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 Limited Q2 FY '21 Earnings Conference Call hosted by Antique Stock Broking Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Vidhi Shah. Thank you, and over to you, ma'am.
Thanks, Faizan. 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; Mr. K.R. Bijimon, Chief General Manager; and Executive Directors: George M. Jacob; Eapen Alexander; and George Alexander Junior. I will now hand over to Mr. George sir to take us through the quarterly performance and what lies ahead in the future. Over to you, sir.
Thank you. Good evening to all of you. I'm sure the results of this quarter are already with you. But I would just like to give the key highlights. The consolidated loan assets under management increased by 29% to INR 52,286 for the half year and consolidated profit after tax increased by 21% year-on-year to INR 1,788 for the first half of this year. As far as the standalone loan assets under management are concerned, it has increased by 32% year-on-year and now stands at INR 47,016 crores for this half year. Standalone profit after tax increased by 25% year-on-year and stands at INR 1,735 crores for this half year. Now to briefly catch up on some of the highlights. The branch network has increased from 4,500 to 4,600. The gold outstanding for this, as I said, gold outstanding has increased from INR 34,000 to INR 46,234. Credit losses have come down from INR 17 crores to INR 4 crores. The percentage of credit loss to the gross loan assets under management now stands at 0.008% The average gold loan per branch has increased from INR 7.7 crores per branch to INR 10.04 crores. It's a 30% increase in the average gold loan per branch. The number of gold loan accounts from last year has come down from 81 lakhs to 76 lakhs. The total weight of gold in tonnage has also come down from 171 crores to 163 crores. The average ticket size has gone up from 43,000 to 60,000. The number of employees stands steady at 25,000 for the total year. There are some other highlights also here. This quarter has seen the highest ever quarter-on-quarter growth in gold loan outstanding, a growth of INR 5,739 crores. That's a record growth for the company. The average gold loan outstanding per branch also crossed INR 10 crores, as I said earlier. 92% quarter-on-quarter growth in branch footfalls -- even after COVID, we are having growth in branch footfalls. 50% quarter-on-quarter growth in the mobile application transactions; the transactions on mobile applications have gone up 50% in this quarter. [103%] quarter-on-quarter growth in the online gold loan disbursement. And loan at home services crosses INR 100 crore disbursement just including this October. The HNI loans above INR 10 lakhs, have also shown a growth of 229%. There is also something more. Our disbursements for the quarter were focused on new customer relations, fresh notes to active and inactive customers and top up of notes to the existing customers. This was supported by adequate [ BCL and ACL ] activities as well as digital innovations. We dispersed fresh loans to 4.4 lakh new customers amounting to INR 3,653 crores and to 4.67 lakh inactive customers amounting to INR 3,450 crores. So these were to fresh disbursals to new customers as well as to inactive customers are ones who have not transacted with us for the past 6 to 12 months. Our average gold loan outstanding, as I said, has been crossed INR 10 crores; it's a big milestone for us. The company has been able to raise funds through bank loans, NCDs and commercial paper issuance regularly. We also maintained a liquidity buffer of INR 7,846 crores as cash back and investments in liquid funds as of September 30, 2020. The subsidiaries followed a cautious approach towards lending.Non-gold loan portfolio in the subsidiaries constituted about 11% of the consolidated loan portfolio, which came down from almost 13% to 11% now. So the growth is actually happening in the gold loan profit -- gold loan portfolio. Collections in the gold loan portfolio have significantly improved month-on-month after the COVID. Every month, it is definitely improving. So these are -- we continue to maintain that our loan growth for the year should be in excess of 15% by the end of the year because even now, we are seeing good gold loan offtake. The offtake is good even now, even in October; we have had good offtake of gold. This month, we have increased our gold loan portfolio this month also. I don't want to reveal the numbers. But this month also, there is significant disbursement of gold loan and home loan growth also. We are having sufficient liquidity and new funds are also coming. Our recent NCD issue of INR 2,000 crores to the retail public issue has been subscribed fully. On the first today, itself, we received bids for INR 3,000 crores, where the total issue was only INR 2,000 crores. Probably in the next 2 days, the money will be there in our bank also. So liquidity and fundraising has been going on properly. New funds we are receiving from new loans -- new credit lines; we are receiving from banks also. And our Private placement in cities have also shown good improvement. We also started the market-linked debenture issues also, which is, again, private placement. But all these are saying that -- showing that we have been able to diversify our funding mix from a year back, where our bank loan constituted about 47% of our total borrowing. Today, it constitutes only 41%. The increase has come from the NCDs, NCDs which are only around 30% something. It is now close to 47%. So Reserve Bank had also asked all the banks with more than INR 500 crores of portfolio to diversify their funding mix and not to be over-dependent on banks, which we are trying to follow, which we are able to do also. So we see good potential in the next 2 quarters also. And branch expansion, yes, we have added about 50 branches in the last quarter -- the last half year. Mostly because of lockdowns, et cetera, we were not able to actually go about and locate premises and maybe start construction also. Now things have started. Probably by the end of the year we will be adding another 100 to 150 branches this year itself. So the branch additions would generally be in outside Kerala locations. And in Kerala branches, we are also merging a few branches which are not showing good prospects. So Kerala has traditionally been a non-gold loan portfolio of branches. So we are -- for rationalization purpose, we are merging few branches. So that will also increase or reduce our cost in that respect. Otherwise, things are now looking good. Our branches are all open after the COVID also. All branches are open. Employees are able to come. Thank, God, we are able to work in the branches. Customers are also coming and our digital business is also showing better prospects, better response from the customers to the digital. So all those things considered, we see good prospects for your company. So with that, I think I will wind out -- wind up and probably take the floor for questions -- financials.
[Operator Instructions] The first question is from the line of Nirmal Bari from Sameeksha Capital.
My first question is on the tonnage growth that for the past 2 quarters, we have been seeing a decline in tonnage as in the gold prices have increased and that is true. But how should we look at future growth considering the recent tonnage growth in the -- tonnage degrowth in the past 2 quarters? Will that act as an impediment to future growth? And what are the trends that you've seen in the same in the month of October?
Thank you. I think, yes, last time also, there were doubts about what is this tonnage growth and why it is coming now. It is because new loans -- the loans are actually very short period, 2 months, 3 months, 4 months, the new loans are getting priced at the new loan to value. The new loan to value is much higher. So instead of printing [4 bangles], they need to print only [ 3 bangles ]. So when the new loans coming, it will come only at the current market -- for current LTV. So when the old loans are taken back or when they are closed, it's actually closed, when they're closed, at 90 grams goes out. And for the new similar loan, which comes later on, only [ 70 grams ] need to come in.That is why we see the tonnage de-growth. But then you asked about how our prospect. See, our loans are based on the loan outstanding. The tonnage doesn't actually give us anything -- any profit; our profit comes only from the lending which we do. On that, we are definitely sure that within the LTV, within the -- keeping the margin straight, we are able to grow. And for your information, today, as of September, our loan-to-value is only 61%, 61% is the current loan-to-value. So we have a lot of cushion with that. It is just that because the price has gone up. Customers need not bring 4 bangles. They need to bring only 3 bangles. That is what you're seeing this.
Okay. And does this decrease in tonnage in a way reduce our ability to grow the online gold loan business? Because for the online gold loan to grow, we should have that tonnage with us as in the jewelry with us already, is it? So…
So no, I think no participants should look at the presentation we have already uploading in our [indiscernible] as they [ have seen ]. So we have added 2 slides on the customer base. So we have provided the customer data for the past 1.5 years on a quarterly basis. So we have given some more information into how the churn happens in our customer base. So if you look at -- though there has not been a significant increase in the -- Page 31 and 32. So the loan portfolio has increased by 14%, number of loan accounts has increased only by 1%, number of customers has increased only by 2%. But if you know -- when we analyze this deeply, what is happening is that there has been a lot of churn happening in the portfolio. So if you look at, we have given fresh loans to the extent of 8% of the customer base. That means we have given 409,000 loans to new customers. And we have the outstanding portfolio as of September 30 from this disbursement is about INR 3,338 crores. And we have given fresh loans to inactive customers. So those who are not -- at the beginning of the quarter who were not -- who didn't have an outstanding loan, we have given fresh loans to those customers. So we have given 395,800 such loans. That is also an 8% addition to the customer base, amounting to INR 2,726 crores. We have also given fresh loans to existing customers with new collateral, that are existing customers who has a loan account. He's bringing fresh [indiscernible] and taking a fresh loan. So that is about 644,535 customers, which is about 13% of the total number of outstanding customer base. And we have disbursed a -- an outstanding amount is 4,339 crores.So which means that overall, the number of customers is not increasing. Within the overall number, there is a lot of change. So new customers are coming, existing customers are taking fresh new loans. Those customers who have not taken in the last 3 months, now he is coming and taking a fresh loan. So this is an important thing for a gold loan because it's very short term. If somebody takes a loan today, no, he might even close the loan in -- on the next day. So we have also [indiscernible] regularly showing the collection pattern of our gold loans. So if you look at Page 29 of the presentation, you can see that 66% of the loan gets closed in the first 6 months. We have even given the breakup for each month. So because there is a lot of churn, which happens, even though there is no increase in the total number of outstanding customer base within the portfolio, new customers are coming and existing customers are taking fresh loans. So [ telling ] is not something which one should be looking at. The churn which happens in the customer base is a more meaningful number. Of course, the addition is only a factor of signifying higher business activity. Ultimately, income needs to be given by a higher disbursement and higher loan outstanding.
I think the tonnage will increase. This is [indiscernible] here. I think the tonnage will increase, then gradually the gold price comes down. When the gold price comes down, people have to bring more gold. Now they are keeping instead of 4 bangles, they are bringing only 3 bangles. So the bangles which is kept at home, next year, when the price comes -- the gold price comes down, they'll bring that also. I think we should be seen as that. Thank you.
Okay. Sir, my second question is on liquidity. So we are carrying excess liquidity, as you said of INR 7,800-odd crores. So what was the cost of this excess liquidity, negative impact of excess liquidity? And secondly, if you can give the incremental cost of funding at which we are borrowing from various sources.
This is not excess liquidity. It's higher liquidity. It's not excess.
So I think last con-call also, this question was raised. And we had said that given the way we are growing, we need to be prepared for adequate fundraising to meet the growth. So we were trying to explain this. Seeing that in the last quarter, we have grown almost by [indiscernible], that was possible because we had a higher level of liquidity carrying in the balance sheet. So one, in the current times, we need to maintain a higher liquidity to meet any uncertainties. Second, to meet the growth requirement also, we need to be having an on-balance sheet liquidity available. So these are the 2 reasons why we are maintaining higher liquidity. In terms of the cost of funding, I think the Q2 average cost of borrowing was somewhere around 9%. I think in the third quarter, we should see that coming down because the incremental -- because in the second quarter, a lot of churning has happened in terms of the cost. You would have seen what rates we have brought on in the public issue of NCDs. So I think from Q3 onwards, we should see decline in cost of borrowings.
This is the operator. Mr. Bari, may we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. [Operator Instructions] The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.
Congrats on the great set of numbers. I have 2 questions. So my first question, I'm again, referring to Slide 32, I want to understand this correctly. So in this quarter, we have disbursed fresh loans to 395,000, plus 409,000 plus 644,000 customers. Am I right? So that adds up to almost 14 lakh, 15 lakh customer.
So this is only a part of [indiscernible] disbursements for the quarter. We just wanted to highlight how the new customer additions have been, how our -- we were able to bring our inactive customers and also the fact that the existing customers have brought fresh jewelry to take a fresh loan. Now the existing customers also would have made top-up on existing loans. So that number we have not disclosed. So we just wanted to highlight the fact that the customers are -- fresh customers are coming and taking a note. And if you look at the fresh new customers, that has been consistently been about [8%] across the last 6 quarters.
Okay. No. So my question really is that when I add this up, and -- I get your point that there'll be top-up loans to existing customers, but we have disbursed fresh loans, excluding top-ups of about 14 lakhs, 15 lakhs and which is the same Y-o-Y. Now I would have expected that because of the pandemic cash flow disruption for our customers, the number of loans disbursed to fresh customers and existing would have gone up dramatically. But it's actually kind of flat Y-o-Y. So how do I really read this data?
So you need to see it across the quarters. In fact, the outstanding loan amount, if you see, it is [indiscernible] comparably higher than the previous quarters.
Yes. But that's because of gold pricing going up.
No, that is not a factor of gold pricing. That is -- you look at the numbers, the numbers have increased across the quarters.
Okay, okay. So then that leads me to my second question. Now gold prices have been stable for the last 3, 4 months. Now assuming that gold prices remain flat in the foreseeable future, from this INR 47,000 crore loan book number, do you expect to grow over the next 2 quarters? I understand from the FY '20 base of INR 41,000 crores, there will be growth. But from the INR 47,000 crore number, assuming flat gold prices, how should we think of growth over the next maybe 12 months, 18 months?
So we had given a guidance of 15%. I think we are almost reaching there. Definitely, we don't want to accelerate -- give any number now. We don't want to do any change. But certainly, it will be more than the total year-on-year. It will certainly be much higher than the 15%.
Yes, but that's off the INR 41,000 crores base. But in the first half, gold prices have moved up, we've got that tailwind. Now in the last 3 months, gold prices have been flat. So from this level, how should we -- from the INR 47,000 crores level, I understand it's a bit too much of a numbers question. But if you can just help guide us as to how that will be? That will be really helpful.
We don't want to give any different guidance. The guidance we gave was 15%. Definitely, we'll do more. We don't want to give any higher guidance now. Certainly, it will be much more.
The next question is from the line of Bunty Chawla from IDBI.
As you have said -- rightly said that LTV as of September is 61%. Can you share the incremental LTV, which we have disbursed during this quarter? If you can share that number.
So no, we are giving currently maximally of 75 percentage on the gold price. So average should be somewhere around at least 70, 71.
70, 71. Everybody doesn't take 75%. So incrementally, it will be 70%, 75% only. 70%.
Okay. And sir, secondly, as you -- we are seeing very good amount of decline in Stage 3 assets from 2.56% to 1.26%. So can you throw some light what has been the trigger for this? Have the client has completely given the amount back or we have collected the interest burden, refinanced at a new LTV? How should we see this factor?
See, the second one what you said is the correct one. They would have paid the interest and taken a new LTV. Please also remember one thing always. If I don't give it at the new LTV, he will go and take it from competitors. So [ I have reason we will ] do it ourselves. So that's the reason.
So that's great. Lastly, sir, any auctions you have done, if you can share that number, sir?
Very negligible.
I think it is INR 5 crores or INR 10 crores.
The next question is from the line of Utsav Gogirwar from Investec.
A couple of questions from my side. You -- at the initial comments you have mentioned about the branch expansion and you plan to add around 100 to 150 branches in the second half. Just want to ask, sir, what is -- is there any roadblock to add more than 150 or 200, like can we add 500 branches next year and expand rapidly. I just want to understand on the branch expansion strategy, is there any hindrance or roadblocks? That is first. Secondly, sir, I just want to understand growth plans for the MFI and housing business. And lastly, P&L interest amount for this quarter.
So branch expansion, it is just our own number that we need to keep it to manageable levels because we don't want to increase -- just increase higher than 1,000 branches because we would rather increase the per branch business. That's what we were talking about. The per branch business actually use optimization of cost, optimization of everything, operation costs, et cetera. So per branch business is more important to us. But then there are places where we need to be present. And that is why we always have about 100 to 150 branches opening. And probably about 40, 50 branches, we will also merge, do optimization. So net about 100 to 150 branches is what we have been doing every year. I think that's a reasonable number. And along with that, we would also like to increase the per branch business. That is your first question. The second was about…
The growth plans and the MFI and housing business.
MFI. MFI housing, I think MFI housing business, actually the housing finance, we are not doing any substantial disbursals now. It's flat. It's only collections, which are coming. In the microfinance, they have -- we have started lending about INR 100 crores that we lend…
[indiscernible]
Two months. So that is the incremental lending. So probably our home finance will see a flat growth or probably a little bit of degrowth by the end of the year. And micro finance, they want to grow by 400 crores to 500 crores. So that's -- earlier they have been growing much more. But this time, they will be growing by about 500 crores.
Okay. And sir, penal interest amount for the quarter? And just if I may ask one more question. The rain cost for the quarter is relatively higher compared to last few quarters. And I believe that we would have revised our branch agreements, rental agreements, and I was expecting that we will have a lower rent expense. But what am I missing over here, sir? Why the rent expenses are higher?
Because in April, et cetera, we did not pay some rent. We [ held ] some rent. So afterwards, when the branches started opening, the landlord also asked, your branch is working perfectly, why do you want a reduction in rent? So we had to actually give back, or maybe better relationship with the branch, we had to -- we had to give back or maybe give back what we had withheld. So because we are also looking at -- we have branches looking at -- profits are like, why do you want to reduce my rent? And rents are not very high for Muthoot. That is one of the reasons for the rents.
Okay. Sure. Sir, lastly, just the penal interest amount?
So penal amount is not the materials and especially after the moratorium, we have given a lot of waivers in terms of the penal interest [exceptions]. So that number is not material.
Penal interest comes in only after 12 months and very few loans cross the 12 months.
The next question is from the line of Saurabh Dhole from Trivantage Capital.
I have 2 questions.
Little more louder, please. Louder, louder.
Can you hear me now?
Yes, yes.
So I have 2 questions. The first one is, have you seen any difference in the end use of the loans that you gave against gold? Because you have mentioned in several of your commentaries that this is largely for the purpose of, say, marriages or any healthcare emergency. So has there been any change in the end use of the gold loans that you give today?
No, sir, I don't know when we said it is for marriage or health purpose. We have never ever said that. Our loans are usually for small business purpose, working capital, et cetera. It's never for marriage. I don't know how you've got that impression. I have never said that we were…
Mostly, the loans are going for agricultural activities, small business, trade, [indiscernible]…
Shopkeepers.
Mostly the end use are working [indiscernible]. So he is expecting some cash inflow to happen 2 months later, 3 months later. So he wants to bridge the gap. So that's why people come and take a loan. Maybe 5%, 10% might be taking for -- purely for domestic emergencies, but majority is for working capital purposes.
But's in the last 6 months, you've not seen any material difference in the end use, which you've experienced in the past as in -- it's again in that -- 90% of the loans are again for working capital or for their business purposes. The trend continues to remain the same?
Yes. I think the information we get is from the branches. We don't really go deep into what is actually [ going ]. But then generally, our branch managers talking to the customers know, and they give us the response that these are going for business. It is not that you can say this is agriculture then there's a price difference or a [indiscernible] difference or interest, nothing. So whatever loan it takes the interest rate is the same, whatever purpose. But then our managers have their ears to the ground and probably they talk to the customers. They generally say that this is going for business.
And sir, in several of the other financials management's commentary, it's been a common trend that almost everyone is growing their gold loan book today. So I'm trying to understand if on the ground also, your employees or your branches are reporting back to you telling you that there is increased competition. Is that a trend that is observable today?
Yes. We see that there is always competition. There have always been competition. Today probably it is a little more intense. The banks are also doing it. They're advertising more. They are saying they'll do that, they'll do this, interest rate is that. We have always seen that there's always competition. But the competition also increases the overall market business, overall pipe, overall business is increasing. So year-on-year people are coming forward to [ price ] their gold. That is what we see in the competition. So you have seen, even in spite of the competition, we will be able to grow. Some of the banks are also able to grow. So everybody is growing because more people are thinking of gold loans. So they all want to see. Everybody coming forward, those who are earlier not pledging loans are also pledging because banks, et cetera, the new generation banks, old generation banks are also giving loans. More people are using this opportunity to raise funds. So we see competition. Our staff also sees competition. But then still, we are able to -- that is one of our strengths. We are able to [indiscernible] our customer service and fast service, et cetera. We are able to retain and get new customers also. Competition is always…
Yes, yes. But competition is not distinctly higher in the last 6 months vis-a-vis the earlier part of the years?
Yes, yes. After COVID, the competition is definitely higher. But I said our -- we are also getting more business, they are also getting more business. Competition, I'm talking only from the bank perspective, not from NBFCs. NBFC's competition is not material for us at all.
The next question is from the line of Alpesh Mehta from Motilal Oswal.
Hello?
Yes, please go ahead.
Congrats for the good set of numbers. Sir, first question is regarding, if I see current quarter-on-quarter growth [indiscernible]…
Your voice is breaking.
Is this better now?
Yes.
Yes. Okay. So sir, if you see the quarter-on-quarter growth in this quarter, it's largely the function of LTV. Last quarter, we were at around [ 65% ], and now we have increased to 61%. So that actually almost 10% of [ second ] quarter growth and roughly 3%, 4% is because of the increase in the gold as [indiscernible]. So first question is related to till what level of LTV would you be comfortable? Regulatory [ remit ] is 75%, but what would be your comfort level? That's the first. And secondly, we are not seeing a sharp drop into the cost of funds to improve this quarter. Some of the other financials have reported. Any specific reason for the same? And how do you see that [indiscernible].
See, the LTV, average NPV, if I don't know, 58% or something was last we had last quarter. Today, we are saying about 60%. So the new loans have the price of the new rate. That is the reason for that. All of a sudden, if the price goes up, the average LTV of the existing portfolio will drastically come down. As the price stabilizes, stabilizes, stabilizes, it will gradually start going up. So we will be comfortable up to 75% is what is the regulatory, we will definitely be comfortable lending up to 75%. So there's more elbowroom for growth or more wiggle room for giving more loans. The second question about the…
Sir just one thing I just want to -- if I look at the Slide #30, I guess the last quarter [indiscernible]
Yes, I think I can give one perspective on that. See, in normal times, when the gold price is stable, the average LTV tends to be around 70%, 71%. So the maximum cap is 75%. So when the gold price suddenly goes up, the average LTV tends to be lower. But the new loans we are gaining at the regulatory maximum number, maximum LTV cap. So as we move along, the average tends to move higher. That is a function of the market. Now we have to move -- if the gold price remains at this levels, gradually, the average LTV will move closer to 70%. So it may not happen in 3 months' time. It may [ actually ] happen in the next maybe 6 or 9 months' time if the gold price remains stable.
But LTV, we do not include the accrued interest [ input ].
Yes. This is -- this is [indiscernible] principal…
Principal, right. Sir, my…
[indiscernible] if we include the infrastructure, it will be about 2 percentage. Instead of 61%, it will be 63% rate.
Okay. And sir, Slide #20, there has been more collections during the quarter. [Indiscernible] you have the higher demand, right? [indiscernible] an average rate of monthly average rate of around INR 70 billion?
Yes. So as we said, we have actively increased
fuel losses.
Yes. So we have actively increased stock up. So in our [Technical Difficulty] the person has to do a top up, he has to settle that interest. So especially when there is a rise in the gold price, no person can do a top up. So he will close the earlier account and book a fresh loan. So that actually has been at a peak level. So this is the reason why we have shown that we see a higher level of disbursements. So a customer can take a loan in the month of -- July 1. In August 1, he can again, close the earlier loan and book at a fresh LTV. So these will come as a closure and as well as a fresh disbursement.
Sure. And sir, last about that cost of fund questions. The growth has been a [indiscernible]…
Mr. Mehta, Sorry to interrupt you, sir. [indiscernible]
Yes. So we didn't hear properly, what I feel you were asking on the cost of borrowing. So cost of borrowing has been around 9%. There has been a lot of churning happening in the borrowing in the second quarter. Right now, the cost has come -- incremental cost has come down. So we should see that [indiscernible] [ borrowings ] coming down from the third quarter onwards. Probably you would have seen that when we have raised INR 2,000 crores in a public issue at maybe at an average rate of about 7.6%. So I think going forward, we should see that average cost of borrowing coming down.
The next question is from the line of Ravi Naredi from Naredi Investment.
[indiscernible], it is a very [indiscernible] result. My point is there in quarter 2, interest cost rises by 34%, and interest income rises 19% only. What is the [indiscernible] of it?
So there is always a…
Lag effect, because 3 months is a very short period for us to generate a large income. And I think the [ INR 5,000 crores ] would not have come in the month of July. It will come over 3 months. So to that extent, that income. So that effect will come more in the third quarter.
Third quarter. Okay. Okay. And sir, do you want to revise the guidance from 15% to upward side?
So we don't want to give any specific number right now. We gave initial guidance of 15 percentage. Since we have already achieved 14%. Certainly, we will be crossing the initial guidance. Last year, we had actually 22%. Right now, we are not giving any specific number. We are hopeful we'll be to do better in the next 6 months.
The next question is from the line of Dhaval Gada from DSP Investment Managers.
Just one question. This is related to the [ slide of ] data that you've coded on Slide 31 and 32. So I just wanted to check the number of customers that you have, does it include the inactive customers as well? And what is your definition of inactive customers, if you could do that?
So inactive customers are those customers who don't have a loan at the beginning of the quarter. That is a definition we have used for this analysis purpose. He is a customer who has taken loan prior to July 1 and closed the loan. And he doesn't have a loan account on July 1. He comes and takes a fresh loan. So that is an inactive customer [indiscernible] fresh loan.
Okay. And does the 48-lakh customer base include inactive customers?
No, 48 lakh doesn't include any inactive customers. That is the 48-lakh customer is -- those customers are having a loan account as of September 30.
And sir, if you were to think about a total customer base, active and inactive, what would be the base?
Mr. Gada, the line for the management is disconnected. Please hold the line. [Operator Instructions] Thank you, and over to you, sir.
So question. Yes. So the 48 lakh customers doesn't -- is the active customers as of September 30. Those customers who were having a loan account as of September 30.
Right. And so my follow-up was, sir, what is the total number of customers, active plus inactive, so your base of customers?
That inactive will be a very, very huge number. I -- some people would have not been there for the last 3 months, 6 months, 1 year, 1.5 years, they're also inactive [ like that ]. But they will come later.
Sir, the idea was to just understand how many customers you've already touched in -- right now and in the past. So the data [indiscernible] that is what I was saying to get to.
[indiscernible]
A few crores.
We will give that number at a later stage.
The next question is from the line of Kunal Shah from ICICI Securities.
Yes. So 2 questions. Firstly, when we look at in terms of the number of customers, so that's been still steady. If we were to look at it over the last 18-odd months, okay, it has not moved. It's somewhere around 48 lakhs only. So how should we reiterate it. Maybe once we start with branch expansion, would we ideally see the increase in the number of customers, and that would be driving the overall growth as well? And second is, when we look at maybe in terms of the number of customers, it's steady, but expense base is building up. No doubt, we can say that AUM is also growing. But finally, I think cost is also rising at a much faster pace to get to a similar [indiscernible] of the customers. So where do we finally see in terms of our cost, because the larger part of growth is driven by the rise in the gold price?
So we have told you that we see growth in this year also, definitely more than the 15%. We are sure that there will be good growth this year also. So the gold price is there. Sometimes it goes up, sometimes it comes down, but then still it is stable. We will be able to grow our business that we have been able to demonstrate all through. So because price has gone up or come down, doesn't actually affect us much, okay. Second is the customers, these customers. Some of our customers are now taking bigger loans also. That is why the number of customers. We don't want all to be small, small customers. The customers are big also is good for us because we -- our interest is only on the outstanding. So a small customer, we'll get only small interest. Big customer we will get big interest. So actually, it doesn't matter much.
Okay. But in terms of the expenses, if we have to look at it, maybe apart from rental also across the board there has been the increase. Some would be a normal increase maybe in terms of employee; also quarter-on-quarter, there is a rise year-on-year also. So -- and still, we keep on adding the branches. So I think definitely on the employee side also, we would be looking to add. So where do we see the cost finally settling down?
See, I think, generally, our cost of operations are definitely under control. We carry a tightfisted cost of operations. But of course, we give a lot of incentives to our customers, to our [Technical Difficulty] just one cost and rent [ takes us higher ]. We -- rent goes up over 5%, 6% always. So rents also -- rent also goes up. That is just inflation. The inflation takes about 5%, 6% every year Whether it is staff cost or other expenses, et cetera, inflation takes about 5%, 6%, always there [indiscernible].
In the second quarter, the OpEx is around 4%. I think 4% to 4.5% is something which we should always back factor it. In terms of the OpEx, we don't expect much gains to come onto OpEx. Again, on the customer base, I think Kunal you should go to the Slide 32. We cannot -- there is a lot of churning which happens, and there's a lot of new customers comes in probably all these quarters, it's not the same set of customers who have been coming in. So in the last 18 months, we have been able to add almost like 25 lakh customers or 30 lakh customers, new customers, which itself is a big churn, which is happening.
Okay. So maybe some of the existing customers become inactive and you keep on adding on to the new one [indiscernible].
Exactly [indiscernible] I tell you the correct thing.
Sir, somebody takes a loan today. He crosses it after [indiscernible]. Afterwards he [ leaves ] only after 3 months. He comes at that time only. Only when he needs the next loan he comes. Otherwise, he keeps the gold himself.
Yes, that's the reason you're saying your next [indiscernible] is also very high.
Yes.
The next question is from the line of Lokesh Mallya from SBI Mutual Fund.
Just accounting questions. We have a derivative financial instrument, which appears on the asset side. On March, it is around INR 344 crores. I think in this particular quarter, it has become a very small amount. And there is a derivative liability of INR 174 crores. So if you could just explain how that is done, that is one. And secondly, in the P&L, we have under the other comprehensive income, INR 14 crores on revaluation of equity, if these 2 bookkeeping questions could be answered.
Okay. So Lokesh, we are following a hedge accounting. So all these mark-to-market at every quarter and when we report, we need to do a mark-to-market. So all this mark-to-market, we are keeping it outside the P&L. So that's why it's coming as an asset or a liability. And the comprehensive income is mainly our share valuations, which we do on our investments. We have investments in ESOP, [indiscernible] and the ForEx and so -- on other investments. So that also -- no, we are not taking it straight to P&L. So we bring that to other [ comprehensive ] income. So that -- it doesn't impact -- this quarterly valuation doesn't impact the profit.
Okay. Sorry. So does -- so just to understand this, I mean, does the movement in the exchange rate -- it has been pretty stable over this period, right? So the INR 344 crores moved to a liability. What is that driven by is what I [indiscernible]?
The -- if you look at, the -- for the ECB borrowing. The principal amount is always valued at the exchange rate. So the impact because of that -- because it's 100% hedged, the impact of that -- the valuation done on the reporting day is not brought to the P&L. It is actually brought in derivative asset or liability. So I think last quarter, it was 75 basis points. This quarter, I think it is 75 [ basis points ] -- 75, 74. So these movements play a role in that because it said we need not bring it to the P&L. The expenses are booked in the P&L based on the hedging costs.
Okay. I'll try to understand it better offline.
Yes. So I think it's a complex thing. We can share you…
Anyway, it doesn't affect our income or profit, et cetera, because it is fully hedged. Only the hedging cost is our expense. All the other things, that's what I also understand, all the other things are below the line just for accounting purpose. It does other -- those things don't go out of our funds. That's all. It's not an expense.
The next question is from the line of Prashanth Sridhar from SBI Mutual Fund.
Yes. Sir, just any numbers on collection efficiency in the non-gold portfolio?
Yes. The collection efficiency in the [indiscernible] whole thing is 84%. And the personal loan book, it is 93%; in Muthoot Money, that is the vehicle finance, it is 82%. And in [indiscernible]
And what was [indiscernible], sir?
That's [indiscernible]. Sorry, it's 86%. 86%.
The next question is from the line of [ Abhiram Iyer ] from Deutsche CIB Center.
Yes. Sorry, actually, I wanted to ask the same question on efficiency, but just to clarify, these are September numbers, right, the percentage that you just mentioned?
These are September numbers, yes.
Got it. Got it. And the other question that I wanted to ask was on uses of liquidity. So could you just give us an idea of the sources of fund? So basically, majorities of principal and interest that are due for the company over the next 6 to 9 months?
For us, as we look at our repayments, the major ones will be the bank borrowings. Most of these bank limits are working at their limit. So working at the limit, that's probably you might know that it's a regular limit. So we take it for a period of 3 months, 6 months, 9 months like that. So when it comes for maturity, you need to make a repayment. But on a subsequent day, we can again avail it. So no, this is a normal rollover, it is not a [indiscernible]. For our ALM purposes, we show this [indiscernible] as a maturity, as our repayment. So every month, we'll have about INR 1,500 crores, INR 1,700 crores of this bank borrowings, which matures.Then the major item is the [indiscernible] paper. We book -- have borrowed about INR 5,000 crores. We normally borrow it for a period of 3 months. So every month, we will have a maturity of around INR 1,500 crores CPs. CPs are -- we are able to place the CPs again in the market. So we don't face any challenge. However, we are taking a large liquidity to meet any kind of -- any eventuality. We are also raising fresh funds to meet the lending requirements.
The next question is from the line of [ Ritesh Agarwal ] from Bank of America.
Congratulations on a good set of numbers. A couple of questions from my side. One is, can you give us a number of what is the gross financing raised in the last quarter, total funding raised? And second question is, again, going on the microfinance business. You mentioned that the disbursement has been about INR 100 crores the last couple of months, and the full year target is about INR 500 crores. But if I just look at, say, March '21 -- March '20 number compared to current, it looks flat. So effectively, INR 500 crores is something which needs to be done in the last 2 quarters, current quarter and next quarter. Is that number still valid -- INR 500 crore growth target? And what pockets are you seeing the demand off? Or what is your focus area in -- focused pockets for MFI business?
So the INR 500 crores incremental growth can happen in the next 5 months. In the last first month itself, we have grown by about INR 80 crores or INR 100 crores. So it is not a target; we said it can happen because we have done much more than that earlier. So when we start the next 6 months, growing INR 500 crores on a INR 2,600 crore portfolio, I don't think it is difficult. The main branches, most of the branches are in Tamil Nadu [indiscernible] And last 2 months, collections are also happening, disbursals are happening. So we don't see a challenge to that. About the funding…
So in Q2, we have [ partly ] raised fresh funding of around INR 4,133 crores. This is bank borrowings as well as NCDs and not included are the rollovers as well as the [indiscernible].
The next question is from the line of Abhishek Murarka from IIFL.
Yes. And congratulations for the quarter, actually, great numbers. So my first question is, do you maintain any data on customer attrition? So when a customer doesn't come back and renew the loan or when they close the loan, whether they are doing so to migrate to some other lender or some other bank or whether they don't require the funds, do you maintain any such data and if you can share some insights as to what the recent trends have been?
So we [indiscernible] inactive customers I would say.
Okay. That's it. So -- okay. Okay. And this per-branch business, is there any limiting factor towards maybe number of customers or the catchment area or something like that? Is there any limiting factor? And if yes, what could be the limit of, let's say, a per-branch business number?
See, there are branches with 5 crores, 10 crores, 15 crores, 20 crores, 30 crores. So we have branches, 25 crores also. So any branch can handle that. So it's just that it's an average. Again, it's just an average.
Sure. And the highest would be about 25 crores, 30 crores, is it?
Yes, yes, yes.
All right. And just a final question. In your online business, is there any difference in the [indiscernible] between taking a gold online versus offline?
Actually, we said you are in some ways waiving some fees and charges, that's all.
And that would be the processing fee or something?
Very, very, very small amount.
Okay. Okay. All right. Sir thanks so much and all the best for the next quarter.
The next question is from the line of Harshvardhan Agrawal from Infina Finance.
Sir, what we see to the broader economy is that more -- more lenders are getting conservative in terms of lending, especially in the ticket size that -- where we operate. And I'm not talking about gold loans but other revenues of funding. So is it that we are seeing an increased demand for gold loans per se? Or is it like the -- or is that, that's not the case?
Yes, you are right. Some of the other loans are not easily forthcoming for people who require funding. So because of that, we see better demand offtake for gold loan. I think it should continue, and that is what we saw in the last quarter, we had a growth of more than INR 5,000 crores. That's a record growth in that quarter. So more and more people who are not -- unable to get loans from elsewhere are looking at gold loans, whether it is Muthoot or bank or XYZ, gold loans are the flavors which people can get today. So we see this demand continuing for much more time. Even afterwards, when the economy picks up also, gold loan demand will grow. Definitely when the economy will grow -- even the economy has not picked up much, it is for all the other pent-up demand and pent-up payments that they are taking these loans. So once the economy picks up, definitely, the same also gold loan will grow. So overall, we see good prospects for gold loan.
So sir, just to follow up on that. So do we expect that to be the fresh loan -- the fresh customer additions that have been upward of [ 21 lakh ] customers in this quarter? Do we have a target of some certain number of customers that we would apply for, say in the next 12 to -- 6 months or 12 months?
So we do a lot of marketing and sales promotions, et cetera, to get new customers also on our books. So that is done at the branch level. So every branch definitely would like to get newer and newer customers also because new customers is definitely new business. So that is always the drive to get new customers always there at the branch level.
But we don't ever have a target set as such.
No, we give -- definitely, we give target to the branch managers and say, you have to do that. You have to do this. But not that easy, though, we can say, every branch brings 10 new customers, et cetera. But definitely, we incentivize branches also if they bring new customers.
And sir, one last question is regarding the interest rates. Because what we hear in the new numbers, which are coming in the gold finance business are at a lower lending rate. So are we looking to reduce our lending rates or we are offering lower rates to our customers?
See, our policy is that we try to keep our interest margins, impact -- intact. So if our cost of funds comes down, we reduce our lending rate also, but we try to keep our margin -- interest margin intact.
Okay. So sir…
The interest price. We try to keep the interest price intact. So if our cost is definitely coming down, we will definitely offer that to the customers, so that we are not affected, our interest spread is safe.
Okay. So sir, what is [indiscernible] we won't reduce our interest rates just because the competition is doing so, but it only a factor of our cost of [indiscernible]?
Sir, finally, if you are getting business at the rates which we are comfortable with, why should we reduce the rates?
The next question is from the line of Sakshi Goenka from Alchemy Capital.
I just had 2 questions. When do you feel that you will be comfortable unwinding the surplus liquidity which you have on your balance sheet? That's the first question. And the second question is, George sir had mentioned that you're now getting customers who want a larger ticket size of the -- larger ticket size loan. Sir I was just wondering why would the customer who would want a bigger loan come to us given our interest rates are much higher than what a bank would offer to them? So just wanted -- because generally, we cater to those customers who want small amounts for a short period of time. So why would a big customer be attracted to us?
So in terms of liquidity, it's an ongoing process, because we are growing every quarter. We need to be prepared for meeting those growth targets. So maintaining this level of liquidity is important for us, both from a liquidity perspective as well as for meeting the growth requirements. So this level of liquidity, we are expecting to be maintained at least going forward.
So most the HMA customers, the higher ticket customers also definitely come to Muthoot. It is not just because it is [indiscernible]. The comfort is there. The [indiscernible] is there. The convenience is there. It is not that every other person who is offering a lower rate, probably take a bank -- all the bank branch, all the branches of the bank may not be offering the same gold loan portfolio. [indiscernible] most of it is convenience, repeat business. But they are convenient, they come. It's not that everybody will go only to the north the industries probably only state bank if [indiscernible] would have any business for any loan in this country. So every bank gets business, whether it's state bank or a bank with a higher rate also, everybody gets business. I don't think we should think that it is just interest rate driven. It's not that.
The next question is from the line of Kaushik Agarwal from Haitong Securities.
Sir, there are a couple of questions from my side. So first question is regarding the security cost. Sir, what is the number for us as we can see that one of our competitors, they report this number in their investor presentation. So this number for FY '20? Or if you can give us what will be the proportion of this number of the overall operating expense? And sir, second question is regarding the gold price fluctuation reserve, which you have created in the year FY '17 for INR 230-odd-crores. Sir how likely are we going to see such results being created by the company in the future? Third question is regarding, sir, in the opening remarks, you mentioned that there has been a lot of improvement on Y-o-Y growth in the online transaction, but still we see in your investor deck that the number of customers or in percentage term driven by 50 bps. Sir, is it on account of reluctance of customers on use of technology? Or if you can throw some light on this? Sir, yes, these are the 3 questions.
Security cost is actually the employees who are doing the security job comes in the HR in the employee cost, all the other things come in the IT costs or other costs. So it's a part of this, we have never tried to find out what is the security cost, et cetera. Everything it is worth a lot of things. So we have never done that. The second question was about the…
On the gold price fluctuations, actually, we merged all the [indiscernible] created when we transitioned to [indiscernible]. So we don't have any balance sheet item called gold price fluctuations or so. However, there is a processed provision, which we are maintaining of INR 295 crores over and above the ECL that we have kept. And probably, we will review it at the end of the year, when we do a relook on the [ PD and the NBT ] percentage.
So if you ask me, honestly, for a gold loan company, there's no need of any provisions, whether it's a standard asset provision or NPA provision, nothing is there. But nevertheless, all these provisions put together, we have more than INR 1,000 crores of provisions with us, more than INR 1,000 crores. So that actually is fully our own fund only -- its own fund. So provisions, the INR 230 crores or something lying there, we just kept it there. That's all. Because honestly, I said there's no need of any provision for anything. So what we have INR 1,000 crores actually [ networks ], you can technically add it to [ network ]. And the final thing was what?
Improvement, Y-o-Y improvement.
Improvement…
No, online transaction.
It's just the customers who are not digitally active. We are actually mapping them and talking to them and hand holding them to start digital transactions. They are seeing 30,000, 20,000, 15,000 loan customers, not that computer-friendly, et cetera. So we are trying to make them to do some transactions digitally so that after a while, they can do this. So now traveling also is not that convenient. So anybody who can do digital, we are encouraging them. So as you also rightly said, it is because our customers are small customers, low-end customers who are not that computer user-friendly. We are trying to still bring them there. They are not doing all their transactions online. They are doing some of their transactions online. Some interest payments, some top up, some repayments. But for taking back the gold and bringing the gold, they will come to the branch.
Okay. Okay. And sir, just one last one, data-keeping question. What will be the portion of online gold loan of our total area? Yes, sir, that's the last question.
It's very negligible. Traditionally, people are more comfortable coming to the branch and taking a loan, but we are taking effort in terms of doing online [indiscernible].
If worst come worst and somebody is not able to travel, we are just doing it as a reserve if somebody is not able to come, and there's some real problems that people cannot come out, they can use this opportunity. But if they are able to come, they would rather come to the branch, give the gold to the manager, hand it over, take the receipt and go. That is more convenient for them. Comfortable, actually, their comfort level.
Ladies and gentlemen, due to time constraint, we will take that as the last question. I would now like to hand the conference over to the management for closing comments.
Yes. Thank you. Thank you, investors. Thank you for really supporting us all this while. Please, from our side, we will see that we run the company well and certainly protect the interest of all the stakeholders, whether it is the equity stakeholders, whether it is lenders, whether it's our borrowers, whether it is our MCV customers or bank or regulator. We will try -- we will put all efforts to see that our company or your company does a good job. So that is from our side. And thank you for your support. Please continue to support us, and that is our strength. Thank you. Goodbye.
Ladies and gentlemen, on behalf of Antique Stock Broking Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.