Muthoot Finance Ltd
NSE:MUTHOOTFIN
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Muthoot Finance Ltd
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Thank you, Margaret. A very good evening to all of you. It's been sort of a roller coaster in last few months with tight liquidity, COVID, followed by lockdown, a lot of moratorium questions and steadily rising gold prices. Despite that, Muthoot Finance delivered strong performance in all of these things. Let me just now hand over to Mr. George sir for telling the performance of Q4 FY '20 results. Over to you, sir.
Thank you, and good evening to all of you. This is George Alexander Muthoot, Managing Director of the Muthoot Group. I have with me our Chief General Manager, K.R. Bijimon; our CFO, Mr. Oommen K. Mammen; our DGM Finance, Shanthi; and also Executive Directors, Eapen Alexander Muthoot and also George M. Jacob, Executive Director -- George M. Jacob Muthoot. So now coming to the results, we have uploaded the results in the stock exchange that I hope everybody is -- has it with them. The consolidated loan assets under management has increased by 22% year-on-year and today stands at INR 46,831 crores. And the consolidated profit after tax increased by 51% year-on-year and stands at INR 3,169 crores for the financial year 2020. Stand-alone assets under management increased by 22% year-on-year and starts -- stands at INR 41,611 crores, and the stand-alone profit after tax increased by 53% and stands at INR 3,018 crores. The branch network, yes, today, we have a group branch network of 5,330 branches, which is a 6% year-on-year growth. And as I said earlier, the consolidated loan assets under management has increased from INR 38,000 crores to INR 46,000 crores, 22%, and the profit from INR 2,100 crores to INR 3,100 crores, 51%. The -- as far as the gold loan business is concerned, Muthoot Finance stand-alone, the gross assets under management is INR 41,000 crores for this year compared to INR 33,000 crores last year, again a 22% growth, and the subsidiaries also have shown a growth of 24%, contributing to INR 5,655 crores. The profit for the group, Muthoot Finance contributed INR 2,993 crores and subsidiaries, INR 176 crores current year.The subsidiaries, Muthoot Home Finance had a -- previous year, it has increased year-on-year only by 4%, and the total revenue stood at 2,000 -- INR 288 crores against the previous year revenue of INR 226 crores. It achieved a net profit of INR 32 crores against the previous profit of 3 point -- INR 36 crores. Its Stage 2 assets on gross loan stood at 1.71 percentage. The Belstar Micro Finance, where we have a 70% stake in the company, grew its portfolio to INR 2,631 crores against last year's INR 1,842 crores, showing an increase of 43%. And it achieved a profit after tax of INR 99 crores as against INR 73 crores last year. Muthoot Insurance Brokers also showed a profit of INR 11 crores this year as against INR 15 crores last year. The Sri Lankan subsidiary, where we have a 60% -- 73% stake in the company, increased its loan portfolio to LKR 1,384 crores, which is approximately INR 500 crores of Indian rupees last year. It is gradually converting itself from a mix of NBFCs to a pure gold loan company. Today, around 35% of the portfolio is gold loan, and our plans are to bring it to just like Muthoot Finance to a 90% plus portfolio of gold loan. Muthoot Money, which is the new subsidiary which is doing the vehicle finance in the States of Telangana and Andhra Pradesh, the company has started extending loans for commercial vehicles and equipment. It has increased its loan portfolio to INR 509 crores as against last year's INR 311 crores. And the loan portfolio year-on-year increase total revenue is -- stood at INR 70 crores as against the previous year, INR 16 crores. We are sure that this year has been good for the performance for the company, where as both on the profit front as well as on the AUM growth front. We are thankful to all our stakeholders, investors, banks, staff, everybody and all, definitely our customers for having supported this. We have been able to maintain good liquidity position right from last September when there was liquidity issues after the issue of the IL&FS and thereafter with the issues with regard to Dewan Housing Finance, et cetera. We have been able to maintain our comfortable liquidity position. Even today, we are maintaining very extremely comfortable liquidity position, and all our commitments are being honored on time. As a company, we have not been -- we have not asked or requested for any moratorium from any of our lenders, more so because in Muthoot Finance, the gold loan company, where we have 90% portfolio on gold alone, there is actually no impact of the moratorium because gold loans generally are although taken for a year are closed in 4 to 5 months. So extending moratorium to any of them is not an issue. And moreover, the assets and the collateral value, although the RBI mandated maximum 70% -- 75%, our -- at the time of lending also, the average lending is less than 70% LTV, loan-to-value, only. But if you look at today's price, if you look at the gold with us and at today's price, it is only at about 52% to 53% of the LTV. So we have a 48% cushion or margin on today's price. That is thanks to the gold price also going up. So these were the highlights of last year. And branch expansions, we have done a few branch expansions in Muthoot Finance. We will do a calibration branch expansion next year also. The average gold loan per branch has increased from INR 7.5 crores to INR 8.93 crores, which is a 19% increase, and the number of loan accounts also has been steady, with 80 lakhs of loan accounts. The average ticket size has increased from 41,000 to 50,000, and the employee count has just increased from 24,000 to 25,000 employees. Other highlights is, we have been able to raise the first tranche of $550 million from international bond market, the $450 million plus tax last quarter. Previous to that, we have been able to raise $550 million, total $1 billion we have been able to raise at a very competitive rates of interest, and that is definitely an achievement for the company. And our rating has also been excellent from the international raters. All the 3 rating companies we took rating -- they have given us very good rating. So as far as the subsidiaries are concerned, whether it is the vehicle finance or the affordable home finance or the microfinance, we will be definitely looking at only calibrated growth in those businesses, where we have to watch and see how things are panning out before going aggressive on lending either in the vehicle finance or the affordable home finance or the microfinance. So we'll wait and watch as of. So we are not planning any aggressive growth in the subsidiaries. But as far as the goal loan business is concerned, we would like to -- we hope that we should be able to achieve about 15% growth on the gold loan portfolio. And please understand that our base has also gone up. So 15% of last year and 15% this year is different. But we hope that we will be able to do that. As far as funding is concerned, we don't see any challenge raising funding for the growth anticipated, which should be -- if it is 15% growth means, we are talking about a growth of about INR 6,000-plus crores. And a good part of that can come from our own money, but we will be requiring funding from all these sources, whether it is banks, mutual funds or NCDs, domestic NCD, international NCD, wherever we get good -- at comfort -- interest rate and terms that are comfortable for us, we'll certainly do that. And we -- today, we are happy that -- proud that we have a very diversified liability mix from -- whether it is banks or mutual funds, CPs, NCDs, international funding, everything. So we are happy that we have a diversified funding portfolio. So we -- from our side, we expect that next year that the coming year also, the first 2 months has been a little bit of challenge because our branches couldn't get opened. But by -- I mean, after April, so after 1 month of lockdown, branches started opening. And the last to open branch -- the last branches to open were usually the -- were the 50, 60 branches of Bombay and Pune. In last 10 days, they have also started opening. 95% of our staff are coming to the branch, more than 95% are coming to the branch. And 100% of our branches are also opened. Some staff who were in some lockdown areas are unable to come, otherwise, the branch business and branch functioning is almost normal. Customer footfalls are there, maybe 60%, 70% footfalls are there. What is lacking is the public transport is not there in many places. That is one of the reasons many customers are not able to come. We are seeing demand for initially the customers who are coming for paying interest and releasing their gold and only a few customers who are coming for gold loan. But in the last 3 to 4 weeks, we are seeing more people coming for taking gold loans than releasing the gold loans. So in 2 months of lockdown, there were pent-up demand for people to take back the ornaments that is what we saw in the first 2 weeks of opening the branch. Thereafter, it this becoming business as usual. That is why we said we will be able to achieve a growth of 15% plus in the gold loan business this year. With that, I think I will -- I will wind down my talk. We'll take questions. I think the others -- as we go forward, we'll take questions, where the CFO or others can also answer them as we go forward. So over to you for question and answers. Thank you.
[Operator Instructions] The first question is from the line of SivaKumar from Unifi Capital.
Congrats for a good set of numbers. Sir, my first question is with regards to the moratorium. What is the AUM under moratorium at -- for gold loan finance and also at the subsidiary level for MFI, Home Finance and the vehicle finance? And what are the specific provisions you are carrying at each of the subsidiaries?
As far as Muthoot Finance is concerned, where we have not got any request for moratorium from any customer because our average tenure of the loan is only 4 to 5 months. The loan is granted for 12 months. What we would rather be telling the customer is that, during this period of moratorium, we may not do any auctions. So auctions, which is a regular feature, is what we have now postponed because of the moratorium. But again, as of date, we don't need to auction any gold because all the gold loans which have crossed the 12 months of the NPA period, we are in the money. We are in the money. So we don't need to auction any of those gold. But what we are also seeing is that customers are coming and taking back the gold, which is -- which has reached more than 12 months. So we don't see any moratorium or this impact on the Muthoot Finance. As far as the subsidiary is concerned, yes, we -- I think, yes...
Yes. So for the 2 subsidiaries, the vehicle finance and the housing finance subsidiary, as on March 31, we have not given any moratoriums. The moratoriums have been given only post 1st April. So for the financials that has been published today, there is no provisions put on the moratoriums for home loans and vehicle finance. But for the quarter 1 of financial year '21, we would expect probably about INR 15 crores of provision to be kept for the housing finance company. So roughly around 22,000 customers are there for Muthoot Homefin, roughly about 6,000 to 7,000 customers are currently under moratorium.
And the same number for vehicle finance...
For the microfinance also, actually, in the month of March, there was no need of a moratorium. 95 percentage of the collections have come. So there -- it was not extended. For April and May, they have extended to -- moratorium to all the customers. That is the policy they adopted. But April, they could collect something like 16 -- 17 percentage collections have come. So for -- as far as the accounting treatment, the remaining has been extended moratorium. That's the way it has extended. So -- but in May, the collections improved to around 35 percentage. And this month, June, they are expecting something to the level of 65 percentage collections to come. And the remaining will be treated as moratorium effects and the necessary provisions will be done. April also, they carried something like INR 1.85 crores also as the -- sorry, March, they carried INR 1.85 crores as the moratorium provision. In the month of the March, last Q4.
Okay. So for Q1, what would be the cumulative provision that we can expect for the subsidiaries put together?
See, it's too early to say on that. One, the numbers are also coming out. So the way we are seeing now is that for Belstar, which is a microfinance arm, we are seeing the collections improving. For April, for Belstar, the collections were quite low, but there has been a significant improvement in collections in the month of May. And in fact, whatever was the collections in May, they have already collected in the month. To that extent, they have already collected in June. So we are expecting a significant jump in the collections. Accordingly, we'll be able to evaluate on that extra provisions only in -- once the quarter comes to an end.And similar is the case for Homefin as well as Muthoot Money. Muthoot Money is the vehicle financing. We are seeing a significant increase in the amount of collections. So though there have been delays since there has been collections happening with a delayed -- with certain delays, I think the situation should ease as we go in the coming weeks. And now -- right now, we don't want to comment on the quantum of provisions.
All right. Sir, my second question is with regards to the cost of borrowing, will you get the benefit of lower bank rates in Q1?
See, I think, banks are not significantly reduced their cost. As you would have seen since October 2018, no banks have been charging a significant risk premium on NBFCs. So we have not seen that trend in terms of fall in cost of borrowing. But here and there, we are able to raise the resources at slightly better rate. Money market instruments, the costs have significantly come down. We are expecting the cost of borrowing on NCDs -- through NCDs also to significantly come down. Banks, we are pursuing with them. Some benefits have come. But as a overall, we are not seeing a significant reduction. But going forward, I think we should see that happening.
And the yield part, sir, because you can't put penalty on delays, would the yield come down for FY '21?
So no -- I think no, the yields are quite adequate to protect our margins. And current environment that we have also stopped some of the low-yielding products also. So I think more or less, I think we should be able to maintain a level. But of course, FY '20, there has been a significant dip in the collections because of the overdue interest rate. There could be a possibility of slightly lower, but still we should be able to manage a good return on asset.
[Operator Instructions] The next question is from the line of Anirvan Sarkar from Principal Asset Management.
And congrats on a great quarter. Just some -- if you could provide us some color on the fresh demand that you are seeing because we have been reintroduced that there is a lot of demand post-COVID because small businesses now have less liquidity, people are looking for cash. So you, obviously, have a lot of demand. So are these primarily new to credit customers or new to your company? Or are these existing customers to whom you're lending more as -- I mean, increasing the ticket size? So what is -- if you could provide some color on the nature of this demand that will help.
Yes, all sorts of customers are coming to us. People who are existing customers with us are also coming for additional funding. New customers are also coming. So as the economic activity picks up, we should see more and more demand coming up. So to add to what type of customers, whether it is all new to customers, people are coming. So we always have a new set of customers also and a mix of existing customers. So new KYCs are also there. Existing KYCs are also there. We definitely -- always, we have an 80% plus of repeat customers for our business.
And my second question, sir, is on the liquidity part of it. So we have a handsome amount of liquidity on our balance sheet as a proportion of total balance sheet has gone up significantly. So what's the outlook on this part? Should we expect this to remain at these levels or how are we thinking of this?
See, I think we have been maintaining a good liquidity on the balance sheet, and we are also in the process of raising funds. So we have been able to raise some amount under the NPR options. We are also looking at some fundraising under the extended credit guarantee scheme. We are also raising to doing market borrowings. So I think we should be able to maintain a certain level, a good level of liquidity going forward. As the fundraising is keep on happening, of course, there are certain gaps in it, but still we are able to raise funding.
My question was more that since we are seeing a surge in demand, will -- shall we prefer to maintain this cash on our balance sheet or should we rather give out loans? That was the correct...
So we need to balance it between growth and the cash we are -- resources we have to generate. So if you are able to generate resources, certainly, we will grow according to the demand. If we are not able to risk, then, probably, we will maintain liquidity in -- certain liquidity in our balance sheet.
The next question is from the line of Prateek Agrawal from ASK Investment Managers.
Sir, my question was on the competitive landscape. We hear many more NBFCs getting into the space. We also hear public sector banks and private sector banks actually publicly talking of focusing on this space. So how are you seeing the competitive intensity in gold loans?
Okay. Competition is there only in businesses which have potential for growth or profit. So that is one I assure that if competition is looking at gold loan means, everybody is seeing growth and profit in that. So that is the first part. Second, we have seen such a situation over the decades. 10 years back, 15 years back, we have seen seasons where people all rush into gold loan business, wanting to do gold loan business. But then, just as we are speaking, this is a very operationally challenging business. Operationally, it is very challenging. It is not just like you can take money and give it to somebody, INR 100 crores, INR 200 crores. This is -- average ticket size is about INR 40,000 to INR 50,000. So we have to build it up brick-by-brick. So of -- good, that people are thinking of this, but operationally, it will be challenging. So Muthoot has seen competitions over the decades, over the years from other NBFCs, from banks, everybody is our competitor. So we have seen such things happening. So it is nothing new for us. And I am sure we will be able to maybe overcome all sorts of competitions. But one advantage, one good side I see of competition coming is gold loan, there are not such a lot of gold in public hands. So if competition is coming means, people are thinking of, talking of gold. Everybody is talking of gold loan. That will increase the pie. The base and the pie will increase. So probably, it will also create that sense of gold loan, which has some negative thoughts we have to -- sentiment taking a gold loan. Now because everybody is now entering into it, that negative sentiments will go. The pie will increase, and I'm sure Muthoot will retain its premier position as the #1 gold loan company.
Sure. One more question. Your product is a very, very short duration product. You can theoretically recycle the entire book in a year. Why then you don't wish to have so high liquidity on the books?
So see, liquidity is a reassurance to the lenders and investors of any uncertainty. Now tomorrow what happens, we do not know. All of the sudden gold has happened. So that is a reassurance to the lenders as well as investors that given any eventuality, Muthoot balance sheet will be able to take care of all those obligations. So that is a cost of removing that, of course, that gives confidence to lenders and investors. Now you are right that our asset cycle is very short. The objective is not to reduce the balance sheet size. So if we need to -- if we are not maintaining a liquidity, we need to bring down the asset size and meet the liability obligation. The objective is to maintain as well as increase the asset size. So given that, we need to maintain a certain level of liquidity. Of course, we have to meet that negative carry for some time.
So how much would be the negative carry in this period of high liquidity?
See average cost of borrowing will be about 9 percentage. And returns from deposits and liquid funds is around 4%, 4.5% or 5 percentage.
The next question is from the line of Anand Bhavnani from Unifi Capital.
Sir, just wanted to understand with regards to our overall growth, if you are to see the tonnage has grown just by 4.2%, whereas the book has grown much higher. So this is primarily led by price. So does that, in some sense, bother you? And how would you -- assuming there's no growth in price for FY '21, what kind of tonnage growth do you see in the current environment?
Please understand that the tonnes of gold belong to somebody else. We are not -- this is not our money. Our interest also accrues only on the loan amount. So if the loan amount is there, we get our profits, we get our interest. If the tonnage is less, we have to be more secure of the gold. So tonnage is not giving us any income. The income comes only if we lend money on the tonnage. That is a lighter part of it, but then people, to get their predetermined money, earlier if they had to give 10 grams of gold, now they need to give only 8 grams of gold. That is the difference we are seeing. So tonnage of -- is of not much value for us, especially in the balance sheet or in the profit size -- side also.
Sure, sir. I understand you are in a lighter mood. I was thinking of more of newer tonnage as newer clients coming in. So on that note, if you can give us some sense on in terms of the walk-ins that you have in June and May? Is the proportion of newer clients higher as compared to same period last year? And if it is higher, by what percentage point it is higher?
See the month of April was a total washout. We know that number of footfalls in our customers -- branches was almost nil. Now we opened our branch network in April 20 onwards. And we steadily saw an increase of customer coming to the branch. And once -- from May onwards, the number significantly increased. And I think towards close of May, I think we are seeing a normalized situation where the numbers are almost similar to the pre-COVID scenario. And I think that now the disbursement and collections are in a very northwest format. Of course, there are certain delays because of the moratorium, et cetera, but still, it is comparatively much, much better.
Yes. My question was slightly different. In terms of our customer mix, let's say, you had 100 customers in June last year, what was the new versus renewal? I think 80% was mentioned in the call commentary, therefore, is that 80% continuing in June this year? Or is it better like you have 70% old, 30% new, so I'm just trying to assess whether this current environment is leading to more people using gold as a liquidity option?
See. First of all, let me correct you. It is not the 80 people renewing their gold. It is -- one fellow takes a gold loan, he closes it in 10 days, 15 days, 1 month. After 3 months, he needs a loan, he comes back. Those are repeat customers, not renewal customers. That's the first thing. So again, we are not very much concerned with all these tonnage, et cetera. If our old -- our AUM is going up, our company is getting business and profit. The tonnage, of course, is not of very much concern to us. But then new customers are coming or some customers are leaving because some customers, maybe prosper and afterwards, they don't need a gold loan. So they go away. New sets of customers come in. That is the beauty of this business.
Sure. And lastly, with respect to cost of funds, typically, in a crisis, the bank would be unwilling to lend, but maybe 6, 8, 10 months down the line, they'll pass on the benefit. So assuming that kind of repetition happens, you get lower cost of funds in due course, can we expect that the cost of funds -- average lended cost of funds can fall by -- let's say, by 50 or 70 bps by the end of FY '21?
If your point is that if our cost of borrowing comes down, we will pass on that benefit to the customer also because we would like to keep the customers happy. So if there is a -- we would like to maintain our margins, net interest margins, et cetera. We'll maintain on the -- if the cost of borrowing is coming down, we will definitely pass on same to the customer. We would only like to maintain our net interest margins. So that is why Muthoot Finance is seen as the most reasonable of all NBFCs. And that is the reason why compared to any other NBFCs, we have 2 to 3x the gold loan business of the others, although they also have the same number of branches. We have 3x because people choose to come to Muthoot because they perceive -- their perception is correct also that we are the most reasonable. So whether it is interest rates or other auctioning policies, et cetera, we are most reasonable to customers. So that is one of the reasons we would like to pass on any such benefit to the customer also, maintain our margins, that's all.
[Operator Instructions] The next question is from the line of Utsav Gogirwar from Investec.
And congratulations on a great set of numbers. Sir, just a couple of questions from my side. What is the current AUM mix or -- within gold loans? What is the bullet versus EMI-based product for -- what is the mix?
Tough question. We don't have EMI loans.
Loans are bullet loans right now, right? Okay. And secondly, sir...
Lot of noise is coming from your side. Lot of disturbance coming from your side.
Is it better, sir?
Sir, I would request the participant to please move to a quieter area and ask the question because the background disturbance is too loud.
Okay. Is it better a little bit?
Yes, we will manage. Go forward. Go forward.
Okay, sir. Sir, what is the ECL provision under Stage 3?
What is the?
ECL provision under Stage 3. ECL provision.
ECL provision is INR 95 crores.
INR 95 crores.
Okay. And sir, lastly, I just want to understand how much capital we need to invest in subsidiaries in next 1 to 2 years? What is your view on that? How much capital will be increased into the subsidiary businesses?
I think that's a question, at the beginning of the talk, I had suggested -- I had mentioned that we are not planning to do aggressive business in the subsidiaries. So we don't need capital in any of the subsidiaries. So actually, if you ask me, the subsidiaries will not need any capital in the next 1 year.
[Operator Instructions] The next question is from the line of Nischint Chawathe from Kotak Securities.
Just a couple of questions. First one, you mentioned that over the next 6 months, you're telling your borrowers that you will not be auctioning any gold. Just wondering what happens if gold price corrects. Do you kind of go ahead and tell your borrowers that you would be auctioning, so kind of give us more gold? Or how would you react in that situation? I have one more question.
What's your next question, please?
Yes. The other thing is that on Slide 28, you have this monthly data. Now is it adjusted for the period in which there was a lockdown and you didn't do any business at all? And just the final one is, if there is any ForEx impact in operating expenses because of the ForEx borrowing, something that we had in the previous quarter?
Okay, okay. So first question is borrowers. So actually, no borrower has asked us for any moratorium. It is from our side that we have just -- from our side, we have just -- not thinking of auctioning any of these gold. If push comes to shelf, and we need to auction it, we will auction it, that's all. We'll send a notice and auction it. If that is so. But I don't think it is necessary. If the price falls, and we are starting to lose money, I don't think it will happen. If that comes, we will do it, that's all. The second question, I think the CFO will answer.
On the Slide 28, we have taken that data as of March 31 at INR 3,955 per gram. So today, the gold price is around INR 4,500 per gram. So no...
No, no, sorry, I was referring to Slide 28, which talks about the disbursement trend collection. So does it mean that for the lockdown period of the last 10 days of the quarter, you have adjusted it? Or despite the fact that there was no business in the last 10 days, you could still achieve INR 98 billion and INR 87 billion numbers?
Yes, that is our actual disbursement and collections in Q4, and that is the average of the 3-months disbursement and collections in Q4. So automatically...
Sure. The ForEx impact of borrowings -- sure. Just final one. ForEx impact of borrowings. You had some number in the operating expenses last quarter. Any major number this time around?
Yes. So last quarter, we have not done the hedge accounting. So in the fourth quarter, we have done the -- adjusted the hedge effectiveness, and we have adopted the hedge accounting. Accordingly, we have restated third quarter number to give the impact. And because of that, the ForEx fluctuations are not coming in the P&L. So let me reassure you that there is no risk on account of ForEx borrowings because it is completely hedged. The only thing is that as per accounting policies, we have to bring the fluctuations in foreign exchange rates, in the financial statements because we are following a hedge accounting. It is moved to OCI as well as derivative assets as well as liabilities.
So herein onwards, there won't be any volatility in P&L?
Yes, there will not be any volatility in P&L because of the hedge accounting.
It is 100% fully hedged. So there is no impact.
The next question is from the line of Ashish Kumar from Infinity Alternative.
Congratulations for a good set of numbers. I had 2 questions. One was in relation to the AUM growth. While you've given a guidance for the full year, but let's say, in the month of -- in the immediate short term, let's say, what are you seeing in terms of trends? Are we on track for that? Or should we be concerned about seeing a dip in the first half of the year?
Second question? Next question?
The second question, sir, is that in this quarter, in the fourth quarter, we saw a slight dip in our yields. Is that purely because we could not do the auctions in the last 15 days or 1 month because of the -- because of the slowdown? Or was this because of product mix? Or did we change any pricing? What was the reason behind that?
So we told -- we gave you a guidance of about 15% that's a -- we gave a guidance of about 15% growth for the full year. I think the first 2 months have been difficult. So what we have done is the Q1 and Q2 targets have been merged into H1 targets internally, not for anybody else. Internally, for our staff, we said that instead of revising any quarter, but keeping the full year's target intact. So what we should see, whatever there is any shortfall in the business target in Q1 as far as growth is concerned, we should be able to make up in the Q2. The second part about the yield, I don't think -- Oommen?
Yes. So no, we had mentioned in our previous calls that there have been higher collections because of the overdue interest, et cetera. So that will get normalized in the coming quarters. So that is a normal fall, which has happened in the collection -- in the interest collection.
So going forward, we should assume that the Q4 is a sustainable level?
Yes. So normally, our target is around 21, 22 percentage, of course, depending upon how we collect the premium interest, overdue interest, et cetera. The yield percentage can be higher. And also keep in mind that now we have stopped some of the low-yielding loan assets so -- because these are all short-term loan assets, we keep tweaking the rate. So I think we can only give a broad range in where it will lie, and that could be -- always be a small variation in terms of the ultimate yield.
The next question is from the line of Ravi Naredi from Naredi Investment.
First of all, congratulations for giving such a fantastic result of this quarter. And sir, it's a -- for new borrowings, what is our planning? We will go for ECB? Or we will borrow from India?
No. So no, it all depends on the market. So we have the rupee borrowings, bank loans, NCDs separate, various borrowing opportunities are available. Depending on the opportunity available, we will tap that market if overseas borrowing becomes lucrative or attractive and opportunities are there, we will certainly look at it.
Because both loans we have taken, ECB, we have took Indian loans, we have took and are taking. So now as the comparison, which one is a better one for the -- as far as company is concerned?
See. All borrowings have its own merits and demerits. So we are looking at diversification to the extent possible so that we are not dependent too much on a single source.
Right, right. And sir, there is -- gold price are very high and borrowers want to sell that gold, so there is less demand for the loan?
No, the market is so huge that even if some people take the gold and sell it, there are many others who would like to pledge also. So it always happens. Some people always maybe selling. Some people won't -- don't want to sell thinking that why should I sell my gold, I would rather take a loan than sell a gold. There are different types of people. So we don't see any impact on that, sir.
The next question is from the line of Bunty Chawla from IDBI.
Congratulations on a great set of numbers, sir. Sir, just one quick question. What we have observed, although there has been a good amount of PPoP growth in our -- in Q4, we have conservatively not floating provision or extra provided for COVID-like impact, which we have observed in other NBFCs. So can you share your outlook on that? Is it because our portfolio, our business model is that we are not expecting any losses, so we have not provided. So if you can throw some light on that?
See COVID provisions, as I have been -- we have been saying, 90% of our business is on gold loan where we don't see any dip in our yield or loss of capital or interest, et cetera. So we don't need any provision for that. If I have say that there is already a provision of -- INR 885 crores provision is there. Actually, for a gold loan company, there is no need of any provision. The provision requirement is 0. But still, we have in our books INR 885 crores of provision. That's all technical provisions only because any loan, which is cross the 12-months period, we have to -- we don't recognize the interest, plus we don't -- we keep a provision also for that. But both of us know that we have the gold with us. And if we sell it, we will get the full money. So actually, no provision is required, but because technically a provision is there, we have kept it. So for COVID or anything else, we still have that INR 885 crores of provision, which is actually a very excess provision. Even as per the ECL and all these things, we still have much more excess provision, about INR 500 crores of external provision as per the old...
I-GAAP.
I-GAAP. I-GAAP, we have. So we have INR 885 crores with us where we -- the provision requirement is actually 0. In the -- yes, thank you.
That is very heartening to hear, sir. Sir, if one data point if you can add. Sir, how much is the interest accrual on the balance sheet as of FY '20? If I can -- last year, same number was INR 896 crores. So this year, what is the interest accrual?
INR 1,557 crores.
INR 1,557 crores.
The next question is from the line of Gokul Maheshwari from Awriga Capital.
Congratulations on your ongoing success. I just have one question purely on the business model. On Slide 29, you gave the net interest margins for your gold loan business. In the last 3 years, they have been hovering around the 15% mark, which is a fairly large departure from the previous 5 years of 10% to 12% margin. So is this a new normal, which you would believe for the next few years? I'm not talking for the next quarter or so, but a percent here or there, but this is the new normal for the net interest margins for the core gold loan business?
So Gokul, that is mostly because of the no leverage and the excess capital we are carrying in the balance sheet. So that is an interest-free fund. So net interest margin will continue to be higher. So you need to look at the spread. So spread should be somewhere around 11% to 12%. Yes, of course, currently, it is slightly higher. But I think about 12% will be a normal spread.
Okay. And in that context, that your requirements to invest in your subsidiaries is going to be limited in the near future. So these kind of spreads or NIMs may continue given the growth in the gold loan business is going to be 15%, which is much lower than the ROEs that you own in that business?
Yes. Certainly, if you look at the numbers, certainly, yes. But again, the amount of investment we make in subsidiaries is quite negligible compared to the overall asset size of the company. So it's not going to give a much impact. But certainly, it should give some benefit.
Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for closing comments.
Thank you. Thank you, investors. Thank you for your support. We definitely need your support and guidance to see us through difficult times, good times, you have supported us always. We are thankful to all the investors, all of you for having supported us. I, Managing Director, George Alexander, I have with me Executive Directors, Mr. George M. Jacob -- George Jacob Muthoot; we have Eapen Alexander Muthoot, Executive Director; and also Chief General Manager, K.R. Bijimon; our CFO, Mr. Oommen; and the DGM Finance, Shanthi. So thanks to all of you. Good evening to all of you. And as usual, we have to say keep safe and have -- let us not -- hope that we want -- COVID pandemic goes away from our place, from the world at the earliest, and we are back to normal. Actually, we are seeing a little -- everything what we do is being differently done now. What we did 4 months back and what we're doing today, even the method of whatever we speak, talk, travel, do everything is different. So let us hope to come back to normal shortly. So thank you. Thank you once again for your support. Thank you.