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Muthoot Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Muthoot Finance 3Q FY '23 Earnings Conference Call hosted by Motilal Oswal Financial Services. [Operator Instructions] Please note, this conference is being recorded. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal. Thank you, and over to you, sir.
Yes. Thanks, Vikram. We have with us today the senior management of Muthoot Finance represented by Mr. George Jacob, Chairman; Mr. George Alexander Muthoot, Managing Director; Mr. Alexander M. George, Whole-Time Director; Mr. George M. Alexander, Whole-Time Director; Mr. George M. George, Whole-Time Director; Mr. George M. Jacob, Whole-Time Director; Mr. Eapen Alexander, Executive Director; Mr. K.R. Bijimon, Executive Director; and Mr. Oommen Mammen, Chief Financial Officer. We, at Motilal Oswal, thank the management for giving us the opportunity to host this earnings call today. We will begin the call with opening remarks from MD, sir. And post that, we will open up the floor for Q&A. Thank you, and over to you, Mr. Muthoot.
Thank you, Motilal Oswal. Good day to all. Welcome to the conference call of 2023, Q3. The consolidated lower assets under management increased to INR 65,085 crores, which is up by 7% year-on-year. And the consolidated PAT also increased to INR [ 934 ] which is also up by 4% quarter-on-quarter. Stand-alone assets under management is INR 57,731 crores, which is up by 6%. Standalone profit after tax, we said INR 902 crores, which is also up by 4%.
We have received permission to open 150 branches. We have opened many branches in the last 2 quarters. In this quarter, we opened 54 branches. Another 30 branches are remaining, which will be opened in February and March. And all the 150 will be completed by March. Thereafter, we plan to approach the regulator for the next set of -- maybe 150 or more branch -- 150 branches. And all these branches, which opened after -- all over the country in North, East, West and South. We have also raised [ INR 432 crores ] through the [ 28 and 29 ] public issue of the secured redeemable-nonconvertible debentures. And we have also launched marketing campaign, showcasing the message, Put Your Gold to Work. We have done a very good media publicity on this, and it is actually started showing results. And all the other comments are also with you. All the other financial highlights are with you. I think I will now close and then probably open up to save for questions and answers. Thank you.
I have with me all the others, some of them, in-person, in the room, are our CFO, Mr. Oommen; and our ED Mr. K.R. Bijimon. The others have joined online. [indiscernible] Okay. Thank you.
Should we now open the floor for questions?
Yes, please.
[Operator Instructions] We have a first question from the line of Vaibhav Badjatya with Honesty and Integrity Investment.
So we are now into upper layer -- it could be classified as upper layer NBFC. So if you can help us understand what is the incremental regulatory restrictions or the -- or any other restrictions, which is there on us as being part of upper layer NBFC as compared to any other lower layer of NBFC?
And I think there are no restrictions [indiscernible] what disclosures and compliance. It is more of disclosure and compliances. And to tell you the fact, in the last 2 years, it's just -- we have been [indiscernible] compliance many other -- really more reports and regulations. And to my personal understanding of this, there is nothing much we need to do a fresh compared to as being in an upper layer, because every year, we are inspected by the Reserve Bank, every year that reference is also just over. So as soon as -- after the inspection, they give us more and more new compliances, new disclosures, et cetera. [ RAR, RMPR ], all those risk mitigation plans et cetera. Everything has been there for the last 2, 3, 4, 5 -- 4 quarters it was there. And all these things, we have started complied. And I think the upper layer bracket just puts all these things together at least.
And this one -- another compliance, which is there was the company to get listed. We are already listed, so I think some of the companies in the 16 number group, some of them may not be listed probably they'd like to get listed. So that's what I said, as far as we are concerned, there is nothing much more to be complied. And to answer your question, there is no restriction.
So difference in terms of regulatory requirement relating to minimum capital adequacy or the risk [indiscernible] nothing like that?
Yes, that's all there. That's all -- already been there. So all these things have already been complied just -- nothing -- new additions to be done.
Sir, for you, there's no incremental thing. But what I'm saying the difference between the lower layer and the upper layer?
Yes, yes. That is there in the act or the relationship. Yes, yes, yes.
We have next question from the line of Shweta Daptardar with Elara Capital. Lost the line of Shweta.
We take the next question from the line of Sagar Shah from Phillip Capital.
Actually, my first question is related to -- I wanted to understand a little bit about the ground -- on the ground regarding our gold finance business. As we have mentioned in your presentation, you have stopped the teaser loans actually, which was low yielding in nature. But now you -- I think you were suggesting that the competition is decreasing, especially maybe the competition is realizing and the gold finance business is not as easy as it seems actually. So wanted to understand that are we in such a phase that will return to the -- return to the era in which we clocked almost a double growth in AUM almost every quarter. So will we return to that? Or are you seeing some different signs on ground? That is my first question.
So I think you're right. We have said like that competition that people [indiscernible] into the gold [indiscernible] slowly to realize [indiscernible] operationally challenging business signal, that's one part of it, and that is the sense I get from my branches from the -- branches and the staff there that we work one side of it.
The second, your question was whether we will return. Hopefully, we should return, whether it will take 1 quarter, 2 quarters or 4 quarters, which is yet to be seen. But to me, after 3 or 4 quarters, we should get back to the double-digit growth.
Okay. So basically, the demand from -- the demand or the -- you can say that the demand from the customers would be on the higher ticket range or the lower ticket range, sir. Can you specific a ticket size range, there is -- you will be seeing some incremental demand?
No, no. The demand is there. It depends on the location. Maybe in Tier 2, Tier 3 cities which is the lower one. And in the bigger cities, it's maybe the higher one. But it's not a big differentiator because the -- depends on the type of people who are coming there. It's not just one pace -- in the area only the -- maybe the lower level people are coming. No, everywhere what type of people are there.
We see demand coming from all over, because people need purchasing power, whether it is the lower level, middle level, or upper level, everybody needs more money some people need more money. So I think generally, our average ticket size is about INR 70,000. So you should see that the people in that way this -- the people are coming to us mostly.
Sure. Okay. My next question, sir, was related to our non-gold finance businesses. Right now, they constitute around 12%, and you have mentioned here in your presentation that you would be -- you intend to actually grow that businesses to increase the proportion of those businesses out of your total AUM. So any specific number that you would like to throw that in the next 2 years, you would like bring back percentage into the -- up to this percentage of total AUM? Do you have a target?
Yes, it is almost 12%, 13%, which was -- a year back it was 10% really. Now it is 13% -- 12% to 13%. So what we have done is we have started a few non-gold loan business 3 to 4 years back. This is the personal loan, the home finance loan, vehicle loan, MSME loans, et cetera. And soon after that, COVID also came, and we went slow on that. But during the COVID, we were able to -- we were able to moderate all these businesses and also learn many things from there, so most of these loans were meant for even to our existing gold loan customers.
Now that the COVID et cetera is behind us, these businesses have now started growing, and we are giving focus there also. That is why you see our non-gold loan portfolio is also starting to increase. And we have not put on any specific numbers there. But in the next 3, 4 years, we would like -- or 3, 4 years plus, we would like this to grow to 15% and 20% is what is in our mind.
But at the same time, all our focus is -- the first priority, first preference will be for growing the gold loan business. And there is what we would see a 10% growth maybe in the next year. End of next year, we should see a 10% growth in the gold loan business. And in the others, the proportion should reach about -- maybe, start growing from 13% to 14% to 15%, probably about 20% by 3, 4 years.
Okay. Sure, sir. So basically, you are -- actually you're saying almost 10% growth in your gold loan business. So that's quite less as compared to, you can say, the pre-COVID levels. So it's just because of the competition you are specifying this low growth actually? Or is it something else?
No, it is kept as [indiscernible] it is a conservative estimate, that's all. We just be conservative, that's all.
We take next question from the line of Umang Shah from Kotak Mutual Fund.
Sir, just related to -- my question is just related to growth. If I also look at your number of loan accounts outstanding, we are significantly lower compared to where we were, let's say, in March '21. And even during the year-to-date period, the number of loan accounts have been shrinking. If you could just give some color as to what exactly is happening in terms of new customer acquisition? And how do you see the pace of new customer acquisition, kind of, shaping up over the next 1 to 2 years?
We were not giving too much importance to the number of customers -- generally looking at the [indiscernible] because that is where the money [indiscernible] not in the number, probably not pretty sure about these numbers, but then we are focusing more on the gold loan [indiscernible] that has been steady, it is not coming down, slightly improving that.
But sir, okay. So in that way, if you could just help me that whether the competition in the high-ticket gold loan segment has it kind of subsided? Or -- because on the ground, I mean, do you see banks as well as other NBFCs getting significantly active in the large ticket home loan segment? Or do you believe that is not the case?
No. It has been -- the competition is there from NBFCs, et cetera. The list of companies, they're also competing for the same business. I wouldn't say competition. Everybody try to give loans or new business -- get business from all these people, whether it is the smaller fellows probably, some banks gives small homes, some banks give -- generally banks give a bigger loans et cetera. Even banks also sometimes give lower loans to probably be as agricultural loans, et cetera. So in that sense also by banks are doing this.
Understood. Sir, the other question again was to a growth aspirations for next year you -- you indicated that you would like to grow the stand-alone gold loan business at about 10-odd percent. For the current fiscal also, we had, kind of put out a number -- a similar sort of a growth number. But if I look again during the year-to-date period, we are almost flattish. How should we look at growth from FY '23 perspective as well?
And also, if you could just provide a little context from -- against the background that the gold prices have been increasing last quarter as well as in the current quarter, but that doesn't seem to be reflecting into our gold loan AUM growth and LTV seems to be dropping. Just wanted to understand a little bit on that front.
See, we dropping this because the gold price has gone up. The LTV likely should drop. We have -- we are seeing growth in the last 2 months. So that is why you see a small uptick compared to last quarter, that's what we have seen. And the next 2 quarters also you should see better gold loan growth. So we should end the year with about 3% -- 4% to 5% growth for the end of the year. That's what our expectations are. So on that basis, that we expect the next full year to reach about 10% growth. That's what our expectations are. So you see growth has started coming back, and that is what we see.
Understood. And sir, just the last question was on the subsidiary performance. So if you go to look, clearly, the micro finance subsidy seems to have come out of the goods and growing pretty -- at a pretty steady clip. But if I also look at the housing finance business now, the AUMs for that business have been fairly stagnant for a good period of time. So from a consolidated AUM perspective, how should we look at the overall mix between AUMs from a 2- to 3-year perspective? That would be my last question.
That's what I said, we would like to -- we're there even slow [indiscernible], especially the home finance and the personal loan and the vehicle finance book slowed during the COVID time. Now it is behind us, we have now restarted growing these things. And we have now a new CEO for the co-finance also who have joined us 2 weeks back. And we have mandated -- or we are planning and budgeting for a very substantial growth in the home finance sector also -- home finance business also becoming listed up, specifically for [indiscernible] finance.
In the personal loan sector also, we have now tested the waters in the last 2, 3 years. We have gone through a cycle with -- with COVID also we have learned quite a few things. We have understood. We have modified our systems or processes, et cetera. And you should see the personal loan book also growing, so also there [indiscernible]. So all the other loans, we have now put correct people in place vertical heads in place, and we should see growth coming in those also in addition to the goal one.
We have next question from the line of Shubhranshu Mishra with Phillip Capital.
The first question is around the branch expansion. We have increased most amount of our branches in West in third quarter. However, if I look at the productivity of branches, the East -- the branches in East India are way more productive than West India. So it seems a bit counterintuitive why we are not increasing more branches in East India. That's the first question.
The second question is around the growth and composition when I look at our website, there are so many schemes which are listed at lower ticket sizes for -- loan interest rates as low as 9% and going up to ticket size of almost up to INR 5 crores. So is competition a real threat? What kind of ticket sizes and is the competition really active in?
And the third is a data-keeping question, sir. If you can split the AUM into less than INR 1 lakh, INR 1 lakh to INR 2 lakh, INR 2 lakh to INR 3 lakh, and INR 3 lakh above as a proportion of AUMs it would be very helpful?
So the first question is about geography. So we are aware where were the business -- per branch business may be high in some geography, some regions. We'll be opening more and more branches in those areas, definitely we should look at many other factors also when considering to open branches that are security, safety reasons also -- which also -- we have to take into considerations when opening branches. So that's assured that there is a growth potential in any place we will be the first one to open branch there.
The second question was about people offering low interest rates. So I think I should answer all this in one way -- one word only. There are so many players coming into the market now. Some are -- everybody thinks that gold loan is a very easy business -- easy-to-run business [indiscernible] that is what people outside are thing. But once you come in really, they feel that -- to get business have to offer loans at 6%, 7%, 8%, that is one set of people. Others are thinking better you can take 2 or 3 employees from [indiscernible] or some other place and start their business, fine. But there -- and there are few things which are very operationally, very challenging for any gold loan business.
One is the frauds, which happened in branches. Whether it was -- see all the -- all the new players, et cetera, especially banks, they rely on an external appraiser for appraising the gold, whereas Muthoot generally do it in-house. All our branch and all our staff are trained to do this. So this thing is done in-house whereas people outsourced it, that is again a very risky proposition, which people will relate only after a while, not initially after a while.
The second is we have started the loan [indiscernible] to help our customers to bring -- help our customers to get their gold to Muthoot. And we send our own staff to collect the gold, whereas most of it including banks or over does that our third party -- is the third party who is going to collect the gold. And customers are never comfortable with hanging over their valuables to a third party who will take it to maybe X bank or Y bank or Y NBFC. So given that -- this is -- as you see -- reading the papers also so many staff frauds, et cetera, happening in branches.
We have a team of 1,000 odd staff. 1,000 on staff who goes around these 5,000 branches and ensures that the quality, quantity, purity is [indiscernible].
Now we have a 13-layer security systems in our branches. [indiscernible] to prevent all sorts of robbery, burglary, et cetera. So these things we have invested money into this, invested time [indiscernible], people are not realizing, everybody is delving into this offering at 9%, you said, I don't know, if that 9%, INR 5 crores, INR 10 crores, et cetera. I don't know what is their math in that, what is their finance expense, what is their profit in that.
So finally, what is happening is -- we have been -- what happened [indiscernible] many players jumped into the gold loan business, taking it is very easy, et cetera. After starting to do business, after growing the business only, they realize the implications, the operational intensity, operational challenges, et cetera, and they are losing trust. So that's what I said slowly, the intensity is coming down, and we should see only serious focused players in gold loan continuing this. All the others who come into just seeing like everybody, getting attracted like may be attracted to this business, they will come after some time, they realized and others just -- the profitability side, whether it's the controlled side, whether is the fraud side or the safety/security et cetera, people will realize fully after that. So I think it is just a matter of a little time that -- it is -- that was tied that we will get back to our old business.
Right. So just one counter question, if I have given the chance, as we understand gold finance so well. Would you want to give a blue sky guidance for growth in FY '24, please give any conservative estimate of around 10%. Would there be a blue-sky scenario as well, like 15% to 20%, if you can comment on [indiscernible]?
So we just give a conservative number only. [indiscernible] it's not that tomorrow everybody is going to stop [indiscernible] takes some time, maybe 1 quarter, 2 quarters, 3 quarters. Let us give it some time, we are not -- not that we are making the losses. We are making reasonable profit in sort of the big profit of [ INR 3,900 ] crores. We have not -- we are making something little smaller [indiscernible] in a year. That's all. Other ways, nothing doing. So we have made about [ INR 900 crores ] every quarter. So I think that itself is reasonable to sustain. But I don't know what the new price, we won't be able to sustain this.
Sure. Sir, my data keeping question, the ticket size by AUM split, sir?
Yes. Less than INR 1 lakh will be about 41%, between INR 1 lakh and INR 3 lakh it will be 35% and about INR 3 lakhs will be 24%.
We have next question from the line of Shweta Daptardar with Elara Capital.
A couple of questions from my side. The first be similar to what earlier participants had raised. So why on sequential basis where LTVs have dropped from 69% to 65%? Is it the outcome of competition? Or should we attribute to anything coming from the regulatory side?
No, it is just because the price of gold has gone up. The price of gold has gone up. So the LTV will be lesser.
Okay. Okay. Secondly, so you guided for 10% growth, right, for the forthcoming year. What ticket segment should drive this particular 10% growth? Should we presume that low-ticket gold loan market is sort of not coming back and [indiscernible] because your ticket sizes have also gone higher, right? So largely, this near-term [indiscernible] growth is going to come from which ticket segment?
No, we have not looked at ticket sizes. We feel that the growth will come from all the branches. We have not looked at the ticket size growth, et cetera. It's not that we are particular only high-ticket loans or low ticket loans. Who all comes from gold loan whether high ticket or low ticket or prices are -- I keep to do that. I don't think we differentiate between high ticket, low ticket, et cetera.
Sir, There is gold loan demand on the low ticket size as well even today?
Yes, yes, there is. Definitely that is why our average is still about 35,000 only, not because we have people taking 5,000, 7,000, 10,000 also. So many people are like -- definitely, any customer who comes to the branch, we will service them, irrespective of the ticket size.
Okay. Sir, one last question from my side. Are we, by any, chance cross-selling any of our gold loans through our Belstar MFI customers?
MFI customers, no, there's nothing like a cross-sell, et cetera, for MFI customers. MFI customers take MFI loans. Gold loan customers take gold loan. If customer who has taken a vehicle loan from somewhere, Bajaj will also take a gold loan. If somebody was taken at a housing loan from State Bank of India, we also have a good loan is all there. There's nothing like a cross sell, et cetera.
We have next question from the line of Shreepal Doshi with Equirus Capital.
So I wanted to ask about [indiscernible].
Sir, I'm sorry to interrupt, Mr. Doshi. Your line is not very clearly audible. Could you please use the handset and come to an area where the network is stable? And then ask the question.
Can you hear me now properly?
Please go ahead.
Wanted to ask you about what is -- like have you created the policy with respect to acquiring customers from other banks and NBFCs in the gold financing space? And I also wanted to understand if some employees has left us, because there has the strategy when other NBFCs and banks are acquiring our employees. So do we have a policy where in we expect them back when they come back? So just wanted your thoughts on that space.
Acquiring customers have -- acquiring staff is [indiscernible] anyway. Jokes apart, people have gone away [indiscernible] if they come back, if we feel that he was a good resource and even -- he went -- by mistake, we will take him back [indiscernible] policy of, maybe, taking -- from where our sources [indiscernible] we will take, whether it is from bank or customer, everywhere somebody brings it, if we take it from the bank and come, we'll take it. If we take you from an NBFC come, we take it, from house also we will take it.
No, no because, like we have done some [indiscernible] suggested that we had some restrictions with respect to say [indiscernible] cases for gold and also for employees as well. So just -- so have you treated these policies in the recent times? Or just...
No, no. Anybody who asked -- if he is a good person, we cannot -- we will take him back.
Got it. Got it. And just why the GNPA number sequentially has gone up?
Sir, NPA.
Yes, NPA number has sequentially increased by almost 50%.
Nobody, usually asked that question, at least analysts don't ask. Only the press people ask about NPA. NPA for gold loan -- doesn't affect the P&L at all because the 100% gold is there. We get back the interest in [indiscernible]. So maintaining some customers, although their NPA definitely a customer-friendly approach. Because customers otherwise the next option is when -- the NPAs are becoming because it has crossed the time limit. So if you give them little more time, we'll take it back otherwise we have to auction the good. So option the gold is very painful to the customers. So when customers request, we give more time. And since we are in the money, especially now that there is a gold price also high, we are in the money -- so what you see as NPA, it is not some hard -- or deposit et cetera, it is people to whom we have grown some guide to feedback the credit loss. We don't -- there are not credit losses sir. Credit loss were only 0.02%.
Yes, that is -- yes. Got it, sir. And sir, so incrementally, you've been guiding for a 10% growth. So that will be broadly -- so how much of it could be driven by these new branches that will be adding?
See, new branches, last year, we are opening about 150 branches. They're not going to grow much in the first year. So in coming years, those branches will start getting results. But more than that, we have capacity/capability of doing more. So today, our average per branch business is about INR 11 crores plus. So any branch -- there are branches with INR 30 crores, INR 35 crores or INR 40 crores also. So potentially, every branch can do this, depending on the location and the type of people, community they serve. This can go up to even INR 30 crores or so. So even with those branches, the [indiscernible] can really go up. But then opening branches in good places is definitely something which we need to do and that we are doing. So next year also we will be opening our new branches. New branches definitely adds to business, but not to very substantial business in the initial 1, 2 years.
Got it. And so also, we are requesting for another 150 branches, right, you said in your opening remarks?
Completed. It is completed. Once we will ask request for the next set of branches.
Got it. Is there any yield increase that we are doing incrementally, pricing?
Yield increase actually, we do when the cost of borrowings goes up. So if their cost of borrowing exits are goes up, we will pass on that to our customers because we tried to maintain our NIM.
We have next question from the line of Pradeep Agrawal with Systematic Shares and Stocks.
I have a couple of questions basically on the teaser book side. So while we understand that in H2 FY '22, we had a large part of the book, which was about teaser rate loans, which got matured in this quarter and some mature in next quarter. So what will the adjusted growth in AUM this quarter on a sequential basis as we adjust for teaser rate book, normalized book, growth book would have [indiscernible]?
Teaser rate, sir. We have been doing teaser rate for the last 10 weeks.
I mean that 7%...
We don't call it teaser rate. We call it differential rate. So we have always -- even today, we have closed at 8.9%, 10%, 12%, 18%, 20%, 21%, we have. And the yield, et cetera, is on a blended basis. So today also, we have -- but we had an ultra low teaser 2 years, we should call it [indiscernible] 2, 3 quarters [indiscernible] now we have stopped it also. That is go. But even now we have loans at 8.9%, 9.9%, 10%. We have to offer differential rate to differential people only then we can be in the market.
Yes, I understand.
Blended higher yield. That is our scope. The ultra teaser rate is what you were talking about...
Why I'm asking this question is because in quarter 3 and quarter 4 last year, our disbursement has grown significantly after we brought in teaser -- ultra teaser rates. So just want to understand you the book which we have done on that ultra teaser rate loans, what proportion of that book would have...
That's fully gone off from our books.
We -- stop the scheme towards the end of March, and we migrated all those customers with effect from July 1, 2022. So that is over.
Okay. So we do not have any maturity which was during current quarter of the [indiscernible]?
So those loans got migrated even before its maturity.
Okay. Okay. Okay. Got it. Secondly, also, I would like to understand your employees base have come down by about 800-odd people, whereas the branches are rising, I mean, to some extent. So anything to -- relating to that?
So no, it could be -- because of the branch addition as well as a normal exits, which can happen. So sometimes it is seasonal, when you pay out larger payouts, et cetera. So it is an impact of post -- the subsequent event of those actions.
Okay. Okay. Okay. Also just an added question on the teaser side. Looking at the past 1 to 2 years behavior, if you can give some sense in terms of [indiscernible] ultra rate or less than 10% rate, what proportion of the customers normally stay back with us even after increasing those rates? What has been your experience in the last 12 months after putting those interest rates of 7%, 8% sometimes not?
We give them an option of going -- which going into the higher tax bracket. Even without anything else, many of these customers the average, period is only 3 months or 4 months, even without doing anything these people will set back their [indiscernible]. Some people who renew the gold and continue with us, maybe some of them continues, [indiscernible] some would have taken back, we did not get into the [indiscernible] of that summary. It's not interested to keep with us, just want to take it away. They would have taken it away. But majority of them would have closed the team otherwise, even if there was nothing else, all the ones generally for 3, 4 months only.
Okay. Okay. Just one last question, [indiscernible] question. What was the auction number during the quarter?
Roughly, INR 200 crores -- [ INR 220 crores ].
We have next question from the line of Nidhesh Jain with Investec.
The first lever 10% guidance that we are putting out for next year, what is the expectation of volume growth in terms of number of customer growth that when we say 10% growth, how much do you expect from a number of customers growth in that?
We do not look at the number of customers, et cetera. I think we are just talking more about the AUM growth. Number of customers is only a byproduct of that.
Okay. Secondly, a subsidiary housing trends, we are seeing AUM decline, asset quality, GMP continues to remain elevated. So what is happening there? What is the strategy there in that subsidiary?
Ten minutes back if he stores that we have now -- we have -- we stared all these businesses, which -- the intention of during the COVID period, the housing finance, the personal loan, the vehicle loans, MSME loans, et cetera, we started it. And specifically, for housing products, we have got a new CEO on board also who have joined us a month back -- month back. And we are sitting with him, I would add probably putting up the business plans for next 3, 4 years or so. So -- but then we should see the growth coming back in the home finance also, that's what we could see, Yes.
Yes. Yes. Okay. And lastly, on the micro finance, what is the reason of the PAT declining sequentially versus last -- last quarter, we reported around [ INR 21 crores ] of PAT this quarter, the PAT has gone [ INR 14 crores ]. So what is the reason for that?
All the micro finance companies alias, everybody has some legacy notes which people write-off over the quarter, because much of you have gone -- some rescheduled notes are available. So it's just what should we say trading of this stable.
We have the next question from the line of Vishal from ICICI Securities.
I had a couple of questions. One question I had about the yield in the gold finance business. It has improved by 24 bps during this quarter, but it is still at around 13.2% that too the normal level of 21%, so just wanted understand the yield trajectory from here?
So due to this teaser rate loans, our yields have significantly come down in the first quarter. So I know we have explained at that point of time that once the [indiscernible] loans are migrated, it will -- it could improve, so which has happened in the second quarter. And again, it has improved in the third quarter. So in the third quarter, it has moved by about 84 basis points. And I think it's not, like the teaser loans 6.99% has moved to 24 percentage. We have more these customers in stages. So probably, currently, those customers might be 10 to 12 percentage. So depending on how the business scenario is evolving, we will gradually increase the rates on those loans. And accordingly, the overall yield also can improve in the coming quarters.
Okay. Understood. The second one also wanted to understand on the funding cost part. In this quarter, it has increased by 20 bps. And if I can say, our acute borrowing has also decreased quarter-on-quarter. So would be equity in our balance sheet tone contain the funding cost? And also, I mean, going forward, how should we think about the funding question, please?
See, I think we have moderated the on-balance sheet liquidity [indiscernible] is experiencing now increase in the borrowing cost. So in our case, also borrowing case has gone up. So that is reflected in the borrowing cost for the third quarter. I think incremental costs even borrowing rates are also higher. So I think it should more up a little bit in the fourth quarter.
Okay. Understood. Got it. And lastly, I also had one question on the MFI subsidiary. In MFI subsidiary, our credit cost seems to be elevated and its not -- not only improvement trajectory if I can say here. So I just wanted to understand what's happening there? And when should we -- the credit cost normalizing in MFI subsidiary?
Our MFI is as good or better than in general or other MFI. So credit cost is there, as saying in the last question, somebody asked the same question earlier also. There were loans, which are rescheduled in the last -- using the [indiscernible] some of those loans we have just taken as aggressive stance and talking to -- that why you'll see credit costs have gone up in MFI. What I said it is -- our credit costs are definitely better than most of our micro credit. So we have nothing -- we are better than the others in the [indiscernible] that's what I wanted to say. Cost side there has no -- there is no credit cost linked owner -- definitely credit cost [indiscernible].
The post COVID loans even as good as in pre-COVID?
Yes. The post-COVID loans are as good as the pre-COVID loans. Yes, correct.
Okay. So should we see an improvement in trade cost going forward now?
Sure, sure. Definitely, we should see better performance letter credit cost going forward.
We have next question from the line of Arul Selvan from Independent Advisors Private Limited.
I had a question in a more long-term framework over here. And this was running your earlier comments about your plans of increasing the non-gold AUM from the current 12% to maybe 15% to 20% in the future. I hope that part is -- I got it correct in terms of your future plans. So now what I'm thinking about here is along the lines of given that the return profile, the risk profile and perhaps in the core underwriting experience and your expertise as well, in each of these segments, be it, let's say, housing loans or micro finance loan. Given that these segments are all unique, is there any plans of perhaps spinning off or demerging this business in the future once it grows to a [indiscernible] proportion?
Is that your question?
Yes, yes. That was my question.
Okay.
And I understand that perhaps it's a little bit too early for me to ask this because, obviously, these things are still at a smaller thing. But I was just trying to understand the...
Promoters of Muthoot Finance, we have been the masters in the gold loan that is accepted. We also accepted. But when it comes to the others, we have CEOs , et cetera, from the market who are experienced with that in all these other divisions. So we don't plan to grow it and then hive it off, et cetera. We can certainly have it in our own books in our company. So one is micro finance. We have CEO, et cetera, who are experts in those fields, and then we have an overall managing control that, that is worth [indiscernible]. And if you -- we have never thought of growing it has been [indiscernible] someday that for cross out myself.
Okay, okay. And in terms of which segment, I heard that the housing segment is where Muthoot is planning on focusing on. So is it predominantly housing? Or are you also looking at other segments like micro finance and vehicle finance in the near term?
Home loan is one. The personal loan is one. The MSME loan is another. The micro finance is another. So we would focus on all these [indiscernible] separate verticals [indiscernible] verticals.
Right, right. But then you said that you've gotten a new CEO for the housing segment?
The other [indiscernible], they're also [indiscernible].
We have next question from the line of Mona Khetan with Dolat Capital.
I just had one question. So what is the share of loans we have [indiscernible] mean less than 12%?
So it may not be sizable. We don't have the information ready available.
If you could give a broad sense also that will be useful?
No. I think we look at the blended yield...
Because we run a repeat system, so its very difficult to free the particular lever.
We take the last question from the line of Pallavi Deshpande from Sameeksha Capital.
Just wanted to understand better on the borrowing cost. Will we see a steeper hike in 4Q and what we've seen in 2Q on the covering cost side? And the second question would be on the employee cost. If you can -- since attrition -- what would be the attrition rate? And what's the kind of salary hike that you go normally if you are wrong?
So borrowing cost, [ now ], for Q3, it was around 8.13 percentage. I think it is likely to go up in the fourth quarter because I think in the third quarter, the incremental costs have been going up. So I think it should move more towards 8.5 in the coming quarters.
Right. I think the third quarter you had the benefit of some high cost volume also retiring or something like that. So fourth quarter will be...
Yes, definitely purchases but not the incremental borrowings, because almost all [indiscernible] ancillary is around 8.3, 8.5 percentage. So -- as and when the research happens, the rates will move in those ranges.
And on the employees, what would be the attrition rate? And how is it moved over the last 1, 2 years? if you could just...
Last 2 years, after COVID, many of the employees don't want to work. They are spoiled beyond repair. They're just sitting at home and they're enjoying. So people now are finding it difficult to come to office. And for us, they have to come to the office, there is no work from home for a gold loan. So gold loan means the customer comes to the bank, so jokes apart. There is attrition everywhere -- if not attrition going elsewhere. Some of them are just going and sitting at go. That's what people tell me. No, they are getting [indiscernible], et cetera, part of it [indiscernible] people go -- attrition is there every where, every industry does be attrition. So we normally produce some salary hikes and retail, et cetera, and to try to contain this and run the business.
Why I am asking is [indiscernible] we've seen banks as I what I understand is there's been a lot of poaching from the gold finance company...
I was telling earlier also some people go there and earlier one person asking whether they come back, will you take them? So if you take the [indiscernible], we have gone away last ever coming back, we'll say take back if they are good people. So sometimes they feel that they need to do as well.
So would the number be above 20% [indiscernible]?
Yes, yes, 20%. Lower [indiscernible] and also the lower level people are the people who just jump away. They don't want to work -- those who join costing increases joined away and they're not going somewhere. They are just going home, not going abroad.
And last just on the, overall on the cost-to-income side, can we assume the long-term trend to be where it is currently? Or we see that keeping up [indiscernible]? And one more, if I may squeeze in is on the online gold loan has 36%, I think, is all transacted online as keep it up. So how is it?
So we transacted online is only just a remittance of cash, madam. People remit cash can if they can but otherwise to take the gold, the kept the gold, keep the gold, keep back the gold, it is the physical project. [indiscernible]. Only the fund the transfer transactions can happen on like, at least they can take the funds, they can repay the funds, they can pay the interest. That happens online. All the other things, checking the gold, checking it -- keeping it in the back in the price, taking it back, they have to come to the branch and this is a physical process of [indiscernible].
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to hand the conference back over to the management team for any closing remarks. Over to you, gentlemen.
Thank you. Thank you, investors. Those who are still there, definitely thank you for supporting us. We need your support. We need your insight. We need your advises always. We are always there. We are already focused on our business and our growth, and we will see that we will do our best to see that your company, our company does better and better every time. So thank you all for good day and wish you a good day. Thank you.
Thank you very much, sir. Ladies and gentlemen, on behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.