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 Q3 FY '20 Earnings Conference Call hosted by Antique Stock Broking [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Digant Haria from Antique Stock Broking. Thank you, and over to you.
Yes. A very good evening to all of you. We have us the management from Muthoot Finance. So I'll just hand it over to them. I'll hand it over to Oommen for -- if there is some opening comments and comments on the Q3 performance, and then we can open the floor for Q&A. So Oommen, over to you.
Thank you, Digant. Good evening, everyone. So hope you have received the press release as well as have seen the financial -- quarterly financial statements as well as the quarterly earnings presentation. Today, unfortunately, MD, Mr. George Alexander could not join the call, so I'll be leading the call. However, we have the senior management. We have Mr. Alexander George, who's the Whole-Time Director in Muthoot Finance Limited; Mr. Eapen Alexander, who's the Whole-Time Director in [ indiscernible ] subsidiaries, Muthoot Homefin as well as Muthoot Money; Mr. [ George Alexander ], Executive Director in Muthoot Finance. We have Mr. Bijimon, Chief General Manager; and Ms. Shanthi, DGM, also is present on the call. So in terms of the business in -- of Muthoot Finance, consolidated loan assets under management increased by 21 percentage year-over-year at INR 43,436 crores as on December 31. Consolidated profit after tax increased by 49 percentage at INR 2,321 crores for the 9 months. Stand-alone assets under management increased by 19 percentage year-over-year and reaching INR 38,498 crores as of 31st of December. Stand-alone profit after tax increased by 50% year-over-year at INR 2,191 crores for 9 months ending December 31, 2019. In terms of business of Muthoot Finance, Muthoot Finance achieved a net increase in net profit of 50% at INR 2,191 crores as against last year INR 1,461 crores. Loan assets stood at INR 38,498 crores as against INR 32,470 crores as at December 31, 2019. That is a growth of 19 percentage. During the quarter, we have achieved an increase of gold loan portfolio of INR 2,783 crores. This is the highest-ever quarterly growth we achieved in the last several quarters or probably [ indiscernible ] first time in the history of the company, we are achieving this level of quarterly growth. Muthoot Homefin increased its loan portfolio to INR 2,025 crores as against previous year of INR 1,835 crores. That is a year-over-year increase of 10 percentage. Total revenue for Q3 and the 9-month stood at INR 88 crores and INR 240 crores as against previous year of INR 57 crores and INR 161 crores. That [ indiscernible ] profit after tax of INR 11 crores and INR 31 crores, respectively. Belstar Microfinance, where we hold 70 percentage, grew its loan portfolio to INR 2,285 crores as against last year of INR 1,563 crores, an increase of 46 percentage. During the quarter, its portfolio increased by INR 178 crores. That [indiscernible] profit after tax of INR 26 crores for the quarter as well as a 76 -- INR 77 crores for the 9 months. Muthoot Insurance Broking, there was a total premium collection of INR 85 crores and INR 217 crores for the quarter as well as 9 months as against last year of INR 62 crores and INR 179 crores. We generated profit after tax of INR 5 crores and INR 12 crores for the quarter as well as 9 months. Our Sri Lankan subsidiary where we hold 72.92%, increased its loan portfolio to LKR 1,301 crores as against last year, LKR 1,163 crores. We generated profit after tax of LKR 4 crores for the quarter and LKR 9 crores for the 9 months. Muthoot Money, which is our latest subsidiary addition to Muthoot Finance engaged in [ working ] finance business, has increased its loan portfolio to INR 492 crores. Its total revenue stands at INR 18 crores for the quarter and INR 49 crores for the 9 months' period. So in terms of important developments in the company, during the quarter, we did our -- made an offshore bond issuance. We raised INR 3,200 crores. We are currently rated by international rating agencies, Fitch, BB-plus rating; S&P at BB; and Moody's at Ba2. On the domestic front, CRISIL has -- since January CRISIL has revised their long-term rating outlook from AA stable to AA positive. Also, during the quarter, we did there 2 public issuances of non-convertible debentures. We raised close to INR 1,200 crores. I think that's our general business performance. I think we should now -- we can take questions.
[Operator Instructions] The first question is from the line of Ashish Kumar from Infinity Alternatives.
Congratulations for a fantastic set of results. A couple of questions. One is the growth that we are seeing in the gold loan business in this quarter. Is -- do you see that kind of continue in the next couple of quarters? Or in this quarter, are you seeing that growth?
So in the -- in fact, we had[Audio Gap] the first quarter of the current year. Second quarter, because of the resource constraints, we had to slow down. Otherwise, we would have achieved a -- we would have continued our performance in the second quarter as we had done in the first quarter. Now we have raised resources, we have been able to grow. So we are seeing a good traction for gold loan business. And that's why we are able to drive good growth. In fact, the growth which we could not do in the second quarter, we have made up [ indiscernible ] in the third quarter. So the trend in growth, we are seeing in the fourth quarter also.
Okay. And in terms of the resource raising, how is the general environment? Are you able to raise resources? You had indicated that you would like to do another tranche of MTN note? Where are we on that? Is it likely that we may do that soon?
So I don't want to comment anything on the future issuances. We may or we may not being doing a future transactions. But in terms of resources, resource raising, we have now multiple avenues. We have borrowings from banks, right, they're slowly improving their willingness to take additional exposures. So that is one positive thing which has happened in the third quarter. Second thing is that Muthoot has been in this business for so long, we have built retail tranches in terms of liability products. Because of this, we are able to do regular issuance of retail NCDs. And for third quarter, we have done 2 issuances in terms of retail NCDs. And we have done -- we have raised at almost INR 1,200 crores through 2 issuances. We are also placing these bonds with -- the NCDs that we are able to place it with mutual funds also. Apart from that, we have the new avenues of raising external commercial borrowings. In fact, the bonds are -- to our understanding, the bonds are [ traded ] at a good [ rating ] as of now. We had initially done at an issuance of 6.1 to [ 7 ] percentage. Now we want to understand that today, now it is trading at around 4.38 percentage. So there is a good appetite among foreign investors. I think the benefits of doing an issuance is slowly coming to us. So that is also another opportunity for us. I think building a good book with a proper resource base is critical for us. I think we have been successful in a significant way the last 3 quarters.
You are saying resources is not -- currently, you don't see resources as constrained for growth in this quarter and next quarter?
Yes, correct.
The next question is from the line of Deepak Lalwani of Unifi Capital.
Congratulations for wonderful numbers. Sir, on your credit cost side, can you help us [Audio Gap] [ duration ] this quarter? So what's happening and for which segments is it? Is it for microfinance or for gold loans or housing finance?
Sorry. Come again, which item?
[Operator Instructions]
Yes. So in our stand-alone P&L, if [ indiscernible ] to see your impairment is -- impairment costs is up.
Yes. Okay. Sure. So the impairment consists of [ generally ] 2 pieces to it. One is the write-offs and second is incremental provisions required on the loan assets. Now since we have grown our book by [ INR 2,777 crores ], we need to make an extra provisions on those assets. So that is one piece. Second one is that we had 2 burglaries of our branches this quarter. So the impact is about INR 33 crores. We have also made some additional provisions of about INR 14 crores. So that comes to about INR 47 crores provisions we have. INR 33 crores, we have written off, and INR 14 crores additional provision we have made. So that is the reason why there is [ an adjustment. ] Of course, now we have filed insurance claim and some recoveries were made by the police. However, as a prudent measure, we have decided to [ total ] -- decide to write off this loan portfolio. So that is the reason why there is a [ indiscernible ] impairment. Hello?
[Operator Instructions]
Hello? Am I audible?
Yes, sir.
So I wanted to understand other expenses. There's a sequential jump of INR 52 crores to INR 206 crores from INR 154 crores September ending quarter. So what would be the driver of these other expense increases?
So this is primarily because of 3 reasons. One is employee expenses our -- So in terms of other expenses, it is primarily because of 2 reasons. One, there is an increase in rental expenses. Second [ indiscernible ] there is an external commercial borrowing we have done hedging. So there is an unrealized foreign exchange loss because we need to do a mark-to-market. So to that extent, there is a INR 21 crores of impact on hedging -- other expenses.
Last question. We have seen a lot of fintech lenders now doing doorstep delivery of gold loans by tying up with banks. So how are we preparing ourselves for this kind of emerging risk? I don't see a big risk, but maybe in 4, 5 years, it could be. So how are we preparing ourselves?
Yes. So yes, we are aware of some fintech companies who have come into the market recently. So this is our business model that we have also been piloting in certain regions. And we have seen initial successes. And we are also going through a learning curve in order to how to more streamline the process and also give customer convenience as well as make the product more attractive to this set of customers who necessarily would not be the same type of customers who are walking into our branches. So we are also having similar products. And we will be scaling up this, let's say, vertical offering to our customers in the next few quarters.
[ indiscernible ] the impairment charges have going up. So it indicates the subsidiaries. Also, we have had either higher provisions or impairment. Can you comment a bit on that as well?
You mean consolidated impairment has also gone up? Are you asking about the consolidated impairment?
Yes, yes. So you explained about the gold book where you mentioned INR 33 crores is the write-off, INR 14 crores is additional provision. So in the consol book, can you give us a sense which part of the business? Is it the microfinance? Is it the housing finance? Where is this additional impairment coming from?
Yes. So on both our portfolios for our vehicle finance as well as the housing portfolio, we have been a little cautious given the emerging market sentiment to be a little more cautious on the provision side. So we have actually increased the provision coverage ratios in both these entities.
[Operator Instructions] The next question is from the line Shubhranshu Mishra from BOB Capital Markets.
The first one is with regards to your resource mobilization. Now when I look at the cash as a percent of balance sheet, you've been maintaining close to 6% to 7% in the last 4 or 5 quarters. So if we do not have any resource mobilization constraints, why are we maintaining this kind of liquidity in that case? That's the first question. Second, I wanted to understand your growth guidance for gold loans and your credit cost guidance going forward in FY '21, sir.
So after the NBFC crisis, [ indiscernible ] keep our [ nominal value levels. ] Now we are not keeping any [ nominal ] level. We are drawing all the limits and keeping as liquid cash. Now we are moving to a [ indiscernible ] situation of maintaining a liquidity coverage ratio. So I think we need to start doing that by December 2020. So because of this, we are maintaining a higher liquid cash in the balance sheet.
So that is going to be the normal in the next foreseeable future?
Yes, yes. So that's going to be -- it's going to be a normal...
So we will keep our bank lines always drawn, fully drawn?
Yes. Bank lines -- today, we are moving -- banks are incrementally moving to a term loan structure. So we need to -- in order to [ sanction, ] we need to keep them [ away. ]
Right. Sure, sir. And if you could please help me with your growth guidance in gold loans in FY '21 and your credit cost guidance in FY '21.
So in terms of the growth, we had initially guided the market for about 15% growth for the full year. Certainly, we are going to achieve 15% growth and probably we may do slightly more also by 31st March, 2020
No, sir, I'm asking for '21, sir.
So generally, we have been guiding the market for about a minimum growth rate of 15 percentage, depending upon how scenario is emerging, the [ indiscernible ] But I think minimum 15% is something we are looking at consistently achieving.
Right, sir. And credit cost guidance, sir?
So we make a standard -- [ indiscernible ] of around [ 1.33 ] percentage. And in terms of write-offs, generally, it is around 10 to 15 basis points of the loan assets.
Right, sir. Sure, sir. You said 15 basis points, right sir?, 1-5?
Yes, in terms of the write-offs, 10 to 15 basis points.
The next question is from the line of [ Druwe Fanri ] from [ Prospereto ].
Hello?
Yes.
Yes. Sir, just when can we see another rating upgrade for you? I mean is this 3 to 5 years away based upon your assessment? Or some thoughts on that.
I think, you know, this question, you should ask the rating agency.
Yes, sorry.
See, we keep interacting with them. So...
[indiscernible]
So we keep interacting with them. Finally, they have to do it. We can only present our case.
Yes. Sir, the reason I am asking this is even in this kind of an environment, Muthoot has come out very strong and even stronger, I would say. And even in the debt markets, when we see -- as you yourself said, sir, that you issued a bond at 6.1%, which got eventually listed at around 4.2% or 4.4% or something you said. And I think similar is the case when in the retail market or even in the NSE and BSE where your bonds are listed, they are barely available at 10%. So the market itself is understanding the quality of balance sheet that you have. But if this translates into better ratings, can it not help you to reduce your costs permanently or at least for a very long period of time?
Certainly, you are right. Certainly, a rating upgrade is long overdue. But for some reason which is not known to us, it has not happened. Certainly, it will bring a lot of benefits in terms of the rate of interest. And I think we should be able to do much better with the rating upgrade. In terms of all parameters, we have done in terms of business growth, in terms of profitability, asset quality, et cetera. But I think they are also taking time to decide. One good thing which has happened recently in January is that [ indiscernible ] [ shown between ] us to [ raise ] our outlook to positive. Hopefully, Some positive change could happen and very soon.
Right. Sir, and one more aspect. Considering this year was a phenomenal growth period, considering the category doesn't grow too fast in unit naturally, but the operating -- I mean, the other expenses has also increased substantially. And can we see it from here that other expenses will not grow by more than 5% to 10% a year? Or is that a correct way to think? Or some thoughts on that.
See, in terms of other expenses until now, the major variable expense is advertisement. So advertisement expenditure certainly will be increased in our loan book, certainly that has to go. Because this is a retail business, we need to reach out to the customer -- customers and -- so that customers, the first name of recall should be Muthoot Finance. So advertisement expenditure will keep on increasing according to the business increase. One new item which has come in, that is -- at least should have gone into finance costs because it is pertaining to the hedging cost of external commercial borrowings. But because of the accounting requirement, we have to classify this as other expenses. So that is coming to about [ INR 30-odd crores. ] We have treated this as our [ prelim ] for [ exchange ] loss. So otherwise, we should see only a normal increase in all the other types of expenses. Employee expenses certainly will increase according to the [ indiscernible ] business because there is available component to their compensation. So depending upon the increase in business, the variable component also will keep increasing.
Okay. And one more question, last one. In terms of branches, over the next 5 years, what can be our potential maximum branch that we can go up to? If there are any thoughts around that.
See. Right now, we are looking at somewhere 100 to 200 branches in a year. So we are also partly doing certain rationalizing [ indiscernible ] in terms of unviable branches. Depending upon that rationalization, we are -- because we are -- every year we are increasing the profitable number of [ networks. ] So I think more than this addition in the branch, we are also trying to improve our [ indiscernible ] business. So today, if you look, as of December, our [ indiscernible ] business is about INR 8 crores-plus, whereas competitors has maybe about 1/3 or less than half of our [ indiscernible ] business. So that is very critical because we want more and more customers to come to our branch and avail our services. Going forward, the increase in the business will be primarily driven by the inflow of more customers. The number of branches, of course, we will add new geographies. That will keep on happening.
The next question is from the line of Amit Jeswani from Stallion Asset.
Congratulations on good set of numbers. My first question is, sir, the spread this quarter has been about 15.6%, and we've been charging 24.58% interest rates this quarter. What -- is this sustainable?
So our yields this quarter has been good. I think last few quarters, yields have been good. That is primarily because we are able to do a better collections. So the yields are better. In terms of the NIMs, it is slightly on a higher side because our gearing is quite low. The capital is almost like INR 11,400 crores on a book of INR 38,000 crores. So that is also adding to the NIMs. So that is the reason why the NIMs are higher.
Right, sir. Right, sir. Sir, then our cost of borrowing right now, incremental cost of the borrowing is 8.98%, am I right?
So the borrowing cost will be slightly higher. As I said, if you add that foreign exchange loss, et cetera, we should come at -- lie around 9.1, 9.2 percentage. I think we should see that somewhere closer to 9.5 percentage going forward.
Yes. Sir, my last question is, sir, what kind of growth do you expect on the housing book? And what ROE do we target there?
So on the housing book, probably this year, we would end up with an AUM of roughly maybe INR 2,200 crores. And we forecast also probably we will disburse around INR 700 crores to INR 900 crores in the coming financial year. That's FY '22 -- sorry, FY '21. On the ROE side, we hope to maintain or bring it up to roughly around 2% of [ ROEs ] for this business, which seems quite...
So sir, we sell the home loans at our own branches?
Yes. The home loans are sold through our own branches as well as through outside open market. We don't rely on DSAs, but we have our own feet-on-street of salespeople. Incrementally today, we disbursed around 10% of monthly disbursements through our own gold loan branches.
The next question is from the line of Amit Mantri from 2Point2.
In the last quarter, you had mentioned that around INR 200 crores was kind of like one-off income because we were able to charge interest even on overdue accounts, and even penal interest you were able to charge. So in this quarter also, have yields benefited because of your ability to charge penal interest. And can you quantify that one-off kind of income that has come this quarter?
See, it is not -- we don't want to say it is a one-off kind of thing. So you have -- once the loans [ cost is ] 12 months, you have all the penal interest, the compounding effect, et cetera, will come in. [ And you follow those interest ] [ indiscernible ] collections which have penal interest, in nature. So when you have a better recovery, and now you -- all these amounts come at a collection, which [ has no ] yield benefit, which is what has happened. And because the cost of funding has gone up, of course, with the NBFC crisis, we have increased our rates also in the -- I think from July -- June onwards. June onwards, we had increased our [ trading ] rates also. That is also partly the reason why there is a higher yield.
Sir, can you quantify on -- because of penal interest, what would have been the additional revenue that you are generating, interest income that you would have generated this quarter?
I think I don't have -- not have -- done that exercise. So I have not looked at it, but probably [ indiscernible ]
Sure. Understood. Second question, on the tonnage growth -- so on a Q-o-Q basis, it's around little bit more than 1% on the gold finance business. So while AUM growth is quite good, or that has come because of higher per gram rates. So what is the approach on tonnage growth [ indiscernible ] tonnage growth will continue to be robust as it used to be earlier?
I think that -- we don't monitor the tonnage growth because tonnage growth is a direct outcome of the what rate at which we are going to let. Now when the gold prices go up, actually, the company decides to increase the advance rate per gram of gold. Customers need not pledge more gold to take the same -- the amount he wants, suppose if the customer [ wants to return those rupees ]. And the price of the gold [ indiscernible ] he need not -- for the same amount, he needs to pledge only a lower quantity of gold. So we don't monitor. So gold tonnage, we are just showing this because to show the quality of the asset book and how good we have collateralized loan book. So beyond that, for our business purposes, we don't monitor the growth in the tonnage.
Okay. Last question, your current [ entity ] [Audio Gap] are -- they are around 61%, right? And is that as per the December gold price -- December-ending gold prices or as of current gold prices?
So that should be as of December 31 prices.
So after that, gold prices probably have gone up another 5%. Your current LTVs will be even better than on the December book basically?
Yes. Of course, we also lend at a higher advance rate depending upon the increase in the gold price. So on a daily or on an average, our average LTV on the total book should be somewhere around 70 percentage. Of course, when there is a sudden increase in the gold price, it tends to come from -- that's why it is 61 percentage. So on a stable price level, it should be somewhere around 70 percentage.
The next question is from the line of Utsav Gogirwar from Investec Capital.
Just a couple of questions from my side. What percentage of active gold loan customers and retail NCD customer overlap with each other?
No, no. I think -- no, a very negligible I think. Maybe some NCD customers might take gold loan. But [ indiscernible ] pure gold loan customers may not come and invest in a NCD. Because the NCD's average ticket size itself is around 2 lakhs, whereas gold loan is -- borrowing is about INR 40,000. But of course some NCD customers might take a gold loan.
Okay. And sir, second question is with respect to the acquisitions. So I just want to understand our thought process. Are we looking at further acquisitions in any specific segments? Or any color you can provide on that?
As of now, we are present in almost all the businesses, which we have -- can be linked to our branch network as well as we -- it can be linked to our core business. So there is no plans for any inorganic growth as of now. And right now, currently, we are not looking at any other acquisitions other than what we have already mentioned.
The next question is from the line of Sanket Chheda from B&K Securities.
[Technical Difficulty]
[Operator Instructions]
Hello? Is it audible now?
Yes, sir.
Yes. So I just wanted to understand what led to a sharp [ investment ] in our asset quality this quarter.
So I think we have been explaining this every quarter. See in our [ own business growth, ] Stage III asset or a NPA asset is not something which -- what may not be concerned. In terms that we are giving some extra time to customers [indiscernible] Stage III numbers go up. Today, we are having better collections. So we are able to contain the -- our loan portfolio which is going beyond 15 months. So other than that, there's no specific reason. [ One ] needs to be attributed to the movement in terms of the NPA [ of the stage ].
Okay. Okay. And sir, in case this gold price is more of like INR 30,000 to INR 40,000. On INR 30,000, suppose you would be lending around INR 20,000 [ indiscernible ] if gold prices move up to INR 40,000. Do you provide an option to the borrower of borrowing some more money if he needs to, to maintain a same LTV?
So just because the gold price has gone up, the regulatory ceiling certainly goes up. But that doesn't mean that we are going to let. If we are comfortable with the price or the trends in the price. As per our internal loans, we can take it for the [ lender ] to increase price. So if we decide to give it, certainly, we can do a top-up. If we don't give it, somebody else will give this top-up. [ indiscernible ] decide not to increase the [ run rate, ] then certainly, that benefit will not be available.
The next question is from the line of Kunal Shah from Edelweiss.
Yes. Congratulations on a good set of numbers. Sir, 2 questions. Sorry, again, getting on to the operating expenses. [ Many times ] I had to look at the breakup of the operating expenses which you had given. In that, the other operating expenses, now that's growing quite significantly. Sir, you mentioned the -- maybe the -- or maybe INR 21-odd crores are because of the foreign exchange borrowing, which we raised. But what would be the other component? Because that seems to be quite high in this particular quarter. So is there anything else as well in this other operating expense, which is moving up from, say, INR 55-odd crores to INR 120-odd crores?
So if you look at the -- see in the presentation, the details are there. So the advertisement expenditure is INR 44 crores, whereas in Q2, it's just INR 21 crores.
No, no. I'm ignoring -- no, no I'm ignoring advertisement. I'm just looking at the breakup of operating expenses. So in the last line, which is the there, other, okay, which INR 120 crores. So if I look at that run rate of INR 120-odd crores, so in that the breakup of operating expenses, ignoring rent, ignoring advertisement, everything, just others component is extremely high. And if I look at it, that's almost like 23% of the overall operating expense. I'm not able to get what is this INR 120-odd crores. Because normally, it's like INR 30 crores, INR 40 crores.
Just give me a second.
On Slide #36.
So no, it should be the ECL provisions as well as bad debts provision, bad debts.
So yes, sir, ECL provision, it is coming into this others line item?
Yes.
Okay, okay, okay.
So look at from the [ results ] which we have declared, so if you add up that, it will come to that. So we have compiled everything in that others.
Okay. Okay. And the entire delta, which is there in this provisioning, that is getting reflected in others?
Correct. Correct.
Okay. And this ForEx, which we have raised, so now -- maybe we had seen some -- maybe some loss on ForEx exposure. So, is that unrealized loss? Or maybe is this hedge, unhedged? And should we see any kind of a volatility or -- with the exchange rate changes?
No. It is completely hedged still [ indiscernible ] both interest and [ indiscernible ] [ to the hedge. ] But because of the accounting, we need to go [ aftermarket ] every reporting [ day. ] So no, there could be small variations happening on this on a regular basis. Ideally, this cost should have gone to the -- it should be a part of the finance costs for understanding purpose. But because of the accounting requirement, it is coming as a part of other expenses.
Okay. Okay. And then lastly, in terms of the housing finance, so there, our GNPAs have also gone up and our disbursements have slowed down. So is this the normalized level? Or we are seeing a higher stress, and that's the reason we have decided to go slow on the housing finance and profitability is also sequentially lower? So how should we read into this entire maybe AUM being down, disbursements being down and GNPAs being up in housing finance?
So yes, this should be around the level of the NPAs. So I think given the stress that I think some of the markets that we are operating in, especially the segments that we are operating in is going through, we have seen some NPAs increasing. So I think going forward, this should be around the number.
Okay. And in the disbursement of INR 10,000 crores per month, so the payout would be 12 months for all the disbursements? Or there are any shorter tenor as well?
So no, our products are all for 12 months.
So then in terms of this INR 8,000 crores of monthly collections, so our overall AUM was nearly INR 36,000 crores as end of Q2. And I think monthly collection is INR 8,000 crores. So if I look at quarterly collection, then it's almost like INR 24,000 crores on INR 36,000 crores of AUM being collected. So just not able to get it. So this is like only gold loan or this includes MFI, everything into this INR 8,000 crores maybe -- monthly collection?
Just look at the previous -- no, no, no. Just look at the previous years. It is almost similar. This is what [ some of you ] always used to say. If you look at the next slide, there you can make out 60% of the portfolio comes from the first 6 months itself. So there is a regular disbursement as soon as [ collection happens. Of course, there will be a small amount of rollovers, but in our case, there's no need for a customer to do a rollover for 12 months because he's not getting any benefit by doing a rollover. [ indiscernible ] profit on our product? Customers will have to do a rollover every 3 months. So in our case, it's -- this is actual disbursement as well as collections. Of course, there will be some customers, which will be doing a top-up. So most customers will have to [ indiscernible ] close a loan and take it fresh. To that extent, there will be some variations.
So is it more refinancing which is getting reflected in this number? Because see, if I look at INR 36,000 crores of AUM and say 60% coming in first 6 months, and if I look at INR 24,000 crores of the collections in this quarter, so it's [ indiscernible ] to me more like a refinancing of the same loan because -- and maybe in this quarter itself is giving more than 60-odd percent, 70% in quarter.
You have been studying gold loan sector for so many years. I never expected this question from you.
No, no, sir, it's substantially higher this particular quarter, so I'm not able to get it.
If you look at for so many years, we have been saying that our balance sheet churns almost like 3 to 3.5x in a year. Because that is the [ indiscernible ] why should I look at that next chart, no? If you look at the smaller buckets, if I disburse 100 loans in a month, 10 loans get repaid in the same month itself, [ 22 ] loans get repaid in the second month. So in the first 6 months, 60 loans get repaid. So it's not a new -- [ not ] the same customers. Why should a customer he's given a period of 12 months, now why should a customer close the loan and take it fresh? At least until [ indiscernible ], he may not do that, right? What is the benefit he is getting by that? So these are all repayments. So today, they might be taking a loan, [ we ] might be repaying it. Tomorrow, [ we ] might be taking a loan and they might be repaying it. So that's the way that business works. I think this we have explained in several forums.
[Operator Instructions] The next question the line of [ Kripthi Agrawal from Vital Capital ].
Congratulations on an excellent set of results. I have 2 questions. The question on the yield, which the other participants have also asked. I just want to know whether this percentage, which is almost like 24.5% in this quarter, is this sustainable even for the coming quarter given that you would have increased the rates and perhaps would not rollback? That's my first question. And my second question is I would like to know your comments on the CP market. Because we hear that there is some revival in that market. And given our track record and credit rating, can we expect you to access this market and benefit from the low cost of funds incrementally?
In terms of the first question, the yields are higher, one. We are able to collect all this penal interest, et cetera, once if the loans cross beyond 12 months. So [ lot of ] loans you collect the full amount, because the price have gone higher, so you are able to recover more. Second thing, we have increased the interest rates [ indiscernible ] last year, so that benefit also should be come in yield. The second part which you are asking is about the CPs. See, we have been placing CPs throughout. We never faced any challenge even in the midst of NBFC crisis. We have increased our CP ratings in November 2018 from INR 4,000 crores to INR 5,000 crores. There is tremendous demand for our CPs, and we are able to place it on a regular basis.
The next question is from the line of Kislay Upadhyay from Abakkus.
Congratulations on the quarter. On the statement of borrowing costs, including the hedging MTM hit being around 9.1, 9.2. Is it [ growing little bit, ] can be 9.4, 9.5?
[ indiscernible ] might be possible. Of course, this quarter, certain portion has gone to the other expenses. So I estimate that's about 9.2 to 9.3 versus -- when you do an averaging, there is an averaging effect also. I think my cost should be somewhere around 9.2 to 9.3. Perhaps it can go up to, [ indiscernible ], it can go to 9.5, let's see how it is evolving. CP rates are also significantly up also. So those benefits are also coming to us. So I think, currently, it should be somewhere around 9.2 to 9.3. And there is a possibility that it can move to 9.5. It can be lower also. So it should range between 9.2 to 9.5.
Yes. But I actually wanted to -- why do you believe that it can go further up? I would have expected the other way, actually.
No. So the CP rates play an important role. I don't think that other than this quarter, the CP rates are going up. So I think we should have this benefit in this quarter also. And generally the rates are also declining. Since you asked, I said, currently, the rates is around 9.2, 9.3. There could be small variations in terms of the borrowing cost. I'm not expecting it to go beyond 9.5, at all there is an increase.
[Operator Instructions] The next question is from the line of Nirmal Bari from Sameeksha Capital.
Okay. Congrats on the very good...
[Operator Instructions]
Yes, am I audible now?
Yes.
My question is on the yields again. They've been ranging in a very high range, which had not been there in the past. So are we looking at -- or are we in the process of reducing interest rates? Or there is nothing sits on the table?
No. So these are [ indiscernible ] loans. So we generally increase [ indiscernible ], depending on the cost structure we take a view on this. So as of now, there's no plan to reduce the range. Of course, in between -- see, this is more a shorter term [ than long. ] So when there is a low investment in a particular geography, we try to [ migrate ] that particular geography through lower rate schemes. So that keeps happening on and off. So there's no particular [ area ] otherwise. Generally, we have not taken any call to reduce the rates.
Okay. So we can expect similar yields to continue in the coming quarters?
I think this quarter also, it should -- we should do well. But we don't have any plans to have a general reduction in interest rates.
Okay. And sir, for the MTN note, you said that the MTN notes are trading at 4.38%. So what would be the all-in hedging cost for this note?
See, we had issued at 6.125 percentage. So combined, the hedging cost it's in double digits. But going forward, we should see that coming down to single digit. [ Made an ] issue, we had to take that call.
The next question is from the line of [ Rushabh Guatalia ] from Kotak.
All of my questions have been answered, so you can move to the next question.
The next question is from the line of Ravi Naredi from Naredi Investment.
Some disturbance was going on in Kerala about former employees or current employees. How is the situation? And how is the MD now? Some manhandling was there, so I'm just asking for that.
Okay. So see, Kerala is notorious for these activities. That is the reason why in Kerala, no industries have survived. No industry wants to come together, set up a factory. Unfortunately [ indiscernible ] that's why all -- you'll see Keralans everywhere across the globe. So here are some service industries are there, which is somehow managing. You cannot expect any different story, at least in the near term in terms of the industry [ indiscernible ]. Because the past several decades it has remained like that. It is not going to change.Now coming to us, our businesses in Kerala is just 3%. That's about INR 1,200 crores. You see the growth during this quarter itself is around INR 2,700 crores pan India. So for us, Kerala business is immaterial. Earlier, we had set up -- we had opened, I think, around 900 branches plus. And over a period, although we had reduced that because of -- main reason is that earlier we used to take these NCDs at a private placement through all branches. So a customer could walk into our branches, give a check, fill in the application form, [ indiscernible ] normally gets collected, and they're [ not ] used to come to the branch for collection of interest, principal, renewal and a loan debenture certificate [ current ] Rate, et cetera. So a lot of servicing was happening through the branches. And primarily, this collection was a bit [indiscernible] in Kerala branches because that time, the size of the company was quite small. Today, we are doing everything in through [ be materially strong ] and through public issuances. Now with the [indiscernible], we don't need any [ indiscernible ] with all the servicing are done by the registrar, for us it's the Link Intime. So no servicing is happening at the branch other than the initial application. For collection of applications, we don't need this kind of branches. So -- and Kerala, many of you might be aware, the credit uptake in Kerala, because of this interest rate environment, the credit uptake in Kerala is quite low. Kerala is somewhat a [ risk-state ] because of a lot of risks and [ inherent ] risk [ indiscernible ] happening. So gold loan business is not very high in Kerala. So the need for so many branches in Kerala is not there. So it is not going to adversely affect our business. I know that at our business outside Kerala, these are around [ INR 5 crores, ] Kerala is just about INR 2 crores. So the need for these so many branches is not there in Kerala. So that's the background. So this situation might continue. I'm not expecting the people here in Kerala to change overnight. They have not changed in the last 50 years, so they're not going to change in the next 50 years.
Yes, yes, yes. And sir, one more thing, you...
You are also asking about...
Yes. MD. MD. MD.
All right. MD has been attending office [ indiscernible ] from the next day onwards, so there's no issue there. Lucky, he a -- it didn't hit on his head, so thanks to God for [ protecting ] us. So MD is all right. Unfortunately, he could not join the call today.
I see. We wish all the best to MD and all [ over your staff. ] And sir, you are maintaining a very high cash balances. So what is the reason? And what is your -- how you are doing the hedging against the bonds?
So as I said earlier, today, we are maintaining a lot of cash balances because, one, going forward, we need to have a liquidity coverage, et cetera. So we are maintaining everything in liquid investments or else deposits or else cash balances. So that's going to be the approach we are following. And in terms of the hedging, we can -- we did the forwards as well as cross-currency swaps.
Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to the management for closing comments.
So thanks, everyone. We had a good attendance today for the call. And we hope to continue our performance in the coming quarters. And last year, we had about 18% growth. We hope to be near to that or better than that. So let's have -- meet again in April, May, thank you.
Thank you. Ladies and gentlemen, on behalf of Antique Stock Broking, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.