And you also, I think last quarter you had mentioned there was some Rs. 150 crores that you were to receive from the ARC sale. Has that come in in this quarter?
The connections from remaining portion of ARC is, this quarter it is small, very small.
Just going back to Raghav's question on the yield movement. So if I reduce 300 crores-350 crores from last quarter and this quarter's interest income, that interest income has still grown 14% versus loan growth of 10%. So are our fresh disbursement yields going up in the last few months?
So the non-portfolio, so we have a bouquet of products for yield, etc. So high yield, low yield. It occasionally, it sometimes happens that in some quarters, the higher yield portfolio the offtake may be higher. That is simply that. Not that such a lot of retail loans. Some of it happens like that. So it only means that during the quarter or just before the last quarter, more high yielding loans would have been disbursed. That is it.
But we intend to start before April 1st? Or you will just wait for the market to do and then we follow?
We will take some decisions. I think usually we do and others follow.
And just lastly, I th ink you made some announcement around this particular case about some retail investors having some complaints or some issues. If you could just share where that case is or what is t he, any quantifiable impact you could see there, if at all.
The last point, I think we have already filed an exchange filing, which is quite detailed. So, we don't have anything to add more than that. Love, please go through that exchange filing. This has nothing to do with Muth oot Finance, no loss incurred by the investors.
I have two questions. I wanted to understand our average ticket size is now more than Rs. 1,17,000. I wanted to understand at what point or at what ticket size will this start plateauing, because obviously at the higher end, your competition from banks will become aggressive, maybe beyond Rs. 2 lakhs or Rs. 2.5 lakhs or Rs. 1.5 lakhs. If you can help us understand beyond what ticket size do you feel for your book you see far higher competition from the banks?
Regarding the competition from banks, average ticket size, etc., there is space and room for everybody today. As you said in the last line, more and more people are now thinking of gold loan. More and more people are now comfortable to take a gold loan with their jewelry. So, we don't see competition that somebody is taking away our customers or we are taking bank customers or banking. There is space for everybody. The total business is really growing. Today, the banks have a huge gold loan portfolio. They have a portfolio of about 30 trillion and the NBFCs have a portfolio of little less than 3 trillion. So, there is a lot of business being done by the banks. And people may go to banks, may come to NBFCs. My point is, it is not that somebody is taking our business and we are taking somebody else's business. There is business for everybody.
And the second question was, sir, on the branches, that we saw a very good branch addition this quarter. If you can throw some light on the targets and what are the limits which we have unused at this point of time.
So, about the branches, yes, we have been opening branches regularly. We have, we again give a request to RBI for permission to open branches. As soon as that permission is received, we will keep on opening branches. We had about 100, 200 branches every year. And probably this year also, we will look at that number or a similar number of new branches this year also.
Sir, my question is we are earning very strong ROA/ROE right now. So, where do we plan to reinvest for maintaining our customer base growth and our market share? So, if not cutting the yields, then would it be in advertisement and marketing or would it be in more employee incentives? Can you share some thoughts on your growth strategy going ahead to ensure that we keep on growing our customer base?
So, our major expenditures are on employees as well as on advertisement. So, that is where we are going to spend the amount.
So, firstly, if I look at your stage three levels on the standalone book, which come down sharply over the last 2 to 3 quarters to about 2.25%, what would be the target if any for the end of year at your end on the NPA level, given the kind of price we have and given that people are coming back to repay the NPAs?
So, actually, we support our customers who ask for more time. So, when a customer comes and says he wants one month more, two months more, three months more, or four months more to take back the loan, we see, we look whether we are in the money, are we a loser. If we are in the money, we don't mind giving him more time for that. That is how these things remain as an NPA. As and when they get the money, they'll take it back. So, no hard and fast rule that we should, but a very high NPA number in our books always has some doubts on people. Although it is fully secured, we will not lose any money. But nevertheless, people will ask so many questions. Why is your NPA higher, etc. For a gold loan company, NPA is not an issue. It should not actually be an issue. We should not compare the NPA of a gold loan business to maybe the NPA of a personal loan or such other loans, where NPAs result in loan loss. No NPA till now has ever resulted in a loan loss or interest loss for any gold loan company, inc luding Muthoot. So, when we hold something as an NPA, it is only to see that the customer doesn't lose his gold through auction. It's only to support the customer. Otherwise, we don't need to keep an NPA. We don't need to keep it. So, we do it so that customers will not lose their gold because it is a precious ornament for them. That is the reason for the NPA. So, finally, we don't have a target for NPA. We only see whether we can maybe the gold within the money, we will retain it in our books. I think it's around 2% to 3% will remain in that level only.
I wanted some understanding on your yield. So it has moved up again in this quarter versus Q1. Last quarter, I remember you had some Rs. 350 crores to Rs. 400 crores of recovery benefit. What is that recovery benefit in this quarter that is leading to a yield expansion again quarter-on-quarter? Is it somewhere around Rs. 550 crores to Rs. 600 crores in this quarter?
So, Raghav, I think the reason why it has increased a bit is probably in the NPA bucket, there has been a liquidation of some old dues, especially in the light of increased gold price. So there we have been able to generate a better yield, which should be somewhere around Rs. 300 crores plus. So that should add to the additional yield interest income which has been generated. As you know, on NPA accounts, we do not recognize the interest. So that has come in as an additional yield. Rest is probably because of the churn in the book.
So you are saying the entire yield expansion that has come, which is from 19.56 to 19.99, that is entirely because of this Rs. 300 crores. Is that understanding right? Because the math doesn't seem to be adding up.
The math doesn't seem to add up only about Rs. 300 crores because I think last quarter when you had this Rs. 350 crores-Rs. 400 crores, adjusted for that, the core yield was somewhere around 18%-18.5%. And hence the question that if this benefit is only restricted to Rs. 300 crores or is it more?
Sir, also in your opening remarks, you mentioned about favourable regulatory tailwinds. I think you are referring to the LTV, you can give at a higher LTV for lower ticket loans. Have you started doing that for loans less than 2.5 lakhs?
What I meant by regulatory tailwinds is mainly the clarifications, the what is the clarifications and what should I say, confusions being set at rest by the RBI. I think that is what I meant by the regulatory tailwinds. Of course, we have not started the new, what should I say, less than 2.5 lakh loans and 85% etc. We have not started, sir.
So just lastly, on cost of funds, how much more benefit can we expect to see over the next 2-3 quarters?
I think it has started. Cost of borrowing has started declining. I think last quarter it was 8.88, this quarter I think it is 8.78. So I think it should come down. I think banks MCLR also started declining. So we should see that. I know domestic NCD market also, the rates have started falling. So I think we should see the, I think the peak level of interest has already reached and I think it started declining. So we should get benefit in the coming quarters. Probably by the end of the year. Not end of the year, it is another 2 quarters, right? W e should see some decline. Maybe another 15-20 basis point decline should happen from first quarter of next year.
I have two questions. One is on yield. So do you have any plans to cut your yields given that competition is at very varying levels of yield? There are gold finance companies such as you which are at 18%-20% and then there are SFBs and other NBFCs at around 15 and then banks are lending at lower. Maybe they are all different segments. But are there competitive pressures enough to suggest a yield drop or it will just take the, it will just track the interest rate cuts?
So Maruk, see our lowest interest rate will be around 10%. Our highest rate will be around 21%. We keep tweaking with these schemes depending upon how the business scenario is. So that's why sometimes the rates go up, sometimes the rates come down. But we generally try to remain somewhere around 18.5 kind of a level because we try to cater to different segments depending upon how the market is. So to answer your questions, we have low rate products. We have not done any across the board reduction interest rates.
I'm just trying to understand, especially in southern India, where we kind of keep hearing that there are other NBFCs who've entered into gold loans and who've poached employees from Muthoot. So I'm just trying to understand, despite so many NBFCs now announcing their foray into gold loans and now starting to build teams in gold loans, it still is not really prompting you to rethink your strategy in any way, right?
So, thank you. I think there is competition always. This is not the first time others are also planning to enter. There was again, I remember in 2011-12, there was again a rush of all NBFCs and non-NBFCs also wanting to enter the gold loan sector. After some time, after a year or two, most of them lost interest. So at this point of time, there are people coming in. But focused players, people who are focused, we were also focused at that time. We are focused today also. We are focused on gold loans. I think there is always space for us and we did not take any knee-jerk reactions when such things, some people come. No need for any knee-jerk reactions. We are there. We have branches. We have our customers and those customers definitely value the service and the products which we give, I think. To answer your point, no need to take any knee-jerk reactions to some people saying that and people poaching from Muthoot always has been there. But anyway, people think that by poaching a few managers or some senior managers from Muthoot, they can start a gold loan. But they will start. But afterwards, they will find that the operations, the challenges in the operations will catch up with them. We will wait and see. So one point, one word, there is no need to take any hasty or knee-jerk reactions. People will come and go. But we have been there, focused on this.
And sir, there has been a related question again on the same thing, that even despite so many other large NBFCs entering to gold loans, no one is, at this point in time, introducing any teaser rate schemes just to entice customers. So given how years have been, what I'm trying to understand is the pricing discipline in gold loans is still very much there, right? Everyone is able to grow without really having to do too much on yields and pricing.
I think you put the question, you answered it also. So I think I should agree with that only.
I mean, while you explained that there were some one-offs in interest income in the first quarter, second quarter, right? And which is why maybe the yields are higher. But from a second half perspective, if you could help us understand what are the recoveries which are expected either from NPA resolutions or from the ARC transaction that we had in the first quarter called out that maybe another 100 crores-150 crores we are expecting. S o what are the recoveries which are expected, which will reflect in interest income in the second half? And then what are the blended steady-state yields which we should expect going forward?
I think yield is what Oommen also mentioned, 18.5, that is the rate which we would plus or minus 0.5% is what we would be expecting, maybe 18%-18.5%, that should be the steady state. Occasionally some of these comes because as Oommen said, when there is a churn in the NPA, the gold loan NPAs with a lot of interest embedded in them gets replaced by a new NPA with much lesser interest. So all the interest which we had actually derecognized will become recognized. So when this churn happens, some of these things happen. So our NPA as of this quarter is I think little less than Rs. 3,000 crores and I think it is continued to be there that is because we give more time to the customers to take the loan. That is the NPA. Regarding the ARC, yes, some of it people have come and taken back their gold and now the gold price is also high. So probably more and more people may come and take back their gold. In fact, in the ARC also, all the customers who are able to take back the gold are very, very happy because we did not auction their gold. So again, there are some little bit, a little ARC is left and we are definitely in the money. So we are not hard pressed to auction it quickly and when they come, they will be able to take it back. So answering the question, the yield should be in the 18-18.5 range going forward also. This of course, occasionally this churn in the NPA etc happens and some extra interest come in.
On the ECB side, the dollar bond borrowings, of course, they have grown to quite decent portion of the overall funding, about 15% now. If you could just share some insight to where you think your target or any steady state number you have in mind as a percentage of your funding for the ECB borrowings.
ECB borrowings is around 16%. Ideally, we should have a stable source of funding. If it is a stable source of funding, it should constitute around 25%-30%. But on ECB borrowings, now we have focused only so far on bonds. There is also a larger ECB loan market, which probably we will be keen to look at it.
Second question would be around the new RBI guidelines. If you can sh are what has been the changes since they have been implemented in October. And I believe some of those measures would likely be implemented from April onwards. But just to get a sense of what you expect in terms of changes, in terms of growth, competitive scenario, or anything else which you could highlight.
Regulatory changes. Regulatory, actually, it's all clarifications. There's not much changes happening. And we have not started implementing the new regulations. It is coming, kicking in only from 1st of April next year. So, I think there is nothing now to be done on that. So, we have not made any changes. There is no big changes necessitated from this regulatory guidelines. The only thing is that the new loans, which we are permitted to do, loans up to Rs. 2,50,000 with 85% LTV, etc., that we will consider from next April. The board will have to take a decision or the credit department will have to take a decision on that.
My second question is on the number of customers. Obviously, there was a very strong growth in the number of customers in the slide that you've given of customers coming back with fresh collateral, etc. But in this quarter, that number seems to have plateaued a little bit or declined in certain segments. It seems a little counterintuitive because we thought that a lot of customers who are not getting MSME loans, not getting MFI loans would still be coming to you all. Has there been some slowdown in the number of people walking into your branches?
See, Shreya, the number we are showing, it is actually the incremental number of new customers. So, every quarter, if you are able to bring in 4 lakh plus new customers, that is a big thing. What you are thinking is probably the outstanding number of new customers. So, answering Shreya's question on number of customers, every quarter we are adding a new set of customers, which is around 4.2 lakhs. Sometimes, there could be small variations. Sometimes, it could be higher than previous quarter. But the important thing is that every quarter, we are adding a similar number of new customers and we are making fresh disbursement to those customers.
So, just to kind of harp on this point of compet ition, while I agree that Muthoot has been there across cycle and probably one of the most long-standing players, I just wanted to pick your brains on the fact that this time, the new competition is AAA rated, especially from the NBFC side, large NBFCs who are AAA rated want to scale this product. Also, more invested in technology. So, how are we trying to stay at the forefront in the product as well as do you see any risk to say pricing or yields?
So, I think I had answered a similar question earlier also. There are people coming AAA or AA or whatever A rating, etc. with deep pockets, maybe coming into the business. But then we have been focused on this business. We are focused on gold loan or branches are also focused on gold loan. And we have seen similar people coming in probably after some time losing interest also. But whatever it is, people come to a sector when they see a lot of growth potential. So, it definitely answers one question, there is growth potential in the gold loan sector. Now, whether somebody is coming and taking away our business, that question, I don't think it has happened , it is happening. And till now, we have not seen anything like that. So, we will see, we will wait and see what is happening in the market and we can always make changes if necessary. But to me, if you ask me, I don't think we need to do anything, any knee-jerk reactions today.
One is on the LTV piece itself. So, this time, I think we have consciously or probably, because of the market factors, we have kept the LTVs much lower than what it was running till last quarter. It's right now about around 57% versus 60 to 61% we had earlier. So, I wanted to get your th oughts that is it a conscious decision from our end, given the heated prices right now?
And on the LTV, the 43% you see is the average LTV. So, our portfolio will have old loans which is because of the increase in the gold price. Currently, if you look at, it will be at a lower value. So, it is merely because of average LTV. Otherwise, we are lending at 75% of the gold price as per RBI norms.
And on the one last question is that when I look at the Stage 3 reduction, last quarter, it was Rs. 700 crore, this year, it was around Rs. 100 crore. Despite that, our interest income recovery this time seemed very strong. So, just wanted to double check that the Rs. 350 crore odd number which you said last quarter was regarding probably the Rs. 600 crore of stage 3 reduction. But this time that number was only Rs. 100 crore, yet the number was very strong. So, if you can give some color on where, how should we look at the yields?
Regarding the NPA, I think Oommen had clarified earlier in the first or second call that it is because of the churn in the old NPA accounts. So, the old NPA accounts which were really old and had lots of embedded interest which was derecognized earlier, when it became, when it was got renewed or closed, closed interest, a big chunk of that interest came. And the new NPAs which came did not have that much of accrued interest. So, that is the reason for that.
Typically, by when, sir, in your experience, does the customer come and take relatively higher amount or take some of the gold back?
I think there is one thing which people should really understand. It is not that somebody has pledged a gold and he will take all the maximum loan every time. He actually wants the gold back. So, he will take only an amount which he feels he will be able to repay. If not one month, two months, three months. If he feels that he will not be able to repay that loan, he will not take it on the gold. Because if he really wanted the full money, he would have actually sold the gold and got all t he 100% instead of coming to a financier and taking only 75%. So, he is a person who needs temporary money and he feels that after one month, two months, three months, etc., he will be able to take it back. And he will take loans only up to the amount whic h he feels he will be able to repay. Otherwise, he will lose the gold. So, those are people how, somebody will not come just because the gold price has gone up. He will come if he really needs the money.
And on Belstar, I mean, the losses have come down. And now even the book has stopped regrowing. So, what is the outlook on growth and profitability in the next 3-4 quarters? How quickly can we come back to that 15%-20% growth, 3%-4% ROA. What is the assessment basis, the current loan stages, the current collection efficiency? How quickly can we come back to normalcy?
So, I think probably next 2 quarters will also be quarters for consolidation. Probably, we may not see big growth there. But then consolidation and maybe making the portfolio better quality would be the focus for the next 2 quarters. Probably after that, after 2 or 3 quarters, we should see business growing also. But again, it will always be on a calibrated scale only. Not something which is, what should we say, very high-powered growth etc. may not be there. So, it will take 2 quarters for it to stabilize. Maybe this quarter, the loss has come down. Probably by next 2 quarters, we should see a zero loss etc. And then probably we will slowly see business also going up.
My question was pertaining to the ARC transaction. So, what is the quantum left that can flow in the second half from the ARC transaction that we have done earlier?
Another Rs. 90 crores is left. So, that should come. We are not very aggressive in terms of the recovery efforts.
The second question was pertaining to the auction during the quarter and what would be the loan book split in terms of below Rs. 2.5 lakh to Rs. 5 lakh and above Rs. 5 lakh ticket size?
Auctions is just Rs. 10 crores or something. It is just 5 crores. So, above 3 lakh is 44%. 1 lakh to 3 lakh is 33%.
Okay. So, the last question was pertaining to the NPA resolution that we saw during the quarter. So, just wanted to understand like at a blended level on this Rs. 3,000 crore of NPA pool that we have, what would be the overall interest outstanding? Is it fair to assume that it will be more than 30% sort of a number?
No, you can take approximately 30%, one and a half years. If it is more than one and a half years, it could be higher also. So, I think we are repeating again on this. So, when there is a churn, you recover the earlier NPA accounts, the new loans get matted. So, the thing is that because gold prices have been high, some of these customers might renew the loan, or maybe take out the NPA accounts to sell the gold. The newer accounts, because there is a churn, which is happening at a higher level, the interest dues will be lower. So, when you collect on the old loans, you get a higher income, but the new NPAs might be, the interest dues will be lower. It will be somewhere around 30%-35%. We don’t have the exact number.
Just the last question was pertaining to the business strategy. So, we have gold business being done under three companies now. What is the thought process going ahead? Will we continue with this structure or there could be some change there?
We will continue with this structure.
And secondly, what would be our incremental cost of borrowing from banks as of today?
I think most of the banks MCLR, 1-year MCLR is around 8.65 to 8.75, 8.8. That will be the, because we are taking term loans, it's all linked with 1-year MCLR. All borrowings are linked to MCLR. All bank borrowings are linked to MCLR.
And just finally, so under Belstar, you recently opened 23 branches in H1. Is that the total gold loan branch count you have under Belstar?
As of September, it is that much. We are still opening more branches. The plan is to open about 150 branches by this year.
Just one data point if you can share, sorry if I am repetitive. Can you share the auction number for this quarter as well as Q1 FY'26?
This quarter it's 5 crores. Q1 is 13.