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Muthoot Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Muthoot Finance Q4 FY '22 Earnings Conference Call hosted by B&K Securities India Private Limited.
[Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Sanket Chheda from B&K Securities India Private Limited. Thank you, and over to you, Sanket.
Hi, very good evening to all of you. We have with us the entire management from Muthoot Finance to discuss the 4Q results. We have George Alexander Muthoot, the MD, sir; and 4 Whole-Time Directors: Alexander George, George M. George, George M. Alexander and George M. Jacob. Also, we have Executive Director, Eapen Alexander; and CFO, who is Oommen Mammen.
Without any further delay, I would hand over the call to the MD sirs for the opening remarks, post which we'll continue with the Q&A session. Thanks a lot, sir. And over to you, George, sir.
Okay. Thank you. Good evening to all. This is George Alexander Muthoot, Managing Director. Along with me, as suggested, we have the Whole-Time Directors as well as the CFO and the COO, Mr. K.R. Bijimon, also with us. We had the Board meeting this morning, and the Board has considered the financial accounts. And the gist of that would be: the consolidated loan assets under management increased to INR 64,494 crores. It is up by 11% year-on-year.
The consolidated profit after tax also increased to INR 4,031 crores, up by 6%. The stand-alone assets under management increased to INR 58,053 crores, up by 10%. And stand-alone profit after tax increased to INR 3,954 crores, again up by 6%. There are a few key milestones for this year, which is the consolidated AUM has crossed INR 64,000 crores in this financial year. And the consolidated profit after tax has also crossed the INR 4,000 crore mark, and the net worth also has crossed INR 18,000 crore mark. And we have also paid a 200% dividend on the face value of the shares, involving a payout of INR 803 crores.
The branch network is 5,581 compared to 5,451, a 2% increase. As I said earlier, the gross assets under management has reached INR 64,000 crores and the consolidated profit to INR 4,031 crores, both these are 11% and 6% higher than the previous year.
We are witnessing signs of recovery in the economy. The RBI rate hike may not dampen overall demand scenario. And we are also expecting borrowing costs to go up gradually during this year. Gold loans are a great help for people in times of need and as the economy recovers and the overall economic demand revives, our focus will be to make the most of the opportunities and keep innovating further.
Gold loan AUM grew by 11% during the financial year '22, and we remain optimistic about a growth of 12% to 15% in the gold loan AUM for the financial year '23 as well. The digital initiatives have all done well. It is -- all these are giving us good results, and we want to also expand our Loan at Home services to more and more branches in India.
The Q4 results highlights a steady performance in this quarter. We had disbursed fresh loans to 4 lakh new customers, amounting to INR 4,664 crores and to 4.89 lakh inactive customers amounting to INR 4,759 crores in this quarter. We could register a 6% increase in profit after tax for the 12 months.
With respect to our subsidiaries following the rise in demand in the economy, the collections of microfinance, vehicle finance, home loans have improved. We aim to further improve our collections in these segments. However, we will continue to adopt a balanced growth strategy given the ongoing macro economic environment, and we continue to be cautious on the micro finance and the vehicle finance business. I think this is a gist what was discussed -- what is the results of the company and its subsidiaries, which were considered at the Board meeting.
Now I think I will leave it to the audience for their queries and messages.
[Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal.
Sir, 3 questions. First, what has led to this weak gold loan demand in your core customer segments, which were typically this, I would say, INR 40,000 to INR 60,000 kind of a ticket size gold loan customer? That's the first question.
The second question is on the yields. If I understand right, there was a yield compression of about 200 basis points sequentially that we saw in the fourth quarter. Do you believe that this is the new normal for the sustained yields that you can make? Or do you think that the competitive intensity in the last, I would say, 2, 2.5 months has eased out significantly and the yields have also bottomed out and then incrementally you can deliver higher spreads in FY '23?
Sir, lastly, I mean, from what I see, the gross stage 3 assets is still elevated at about 3%. Is it because -- I mean, your peer who reported last week, they suggested that they had made some changes in the accounting norms in terms of recognition of NPAs.
So earlier, they used to consider even collections received in 1 month following the end of the quarter while reporting the NPA as on the end of the quarter. So have you also done something similar? Or is it because the auctions were lower during the quarter? And sir, lastly, if you can share, I mean, what was the quantum of auctions and the accrued interest as on March '22?
Okay. Thank you. Your first question was about the low average ticket size. The average ticket sales has definitely gone up from INR 40,000 to INR 60,000 to much higher levels. It is actually the path of the growth in the economy only. So people who are borrowing earlier are borrowing more. That's all. It's only a -- or should I say upward movement of the customers.
The yields and spreads, yes, we consciously had done decent rates on the yields so that we could get more customers, and it has been quite successful. We were able to get quite a lot of new customers during the last quarter and also during the end of the third quarter. So to that extent, it has been successful. We have been able to grow our AUM. We have been able to attract lot of customers who are able to go elsewhere. Of course, we have now discontinued the very low yield schemes and because the period of the low interest scheme, which we started, as we wanted to, so it discontinued. And so now we should see more customers coming.
Since we have got these customers, we will see that we continue to retain these customers going forward and probably the yield also should start inching up. So certainly, what we did was a conscious decision to acquire customers. It is for a limited period and that period is over. And now we have gone back to the -- we have discontinued the very low interest schemes. And your next question was about the stage 3 assets. Yes, we have not made any change to the...
No, we have been always following based on a number of days past due. So there's no change as far as we are concerned the classification. The quantum remains higher because that is a conscious call as we have been telling in every call that we are not too much worried about the history assets because ultimately, we are going to record this amount. Just -- we are giving some more time to the customers to pay the amount. Last few quarters...
So your specific question was about whether we have changed -- we've made any change. We have not made any change. If the NPA is less or high, it's just because we are giving more time to the customers to repay, and they are not concerned about -- we're not unduly concerned whether we are going to lose because our -- the gold is safe, the asset is safe, and we will not lose money there.
The auctions for the quarter is INR 2,100 crores and accrued interest is INR 2,071 crores.
INR 2071 crores is the accrued interest. Auctions, we have done is INR 2,100 crores.
Sir, if I can just squeeze in 1 follow-up question. I mean does the weak gold loan demand that we are seeing today, I mean does that worry you or do you think this is just cyclical and gold loan demand should improve in the coming quarters?
I don't think we see any weak demand. The demand is not weak. It is just probably the -- hangover of the March is only what usually happens in the first 2 weeks of April. I think demand is picking up and demand should pick up, and I think we are back to normal. We don't expect...
No, we grew by INR 3,300 crores in the fourth quarter. So it's not a weak demand for us. We have been able to grow unlike our peers. So -- and finally, we could do a double-digit growth for the full year. We grew by 11% in gold loan for FY '22, though we lost first quarter due to the third wave and third quarter because of the larger auctions. In spite of that, we could do a double-digit growth. So that is quite a good achievement, which we could do in spite of all the headwinds.
The next question is from the line of Deepak Gupta from SBI Pension Funds.
My question is, firstly, just continuing the previous participant question on interest yields. Where do you see interest yields for your company ending up? Given the fact that some -- I think this has been the sharpest decline quarter-on-quarter ever for Muthoot Finance. So at what level do you think interest yield is likely to stabilize for the overall book?
See, the interest yields maybe probably declined because in the last 4, 5 months in the last year -- last 4 to 5 months in the last year, we had started the new campaign, the new campaign of the low-interest scheme. And that low interest schemes has actually given us benefit. Now that we have discontinued the low interest schemes, we should go back to the old -- the earlier yield scheme. But of course, since the borrowing cost has come down, probably the yield may not be high but we will try to maintain our spreads, that is what we would be trying to do. Our achievement will be not more on the yield, but on the spread.
But sir, given now incrementally, your borrowing costs will be going up, right, given the way interest rates are shaping up, so to maintain the spread, you will have to increase the interest rates, if I'm not mistaken?
No, so I think we will have to -- the whole world rates are going up, then our customers will also understand that rates are going up, and we'll have to do that. So usually, we try to keep our spreads almost same. We try our best to keep our spreads straight. And that is what is actually what is -- what should we say, our focus should be on the interest spread. If the rates -- borrowing rates are going up, then lending rates, not only for us, the whole world will go up. Whole world means for all the borrowers in the world, and that...
I understand, sir. So sir, is there any spread that you want to call out that these are the kind of spreads you want to maintain?
Yes, yes. We were looking at about -- in the range of 10, maybe plus/minus something here, but the general range would be in the range of about 10%.
Understand, sir. Sir, secondly, I just wanted to understand, this quarter your cost/income ratio has been extremely high. Obviously, I understand because the interest income is low -- but how do you see your cost/income ratio shaping up for your company in the next few years?
I think if you take the overall total year, it would be the same. The quarter -- some quarter extra payments may be there in some quarters. But if you look at the year as a whole, it is the same -- if you look at this for the full year. Because some expenses come in some quarters, and that is what the cost/income ratio. So we should be able to maintain our cost because our per branch AUM is also little going up only. So I think the cost/income should be as it is -- will continue as in the previous years, the ratio.
Sure. I hear that. Sir, thirdly, on the INR 70,000 of reversal that you've done on the impairment, if you could just share some perspective on that, what exactly was this on account of?
Sorry, can you just repeat that question?
Sir, for this quarter, you've done INR 70,000 of reversal of impairment of loans in -- for the quarter. Yes. So what exactly...
Yes. So we review this probability of default and loss given default every March, year end. Two things have happened. One, our NPA for December was INR 2,100 crores, now it has come down to INR 1,700 crores. So that has reduced the provisioning requirement for the quarter.
Second, the ratios have come down a little bit lower. So that also has played a role in terms of reversals. It is for the quarter. But the full year, it is not a reversal.
I understand. I understand, sir. And sir, last question is on your Sri Lankan subsidiary. Given the crisis which is taking place in Sri Lanka right now, what is your view on the subsidiary? And I know it's very capitalized, but how do you see that shaping up over the next 12 months?
See, one thing which we have -- when we entered Sri Lanka itself, we had decided that we would be growing more on the gold loan fund. And today, as we speak, the gold loan business is 75% of the total portfolio. Only the rest is some small trader loans, et cetera.
And as you will understand that because of the depreciation, the value of the Sri Lankan rupee and the value of the dollar and the Indian rupee also going up, the gold price has really shot up there. So what we are due is all gold loans, and that is today, very, very, very safe. The margins, et cetera, are extremely safe there. So as a portfolio, we don't see any issues. But of course, we have been talking to our people in Sri Lanka. The situation is not as bad as some of the newspapers, et cetera, say. They -- I think they will all survive. So things are getting better also.
Today, I also [Audio Gap] that their depreciation of the Sri Lankan rupee has I think bottomed out and probably it will start going up only. So overall, the economy in the country will revive. As far as our portfolio is concerned, it's extra strong today.
Sure. I hear that. And sir, just last question from my end. Your credit growth guidance, last quarter, last year, you had made 12% to 15% guidance, you've ended at 11%. So would you maintain the similar kind of guidance for FY '23 in terms of credit growth?
I think we will maintain the 12% to 15% guidance. We will maintain. So it's our job to see that -- as we see we will try our best. That is why we are here for.
The next question is from the line of Gaurav Kochar from Mirae Asset.
Sir, in the previous question, you answered spread as 10%, if I'm -- correct me if I'm wrong. The current spread that we are making is 10.91% for the quarter and for the full year, it's much higher. And even if I look at last year, the spread was anywhere between 13% to 13.5%. So I mean, where does this 10% come from?
No. 10% is something which we said the bottom rate, something 10% is -- we are happy with the 10% even. If good years, we can make 11%, 12%, 13%. Very good years, we will make 13%. Probably, anything above 10%, 11%, that is what is reasonable, and I think we should be able to do that.
Okay. Okay. So sir, given that the teaser rates have now -- I mean you've stopped doing the loans at teaser rates, should we expect that spreads will only improve from here on? Currently, 10.93%, at least from these levels should we expect descent rates?
Yes, but the teaser rate impact will take some more months in this quarter also. So it's not that the moment we stop teaser rates, it is -- the impact of that will take in this quarter also. But finally, that's what I said, 10% to 11% and around 10% is what we should see the spread. I think that is quite reasonable.
Okay. Okay. So for the full year, I mean, anything that you'd like to guide for FY '23 full year?
I think we have guided at 12% to 15% gold loan AUM growth, sir.
No, I'm talking about spread, sir.
Spread, that's what I said. We will try to maintain 10% -- around-ish 10%, probably something above 10% also. It also depends on how things are panning out also.
Okay. Sure. And sir, on the growth front, while this quarter, if I look at INR 2,100 crore -- if I adjust for that INR 2,100 crore auction, the growth is around INR 5,400 crores. That's roughly 10% of your AUM. So if the growth is that strong, the demand is that strong, why the guidance is only 12% to 15% for the next year?
Yes. See, this is the fourth quarter, we did that. In the first quarter, we did not do anything. Second quarter, we were able to do something. Third quarter, we had, again, the similar auctions also. So there are so many headwinds also coming across. So we didn't want to give a very high guidance and then underachieve it. We have always been saying 12% to 15%, and that is what we would be trying to do probably. We may be able to do better also. Anyways, thanks for your good calculation of INR 5,400.
Sure, sure, sir. And sir, on the liquidity, now that you've given that margins maybe for next quarter also may be under pressure, and the growth will be probably soft, just perplexes me why do we keep so much liquidity on the balance sheet? Because maybe 1.5 years back when the growth was very strong, 25% to 30%, having 15%, 17% liquidity on balance sheet was reasonable. But now if the growth is going to be soft and at least the cost of money is getting dearer and dearer, is it not prudent to cut down some liquidity which we are carrying, around 18%, 20% liquidity as a percentage of borrowings. Would it be fair to reduce this over the next, say, quarter or so?
Yes. So we also would like to reduce it, but understand always that we are an NBFC. We are not a bank. We don't get any support from regulators with regard to liquidity, et cetera. We have to find our own means and ways. And I think keeping a liquidity -- we know it has got a negative carry, but it has always helped us only. And we don't want to take any risk or any risk, I won't say a risk, at least, should have anything negative on our side with regard to liquidity. That is why we are keeping something extra. I know it carries a negative, but then that is -- you should consider it as part of the NBFC or part of the type of business we are doing. So we are an NBFC, always remember that, that is what we have to find our own way for.
But if I look at -- sorry, but if I look at the pre-COVID run rate, the liquidity used to be 7%, 8% of borrowings or even lower than that, even FY '18-'19. During COVID, one would understand that there could be some liquidity crisis, and the growth was also strong during COVID, at least for FY '21. So to that extent, I mean liquidity -- excess liquidity on the balance sheet was maybe the right way to go. But now given that there is multiple headwinds, as you pointed out, on growth as well as challenges on pricing, would it not be fair to let some of the spreads compression getting absorbed by pruning down excess liquidity? What harm would -- if the liquidity...
It is not only the COVID, even before COVID our problem with liquidity, et cetera, was always the IIFL -- what is it, IL&FS, DHFL, all those things actually unsettled all the lenders. See, all the lenders they become unsettled when such a thing happens, and I don't rule out any such things. I can't guarantee that such things won't happen in future.
So keeping some liquidity is -- I know it is a cost -- it is, what should we say -- so we have been suggesting that the Board is also comfortable saying that "Keep a little liquidity " because if some of these things happen, all these -- all the lenders will get panic, and at that time, we would be left to ourselves. That is what I said in such a situation, there is no reserve bank or regulator coming forward and saying, "We will support you." I don't think so.
However, there is a liquidity LCR requirement, liquidity coverage ratio requirement for NBFCs. So that is about 60%. For that, we have to keep some amount. And always rating agencies also prefer, different agencies have got different thumb-rules, especially the foreign agencies. So they also are more comfortable, probably that is also the reason why some of the rating agencies did not downgrade us, I'm talking about international agencies during the COVID period, even though they have done for some of the NBFCs. So all these plays -- factor plays a role in terms of maintaining a high liquidity.
Even with all these limitations, we are trying to do some rationalization in terms of liquidity, so that negative carry comes down to the minimum. So we are trying to do that. And if you look at last quarter also, our borrowing cost has come down. So within all these restrictions, we are trying to do that, probably we will fine-tune this in the next couple of quarters.
Sure, sure. Perfect. Just last question from my side. How do you see the MFI environment for fiscal year '23 and any sort of growth targets for your microfinance subsidiary?
I think MFI is a sector which will grow -- continue to grow. It is a sector which everybody -- all governments wants to grow, wants to grow. And that is the only way government can put money in the hands of people. So there will be support from the government and support from banks, everybody will support it. And I think going forward also, MFI will continue to grow. Of course, when we look at comparisons NBFC gold loan with MFI, it is quite different, but then MFI is a separate business altogether. I don't see -- I think there is a potential for MFI going forward also.
New regulation is also...
New regulation is also supporting MFI -- new regulations which have come about interest rates, et cetera, are supporting MFI. Only with a calibrated growth, but then there is potential there.
Sure. Any number that you'd like to give?
No, I think they have a target -- what was our MFI target? No, there is -- I think they have a reasonable growth target. And our MFI in the last quarter, I don't know 3, 4 months back, we got only 32%. So we just got INR 1,000 crores of [indiscernible].
The next question is from the line of [ Shubhranshu Mishra ] from UBS.
A couple of questions, sir. One is on the growth versus [Technical Difficulty]. Would it be a fair assumption to understand that the...
Your voice is not clear. Your voice is not very clear, sir.
One second. Hello?
Yes. Okay.
Sure, sir. So would it be a fair assumption to understand that the rates for the customers, the customers have got attuned to lower rates because of the competition in the last 2-odd years, post COVID and -- because there was some amount of regulatory arbitrage in the banks. And going forward also, we would see lower rates and lower yields? That's the first question, sir.
The second question is on the promoter holdings and -- is there a way the businesses can be split among these families? Has that been decided? Has that been written down somewhere that if there is a split among the promoters, some amount of business would go here and some can go here? That's the second question, sir.
And the third question would be on the liquidity, sir. You just answered it, but we are carrying huge amount of liquidity despite having a very strong collateral, sir. Gold is absolutely liquid. And I'm really perplexed as to why a rating agency would look at -- would not look at us differently despite us being an NBFC, because on one side of the balance sheet we've got an absolute liquid collateral. And today, there are multiple agencies who can lend to us. It's not just banks or mutual funds, we can go to some other source of funding as well. So the liquidity is also fairly perplexing despite the LCR norms and despite all the other associates. If you can answer these questions.
Thank you. Yes, you are right, probably in the last 2 years, et cetera, banks have been giving -- supporting people with the lower rates during the COVID, et cetera. But that is one set of people, probably one set of people would have enjoyed and maybe -- they maybe expecting lower rates. But the potential or the base for gold loan is so large that there will be so many others who will not -- who will still be willing to pay a higher rate for a quick loan from an NBFC.
So we don't see any issues there with having some customers who have now got attuned to a lower rate, that's some customers probably. They will also -- they may be like that, but the others, the large number who are not so interest sensitive will still continue to use gold loan as a comfort gold loan and a quick gold loan.
Second question is about split in the family with regard to this. There is nothing like that here. And I think the promoter family continues to hold all the 75%. Whatever we had at the time of IPO, we still continue to hold. We've not sold even one share till now, and I think we have not thought about such things.
The second -- the third point, again, you said about the gold loan being absolutely liquid collateral. But the fortunate fact is, we know it, everyone knows -- nobody needs to -- nobody is willing to acknowledge it. I think I'll take you to one of the meetings with the Reserve Bank or one of the...
You asked the question in this forum, good, probably some of the representatives of the agencies are also participating. So they are also listening to it, good that you ask this question.
Yes. We would like you to accompany us to some of the regulators maybe when we talk to them or to the rating agencies, et cetera. We -- sir, we would also love to keep very -- because before all this IL&FS crisis, et cetera, we have -- we were working with very little collateral. We were saying that our gold loans is so liquid that if there is any issue in the company, the first people to run to the branch will be the gold loan customers to take back their gold.
But that didn't cut a lot of ice with many of the agencies whom I said. They said, that may be so, but we would like to see some liquidity in your balance sheet. Anyway, that's a big question here and there, sir. But finally, we have to look at our side -- our side, we have to look at it, and for that, we are keeping this liquidity, sir.
Right, sir. If I can just squeeze in one last question, sir, data-keeping question. What proportion of the AUM is below 1 lakh and what proportion is between INR 1 lakh to INR 2 lakh and what is above 2 lakh?
So I'll just update this number. Maybe we can take the next question.
When we're answering the next question, we'll update this also.
[Operator Instructions] The next question is from the line of Nischint C. from Kotak Securities.
This is Nischint here from Kotak. Just 2 questions. One is on the spread side, we are running ahead of what spreads you would want to maintain. So why do you really want to stop the teaser rate scheme? You should probably continue or maybe you can offer better rates to the customer.
Yes, sir, we always wanted to do a lower, whether it is the growth rate or the spread rate, we wanted to give a lower one which will be achieved better. Isn't that better than saying a higher rate and achieving lower considering in that sense only.
Sure. Or is it something that you are expecting the cost of funding to increase in a significant manner?
No. There are so many issues, some thing is coming up every time. So we just didn't want to give a too optimistic number. That's all. It's really that way.
Sure. The second question is really on branch openings, and I believe one of your competitors mentioned that RBI is not very sort of forthcoming with branch openings or there are constraints or there are a lot of delays in getting approvals from RBI for permission of opening new branches. Are you facing a similar sort of a problem?
Yes, we are also facing delays from the regulator for branch openings. Anyway, during, at that time, we will -- we are now trying to do business in the existing branches, which itself is good, but few branches extra would have been better, that's all.
And just trying to understand, the branch opening application goes to the central office or does it go to the respective state offices of RBI?
Yes. It is -- all our correspondence are with the local office. But then, of course, they consult the central office and make 99% of the decisions.
And in your discussions with the regulator, I mean, what could really be a concern that the regulator has? I mean if anything, during COVID, monetization of gold is something which has actually helped people a lot at the bottom of the pyramid. So what is it that is concerning the regulators? And why is it that they are sort of a little more cautious of getting more about branches?
I think some of it may be a local issue. Anyway, even if we ask, they will not come out with the real reason. They always...
So probably earlier banks were facing this challenge in terms of the branch licensing probably. Now we are facing delays. So there could -- no particular reasons could be attributed. At least, we have not heard any particular reason for delays in terms of branch approvals. So we give the applications, it's for them to process it and send it back to us.
But there are no red flags raised in any audits for any of the gold loan companies. Is that a fair point to say?
Yes, sir. If there is a red flag, we will stop the business.
I mean, I'm not saying for you. I'm saying that for anybody else in the industry.
No, sir. Every stage, there will be some aches and pains, that's all. Otherwise, nothing, no red flags.
Yes. There was an earlier question in terms of loans above INR 1 lakh. So loans above INR 1 lakh will be 58% and loans below INR 1 lakh will be 42 percentage.
And between -- above INR 2 lakhs?
I don't have above INR 2 lakhs. Above INR 3 lakhs will be 22 percentage.
Sure. In terms of AUMs, right?
In terms of AUM. Yes.
The next question is from the line of Nikhil Agrawal from VT Capital.
I just have one question with regard to the auction. First of all, the number that you mentioned, INR 2,100 crores, what proportion of that would commence in quarter 2, '21 because huge amount of INR 50,000 crores...
Sir, sir, sir, it's not very clear. You're a little fast also.
Okay. Am I audible now?
Yes, sir.
Sir, am I audible now?
Yes, audible, audible.
Yes. With regard to the auction amount of INR 2,100 crores that you mentioned, would it be possible to quantify what proportion of that is coming from the quarter 2 financial year '21 versus the INR 50,000 crores?
Quarter 2, quarter 2, I'll just -- quarter 2, it will be INR 2,800 crores.
Sir, it was mentioned that there were some loans that were not auctioned off, and they were still in delinquency last quarter. So is there any number from this INR 2,100 crores that is referenced from that quarter?
It will be always there. It is a continuing process. Whatever is left there, if it needs to be auctioned in the succeeding quarter, it will be auctioned. There is nothing that we keep a particular account, et cetera. Some customers would ask for some time, we'll give them some time. If they are not coming within that time, then next auction, we will just auction it off.
The number we gave is the auction done in that quarter, not pertaining to any loans became due in that quarter.
The auction actually...
It can be from any quarter. The loans could have become due in any of the previous quarters.
Okay, sir. Sir, with regard to the non-gold loan business, which is [indiscernible] gold business right now. Is there any plan to increase this proportion in the coming season?
Increased proportion of what?
The non-gold loan business.
Yes, if there is a requirement, if that subsidiary -- telling about the subsidiary, if that subsidiary is doing well and it needs more AUM, we'll do it. But as of date, we would love to do more of gold loans. But having said that, we would not hesitate from going into any of the subsidiaries also in the appropriate time. But probably in the next 3, 4 quarters, we don't see a big need for growing those other subsidiaries.
Microfinance raised some funds in the last quarter.
Are you asking about the capital allocation?
Right, sir, that would be another question with regard to the capital allocation for equity infusion as was mentioned in MFIS. So that is another question, but I was asking about the proportion of non-gold loan business coming -- going forward?
Non-gold business today is about 10%, probably 1%, 2%, depending on the comfort we get in that sector.
And sir, with regard to the equity infusion in MFI?
MFI equity infusion is done actually. It has come. It has come. INR 275 crores have come.
All right, sir. Sir, just one last question. So the 16% -- the 17% reduction in GNPA, how exactly should we look at it, sir? Where does it come from?
17% reduction in?
The GNPA numbers from quarter 3.
So no -- NPA was INR 2,100 crores. And right now, as of March, it is INR 1,700 crores. Is that what you're asking?
Yes, sir. How...
It just means that during the quarter, some of the customers' loan script got closed and the new customers coming into NPA are lesser, that's all. It is a, what should you say, it's a moving number. It's a moving number. So it is not just any old NPA account lying there. It is very dynamic. All the NPAs which are there are not more than 3 to 4 months -- NPA, that's all. We don't have any very long outstanding NPAs at all. It's just very, very moving. What you see this quarter will not be there in the next quarter. It will be a new set of numbers in the next quarter. So it just happened that in the next quarter, many people would have taken it off and that is why the NPA is lesser.
The next question is from the line of Digant Haria from GreenEdge Wealth.
Yes. Sir, see, mostly, we are the largest player, so we don't have the option of not participating in, say, the large ticket gold loan. And maybe what -- from whatever I know, large ticket gold loans, about INR 2 lakhs have a lot of competition. So that segment, we will continue to face yield pressure because nobody is just backing off.
But as Muthoot, as we have 4,000, 4,500 branches, are we doing anything special to ensure that even the less than INR 1 lakh ticket sale where pricing is still intact, that grows faster than the higher ticket loans? So is it possible that? As a company, what is our strategy here or any thoughts on this will help.
Yes, I think what you said is right. Theoretically, it is right that we should be concentrating more on the lower INR 1 lakh ticket size, lesser than INR 1 lakh ticket size. Yes, that's a good strategy. And we always continue to do that for customers also. We are always -- we don't differentiate between customers, whether a big customer or low customer, et cetera. But yes, the numbers which you said INR 1 lakh and INR 2 lakh may be too low. Probably it is the INR 5 lakh and INR 10 lakh, et cetera, which should be seen as a big ticket customer today.
The money value is so low now that the INR 1 lakh and all everybody can get INR 1 lakh, et cetera. So -- but the strategy which you said is very apt and correct and always we are conscious of that, and we try to support the smaller customers always because we know that it's a better set of customers who are just -- don't go here and there, just because of some interest rate differential, et cetera. So we know that and we are aware of that, and we have strategies to see that no customers don't go away from us.
Right. So sir, because for these small ticket customers, everything will probably happen at the branch level. It's not easy to pull them in. It will be your branch guys will have to do very hard work. So...
Yes, yes, yes. You're absolutely right. You're absolutely right, sir.
Right, sir. Okay, sir. And sir, just your thoughts on [indiscernible] back, the competition has increased, the yields have been under -- like, there are a lot of random players offering random deals. So do you see this settling anytime soon or it is still maybe 6, 12 months more before we reach the new equilibrium level? Because we were doing 8% ROI using gold loan business, we are probably at 7% now. Where is our equilibrium and the sector equilibrium? Any thoughts on this? I'm not looking for a specific answer, but just your observation.
I think there are -- as you said correctly, the correct word is random players, many random players have now started coming into this, that's a good terminology. I'm sure those people will lose interest and go away, sir. We saw this happening in 2011 also. In '11-'12 so many players came in, they were not serious payers, I wouldn't call them random players, non-serious players. Of course, your terminology random looks quite nice now. Okay, but these non-serious players will lose interest quickly, sir, because gold loan is not very easy for the processes, et cetera, and things are not easy. And nonserious players would just back off after a while. Give them some time, probably 1 or 2 quarters.
And sir, I get it, the random players will go, but just some players like, say, an SBI or a Federal or a [ Catholic Savings ], like, they have somewhat build a book, at least. And I think maybe in the next few years, we will still have -- those will still remain. So just any aggression from those players? The random players will go, but at least the middle tier, the middle tier players who are...
Yes. I think banks being serious players in this can work wonders in the sense that it will attract more and more customers to the gold loan sector, sir. That is the advantage we see. When banks also start doing gold loan, the -- most of the stigma to gold loan, et cetera, will vanish. And more and more people will start maybe using the gold loan model. And that is what I see. That's what I see.
Banks there, banks there is -- only I should see the positive side of it only. The negative side is probably a little bit of competition. But then the positive side is that more and more customers will get attracted or will think of gold loan as a good option, and that itself is good. State Bank and all these banks have been doing gold loan for the past decade. There -- all the banks, which you said have been doing this for last decade.
The next question is from the line of [ Jitark ] Shah from SBI Pension Funds.
Just one question. Could you please elaborate on the other expenses, which has gone up like almost 15%, 18% this quarter?
Give us a minute. We can take some other questions in the meanwhile if there is anybody.
We'll move to the next question from the line of Nirmal Bari from Sameeksha Capital.
Yes. [Technical Difficulty]
Sorry to interrupt, sir, your voice is breaking up in between.
My question is [Technical Difficulty]
Sorry to interrupt, sir, we are not able to hear you clearly. Would request you please join the queue back.
Okay. Anyway, I will answer the earlier question, the administrative expense of 2,021 was INR 723 crores. And in this year, it is -- for the full year, it is INR 742 crores. I think there is hardly any increase. If it is quarter-on-quarter, it is may be a seasonal thing only, but for the full year...
Quarter-on-quarter, Q4, it is INR 206 crores; Q3, it is INR 183 crores. So the increase is about INR 23 crores.
No, but take it as a whole year, sir. For whole year it is -- last year, it was INR 723 crores. This year, it is INR 742 crores.
I don't think it is any material impact.
We'll move to the next question from the line of Prakhar Agarwal from Edelweiss.
Just a couple of questions. I wanted to understand the logic behind introducing a teaser rate loan when we are saying that we are not seeing demand -- gold loan demand, which has gone down. So what was the logic behind, first, starting with a teaser loan, and if that is because of the competition that we were seeing, then why had we stopped it essentially when, obviously, our target spreads is lower than what we are running on the book as we speak?
Yes. So the teaser rates was for a specific period. It was for a specific purpose to get a new set of customers. We have achieved that and then we have discontinued it.
No, Sir, what was the logic? So if we were seeing that gold demand has not come down, gold loan demand has not come down and we were seeing a fair share of demand, what was the logic of introducing this teaser scheme? Is it because of the competition that we were seeing that we introduced or what was the logic behind introducing this?
See, one, the rate of interest has come down in the market when home loans, everybody advertise at 6 percentage, and suddenly, some of the gold loan player starts at a very low rate, acceptability as a product, being a market leader, we need to ensure that product is accepted by the staff as well as the public.
So when we do large-scale spending on advertisements, we need to do something which is acceptable to the customers. So that's why we mentioned that it was for a period. There was a specific objective. Now that objective is met, we are moving on.
Okay. Sir, just in continuation with that as well. So when I -- when we looked at this fact that probably other guys were offering lower rates and all those stuff. So why our business promotion expense for the quarter is -- first, there is a write-back of INR 14-odd crores, and even for a full year, when I look at the promotion expense, that has gone down significantly. What explains that?
Yes. See, promotion expense should have been probably the advertisement and the things -- advertisement is definitely required. Probably in the last year, advertisements -- I don't know the exact number of advertisements, it would be less because of this COVID, et cetera, we would have done less advertisements. Now that the things have opened up, we would have started more advertisements. I'm not exactly sure about the number. Those numbers are just a small proportion to the total business only.
And sir, just to give a number for this quarter, we have reported a write-back of promotion -- our business promotion expense of INR 14-odd crores. So what explains that write-back?
So see, probably there will be some promotions which we have made in the past, we would have reversed.
Some promotions which we made would have been reversed. Yes.
Okay. And just a couple of more questions. In terms of teaser rate when you offered, what was the sort of rates that you guys were offering? And what are the AUM that you garnered from that loan -- that rate?
Actually, we went up to 6.9% was the lowest teaser rate which we did. We've got sufficient business there also. I don't have the exact number here with me.
Okay. Just one last data -- just one last question. When you talk about FY '23 growth of around 12% to 15%, any indication of what is the AUM per gram growth that you're looking at? And what is volume growth that you're looking within that 12% to 15% growth range?
I didn't understand your question, volume growth and gram rate, what is that?
So value versus volume, when you talk about 12% to 15% of overall growth, what is -- what is coming from volume and what is coming from value under your assumptions?
We don't look at value at all. We look at only the AUM. AUM is rupees, money. Only that is what we look at. If you are thinking about gold per se, that is not our gold, it is somebody else's gold. There is no need of any numbers for the gold. It depends on the gold price only. So what we are talking about is the loan -- the value of the AUM.
And so value of the AUM will grow by cause of 2 things, one is number of customers addition and second will be AUM per gram addition because of that particular customer. So I'm just asking between these 2, have we sort of any -- seen any bifurcation as to what is the sort of number of customer additions that we foresee for the full year, next year?
Number of customers, we don't have a list on the number of customers. On the value of the gold, the value of the gold will depend on the gold price at the time of lending. If the gold price goes up, the rate per gram will be higher. If the gold price is down, we will have to reduce the lending, so it is dependent on the gold price only.
The next question is from the line of Nirmal Bari from Sameeksha Capital.
Yes. Am I audible this time?
Yes, please. Okay, you're audible now. Yes, sir.
Yes. So my first question is actually on the yields part only. This quarter, the yields came down primarily because of the teaser rates and all. But given the competitive intensity and -- have we also reduced the top end of the rates, which was earlier, I believe, at 20%, 22%, have we reduced that now?
No, no. The top end rate still continues there.
Okay. That is despite the interest rates that had come down last year, we didn't change that, right?
See, very few people reach the top rate. Top rate is only when the loan gets in the books by maybe 11, 12 months only. 95% of the customers will release the gold before that.
Yes. Okay. And the second part is on the accrued interest. You said the accrued interest is about INR 2,071 crores. So what was the normal figure for this? If you could give the data for FY '20, March end FY '20, that would be helpful.
Yes. Give us -- give a minute, please. Any other questions?
So there was a question on business promotion. I know there is a reversal of INR 14 crores. So that is on account of a reversal of some of the earlier promotions, which was in excess, which got reversed in Q4. That's why for the quarter, it is coming as INR 14 crores as a reversal. And in terms of the promotions as of March 2020...
[Technical Difficulty] promotions as of March 2020, the interest [Technical Difficulty]
Sorry for that. Sir, we've lost the connection from management, just hold while we reconnect.
This is the operator, we have the line for management reconnected.
Yes. Can you hear us?
Yes, sir.
Yes.
Okay. So March 2020, the accrued interest was INR 1,557 crores.
Okay. And sir, the final question on our vehicle finance and home finance segment. So how are we looking at this 2 now in the current year? And would we be looking to start growing that book or we would still continue to be cautious and...
We'll continue to be cautious, but we have started growing the book in vehicle finance as well as the home finance. We have started growing the book. It will be -- but a calibrated cautious growth.
And do we have some targets for that in the current year?
Yes, we have given some small targets for them also. Probably, it's not a big number to write home about, but then they have started them.
Next question is from the line of [ Ajit Chaudhary ] from Total Securities.
My first question is on the average ticket sizes. While I understand that it has increased. But on the branches side, when you're deciding on the branch manager or branch productivity, are you giving the branches any specific ranges that you need to -- they need to have some portion of their loans generated to x percentage of ticket size or some portion of loan to have a ticket size higher than this? Is there any kind of division or rational that you have done to the branches?
No, no, no. It depends on the type of customers coming there. If it is a high-value customer, they take a higher loan. Low value customers -- it depends on the geography also. In that particular area, it is sometimes low ticket customers maybe more. We have not made any differentiation.
That was the last question in the interest of time. I now hand the conference over to management for closing comments.
Can you hear us?
Yes, sir. We can hear you.
Thank you all. Thank you all participants for participating with us. Your questions and your suggestions are always valuable to us. We definitely value it. That is why most of our senior management is also attending this. So please continue to guide us. Please continue to give us your good valued opinions.
And finally, rest assured that we, from the management, will work hard and see that the company and the stakeholders, all the stakeholders, whether it is a borrower, lender or the equity investor, benefited by associating with Muthoot. So thank you, all.
Thank you very much. On behalf of B&K Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.