Muthoot Capital Services (NSE:MUTHOOTCAP) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Muthoot Capital Services Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I would now like to hand over the call to Mr. Manit from Ilara Securities. Thank you, and over to Mr.. Thank you. Good morning, everyone. On behalf of Ilara Securities, we welcome you all to the Q1 FY 'twenty seven earnings conference call of Muthoot Capital Services Limited.

0:47 From the management today, we have with us Mr. Matthews Markos, CEO and Mr. Ramandeep Gir, CFO. I now hand over the call to the management for their opening remarks. Thank you, and over to you, sir. Thank you, Manish. Good morning, everyone, and thank you for joining us today. On behalf of Muthoot Capital Services, let me extend a very warm welcome to all our shareholders, analysts, investors and members of the investment community. I sincerely appreciate your continued confidence in the company and your participation in today's earning call. So let me start with the highlights of q... Quarter one FY twenty seven. I think our twenties... FY...

1:32 The q one FY twenty seven has been an important milestone in our transformation journey, and we believe that Q1, we will remember for the significant strengthening of our balance sheet and franchise. I would like to start by highlighting three key achievements that we made during the quarter. First and foremost, we received a crystal rating upgrade to AA minus table. We believe that this is a very strong external validation of the transformation that the company has undergone over the past couple of years, And it reflects a sustained improvement in our asset quality, our governance standards, our funding profiles, among many other things. And more importantly, I think it enhances our ability to access diversified sources of capital at a very competitive price because that is a very critical aspect of our NIM and ROA, etcetera, etcetera. And therefore, it will position us well for our next phase of growth. Second, our public deposit franchise cross INR100 crores. While this number may not be very big, but considering that, you know, we just recently started scaling up on this and we recently launched our online FD module and all that, this is a significant achievement.

2:44 And, you know, this is important also from the fact that it gives us a very stable, diversified, and granular funding base, and it's a very pill... Important pillar of our long term liability strategy. So this is one business that we want to continue to focus on and scale it up to significantly large amount. Third, I think we delivered a substantial improvement in our asset quality. Our G and P level reduced to 3.94%, representing a decline of about 182 basis points year on year. And this is a function of our disciplined execution on collection, sustained recovery and the successful resolution of the stressed asset. So this is a very clear demonstration of our focus on quality even while we pursue growth.

3:33 I think these are really foundational measures. And coming to the business performance, the external environment has been very favorable. Q1 automobile industry saw good growth. The two wheeler industry recorded a 14% year on year growth. At Muthoot Capital, we delivered a 6% growth, which may be slightly moderate compared to the industry growth. But all our internal analysis indicates that the gap was not driven by market demand, but primarily due to the fact that our credit acceptance ratios were kept moderate. We were approving about only 35, 40% of the cases that were getting logged in, and that was as a measure of continuing to focus on our quality.

4:21 As we go forward, some of the measures that we are taking is that building our own. So we were using different scorecards from partners. Now we are... Our own data analytics team is building our scorecard internally, which will be differentiated for existing to credit and new to credit. And we are also bringing in a multi product, multi bureau strategy to enhance our credit profile. The parallelly, what we have done is that our own retail portfolio has been considerably increasing. So we have reached 84, which means our co lending book has been steadily declining. That is a conscious call that we took. So or if you compare Y on Y last year, Q1, we had about INR120 crores of disbursement through co lending. And this Q1, in the first month, we stopped, we only disbursed INR20 crores. So overall, dip in numbers Y o Y is a function of that, but MCSL alone has grown.

5:18 And our portfolio yield remains healthy at about 21%. And as we move forward, I think our focus will continue to be on accelerating high quality retail book, improving credit conversions and expanding our liability franchise and of course, leveraging technology. I think last couple of years, have invested a lot on technology. And now we we are continuing continuing to invest in AI driven technology. We have brought in AI in multiple fields now. Our entire x bucket collection is being done by AI bots. So AI bots continue to collect about... So this month, our resolution on with AI bots on the x bucket was as high as 55%, and we... We'll continue to expand there. Other use cases of AI has been on our welcome calling, our audit and compliance, our automatic ticket segregation of customer complaints. So we are investing heavily in AI. We've done couple of trainings already for our senior management and all relevant people on AI. So that continues to be our focus area and we will continue to invest in that as a technology because we see that consuming a lot of space in the BFSI segment.

6:34 And we remain confident that the investments that we have made so far in strengthening our franchise will enable us to deliver sustainable and profitable growth in the periods to come. So I think with those opening remarks, I'll now hand it over to our CFO, Ramandeep, to take you through the detailed financial and operational performance of the quarter. Thank you once again. Over to you, Raman. Thank you, sir. Good morning, all. We'll start with the assets of the company. So as Nathi sir has detailed it, the retail portfolio of the company, which was a year back close to INR 2,300 crore. Now we close at INR 2,851 crore. We have seen a significant growth in that retail portfolio. Co lending portfolio, which was close to INR 1,000 crore a year back, now it has been closed at INR $4.99 crore. And safe to say that we are having a zero incremental business from the core lending.

7:27 And the corporate loan book, we are not doing from last two years. That book has been de grown again by 16 percentage. So, overall, the focus was on the retail portfolio wherein which has which has grown a significant growth of 500 crore year on year basis. Of that retail portfolio, we are seeing growth in all the parameters whether we whether we can call two wheeler and the CV also used car as well. Put together, my CV and used car, they have shown a growth of around 40 percentage from year on year as compared to the previous financial year. My two wheeler, since we have excluded that DAMD ARC portfolio, we can see a minor degrowth, which is stable portfolio only at one percentage. Other than that, construction equipment, which we have recently started, has again shown a very good growth of 75 percentage.

8:19 And then as as we said, corporate loan, we are not doing as of now. The portfolio has been evenly evenly split throughout the India, wherein South part is containing 40 percentage, and the remaining part has been contributed by East, North, and Western part of India. That has also been shared within the investor PPT as well. The business of MCSL stand alone comes to $5.35 crore as compared to 508 crore, which we have done in the q four. So there is also a growth. We see q one business slightly lower than the Q4. This is the first time in our last three years where the Q1 business has picked up, specifically the NCSL disbursements. Then as Muthoot said, the yield on the product has been closely tracked now. The... We started used two wheeler, which has given a yield of 26 percentage while while my two wheeler and the loyalty loan and others, the blended yield for the for the entire two wheeler, is come to 22 percentage, while my CV and CE having the blended yield of 17 and a half percentage and used car is operating at 18.6 percentage.

9:30 Right now, we are almost... I said, you know, the co lending business has already been closed. So the entire business from the q one, except some four to five percentage has come from core lending, which is... Which we have done in the month of April, let's say. Other than that, the entire business has come only from the MCSL retail. And when I say retail, the dealer channel has shown a significant growth as compared to the Q1 of last year, wherein we can see that last quarter... Last Q1 of the financial year, we did INR $4.51 crores from this channel. Now we have concluded $4.65 crore alone from this channel. So therein, we are seeing the growth. Coming to the asset quality of the company, 96.06 percentage of the total portfolio of the company remains standard, while 3.94 percentage remains substandard.

10:18 Out of that, there is a stand alone case of corporate loan, which we already spoke, you know, in last two quarters, wherein we that we retail retail GMV of the company stood at 3.49 percentage only. That one case is contributing 15 to 16 crore. That's the reason the GMV is coming just at four. On the bucket wise, the company is having 85 percentage lying in the zero bucket. Last year at the same time, it was 78 percentage. On the first bucket, the company is setting up portfolio 7.34 percentage. On second bucket, it is 2.76 percentage. And then we have the NP and all, which is 3.94 percentage. The segment price analysis also we did, which we have already shared, wherein we can see that GNPA from my CV portfolio along with the CE is coming only point three five percentage expense.

11:15 While my used car portfolio is showing as 1.31 percentage only, the remaining GNPA is contributed by the tubular portfolio. Last year at the same time, the GNPA was 5.81 percentage for the retail. Now we are closing at 3.50 percentage. There is no change in the TCR of the company. It stands at 50 percentage. Hence, the NCR is one... Hence, the NNPA is 1.94 percentage. So therein... Now we spoke... We'll speak about this asset quality, and then we... Muthoot said, and we have given a detailed note also, note number six with the results. The company has undertaken one ARC deal with the Paris. So this deal, they they... The world objective was to, you know, bring down the GMPA at the same time the portfolio which is not contributing, wherein we are not getting as much recovery as we should have got.

12:07 So therein, the company has taken a average valuation of 45 percentage on our portfolio that we have sold for around 203 crore. So that was one time clean up excess we wanted to do in the q one itself so that by q two, q three, and q four, we should have a portfolio wherein wherein we are are getting recoveries from the MCSL itself. Secondary part, the portfolio which we have sourced in the last fourteen months and all, therein the GNP is only one one percentage. So that gave us confidence that, okay, the new portfolio is behaving well. That was the sole reason of, you know, doing a deal for the ARC of the portfolio, which was two year to three years and more, which is there in the books of NPSM. So that deal also been has also been concluded in this quarter itself.

12:54 Our source of recoveries, the major source wherein last year, as Matthew said, bank and electronic mode, which used to be, you know, 75 CR, it has now reached 200 crores, which is again a very significant achievement. The total income, wherein the other income we have classified from insurance partner from Cross sells since the company is holding IRDA. So then the total insurance income comes at 2.47 crore that is part of the other income system. On the liability front, we... The promoter's shareholding remains at 63.33 percentage, and remaining has been contributed by corporate, retails, and others. While we have acquired lot of banks during the last financial year, you know, we relied very less on the NGS fees and the NCDs. And now the overall cost of funding, which we have already shared, we have seen, you know, 0.80 paisa down as compared to the last financial year. That is... That change has come only in my term loan, which we have taken from the bank loan. Overall change in the borrowing, we can see from the last quarter q one to now this q one, we can see 0.43 paisa.

14:04 And that too, rating rating upgrade has has happened now. So we are expecting another, you know, forty to fifty paisa down in the upcoming deals as well. On the fixed deposit part, the company has touched 100 crore in this year, in this month itself. So the liquidity position of the company remains, you know, stable, wherein the company is always having the balances over and above the LCI balance, which is required to be maintained from the RBI. So when RBI is a 100 percentage, the company is... Every company giving a fund balance of one twenty five to one thirteen percentage, which we have already maintain... We've always maintained throughout this quarter itself. The... Over and above the balance wherein the asset... The liquidity, which has been classified as an high quality liquid assets that has been invested in my SLR investments, PCC investment, SLR deposits, and collateral deposits with the bank. Whereas the over and above 100 percentage has been invested in the fixed deposits with the bank itself.

15:06 The company has taken an overall yield of 6.71 percentage on those investment. Liability front, the company has closed the borrowings at INR 3,318 crore at a borrowing cost, incremental borrowing cost in the Q1 at nine percentage. This is this is going to go down in this in this quarter as well. That has a, you know, very fair mix of banks, entities, PTCs, big deposit and others. Then there are the last two slides, which we have shared with sales, the overall organization, setting the the company is earning a 3,300 crore, wherein we have excluded the portfolio that we have sold out through DA and also the G and P portfolio of INR 20 crore that has already been sold out to ARC.

15:57 The company has reported a path close to eight crores by which has taken the shareholder funds to $6.78 crores. The overall balance sheet size of the company has grown by one percentage from Q4, which is 4,079 crores. The q one business, as I said, $5.64 crores, which which which takes our line loans customers to 5 lakh $77,008.34 crores. The blue wheel, which we have shared with the investors as well, wherein we can see a growth of AUM on four percentage, the GNP has gone down to one eighty two bps. One reason, which is very specific reason is basically, yes, we have done the ERC. That effect, we can also see in the NNP as well. PBT as close to 11 crores, CRAR at 22.07, and the debt to equity for gearing of the company stood at 4.88 times. The total business which the company has done in this quarter is $4.65 crores.

16:54 Over to you, Manit, for the questions now. Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. The first question is from the line of Sukrit D. Parter from EyeSight Finance Private Limited. Please go ahead. Good morning to the team. I have my... I I have two questions. First question is mister Matthews. Was just beyond the headline disbursement growth. So to understand how are you planning to structurally reposition Muthoot Capital's two wheeler and retail lending portfolio over '28...

17:48 Financial 2028 to defend margins in a rising cost of funds environment while it was still maintaining strength against rural stress and, you know, identifying competition from other fintech companies. That's the first question. I'll ask my second question after this. Thank you. Okay. Thank you. So first of all, our portfolio is... You you would see that quarter on quarter, we are diversifying our portfolio. So the two wheeler used to be our warhorse for a long it was actually the single product for us for a long time. Now we have diversified and our other two other three businesses, which is consumer the construction equipment, commercial vehicles and car is steadily growing against that. So this diversifies our portfolio and the portfolio that is growing is at a much significantly lower GNPA levels by the basic nature of that those products.

18:50 You have slightly more qualified customers, you get more documents, you do a direct personal discussion, people need them contrary to a two wheeler where a customer walks in and the decision is taken in five minutes and all that. So, it's a completely different profile that we are catering to. And there is even on our existing portfolio, we can see that the GNPA levels are sub 0.5% and all that. So that reduces the pressure on us on keeping higher provisions, etcetera, etcetera. Two, we have got a rating upgrade, which will significantly alter our funding, okay? So as it is, we already started seeing, I think, Raman has already taken you through the numbers. We already started seeing at least a 50 bps reduction in our borrowing cost and which will continue to happen. On the third side, we are also aggressively building our liability franchise, which is at almost 150 bps lower than our borrowing cost. So that will also come in handy.

19:56 Fourth is that our geographical distribution also is in such a manner that we are not maybe in direct head to head competition with the large banks where, you know, the rates are disproportionately low. So our markets are largely the tier two, tier three players, and we have a very nuanced approach of the competition whom we face. And the competitors that we face in these markets operate broadly in the same interest rate range as we do. So I don't see a significant pressure on the top line in terms of NII, etcetera, as of now. And we are steadily watching the portfolio.

20:45 As I mentioned in my opening remarks that we are also coming up with our own originations scorecard where our data analytics team is working on. We are planning to rework on our risk based pricing also where we will be... You are pricing the higher risk customers significantly higher so that it covers the possible credit loss that we will incur. So... And then this, you know, risk based pricing will be a very dynamic one, which we will continue to monitor on a weekly basis. And wherever we see that any portfolio is coming down on the rates, we'll be able to alter those rates. Because it's our internal scorecard. Till now, we were dependent on a vendor to do that, and vendor would review it every quarter, etcetera, etcetera. But now with our own internal data analytics team doing it, we will be able to do it on the same day itself, but, of course, we will monitor it on a weekly basis.

21:44 Yeah. You can ask the second question. I hope it answers. Yes. Yes. Thank you for the guidance. My second question is to mister Gill. You know, with credit cost showing, you know, some early signs of pressure and capital adequacy moderating, what frameworks are you putting into place to sustain provisioning discipline along with funding digital trans... Digital transformation and maintaining the dividend commitments? Especially, you know, pertaining to any regulatory compliance that may keep on changing over the coming quarters. Thank you. Oh, sure. Sure. Sir, I think three ticks that, you know, we have done, and this is what I wanted to share while... And this is for everybody of the call, sir. First thing is, while you see the total AUM growth is not that much on the book, the best part what we have done over the last one year is we stopped co lending almost. Now how this has helped us with... Which we can see in the results.

22:49 I'm not talking about now ECL. I'm not talking about any impairment of the words. Our total income... So the overall growth was only one percentage, two percentage on the... Our total income on the same book, which was $1.47 crore, has now has gone up to $1.60 crore. This is substantially because we are doing our own sourcing. While the n... GNPAs remains the same as as per the q one of of last year, if I exclude the ARC portion, what we have done. So which means there's a 12.5 crore increase in this revenue. Why? Because the blended yield is going up as MCSL is sourcing on its own, number one. Number two, the finance cost of the company. As we... I have also explained, Muthoot has also explained, it has already gone down by point five zero percentage. Now there comes the third portion, which is the impairment of the company.

23:38 See, we are tracking it. So what we have done is, as I said, you know, last fourteen months MOV. So the two wheeler is the... The two wheeler is somewhere around, you know, 75 percentage of the book. So wherein we need to see that entirely impairment will come from here itself. So on fourteen month MOB, we are seeing a GNPA of one percentage, which used to three and three point five percentage when spoke in the last year Q1. So therein, we are seeing a reduction, but at the same time, macroeconomic factors has also been taken. So we have last year also we engaged and this year also we have engaged Therefore, if you see the note number five, which we have placed, we have additionally taken 2.5 crore on the impairment.

24:23 Because we know that in q two, when the ECL... So ECL model is something which we are going to revise every year. So that, you know, we should know that any macro economy factor, which as you have asked, is impacting the impairment, how it could be done. So we have done an analysis in the Q1 itself. For us, so last time that we did this analysis in the Q2 of last year, that gave us a reversal of INR 5 crore. This time, we don't want that factor. We just we just we just thought, okay. Let us see how how it is affecting my PD and LGDs of the world. So LGD remains same. We we were expecting okay with macroeconomic factors, some probability of default factor may go up. But at the same time, the GMP on the fourteen month book has gone down from three percentage to one percentage.

25:08 Still, we kept around two and a half quarter there as an additional impairment, which I have also shown in the note. So therefore, that gave us extra, you know, space that whenever we revise our model, which is which is due now in next four weeks or so, therefore, we don't have to take additional fee and a rate for the entire year. And number three, last time, if you see my ACLs, you know, the impairment that we have taken, though the company is at 50 percentage PCR at a whole, my used car and CV at... During last year, we have taken an LGD of 50 percentage, you know, which was very... Which which which was on the higher side while their GNP remains static throughout the year itself. Rather used car GNP has gone gone down from 1.75 to 1.36 percentage.

25:54 Therefore, we are expecting some downgrade... Some some revision in the LGDs as as well, wherein 50 will become 40, 42. So therein also some advantage might come, but we are not going to take it because we want to see this through whole financial year that how it's going to pan out. Therefore, we are providing additionally. If required, we will take a final call in the Q4 that if required, we need to we need any reversal, we'll take that reversal. Other than that, whenever we see any profits that are happening and if we are able to provide further more for impairment, we'll do that, sir. I hope that I have been able to answer. Thank you very much, sir, for the guidance and best wishes. Thank you. Thank you. The next question is from the line of Mahindra from Muthoot Capital. Please go ahead.

26:45 Thank you. So my first question is on where we had aspiration of 10,000 crores of AUM. So how do you see AUM as a FY 'twenty seven and 'twenty eight? And also, if you could indicate any ROA aspirations we may have budgeted for? Yes. Thank you. So on the AUM growth, as I had mentioned earlier, we are so in the Q1 of this year, our credit acceptance rates were far below the industry numbers. So where industry gives about 75% to 80% approval rates, we were only at about 35%, 40% approval rate. So that was being cautious.

27:30 Now we've seen how the last one point five years portfolio has behaved and now therefore we are bringing in a scorecard based model, which is getting built internally. And we are going to scale up our disbursements from Q2, end of Q2 to the rest of the year. And of course, Q3 happens to be the biggest time of the year. And the you, of course, have a bump for Q3 because of Diwali, Dhantiras and the entire festivities coming in. So that is the time when we want to be ready for the market and take advantage of that quarter and scale up our numbers. This year, the AUM projection that we had given was around 4,200, 4,000 thousand to 4,200, and we will reach those numbers this year. That's the projection. Yes.

28:22 And, Raman, can you take on the ROA part, please? Yes. So as of now, so in this year, as I said in the call, as... Also, we have taken a pretax ROE of around two and a half percentage for this financial year, and we are going to work on that. As of now, we have reached a stage of one percentage, but, you know, there are... Now from the next quarter, seems wherein we are expecting the business to grow. Therefore, we are also expecting, as I said, the interest income, we have already seen a growth. So we are expecting, you know, that this this impairment piece, which was, you know, which which which was which was an issue for us in the last financial year, that has been over now. So we are not expecting much increase in that cost during this financial year. So we are on track. This is what I I want to say on the ROE tree.

29:13 Sure. Thanks. My second question is on the ROE for our used car book, you know, because the yield there is significantly lower at 18.6%. So can you provide ROE tree for that, or or what ROA do we expect for this quarter? Sir, sorry. Can you just repeat your question? I missed it. ROA for used car? Sorry. Yeah. Yeah. ROA for used car because, see, the yield is significantly lower at 18.6. You know? And our... And if I take, you know, cost of fund of, say, ten ten point six and then some amount of OpEx Yeah. The product will be dilutive to ROE at a console level. So I just wanted to hear your thoughts on what do you expect ROE to be, you know, in a near term, like, FY 2728.

29:59 Yeah. Yeah. Sir, we track that we track that this vertical price profitability of... Rather for used car as well for CV as well. Because CV and CE also, if you see it is on the same line, 17 and a half to 18% digits. The best part about these two is, you know, the impairment sector. While CV is hovering around only point three six percentage, the four wheeler is about 1.31 percentage. Whereas, if as compared to two wheeler, which is around close to three and a half percentage. Right? And productivity is something, you know, which we are... Which, you know, we we we need to see for all this. So, therefore, the last quarter, you know, we have prepared the vertical wise p and l for... And there there in, we have seen the ROAD for used car. The eighteen and eighteen eighteen and a half percentage was my total income, which I am receiving from the used car. On that, I am having a minimum expense, which which we pay for the impairment. I'm excluding the finance cost, which you have already said, though we are 50 paisa lower only, but still by taking your finance cost and then there is a impairment cost of around 0.5 percentage as compared to two, two and a half percentage for the other product we have.

31:10 So, therefore, we are expecting an ROE of around one, one and a half percentage. But at the same time, used car is going to have a breakeven in this financial year. So we are looking forward for for that. Then we will set up formula, okay, at this this range, you know, at this... The... These are the number of units which used car has to do. So as to make a profit of this for the whole month. So that formula also has been provided to the respective businesses as well. So they're working on that. And, sir, the... If... Even if you see the used car business, as I have shown in my portfolio as well, used car business has also been grown. If you see the last year, last year to this year, there's a significant growth in my used car business as well. And on the total contribution to the AUM, used car alone has gone up to eight eight eight and a half percentage for the company, which was only two percentage in last year. So as in the business is growing, we are in... We are expecting a good numbers in the top line from the used car, sir, and so as to give you the RO.

32:09 Yes. It's... I just... I think what Raman has said, I think now we are tracking vertical wise, not only vertical wise, but also region level p and l. So every regional head... Area head has a p and l and vertical wise. So that gets monitored and reviewed every week, every month. So that and it's bottom up. So therefore, everybody knows, understands how the P and L is to be managed. Yeah. Yeah. I'm just looking to clarify the numbers. So what type of OpEx are we, know, forecasting for this used car business? One second, sir. I have just opened my used car business only. So, sir, I am expecting at a breakeven level of around four percentage of OpEx, which the company has to operate. Right now, we are at six, six and a half percentage.

33:02 Yeah. So you are expecting some reduction in OpEx because you are sourcing it yourself or what? The 4% Yeah. So, sir, OpEx sir, OpEx will go down as and when productivity will increase, which we are seeing now. So last year, the team the the the team has come. And this year, you know, the business has started growing from the same team itself. As I said last year, from the same team, the... It was contributing two percentage of the AUM. Now the same team is contributing eight eight and a half percent. I mean, eight eight and a half percent. Add some number to that, what Raman said. So last year, our average productivity for car and CV used to be 13, 14 lakh. Right now, is 20 lakhs plus, and we are expecting it to go to 30, 35 lakhs. So that's where, you know, the entire dynamics of this business will change.

33:49 Right. Perfect. And the last question is on the LTV. You know, whenever we calculate LTV for two wheelers, how is it, you know, how is the LTV calculated? Is it on on the road basis, or is it on, you know, off road basis? On road price. The series is calculated on the on road price. Okay. Perfect. That's it from my end. Thank you very much. Thank you. The next question is from the line of Hitanj from Trust Securities. Please go ahead. Hello. Yes, sir. You are Hi, sir. Yes, sir. You are the Hi. My first question is regarding the ARG transaction.

34:35 Can you just provide me the brief about the transaction? What are the numbers? And what were the number previously and the current number? And is there any amount written off from their side as well? And can you just provide about it? One second, sir. I'll just give you the entire number from the. Yeah. So, sir, so when we we did an ERC of 203 crores at this time, this is a third ERC of the company. So you are... You wanted to be specific on the third ARC, or you wanted to know the numbers of first and second as well?

35:23 Yeah. First and second as well. First. So I'll take it... You... So this is the third ARC of this company. The first ARC we did in September 2023, wherein the company has sold a pool of around $22.35 crores. The second ARC, the company has done in September 2024, wherein a pool close to 100 crores have been sold to the ARC. So these are the these are the two ARCs. The first ARC we did with Felix. Therein, the first ARC, valuation which the company has got on that pool was 117 per... CR, which comes to 50 percentage. On that, the company was having a security receipt of 102 crores. That security receipt from the first ERC has been gone down by 75 percentage, which means that company is able to recover 75 percentage of that, ARC in a span of two and a half years.

36:20 Coming to the ARC, which was close to 100 crore, again, the company has got a valuation of percentage, wherein the security receipt comes to 48 crore. Of that, the investment from Muthoot Capital comes to $40.41.73 crore. From that ARC also, we have been able to have been able to bring down that ARC by 46.71 percentage, which means that 46.71 percentage has been recovered by the company. Now this come... There comes the third ARC. So third ARC has two components wherein right of pool of the company, which was there, you know, wherein we are... We we have started getting recoveries as we have a specific focus now. So that pool was... Comes to 83.18 crore, and then there is a normal GNPA pool of the company, which has a DPD of around more than six hundred days. So that pool has also been sold to ERC.

37:15 So in totality, 203 crore have been sold in the ERC three at a valuation of around 45.61 percentage, which I have already shared in the note. So there... After this... During this evaluation exercise, what we have done, we have taken a blended valuation. Unlike the first two days wherein the valuations were coming in 50, 55 percentage with the same ARCs and therein also the company has shown a significant reduction in the balance of the security receipt. We don't want that higher kind of valuations on those. So we have taken a blended valuation of the entire pool, which comes to 46.51 percentage. Of that 46.51 percentage, the company had the... Has parked that 81 crore as an investment in the security result in this year financials.

38:05 So this is what the answer to transaction is, sir. Okay. Thank you so much. And my second question is what are the guidance for GNP and NPA for FY twenty seven and going further? Okay. So this year, as far as the Q1 is concerned, so we have already taken a call from the ERC, from the pool, which was already... Which was always forming part of the GNPA, and we have... Were not getting much of the recoveries. So we were expecting the recoveries from that pool. That is the reason we have done a very conscious call on the ERC. Therefore, my retail GNPA comes at 3.49 percentage. Then there is one corporate loan, which I have already explained multiple times. I'm excluding that corporate loan for that purpose. Just to add on this... About that corporate loan as well, we have been able to take this security from that corporate loan, you know, during this q one itself.

38:58 And that security is something which is already parked in my financial as an asset held for sale. So therein, we are expecting that corporate loan recovery to happen in this year itself. So we are expecting within six to eight months, we'll be able to sell up this property, which we have taken from the corporate. From the retail portfolio, the GNP is 3.49 percentage. We are expecting, you know, if the business is continuing to grow in the same fashion, so we are expecting the GNPA to be sub four only throughout this financial year for the retail segment. And there is no change in the ECL course... Policy of the company. So as the PCR, an NPA would be sub two. Okay. Alright. Thank you. Thank you, sir. Thank you. Participants who wish to ask questions may press star and 1 at this time.

39:52 The next question is from the line of Vinay Jardwani, an individual investor. Please go ahead. Hello? Hi, Vinay. Sir, good morning. Yeah. Good morning. My question is please excuse me if I... My question is regarding Lehman's Lens View, and this is related to the sale of a r n p to the ARC. The... I want to do the accounting impact of this whole sale. So you have you have sold that amount and how it's impacting the profit? Already the impaired asset is there on that. I just want to... Just please excuse me. I'm just asking from a lend... Layman's lens to you. Yeah.

40:39 So I take it, sir. So something impact pay will just come to... Will just tell you $2,203 crore of pool has gone. Right of pool was 83 crore, which means that that pool was not there in the books. Of that, company has already taken a 100 percentage impairment hit in the last financial year. Right? Okay. And I I So we go step by step. We just go step by step to write off impact impairment. It has already been taken in the last financial year. Means last p and l already had that impairment expense. When we saw that key schools recovery, we have started. So therefore, we have taken a call queue.

41:24 Okay? If we are able to sell their pool, so then what... Now 100 percentage impact we have taken in the last year of eighty three eighty three c r last year. So we have taken a p and l hit of eighty three eighty three CR in the last year, and then we got our recovery out of that pool only 14 crore from the ERC. So accounting impact will say that last year's p and l, 83 crore has been wiped off from the p and l. In this year, p and l, only 14 crore has come. So this is what it is. So there is no gain from the ART. It is just that the 83 crore has already been taken a hit over the years. Now 14 crore has come back because we are seeing some recoveries out of it. Now coming to the main second question. Sorry, sir. Just to just to say that 83 crore has been taken a hit for the last year, and what we are seeing that 14 crore will be added to the net... To the profit and loss for this year. You need to do that. This year. So see... Yeah.

42:18 It is for the last year, not last year, sir. Last year, it was only one fourth of that. So last year, maybe a couple of three to four years, we have taken an impact of 83 crore on the book 100 percentage. Now only INR 14 crore has come. So there is no gain out of it. It is just that key. We have started seeing some recovery. So we okay. We said, okay, let's take a call out of it. And of that INR 14 crore, sir, of that 14 crores, 85 percentage has been held by the company in the SR only in the balance sheet. So which means that we are going to bank on that 83 crore pool. You understood, sir? Okay. Yeah. Yeah. Yeah. So that is not something which is reflecting only in the p and l balance sheet. Maybe it is also reflecting as an investment in the SR. And if that... If 14 crore is not received, I have to do a mark to market valuation of that investment, and I have to again take a p and l hit if required. But since I've already taken a valuation of only 14 crores, so I don't think so we we need to take any hit.

43:17 I'm going to the history of the ERC one and two, wherein 76 percentage and 46 percentage has been recovered by the company. So I think we are able to we are able to take take take this 14 crude as well. Now coming to the ARC of remaining pool, which is one twenty crude, that is forming part of my normal GNPA pool. On that, we already had a provision of 50 percentage. And then therein, we... The sale price of that ERC was 78 crores. The provision held in the book was 59 crores. Book value, we had 60.34 crores, and the entire income of 15 crores, we have already reversed. So there is a very small portfolio wherein 2.99 has been received. Of that 78 crore proposed sale price, 85 percentage of that, which comes around 66 crore, that has been held by the company in the investment in the SR.

44:10 Okay. Okay. Yeah. Okay. So if tomorrow if tomorrow no no recoveries comes, then there is a mark to market valuation. But considering the historical valuation of ART one and two, we have taken this call, sir. Okay. Okay. And my secondary question is regarding the equity raising for the last phone call you have told that you are planning some issue of equity. So can you update on that? Yeah. Muthoot, you want to take or shall I? Yeah. Go ahead, Roman. Okay. Okay. So right now, if you see debt to equity of the company is 4.88 times. You know, we are quite comfortable till six level. Okay. But at the same time, last time, what I have told, I want to continue with that only. We are speaking to investors. There are two, three investors, you know, who are already sharing data. Sharing has also been happened with them. So as and when the valuation will kick, so wherein we are expecting some meetings to happen in q two only.

45:09 So then we can we can think about it and we can close the deal. But that will be something, you know, which will be very known if we do that. Sure. Sure. Yeah. Sure. Oh, that's it from my side. Thank you. Thank you, sir. Thank you. The next question is from the line of Manish Arora, an individual investor. Please go ahead. Hi, sir. Thanks for the opportunity. So my question is... Good morning, sir. So are we speaking to the guidance of 10,000 per annum for financial year '28? And if yes, and if we are expecting 4,000 to 4,500 crore AUM in FY '27, are we guiding for 150%...

45:55 Around 150% of AUM growth in FY '28 year on year? Thank you. That was my question. Yes. Maniji, I'll take that question. So, yes, we are... Our our objective is INR 10,000 crores. At 2829, we'll, of course, you also know about the overall macroeconomic conditions, war, etcetera, etcetera. We don't know how the entire impact will hit our Indian economy and all that has to be seen, but, yes, that $2,010,000 crore guidance is still intact. 2829, we will be there. And other guidance on expanding our non two wheeler portfolio of car CV, that also is in... Intact. Our current year projection of 4,200 odd AUM is also intact. All of this, we we are very closely monitoring the evolving macroeconomic situations, but the intent and the direction is is the same, and there's no change in that. So Sure. We are gearing up as an organization for for multiple x growth in in this vehicle space.

47:03 Yeah. Okay. Okay. So so so, sir, in conclusion, I think you are trying to convey your messages, non two wheeler would contribute to the higher growth to... You know, leading to 10,000 growth. Yes. So two things on that. Our disbursements may continue to be higher on two wheeler, but the runoff of two wheeler happens to be very fast. So the other two products are longer term products. So about forty eight to sixty months, whereas two wheeler is about twenty two to twenty four months average. So the book runs off also very fast. So disbursement may be, you know, fifty fifty or sixty forty in favor of two wheeler, but the retention of the book will be faster on the other two.

47:50 So that is where we see that AUM growing faster than two wheeler AUM. But, yes, over our next three, four year horizon, the objective is to bring down the two wheeler book to around 30% of the overall book and 70% being contributed by car, CVC, and maybe we will get into tractors. So, basically, the objective in the long run is to do everything on wheels. We have accordingly adopted our tagline as turning wheels changing lives. So we want to be doing everything on wheels. That's under the Muthoot Parpitsch and Banner. Anything to do with wheels will be getered to by Muthoot Capital Services. That's the longer term objective. Thank you very much, sir. All the best.

48:37 Thank you. Thank you. The next question is from the line of Ankur Gulati from Genuity Capital. Please go ahead. Sir, two things. If you can give us some color on 10,000 per annum, what kind of branches are you guys anticipating, and what is the branch level productivity at that target area? And second, first, about the 2,000,000 thing, then the remaining AUM is roughly $7,800 crores. So we are talking about taking that 700 approximately 10 x. So how are you preparing for it? Yeah. So... Okay. I'll take that question, Raman.

49:24 So that... To talk about a branch level strategy, you... We will have to first differentiate between, you know, our own branches and the group level branches. So today, we... At an enterprise level, we look at everything holistically at a MPD, Muthoot, Pappachin group level. Okay? So there is a very clear mandate from promoters that across the group, we leverage the existing customer base, cross sell to... Across the across the enterprise length and width of the organization. So that's a very clear mandate because today, as... It's a very, very famous line, data is a new oil and all that. So we have a huge amount of data across our enterprise level between the four NBFCs and non NBFCs that we have in the group. So we have Fincorp, which is in the gold. We have Microfin, which is in the microfinance.

50:18 We have MHFL, which is in the housing and labs. And we have Capital Services, which is into vehicle. Other than that, we have Muthoot Kids, hotels, and all all of these all of these entities have a huge sitting layer of customer data, and we are actively working on leveraging that. So to that extent, the 6,000 or or 5,000 plus branches of all entities in the group happens to be a extension counter for me. So today, are actively sourcing from across branches of Muthoot, Fincorp has 4,000 plus branches. We have a branch activation of about 25 to 30% right now, which means about 25 to 30% of Muthoot Fincorp branches contribute to at least one vehicle loan per month for capital services. And the objective is to, by the end of the year, take it to 50, 60%. Okay, which means around 2,000, 2,500 branches of Muthoot Fincor will be doing at least one vehicle loan per month. Similarly, with the other Muthoot Microfinance and housing. So, the board, we have started doing cross sell.

51:26 For our FD business, Muthoot Chit customers, we have got into an arrangement where Muthoot Chit customers do FDs with us. So there's a complete collateral... Sorry, a complete cross selling layer that we have made on top of each institution at an independent level. And that is going to... I I cannot... When I talk about talk about branches, if I talk about only the 34, 35 hubs that we have, it would be grossly inadequate because that is not our strategy. Okay? That is one set on the branches. Secondly, we today work with 5,000 plus dealers across the length and breadth of the country for two wheeler car and CV put together. And every dealer, DSA, who's a sourcing agent for any bank or... And we have fees are partner too.

52:13 So that... So therefore, it is not a a branch centric business for us anymore. So it's a entire ecosystem is a play of the branches, the DSAs, the dealers, the sub dealers, the MBOs, all of them. And all of them are sourcing points for us, and the entire journey is digitally delivered to the customer. So the the physical brick and mortar branch is losing its significance to that sense. Okay? Because all... So today, we have deployed QR codes where a customer can walk into a dealership where even if our manpower is not there, he can scan a QR code and he'll get a on spot approval. And then that spot approval comes into the nearest mapped sales officer of our institution, and then he continues that journey till closure.

53:07 So so technology is enabled tech... Enabler technology is driving the business for us today. So I think the branch... We break in model branch per se, while it is significant to the fact that we have across the group about 60, 65,000 walk ins into our branches, so they are all, of course, our customers whom we will cross sell to, but but the digital journey is adding strength and muscle to our overall acquisition. So that's how we are looking at this. And and that is exactly... So the second question was on how do you take the 700,800 for to multiple x. So the entire strategy, again, hinges on the fact that we are there for the customer at his place, both digitally as well as physically.

53:54 So the 5,000 plus branches is something which many large banks don't have. So we have that physical infrastructure, plus we have the digital infrastructure because we have made significant investments in in digital AI and all that. So today, all the touch points are multiple. Touch points are multiple for us. So... And and and we have today the ability to, you know, do underwriting at scale based on our models that we have developed in house. So that's that's going to be the future for us. So I think this is second time. It's first thing we refer to the whole group benefit was last time.

54:40 So any numbers that you can share in the last three months or six months, how has that collaboration helped you? Right? Which collaboration? With the broader group entities. Right? I think last Group entities... So 15 to 20% of our incremental sourcing every month comes from group entities today, and the objective is to take good to 40% of the incremental sourcing. As we speak, 15 to 20% of our incremental sourcing comes through group entities. So even if I assume 50%, then the remaining 3,000 or CR, what you guys will have to set up your own network? Yeah. Yeah. So I said, no. I... And our own network means the entire network of dealer, DSS, partners are our network. No? We we don't need to have our own branches to be sourcing business.

55:36 And I don't know if you have the data, but let's say the incremental 15, 20, which is coming from the broader group. Do you have any effect ratio for that procurement, or is that highly profitable? Expense to income or any other profit metrics only for the Yeah. Yeah. So that comes at a lower costing for us because we maintain our related party transactions are all above board, vetted by our board, ACV, and even our very thorough audits on that. So our acquisition cost is lower compared to the market on all related party transactions. And not only that, when we say vertical level p and l, we have a complete vertical with a business head called group relations and digital. Okay. That business head manages that p and l, and there is a monthly p and l that gets made for group relations and digital channel. So we have PNL for two wheeler dealer channel.

56:36 We have, you know, PNL for CV dealer channel. We have PNL for construction equipment dealer channel. We have a PNL for used car dealer channel. And then we have a P and L for group relations and digital, where all these products gets consolidated because group companies are product agnostic. Whatever product need... Customer needs, they'll be able to source. So that that gets consolidated. So every vertical is being monitored separately for profitability, and each vertical is independently profitable. And last thing, if you guys have that metric, the the business sourced group chances, is is that coming at, let's say, 1.7, 1.8% ROA compared to one odd percentage for the overall entity today? I'm just trying to figure out that one return ROI kind of benchmark.

57:31 So so wherever... I... As I mentioned, the OpEx and the, you know, cost of acquisition from that channel is lower. So, obviously, it it has a slightly higher ROA compared to the dealer channel. So it is there. Those numbers are available. We can share it on a on a different call. Okay. Alright. Thanks. All the rest. Thank you. Thank you. Thank you. Thank you. Ladies and gentlemen, that was the last question of the day. On behalf of Telara Securities Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you, everyone, once again.