portfolio got shifted to the normal rate? That's the first question.
So, see, as MD sir explained, the teaser rate, we stopped in March. And in the first quarter, the focus was on migrating these loans to higher rates. This exercise was completed as of June 30. So all these loans are at a higher rate from July 1st onwards. So we should see that the overall yield should improve from Q2 onwards.
Sir, I understand that. But I'm just looking forward to some numbers. So 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.
So teaser loans are a sizable segment because some are at -- because we follow a rebate system, some are at slightly higher rate, some are at the base rate. So we can't quantify exactly what is the level of teaser rates so...
Teaser rates started at 6.9%.
Yes. Teaser loans start 6.99 percentage. That is given as the rebate for prompt payment.
Okay. So let me just flip the question over here. What is the yield improvement do you see for the rest of FY '23 from the current levels based on your portfolio composition?
So we try to maintain a spread of above 10% at all points of time. Now this was a specific situation, 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 smoothly passing some of the teaser rate to the higher rates. So I think going forward, we should improve the spreads. And the overall objective is to make a spread 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 these teaser loan as you have done. So overall competitive intensity in this space. And the related question to this, what percentage of our portfolio is related to the business for -- if the economy is recovering, do you see growth coming back strongly or it would be a gradual improvement in your space?
Yes. I think the improvement will be gradual. The business has to pick up. It's not that it is going to come out all of a sudden in a jiffy. It will come back. Competition is always there. Competition has always been there. It's just now that many of the banks have just had -- just in the last 2, 3 quarters, focused more on this, and that is one of the reasons why these teaser rates, 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. But if you say that some people are saying that the banks have stepped off the accelerator, I'm not aware of that. That's probably...
That comment was related to the NBFC, not for the banks. Because the bank competitive intensity is still there. And is this the first tranche of the -- is this the first tranche of branch approval from the RBI for FY '23? Or this is the overall branch approval for the entirety?
No. We asked for some branches and they give it. And once that is open, we ask for the next set. That's the usual practice. It is not that we go and ask for 1,000 branches and then tranche, et cetera. When we ask for some branches, they will give the approval. Then once it is open, we will again go there and ask. That is the usual practice. But only that in the last 2 years, they did not give the approval. That's all.
Okay. And just the last one from my side, to the CFO, sir, you mentioned spread, right, not the net interest margin. So we are talking about these interest rates...
Yes, I mentioned the spread.
Okay. And when you talked about 10% you tried to achieve, that is for the entire year or for the quarters to come? Because there has been a decent amount of spread compression for the first quarter. So to make up for that, the second half of the tranche should be higher than the...
No, I was running to the future quarters.
Future quarters.
Out next question is from the line of Ankit Patel from L&T Mutual Fund.
Yes, please go to the next question. I'll come back in the queue. Thanks.
Our next question is from the line of Piran Engineer from CLSA.
Just a couple of things. Firstly, were there any auctions this quarter? And if so, what was the quantum?
So there was auction, which was around INR [ 1,324 ] crores.
Okay. Fair enough. And secondly, just wanted to understand this teaser loan being 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 runoff by June?
See, all loans are given for 12 months, but of course, we always have an option to increase the rates by informing the customer, giving a month's notice. And that is what we have done.
But -- is that compliant in the sense that the customer has to agree to it, right? And why will the customer agree when we launch to 7%?
It was in the contract, sir.
Okay. So we can change the rate?
Yes. But already informed the customers, that's it.
So sir, like if we had given the 7% loan in this January...
Without that -- we actually were meeting the customers. They are coming forward too, because everywhere the rates went up so they are also understanding of the reason. We don't have any issue there.
Okay. Okay. And when you say you migrated to higher -- rate loans went from 7% to 10%, which is the next bucket, is it?
There's no bucket like 10%, et cetera. It is a higher rate, that's all. It could be 10, 11, 12, 14, et cetera. So it goes to the higher rate, depending on various other parameters also.
Okay. Okay. Fair. And lastly, I noticed that you all have reduced liquidity after several quarters, is this going to be like an ongoing exercise or is there some one-off and liquidity goes back to 15% of balance sheet?
Piran, that's because all of you are pressuring me, I'm maintaining a higher excess liquidity. So we thought we should reduce a little bit. So we try it.
Hoping that you people will support us if there is a niche.
Our next question is from the line of [ Gina ] Desai.
So I had a very simple question. So you were mentioning in the opening remarks that we have 5 million customers live with us. And across 4x of that, which is 20 million customers, which are not dormant on our book, right? Do we have any plan for running some sort of analytics and any sort of crossing on other products on these -- on high-yielding products on this set of comments from a future standpoint.
Okay. Yes, that is the question. Fine. We have 5.4 million customers, who have account with us today. That is the people who are with account today. But actually now, our loan period average is about 3 to 4 months only. So people take a loan, they come back after some time. That is why we say [indiscernible] our customers, 4 to 5x these customers have already taken a loan from us. They are like dormant, some of them come next month, some of them come after 6 months, et cetera.
Yes, we have actually -- we are actually doing a good service through our efforts that we 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 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. So because we have the touch points, we have the 5000 branches, we are able to do that directly with the customers and most of them can come to our branch or we can meet them also because of the branch network we have.
Of course, if we were a company with just a few branches, a lot of analytics and data and things only probably it would have been different. But now that we have branch, we can always make advantage of our branch. That is what we should -- we would be doing in the coming days. We have -- actually bring the other departments to do this. The personal loan also started, the vehicle -- the home loans and the loan against property also is being started.
So we have more sticky customers. Also the vehicle loans. So as you said, yes, we will be diving deep into these customers, probably meeting many of them because our branch manager can go and meet them also. That is our plus point because -- compared to others who don't have the branch network.
Our next question is from the line of Abhijit Tibrewal from Motilal Oswal.
Sir, again, coming back to that question on auctions and while you share the quantum of auctions, when I look at [ it was 30 plus DPD ], which is your Stage 2 and Stage 3. I mean, you typically used to be in that range of 1.5% to 2% before I think it spiked to about 13%, sometime around the second quarter of the last fiscal year. Now we're again kind of seeing it moderate, it has been declining for the last 3 quarters and has now come below 3%. So fair to assume that going forward, I mean now the trajectory in auctions will moderate over the remaining 3 quarters of this fiscal year?
Please understand something. Auction is not [indiscernible] we give time to the customers even after the 12 months, even after the 30 days, 60 days, et cetera, who are not coming, who are not able to take. We will give sufficient time. Those are the things we auction. By auctioning actually, we don't lose much, probably a smaller part of the interest only will be reduced. Otherwise, we'll get the principal -- maybe 90%, 95% or 85% of the total interest we will receive. So that's not an issue just because there is an option. .
But of course, as you said, what -- when we had the 13% or 12% which you are saying, as DPDs, et cetera, that was the time when we had given a 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 has been auctioned. We auctioned it -- just behind us now. We auctioned, we realized money, probably we do not lose any money. We got the interest rate, et cetera, that's all behind us.
Now going forward, such type of an issue, we don't see. But if another COVID or something comes and such things come, probably that is part of this business then. Nothing unusual part of this business. So now we don't have much DPD business, et cetera. Probably I'm not -- I can't say that after 1 year or 2 years, this is not coming in. That is only what I wanted to say. But looking at the percent thing, I don't think in the next few quarters, et cetera, there will be substantial auctions.
Sir, essentially, what I was trying to understand is why -- it's known fact that you don't lose much in auction, but it does lead to a runoff or a decline in your -- so as you say, loan book -- gold loan book. So what are we trying to get to it, 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. And 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 once you -- while you're sharing 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 at which customers might go 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 competitor, et cetera, which was also -- have only the same rates. So nobody has the lower rates than this. But then -- there is generally people would take that aboard in the normal course. It is not that all the releases and all the -- what came out of the -- whether the books is because of teaser. Teaser is only a part of the book. The main book of the majorities [indiscernible] not that everybody took a teaser rate or rather everybody. We didn't give teaser rates to everybody. But then like that is done, migrated, some of them -- most of the -- 90% of the -- 95% migrated and came off. Some people took out their gold. That -- and in the normal course also, people take back the gold. Why should somebody -- I told you the average tenure of loan is only 3 to 4 months. Nobody keeps it for years together.
[Operator Instructions] Our next question is from the line of Amit Mantri from 2point2 Capital.
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 interest loss.
Mr. Mantri , do you have any more questions?
No, sir, for example, last year, there were around INR 7,400 crores of auctions that happened, and we recovered around INR 6,500 crores against the INR 7,500 crores outstanding. So there were around INR 900 crores of interest lost last year. So in this quarter also, there would have been not -- 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 premium interest loss -- extra interest that is the usual loss, which happens. See, when it is coming into more than NPA accounts, the interest jumps or there's a premium interest of 2% rate, et cetera. That is what would have been the loss. For us, we know it, there's nothing -- not like that. Those are not actually -- what should I say? The normal interest.
Okay. So how much was that premium interest loss that will happen?
No. So we don't have that figure right now. So the auction realization was around INR 1,800 crores. The auction, INR 1,374 crores, we recovered INR 1,800 crores.
So the recovery was higher than the auction outstanding?
Sorry?
So the recovery was higher than total auction amount?
So the INR 1,374 is the loan amount. And when we auctioned it, we recovered the interest. So including in the interest portion, we recovered INR 1,807 crores.
Okay. Got it. And last question, in Belstar, now this -- you would have shifted to the new RBI regulations. So what has been the increase in the interest rates from the earlier regime to the new regime now?
I think they did it in 2 tranches. One [indiscernible] done in May. And the second one is just now, they have increased another 1.5 percentage, almost 3 percentage -- 300 basis points have been increased on fresh loans.
Our next question is from the line of Vaibhav Badjatya from Honesty and Integrity.
I have 2 questions. 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 costs for the customer for similar ticket size of gold loans?
Actually, we don't discuss any interest cost -- any acquisition cost at all. For us, the customers are acquired through the branches through overall channels. So we don't have [indiscernible] have such people to bring or book loans for us. So 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 doing -- engaging in external agency, it's an very expensive cost. We don't have it, sir. If that's your question.
Okay. Sir, I was not talking about that is the acquisition cost. But in terms of servicing customer. I mean, I'm just trying to understand whether banks have any cost advantage apart from deposits -- lower deposit cost that they have do. Do the banks have any other advantage apart from that, is what I'm trying to understand.
I don't know. I don't know what -- I don't exactly understand your question. Anyway, what is the acquisition cost -- this acquiring customer cost is what I said. I don't -- I do not understand what you're saying about any other cost.
Okay. I'll just move to the second question. Sir, lastly, in terms of gearing, we continue to kind of have a reduction in our gearing note which has reduced to 2.2% from around [ 2.7% to 2.3% ]. So 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. So do you want to use that lever to improve on or what's your thoughts on that?
So for -- the endeavor is to improve the gearing, of course. It all depends on how much loan we are able to increase. Of course, it takes time, but at the same time, still in spite of kind of a profit this quarter, still we have delivered ROE of almost 18 percentage. So in normal times, I think we are doing better than 20 percentage.
But don't you want to kind of think about improving your dividend payout ratio and kind of rest falling in spite till the time there is a substantial growth pick up that happens?
This is a NBFC. We have to quite well capitalized because there is nobody outside to help us or help an NBFC in times of a need, so having more capital is always advantageous to the overall stability of the NBFC. So we always keep that in mind. And 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 growing fully well. It's not being fully utilized. Anyway, as Oommen said, even if we take it out, I don't know whether we can get the 17% ROE somewhere else.
Our next question is from the line of Prakhar Agarwal from Edelweiss Securities.
Just 2 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 streaming to normal loan within the quarter. What is your thought process decided these 2 actions.
It's a strategic call where many -- even competitors also started desperately offering very low teaser rates, et cetera. So being the market leader, actually, we could not -- we also -- we could not actually advertise that our rates are higher than all these things. So we also -- through some efforts, we had to also see that we offered these low rates to them also. But then 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, it would not have come to us because of the higher rates, et cetera.
So some new customers came to us. We service them; after a while, when -- it is actually our smartness to see that we can migrate them into the higher rate. So we are successful in that also. But that came at a cost. That came at a cost is what we see in the [indiscernible]. But then 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 process would have left. That's the advantage we have. But that's the thought process behind that.
Just a follow-up on this. Supposedly tomorrow, the competition, again, introduces the sort of teaser loans, we probably will think again on those lines. Is that a fair assessment?
We'll take a call at that stage.
For a different strategy.
Yes, for a different strategy.
Got it. Just one data point, I know that you guys are not sharing the AUM that is coming from teaser loans, that you made a statement that large quarter customer base shifted from teaser loan to normal loan. So what are the number of customers that availed the teaser loans and how many of them converted actually into a normal loan. That number of customers...
Not more than 5% to 10% would have been taken back their loan. All the others converted. That is the problem. [ 6.9 exercise ] is the rate which nobody is going to offer.
Our Next question is from the line of Shweta Daptardar from Elara Capital.
Sir, I have 2 questions. How much incrementally does a new branch add to the AUM on an annual basis? And now that you have 150 branch approvals from RBI [indiscernible] of 2 years, and we were focusing on existing branch productivity. So does it change your overall AUM outlook for better, because Q1 happened to be pretty sluggish in terms of gold loan AUM?
So it takes about a year or 2 for a branch to mature. By 2 years, 3 years, a branch should reach about R 6 crores, INR 7 crores. It takes some time for them. Initially, it will be slow, but after a while when people come to know more about the branch, it will go up. So Initially, yes, we're not -- it will take some time to reach there, but then finally, 2 years plus, we should see the branches delivering at least INR 5 crores, INR 6 crores of portfolio. It's a minimum.
Okay. And sir, your growth outlook, does it change for better?
Yes, definitely. Actually, at the opening also, I said when new branches also come, we can get -- we can go to new unbanked areas. Maybe where we see a lot of potential, that is where we will be opening our branches. Certainly, it will help us to spread ourselves better and attract new and more customers also.
Sir, can you quantify, please, what is the growth outlook you are looking at?
We had always been giving a guidance of 10% plus or 10%, 12%, 15% depending on the business environment, et cetera. We continue to do this 10%, 12%, 15%. If it is not very good, at least 10%; otherwise, 12% to 15%. That is what we have been looking.
Our next question is from the line of Bunty Chawla from IDBI.
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 '23. So can you share that data?
As on June?
Yes, as on March, as well as on June?
March, I think, it is INR 1,955 crores. And June, it is INR 1,700 crores.
Our next question is from the line of Alpesh from IIFL Securities.
Sir, just wanted to get some idea from regarding the branch opening. 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 2, it's not fair to say that the last 3 years, we did not open any branch. We had even proposals and some of them got extended. And so it is only in the last 4 quarters, et cetera, that we did not open any branch, right. So that there were always some bits and pieces, which earlier, which was there, we opened. But then 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's just that they kept it on hold. We can't see anything more than that. And 2 months back, they just gave the permission for 150 branches.
And 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? Or do you see that it should be a very gradual process rather than -- because we are sitting on the excess profitability, competitive intensity is increasing. So 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 -- 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. So we have asked for 150. We've 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 exercises. It is dictated by the potential we see in the branch. That is what dictate us. So today, we have gone for the first one. Anyway, we can't open 150 branches just in a jiffy. It takes time to locate premises, have the people increase, open it and then go for the next ones.
So once we open this, we will again approach them when we locate potential areas. So once we locate potential areas, we'll again go forward for addition. So as you said, yes, branch opening is also important for this business. We will keep doing it also.
And 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?
I don't know. 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 really digital collection of money proceeds, either we give the proceeds of the loan digitally that means through the bank, et cetera, or correct interest and proceeds through banks. That's what we do digitally. But digital lending, I don't know. It's in the -- earlier everybody was talking about digital lending. Now it is something really not very palatable by the regulators also. Anyway, we've not been doing that -- we don't continue to want to do that also. Our 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 RuPay kind of a stuff.
I know, sir. There are people who just -- I don't know exactly, they just look at some scores, et cetera and give 10,000, 20,000 rupees to people. That type of business, we don't do. But I think the regulator is not very comfortable on that. I think many people have stopped that business also or are asking to be stopped. So finally, fintech, I don't know whether it will survive here, if that is the business. I don't know exactly. No, I'm sure -- I'm exactly not sure about what this fintech people, what type of lending they do also.
Our next question is from the line of Bhuvnesh Garg from Investec Capital.
My question is regarding the growth versus margin play. So considering that is the current competitive scenario prices for next couple of quarters. In that case, what would be a reference between growth and margins. So how do we see both these parameters?
One cannot be -- 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. So it will be a balance of that, sir. So not such that we will want to grow very aggressively and not have margins or the other way also have only margins without the growth. It will go hand-in-hand only. That is a balance which we have to take from our side. So I think if you ask the policy, in our mind, it will be a balanced growth, both AUM to a reasonable extent, yields to a reasonable extent.
Our next question is from the line of Hitesh Gulati from Haitong.
Sir, what are the new number of customers you have added in this quarter and what are the customers that have been written off?
So we have added 3.14 lakh customers during the quarter -- new customers during the quarter.
Okay. And sir, the written off customers?
What customer?
Sir, written off customers.
Written off? There's no written off, sir. It is just customers taking -- closing their loan and closed -- account closed.
Okay. And sir, this ROE that you're seeing of 18%, can we assume this is the bottom that we are seeing because this is not -- I mean, we have always tend to put in much higher ROE. So what is your view on that?
Sir, we would want it to be the bottom and we would like to see go up fully just like you.
Our next question is from the line of Varun from Kotak Securities.
This is [indiscernible]. 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 nonemployees?
So actually, employee expenses have come down. Mostly the annual increment. If there is an increase, it should be on the annual increment. Just a second -- so employee expenses have actually come down from last quarter INR 313 crores to INR 282 crores. And other expenses have increased to INR 247 from INR 206 crores So primarily, other expenses have gone up because of increase in advertisement. You can see that in our presentation. That is about INR 10 crores. And CSR expense has increased compared to last quarter from, I think, INR 26 crores to about INR 55 crores or something. So that is a major increase in the -- during the quarter.
Our next question is from the line of Abhijit Tibrewal from Motilal Oswal.
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 42 crores.
Sir, what was the reason? I mean earlier, I mean, because there was a very high competitive intensity. I mean, a lot of players talked about the need for higher advertising and publicity. So what is kind of teasing 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. So that is also necessary. [indiscernible] the competition, people believe that that's what our marketing and advertisement department also tell us, and that is what we also do. We need to be in the public mind, sir.
Got it. Sir, last quarter, you shared on 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 percentage, and below INR 1 lakh is 42 percentage.
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. Thank you all for supporting us till now, for actually participating in this conference call. One assurance from our side, we will keep -- we will leave no stone unturned to do better performance quarter-on-quarter, both in the yield as well as in the AUM. So thank you from me, Managing Director, George Alexander. We have the other directors also here and also Mr. Oommen, our CFO; and new ED, Mr. KR Bijimon; and team also here. So thank you all, and thank you for a patient hearing. Goodbye. Happy Independence Day, 75 years.
Thank you, Sanket. Thank you for arranging the call.
Sure, 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.