Mahindra & Mahindra Financial Services Limited (NSE: M&MFIN) Q3 2025 Earnings Call dated Jan. 28, 2025
Corporate Participants:
Raul Rebello — Managing Director & Chief Executive Officer
Sandeep Mandrekar — Chief Business Officer – Wheels
Analysts:
Anuj Singla — Analyst
Abhijit Tibrewal — Analyst
Renish — Analyst
Viral Shah — Analyst
Kaitav Shah — Analyst
Nischint Chawathe — Analyst
Raghav Garg — Analyst
Avinash Singh — Analyst
Kunal Shah — Analyst
Kushan Parikh — Analyst
Punit Bahlani — Analyst
Nidhesh Jain — Analyst
Sonal — Analyst
Jigar Jani — Analyst
Umang Shah — Analyst
Presentation:
Operator
Good day and welcome to the Mahindra and Mahindra Financial Services Limited Q3 FY ’25 Earnings Conference Call. This call will be recorded and the recording will be made public by the company pursuant to its regulatory obligations. Certain personal information such as your name and organization may be asked during the call. If you do not wish to — for it to be disclosed, please immediately discontinue this call. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star and then zero on your touchstone phone.
I’d now like to turn the call over to Mr Anuj Singla. Please go-ahead.
Anuj Singla — Analyst
Thank you,. Good evening, everyone. And this is Anuj Singla from Bank of America. Thank you very much for joining us for the Mahindra Finance call to discuss Q3 FY ’25 earnings. To discuss the earnings, I’m pleased to welcome Mr Raul Robello, Managing Director and CEO; and Mr Sandeep Mandrekar, Chief Business Officer. Thank you very much for the opportunity to host you, sir. I now invite Mr Robello for his opening remarks. With that, over to you, Mr. Robello.
Raul Rebello — Managing Director & Chief Executive Officer
[Technical Issues] who is joined from different time zones too. So in summary, this has been a quarter which is characterized from our standpoint as a stable one. What’s really underscored is the fact that we’ve had some positive momentum in growth and margins and largely asset quality has remained range-bound. The debt has been uploaded in the last few minutes or maybe last 10, 15 minutes on the exchanges. So I’d request everyone to keep the document handy. I will be referring to certain pages on the document as we proceed. So first page is page number four, which is titled as key highlights. Disbursements have been up 25% quarter-on-quarter. Relative if you look at Q3 of last year, we’re up 7% in our business. There’s a lot of seasonality involved. We have seen this year been flattish most part of the year, Q1 and Q2, but Q3 has seen positive momentum in growth. On the diversification front, directionally, we are moving well, the SME disbursements have come up with a 60% Y-o-Y growth, which is encouraging. Asset quality has, as I mentioned, remained range-bound. GS3 is at 3.9%. We do understand the environment continues to be — it has its set of challenges and on our part, we remain focused on prioritizing collections. Moving to margins, NIMs have remained overall stable on a quarter-on-quarter — on a sequential basis, we’ve seen a 10 bps gain from last quarter at 6.6%, which on consol basis means that the PAT came in at 899 CR, which — which is of course also a benefit that we have gained from the provision relief. There’s a detailed document where I’ll talk through the provision relief that we have benefited from. But overall, I think as I mentioned, the quarter, which is encouraging.
Moving to some of the non-financial but strategic highlights for the quarter. Specifically on the auto front, you would have seen in the last quarter, a lot of OEMs talk about the EV, the new passenger EVs which are coming forth. We think this is a very positive move. Being a significant PV player, we have decided to actively participate in the new EV passenger vehicle momentum, which will pick-up. We’ve secured an exclusive lending partnership with M&M for the new two electric vehicles, which are slated for booking from 14th of February. Similarly, one of the other strategic imperatives that we’ve been talking about is fee-based income. In that line, in the quarter gone by, we linked a credit card partnership with RBL Bank post getting the license from RBI for co-branded credit cards. We’ve also, after getting our corporate agency license, signed-up nine insurance providers for distributing life, non-life and health insurance. Another source of, you know, revenue is for the vehicles that we finance, we are looking at getting a some amount of revenue from the fast tag issuance. For that, we have tied-up with IDFC Bank, which has just happened in the last quarter. And we’ve also received from NPCI an in-principle approval for the TPAP license, which will again improve our digital presence.
I would now move to page number seven. Double clicking on growth, as we’ve seen and witnessed in the year gone by, the first two quarters were rather soft. This quarter has seen a comeback of growth of sorts, led largely by the farm business, which is the tractor business and the passenger vehicle segment. Tractor specifically saw 24% growth, which was encouraging. Passenger vehicles at 8% is also decent. This is on the back of what we could call as revival in the underlying industry as well as our efforts to improve coverage in dealerships and geographies. Disbursals were rather slower in the CV business, which saw a 5% Y-o-Y degrowth, but sequential growth still of 25-odd percent. Our SME business, as I mentioned earlier has seen a promising growth of 60% Y-o-Y. We do recognize this is from a relatively lower base, but what’s really moving here is the lab business, which now constitute to majority of the business and this business is coming at a good cliff. Refer you know we move to page number 8, which talks about margins. On the margin front, what you would — what you would see that the NIMs have — are at 6.6% for the quarter. This is a 10% sequential gain. It has, of course been a 20 bps fall from last year same time, Q3. If I break-up NIMs, what you’re seeing is that there’s been a 20 bps sequential improvement in the loan and fee income. We are looking at whatever are the levers at our end to kind of get a sequential and a improvement here. Overall cross-sell continues, cross-sell, fee-based income continues to be agenda item for us.
On the cost side, we have seen a 10 bps increase. Factors — underlying factors here are there is, of course, now the debt-equity is higher, leverage is at a higher-level. We’re also seeing a runoff in the — in the earlier lines, the lower-price lines are running off. So of course, we are trying to get-in the incremental funding at a lower level and we have been reasonable success — have had reasonable success on that front. But at an overall basis, cost has been — has kind of moved up sequentially by-10 bps. Moving to Page number nine, which we have commentary, detailed commentary on asset quality. Here, the highlights are that GS3 moved up sequentially by-10 bps. It is still 4 bps lower than quarter three of last fiscal. On a sequential standpoint, we have added INR216 crores. If you see the right-side of the page, INR216 crores GST has got added. It’s a consol figure, but when we look at respective asset categories, we added tractor last quarter slightly higher. We’ve seen actually a sequential reduction in tractors of course, other asset categories have added to the GS3 stocks. Yeah. We continue to look at levers that can keep the GS3 numbers under control.
And for us, the primary variables there are to continue to originate a decent amount of Prime Plus customers in the origination mix, continue on the underwriting practices and the entire use of collection toolkits that will keep GS3 range-bound. So if you look at the bottom half of the page, you would see that for the quarter, we’ve added only INR9 crores in terms of overall credit cost. The big difference here is the provision reduction of INR434 crores. I request you to move to the next page for me to give you some color on what’s moved there. So if you look at page number 10, I’m referring to page number 10 on the PCR change because of the LGD decline. Just for understanding, the company follows the complete ECL model-based methodology. We follow LGD using cash-flow for a 42-month period. Now for Q3, for the first time in this physical, the June ’21 stock has got included in this 42-month pool. And you would recollect the June ’21 stock actually had a INR4,000 crore and that’s what I’m referring to in the slide. The June ’21 ’22 stock had a INR4,000 crores addition to the pool. And the cash-flow of this pool has seen, we have demonstrated very-high collection in this pool, which has led to the LGD coming down, I think in 1/4 itself.
Now this is encouraging and of course, we do not — this is a provision is a function of LGD and PD, while PDs will definitely climb in this environment, but what we benefited for is, one, the stock of LGD that we could collect from, which is a INR4,000 crore pool, which came in FY ’22 Q1 and the demonstrated collectability of this pool has been good, which has resulted in the PCR falling from 59% to 50%. The other moving factor, if you just move to the next page, you would see that you know for for the — our stated goals for the full-year is to keep credit cost in the 1.3 to 1.5 range basis how Q3 has panned out and how we look at executing on Q4, we still hold these targeted ranges of 1.3 billion to 1.5%. What is also encouraging to note is the end losses, which we’ve been for some time now commentating upon has remained in a declining trend. You’d see that in the page on the left top of the page, sequentially the end losses have been coming down and even for the nine months of this physical, it is INR53 crores, INR52 crore crores lower than last year nine months.
Let’s move to the — to page number 11. So on page number 11, I have some organization and updates to share with all of you. We’ve also posted it on the exchange. The first part on talent, we have been strengthening our senior talent pipeline. We’ve made announcements in the last quarter. We have mostly done at the senior-level. You know we — the CFO — we have a CFO, of course, as an interim CFO in-place. Animesh is — is the interim CFO, but we have had a very-high bar for who would be the CFO going-forward and we are happy to announce that Pradeep Agarwal will be joining us shortly. He is currently the CFO at Aditya Birdla. And we also have a senior leader, Anur Raj would be joining us as the Head of Marketing and Corporate Communications. These are the two senior-level leadership that we have to announce. Besides that, this is an organization which is which is prioritizing. Overall, we have a 26,000 workforce and we continue to make sure that the entire workforce is aligned to the new ways of operating, whether it is in the lean mechanism or the digital toolkits that we have recently unfolded, 49% of our employees have gone through new certifications and done the digital experty program. We’ve also added the POST, the capability for them to cross-sell insurance, 4,000 employees have got certified. So we’re looking at a very encouraging talent pool being ready to work-in the new ways of how we refashion the organization working forward. On the tech and digital front, we have moved 40% of the applications to the cloud now. In the last two, 3/4, there’s been a significant upgrade.
The LOS stacks for the SME business, you’ve kind of onboarded the sales force toolkits and we are using AI, which is contextual to our business for cross-sell collections and underwriting. Some updates on the opex side, how we’re looking at keeping opex lean, a lot of the CPC capabilities continue to be upgraded. From a distribution standpoint, we have not had too many branch additions, but we’ve added 25 branches in the last quarter. Overall, year-to-date 34 branches, we plan to add another 15 20 for the year and we will see that going-forward next year too. We continue to have a high bar on our entire governance and risk program capabilities that we add-on. Most of our risk models have been upgraded, our underwriting tools have been, you know, refreshed and we’re looking at the tools now sloping risk in a much more encouraging way.
Moving to page number 13. Yeah, here, this is just a slide which keeps us honest to what we have the ambition for the organization to close FY ’25. We’re not changing any numbers here, which we are looking at more aspirational closure numbers for the year. Overall, we are trending well on asset quality. NIMs, yes, is also in the range that we — we want to close the year 6.5% to 6.7%. Growth seems to be trending again in the direction. Diversification, yes, that’s the only one which is going slower than what we anticipate and are we maintaining that we would like to be in the 1.8% to 2%.
Finally, you know, this is — this is a focus slide for the focus that the team has for delivering on FY ’25. But yeah, this is not an organization which is only looking at short-term. We are also looking at being future-ready and we have ambitions on growth and profitability across lending and asset categories and other financial service opportunities. So on these lines as well as we would like to share with you a more holistic plan on our digital AI use cases that we are planning and very soon at the end of Q4 results, we will have a very detailed roadmap for how we’re looking at navigating the next three to four years of being absolutely future-ready and operating in a manner which we think we’ll be able to unlock value and unlock revenue from different revenue pools that are available for us.
I pause here now and invite — we’ll open it up again for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question and to limit your questions to two per participant. You may rejoin the queue for follow-up questions. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. We have the first question from the line of Abhijit Tibrewal from Motilal Oswal. Please go-ahead.
Abhijit Tibrewal
Yes. Good evening, everyone. Thank you for taking my question. Sir, I mean, first things first, I mean, I would say congratulations on a good quarter, but there are two things I wanted to understand. First thing is, we have been for the last couple of quarters been talking about this benefit from ECL model, so to say a provision release, which we have seen in this quarter and has resulted in a decline in the sequent provision releases. Just trying to understand whatever benefit which had to come from this ECL model refresh, which we were expecting for the last two quarters — for the last few quarters, are they already there or is there room for further releases in provisions for the next couple of quarters? That’s my first question.
Raul Rebello
Thanks, Abhijit. So I would say that the benefit has got baked-in this quarter. I think for the last few quarters, we have been mentioning that because in the 42-month pool for which we look at LGD cash flows of LGD, the Q1, which was a pool, which is a significant pool and that’s what I detailed in Slide number 10, the INR4,000 crores which came in-between March ’21 and June ’21, I mean in June ’21, this INR4,000 crores got added. It gave us and this pool typically because it was coming after COVID, you know the pool collectability of that pool, which we demonstrated on our collection was very encouraging. So I would say that the LGD benefit is kind of fully baked-in for now. And yes, this is something we knew was going to come in specifically because of the way in which the ECL model works. LGD is a programmatic number. We — it works completely based on cash-flow that we’re able to execute on the 42-month pool. So this is baked-in.
Abhijit Tibrewal
Got it. And just a follow-up on that. So suffice to say that I mean provision covers across Stage 1, Stage 2, Stage 3 that we are carrying today are largely going to be steady-state from here on.
Raul Rebello
See, as you know, provision is a function of PD and LGD, right? The PD, we every year refresh the PD and the PD nationally would in today’s environment generally seem to trend upwards because whether you look at all the macro factors that go into PD, typically they — the externals are not extremely rosy. LGD is a variable which will move basically basis the cash-flow of the 42 months. So if we continue to collect well for the — for the pool, which is in the LGD consideration, we will see these numbers being in this range. If the collection is not demonstrated to the way it is, it might see an upward trajectory. This sharp decrease is largely because of the, as I said, the INR4,000 crore pool, which came into the consideration set and the collection efficiency of that INR4,000 odd crores, which came to the pool.
Abhijit Tibrewal
Got it. And thank you. And then the last question which I had is again what you just referred to, sir, as the environment. Just trying to understand if you can give some color on your individual product segments, maybe particularly tractors, CVs, how are they behaving during the quarter?
Raul Rebello
See, I think our observations are not too divergent from, I’m sure what you’ve heard from the community, it is an environment wherein we need to make sure that our collection front lines are on-the-job because there is a level of leverage which we see is which is higher than the past. And in this environment, it’s very important that we constantly be engaged with the end-customers. We are able to collect in time and sensitize them on keeping a certain level of discipline. So we continue to be on the ball. Collections is a big priority for us and we have actually made sure that the collection offices get all the enablers to kind of meet those outcomes. Having said that, the initiatives that we’ve taken in the last two, three years of moving into the prime segment, having a higher mix of customers in the prime segment is also auguring well for us in this environment. But nothing taken for granted, we constantly need to be on the ball. Specifically, portfolios like three-wheelers, etc., are more sustainable — susceptible to disruptions and to these kind of situations where there is a liquidity stress. So we are making sure that we don’t leave any effort on the collection front.
Operator
Thank you. The next question is from the line of Renish from ICICI. Please go-ahead.
Renish
Yeah. Hi, sir. Just two questions from my side. One again on the provisioning front, so for this quarter, we saw roughly INR434 crores of provision reversal. But at the same time there is a write-off or let’s say the losses of INR400 odd crore. So let’s say going ahead entering FY ’26, and if there is no such provision reversal, what kind of a steady-state credit cost one should assume?
Raul Rebello
See the — you’re right, this benefit has basically got crystallized in this quarter. We’ve — we have in past forums also said that we would like to operate in a credit cost range between 1.3 to 1.5%, that’s for this year and going-forward also be in that below 1.5 range. To get to that, we’ll have to make sure that the — it’s a combination of, you know and losses and provisions. If we keep the GL3 numbers range-bound, then the provision increase won’t be so high. Of course, we’ll have to see how the PD number works. But the controllable variables here are to keep the numbers in that in that zone and make sure that whatever write-offs and disposal losses are also not going up. And I think if you — if you kind of refer to the pages that we disclosed, what’s been a good trend is that the end losses have been on a declining trend, which means credit costs to be in that 1.5 or 1.3 to 1.5 zone seems — seems a plausible outcome if we execute well.
Operator
Thank you. The next question is from the line of Viral Shah from IIFL Securities. Please go-ahead.
Viral Shah
Yeah, hi. Thank you. I have two questions.. So first of all, on the asset quality front, just again touching over there. So can you give us some flavor of — again, I understand you were saying that next year you won’t have this and you aspire to be at, say, 1.5%, but the very fact that you will also be growing the book, right, and you will have incremental Stage 1 to provisioning, how can we be say at 1.5% credit cost also next year if your write-offs say even this quarter is at 1.4%
Raul Rebello
Yeah. So if the write-offs have been on a declining trend and you’ve seen over the last couple of years, this write-off number has actually been coming down steadily, right? So if we keep the GS3 numbers and as the book grows, if the GST needs to be in the same percentage, absolute values will go — might go up because there is a rolling stock which moves from Stage 2 to Stage 3. But as you know, we also have a stated growth plan of 15% to 18%. And hence on an absolute basis, if we keep the GS3 numbers range-bound and curtail the end losses, keeping credit costs in that zone shouldn’t be too challenging. Just to give you a quick look-back on the end losses, this number from ’23 from 2.6 has already slid down last year to 1.6 and YTDA is 1.2. I’m talking about end losses. Hence, maybe the remaining to be — again, I’m kind of giving you ranges 1.3 to 1.5. That’s again an ambition. I’m not saying that this is cast in stone. If the end losses are kept in that range, then whatever 20, 30 bps of provisions is something that we should be able or we should keep as a range to operate with it.
Operator
Thank you. The next question is from the line of Kaitav Shah from Anand Rathi. Please go-ahead.
Kaitav Shah
Now, yeah, thank you. Am I audible?
Raul Rebello
Yes, sure.
Kaitav Shah
Okay. Sir, just wanted to understand. So our CFO is the previous CFO resigned on 31st October. And in the interim, we had no CFO in which period we had this write-back.
Raul Rebello
Sorry, I didn’t understand the question.
Kaitav Shah
So the previous CFO 10-year ended on 31st October. Correct?
Raul Rebello
Yes, that’s right.
Kaitav Shah
And then interim CFO has been appointed from today, tomorrow.
Raul Rebello
Yes.
Kaitav Shah
So this time-frame where we got this provision write-back, we did not have any CFO?
Raul Rebello
What is the connection of the question? I mean the — as we’ve explained in detail, the PCR number is a function of the ECL model. The ECL model, we have a full-fledged finance team, the finance team is not represented only by the CFO. We have a very well-equipped finance team and the whole purpose of — and the whole exercise is done with the senior finance team and the stat auditors and of course, the audit committee and Board.
Kaitav Shah
Okay. Thanks for the question actually. Thank you, sir. And second question is, in terms of your provision coverage ratio, given that we are moving now to a more premium set of customers, is the PCR perhaps going to trend lower over the medium-term? Is that an aspiration?
Raul Rebello
No, I don’t think the — see the PCR benefit as I — the cost of repeating has largely been, you know, kind of demonstrated right now because of what came into the 42-month pool, which is the June ’21 stock. I do not really see a decline further. There might be a small uptick maybe because this benefit definitely gives us a one-time or not a one-time, but a benefit which fructified in this quarter. The levers for keeping PCR in a zone will be all the kind of cash flows that we are able to demonstrate that can come in through the 42-month pool, which is considered for LGD, right? As I said, LGD is largely within our — within our control. PD is a function of whatever gets refreshed on a quarterly basis and how that number moves?
Operator
Thank you. The next question is from the line of Nishan Chawathe from Kotak Institutional Equities. Please go-ahead.
Nischint Chawathe
Hi, thanks for taking my question. The first question is actually on margins. When and how do we sort of expect to go to the 7.5% margin benchmark? And I think the second one essentially is on your outlook on growth. This year growth has been — disbursement growth has been rather and how should we think about it for the next year, but given the fact that the overall outlook for auto industry itself is a bit soft and M&M is probably gaining market-share, but most of it is in the prime segment where probably we don’t have access to.
Raul Rebello
Yeah, thanks,. See, on the margin front, I just want to reset, 7.5 was a kind of aspiration we shared in FY ’22 end. I think post that, as you know, the NIMs are at that point of time, no one could hazard that the cost of funds would remain elevated for 2.5 years. We did recalibrate our NIM aspirations at least for this fiscal to-end between 6.5% to 6.7%. I did share with you all that in the longer tenure or the longer period, we would look at NIMs climbing up, but I don’t think 7.5% with the kind of choice metrics that we have — we have shared on the profile of incremental customers as well as the kind of product choices that we are making for the future will achieve a 7.5%. So 7% is more like the long-range target immediately this year closing in the 6.5% to 6.7% is the goal. But what clearly we will try to offset from the — from the declining NIM is to keep OpEx in that range of 2.5% to 2.7 and keep credit cost in the range that we shared earlier, right? So to get to the — at least for this year 1.8% to 2% ROAs, but for a longer-term, yes, the aspiration is to get into the — to get — climb up to 2.5%.
Your second question on growth. See the bulk of the organization is still heavily dependent on the wheels business. As you know, 93% is still the wheels business. In the wheels business, there are — not every cohort is growing in the same manner. You have, you know, the CV business, which has seen prolonged stress in terms of not really breaking out in terms of growth. There’s underlying reasons why CV has been range-bound. There have been a kind of growth, which we have seen in the past in the used vehicle this quarter has not seen such a very encouraging number. PV, you’re very right, the larger growth is happening in the extreme prime segment, which is very, very cost of price conscious. We’ve been able to grow in that segment, but our growth has a certain upper ceiling beyond which it will have a — it will have a kind of impact on our margins. So we are conscious of in the vehicle cohort where we are choosing to balance between growth and margins. We will continue to double-click on tractor, which gives us higher NIM capability on used vehicle, which continues to give us a higher NIM capability. And specifically to look at in the longer run, avoiding huge dependency on one asset category, which is wheels. We’ve shared with you our plans on the SME business, on the mortgage business and specifically on fee-based income because finally, yield is a function of both IRR as well as fee-based income. So to achieve those margin goals which I shared earlier, there is an asset diversification plan and then there is a fee-based plan to kind of get to those aspirations.
Nischint Chawathe
Got it, but any specific number that you want to kind of guide to for, let’s say, the next financial year in terms of growth?
Raul Rebello
On asset growth?
Nischint Chawathe
Yeah.
Raul Rebello
We’d like to be in the mid to-high teens.
Nischint Chawathe
Got it. Perfect. Thank you very much and all the best.
Raul Rebello
Thanks.
Operator
Thank you. We have the next question from the line of Raghav Garg from Ambit Capital. Please go-ahead.
Raghav Garg
Sir, good evening and thanks for the opportunity. I just wanted to confirm a number with you. Your net slippage for the quarter is around INR665 crores. Is that right?
Raul Rebello
We don’t disclose that. You can compute it,.
Raghav Garg
Sure. So as per my calculation, it’s coming out to be that number, which is about 150% higher versus last year. You also said that tractor slippages have come down versus last quarter, which is 2Q. Can you highlight which all segments contributed to the slippages or to this extent of INR670 crores in this quarter?
Raul Rebello
So we don’t do a — I’m just being fair to the level of disclosures, Raghav, we don’t do a product-by-product, but we did see a correction in fact, as I mentioned from last year, but there have been slippages. You’re right versus last year, but if you do the same slippage to last quarter, you’d see that this quarter has seen a lower net slippage
Raghav Garg
Right, but I think I was trying to understand what’s from a place where we are seeing CB delinquencies rise in the system and generally in the auto loan space as well, a lot of lenders have pointed out that there is some stress in each segment. So I was trying to understand from that perspective, you know if at all there is any pain in any of the other segments apart from tractors.
Raul Rebello
So I think overall, the environment, as I said, is not as rosy as it was maybe if you look at Q3 of last year. Possibly last year was — was I would say, a year which one can look at as a you know as a year which is much more from a — from the underlying ability for collection was for much better place last year than this year. So it’s not a very comparable 12 months that’s gone by. And other than tractor, which we saw quarterly — last quarter we saw tractor GST number spike more than — as I called out, it was more a delayed than a default. We did see that number come back and that’s the GSG number we — which I called out as a reduction over last quarter. Overall, if I were just to talk about there is no specific pain in any segment. As you know, we participate in three-wheelers, passenger vehicles, CV, mostly in the light and small commercial bus segment, use PV, use CV, use tractor. Yeah, these are the wheel segment. I wouldn’t call-out a very the abnormal slippage in any one of them. It was segments did see their relative level of pain.
Raghav Garg
Understood. Another question is between the write-offs of about INR450 crores and this slippage number of INR670 crores-odd. Your collection efficiency numbers that you report has still managed to hold stable at 95%. Now one of the things that I’m thinking is that there’s probably that pool of INR4,000 crores that you’re referring to may have contributed to this 95% number being stable Y-o-Y quarter-on-quarter, whichever way you want to look at it. So if you sort of remove the impact of that pool, collection efficiency ratio has come down. Is that the correct understanding?
Raul Rebello
Not really because the collection efficiency formula is basically stayed constant and that pool is the LGD pool. But I think what you have to look at collection efficiency is real-time CD and OD collection, right, that’s what goes in the numerator divided by the current view collection. So that formula is not similar to the LGD numerator denominator.
Raghav Garg
Understood. Understood. And just one last question from my side. Sorry, you’re at 15% Tier-1. When do you plan to raise capital?
Raul Rebello
So it is clearly on our minds and you know, we usually when we come to these levels, we start warming up the engine for Tier-1 augmentation. So at the right time, we will — we will — we will have commentary on that.
Raghav Garg
The next six months, is that possible or something like that?
Raul Rebello
So I’ve said what I could give you as much as expected.
Raghav Garg
Fair enough. Yeah, yeah.
Operator
Thank you. The next question comes from the line of Avinash Singh from Emkay Global Financial Services Limited. Please go-ahead
Avinash Singh
Yeah, thanks for the opportunity. Couple of questions. The first one is again on the yields and margins. So what you are indicating that the growth in the EV segment is in a ways EV is going to contribute some bit to growth, you are still going to kind of go into prime mortgages and prime lab. All this put together, you’re still going to put pressure on yields are right. Now on the opex side, of course, I understand that over the medium run, these prime businesses are typically lower opex. But at the moment you expand into this, again, OpEx is going to be sort of on the higher side. Now on the credit cost side, even festival, the improvement because I mean, the reversal part on other PCR reduction part is done, so FY ’26 should not be. So in the — if we kind of try to add, of course, I’m calling you on the fact that what you are saying on the fee side, but the place on the pure interest income yield or some bit of opex even I mean operating leverage getting delayed because you are entering into newer segments. So do you see the FY ’26 your ROAs — ROA numbers could be better, I mean, than what is there in FY ’25 or say, can it cross 2%? So that’s question one. And second, if I just look at the last quarter, I mean, it’s a smaller segment, but yet we see kind of a bit of a slowdown in your pre-owned vehicle segment. Is it because of your kind of a proactive move seen the environment or I mean, is it that there is a kind of a weak demand itself?
Raul Rebello
Yeah, I didn’t get your second one, but I’ll first attempt the first one. So when we look at our overall growth plans, see, we are building an organization for the future also. So when we take calls to diversify and build new business lines, one should take into context, which is not just to deliver FY ’26 numbers or ’27 numbers. Many of these are long-term initiatives and long-term investments that we think we have to make at a certain size and scale of being — having a loan book of INR1,15,000-odd crores and from an organization which is looking at playing a much more holistic financial services play for — for the foreseeable future. We do believe some of these investments on the diversification front are longer-term initiatives that we’re making, right? So whether it is the prime mortgages or it is playing in other categories of the wheels business, these are all slated with a larger ambition to being a growing franchise and also to be a sustainable profitable franchise.
On the choices that we have made, we do understand some of it will consume opex in the near-term. This is for us growth opex. Some of it, we do understand that will have impacts on margins. We have a calibrated view on how much of the new segments we will do on-balance sheet and off-balance sheet. We have talked about in the past of our strategic tie-ups in co-lending coordination with certain partners. We believe that there is a certain revenue that will accrue to us from a distribution play. We are after all, sitting at a very strong position of strength in 6,000 dealerships across the country. We can orchestrate a lot of this finance while earning fee. Part of it, we will keep on our balance sheet, which we think is extremely margin sensitive, we might offload to partners. But the objective is to be able to consolidate this momentum, this growth momentum and feed either our balance sheet growth or our off-balance sheet growth, whichever is deemed fit to get to both our growth and margin — our margin objectives.
You know your second question, if — I mean I couldn’t completely understand it, if you could just repeat it?
Avinash Singh
No, your kind of muted growth or rather a negative growth in the pre-owned vehicle disbursements. So what is happening there? I mean because this is — I mean, yeah, a relatively a smaller piece in the pie, but in the quarter, it was doing for — in the first-half, it was doing quite well. But in the Q3, suddenly there is a kind of a decline in disbursement pre-owned vehicles. So what is happening there?
Raul Rebello
Yeah. So the pre-owned vehicles part of it is our own vehicles which come up, the new PVs or tractors that we fund when you know customers want to — they finish their period or they need a top-up loan on that. And part of it and large part of it is from which happens in the commerce, which happens in the used vehicle industry. What we’ve seen the PV continues, the use CV as the main CV business, LCV SUVs are not growing significantly. I don’t — some of the replacement demand in that segment is starting to be muted. And also we have to factor-in what is the risk that is in-part of these segment. So it’s a combination of what is the underlying replacement demand which is there as well as some of the risk factors that we’ve taken. Nevertheless, in our mind, we could have executed better on this. We want to make sure that incremental sourcing of used PV, CV tractor is 20% of our incremental disbursement. It was a soft execution one that I would Call-IT. We have to work within the constraints and we have put in us — we’ve in fact augmented the used CV team to be able to bite a little more of the acquisition that is that is capable. But our plans are to be participating much higher than where we are right now in this segment.
Avinash Singh
Okay. Thank you.
Operator
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go-ahead.
Kunal Shah
Yeah. So firstly, again, getting back on to the overall provisioning coverage. So again, Stage 2, the decrease which has been there, that is also on account of a similar pool because during that period, in fact, Stage 2 assets also went up by almost INR4,000 odd crores. So is it the same pool getting added and that’s where Stage 2 is also down in terms of the coverage.
Raul Rebello
Yeah. So you are talking about the Stage 2 PCR?
Kunal Shah
Yeah. So Stage 2 coverage has also dropped from 10.6 to 9.1 almost like 150 odd basis-points. So is it like a similar pool? Because when I look at June ’21 Stage 2 pool, along with Stage 3, June ’21, Stage 2 was also up by INR4,000 odd crores.
Raul Rebello
Yeah. So the cover — see the Stage 2 is again a function of PD and PD and LGD. So there are factors which work — there are three macroeconomic factors that work behind the scenes. And those factors, along with the collection that we would have demonstrated in the Stage 2 pool would have resulted to the coverage number. So the LGD is common across the stages.
Kunal Shah
Yeah, LGD is common just the PD-1. And maybe overall when we look at it after that June ’21 behavior, if we look at till this — maybe at least like March ’22 behavior, there was again a contraction of almost like INR5,000-odd crores in the Stage 3 pool. And similarly like Stage 2 pool also contracted by INR4,000 odd crores. So would that again have any kind of an impact in terms of obviously these are like getting out-of-the pool, but can we then fairly assume that the provisioning coverage will keep on inching up over a period as the new projects added and the collection might not be that robust as we saw in the June ’21 pool.
Raul Rebello
So to some extent, you could say it marginally might go up. Again, a lot of it is Kunal basis, the — if the team continues to have a collection for that 42-month pool, if the cash flows which can emanate out of better collections, then that could of course, you know, impact how much that increase in PCR or LGD will you know will spike.
Kunal Shah
Yeah, but the only thing is this collections would be over the period, okay? So it’s not like a 1/4 phenomenon. So at least in terms of the trend, obviously, you are well aware in terms of June ’21 pool having a much better correction. You have looked at it over the past three years and you are confident that this coverage would come down. But you know in terms of how the incremental pool has behaved, it’s not like one single quarter phenomenon. It just gets added, but there is a fair — a fair trend in terms of the collections and if you can guide based on that because this gets slightly volatile for on a quarterly basis, but at least you have — you would be aware about it, yeah.
Raul Rebello
Yeah, we are. We are — we kind of know the module kind of has reflected what kind of cash flows have happened in the 42-month moving period. So there is part handle in what we can do again in every quarter. But as you rightly said, a lot of it has already got baked-in. Kunal, just to — it will be giving, I guess, too much — while we do, of course, as management know what is and we can bake in what additional collections can come in. I would — I would refrain from giving specific guidance on how the will kind of move specifically in the foreseeable future.
Kunal Shah
Sure. And on OpEx, when we look at it, so this quarter it’s been up, maybe you have been indicating that there could be some upward buyers as you would continue to invest. But then maybe we have reached that level of 2.5 to 2.7. So should we see the efficiency gains and that helping continue the opex or there could be some upside risk to the opex to asset guidance which we given.
Raul Rebello
So if we bake in all the — what goes in behind opex is, of course staff, there is acquisition cost, there is collection costs and then there is diversification for the new — for the new businesses. For the existing wheels businesses, clearly, we would expect that the efficiency levels start kicking-in because these are steady-state businesses with all the efficiency toolkits that are there today, you know and just to keep everyone mindful that we have actually from March ending of ’20 — the last fiscal, we have — our staff strength has come down for the main businesses. So we are gearing the teams to be much more efficient for the core businesses. There will be growth-related expenses that we will incur for the diversification businesses. There will also be as we flesh out more of the underwriting teams, risk team, compliance teams and we invest a little more in technical tech, there might be some investments over there. And I would also not shy away from in the environment that we’re operating in to spend reasonably on collections, right? So overall, yes, we would — we would still like to operate in that 2.7 kind of corridor not to go up maximum 2.8 but there is a lot of efficiency gains that we are extracting from the teams.
Kunal Shah
Okay. Got it. Thanks and all the best, yeah.
Operator
Thank you. The next question is from the line of Kushant Parik from Morgan Stanley. Please go-ahead.
Kushan Parikh
Hi, thanks for taking my question. Sorry to just keep harping on the provision coverage part. I appreciate your point that you would like to refrain from giving specific guidance on how the new pool of loans essentially is performing from an LGD perspective. But could you just give us a picture on the — I mean, how should we view the glide part? I mean, I appreciate your point that you could see a slight uptick in provision cover given the environment and rising PDs and the SDD performance of the new pool. But will this be more gradual in nature or over many quarters or should we expect a sudden spike again few quarters down the line?
Raul Rebello
Yeah. So I kind of borrow from what I said to Kunal also earlier, we don’t expect a very sharp increase because I mean, you could also just go back and see the collection efficiency that we demonstrated from ’22 onwards as well as what has been the end losses. So in summary, I would say it would be range-bound. It clearly won’t climb back to those levels. It climb — the post-COVID effect of or the kind of impact of the second wave got the whole PCR cover to basically climb up to those levels. With what we have seen now and what collections we have seen in the last two, three years, I would more safely say this would be marginally increasing, but more or less very, very range boundary clearly below the peak levels that we went to earlier.
Kushan Parikh
Got it. And with this will be happening gradually over and over the quarter, not a one-time change or a refresh wanted.
Raul Rebello
Yes, yes, absolutely.
Kushan Parikh
Understood. Fair. Okay. That is my only question. Thank you.
Operator
Thank you. We have the next question from the line of Viral Shah from IIFL Securities. Please go-ahead.
Viral Shah
Thank you for the opportunity to let me ask the question again. So thanks all. And just one thing, Rob, can you give some commentary as to how are the prices of used vehicles trending? So the commercial vehicles, the PVs, the tractors and like recently and versus, say, what it has been like six months or a year back.
Raul Rebello
Yeah, I’ll, you know, I’ve not seen any sharp decline. I think some would I mean think about it, the CV business, business because the rates of the new vehicles have been going up, clearly, there will be a certain impact on the used vehicles. Of course, the PVs, we have seen a big onslaught of price reductions at the middle level and some models. It’s a very model-to-model. Some models have had a drastic drop. So one could think that even it could rub-off on the used vehicle side. But in total, I don’t think we have a very — I mean, we’re not seeing very huge drops, but I would invite my colleague, Sandeep here to give more color on specific.
Sandeep Mandrekar
Yeah, I think the prices, if you look at it from last year to this year have more or less remained stable in the market. They haven’t dropped or increased either. If you look at the last three to four months’ time when we have started to already see discounts getting offered onto the new vehicle, this automatically have some bit of rub-off effect on the used vehicle prices, but nothing at this point of time to feel worried about in terms of large drops which have happened.
Viral Shah
So just on the last three, four months piece, that a slight say, a correction which you’re referring to, that’s true for all the segments of fueled vehicles or just in PVs?
Sandeep Mandrekar
No, I was talking more from a new vehicle passenger vehicle standpoint, wherein we have seen the month giving more discounts on the vehicles leading to on-road prices going down.
Viral Shah
Correct, correct. So but are we seeing similar trend in, say, a used commercial vehicle or a used factor?
Sandeep Mandrekar
Not yet, not yet. So I’m saying it has not yet gone and dropped the prices on the use. They have held their prices. We haven’t seen much drops on it as of now.
Viral Shah
Got it. Thank you. Thanks a lot.
Operator
Thank you. The next question is from the line of Puneet from Macquarie Capital. Please go-ahead.
Punit Bahlani
Sir, thanks for taking my question. Firstly, on the margin bit, sorry, I missed the opening remarks. What was the reason for the yield improvement of 20 bps?
Raul Rebello
See, sequentially, you know, we’ve been — there are different levers that can work-over here. Clearly, we’ve been looking at optimizing on the incremental pricing. At the same time a part of the mix — mix which can also kind of impact. And thirdly, fee-based income, which is the biggest kind of initiatives we are driving, the corporate agency license has actually given us in the last seven, eight months a pretty healthy fee-based income. Even if you look at in previously, when you normalize for the MIBL’s contribution, even normalizing for that, it’s been a very healthy addition to our overall income and yield outcomes.
Punit Bahlani
Okay, okay. Got it. Sir, secondly on the PCR — PCR change, say last quarter you have given your recovery period for LGD was, say, Q4 ’21 to Q2 ’25. So that included the 1Q FY ’22 period, right? I’m wondering like if this quarter also it included, then why was this change not done last quarter when the high recovery period was included in the last quarter as well if we are going by that 42-month period?
Raul Rebello
No, no, no, I don’t think you’ve read it right. What happens is that there is a new pool, which has come in. The entry pool for — for Q3 of FY ’25, this pool did not come in last quarter. This pool has come in this quarter itself because the — if you trace back 42 months from December, June ’21 is what comes into the mix, right? So this entire INR4,000 crores, which is the LGD recovery pool for the next 42 months is the first time that Q1 FY ’22 has come into the mix.
Punit Bahlani
Okay. Okay, okay. Got it, got it. Got it. And sir, on your — so when this goes out-of-the mix, your PCR is — might increase, right, because this has led to a 900 bps decline in PCR. So going-forward, if like once this pool is excluded, there will be some — some increase in PCR, right?
Raul Rebello
Yeah, there will be a gradual because there is a certain benefit that this has accrued right now. And that’s what I said, it will be range-bound. We don’t see it spiking up. We see a gradual tick, but it will be range-bound. In my estimate since you’re all pushing on this, I don’t think this will definitely go beyond a 54% number. That’s between a 51% to 54% number the near-future.
Punit Bahlani
And 1.3% to 1.5% factor is this right.
Raul Rebello
Sorry, that’s the credit cost aspiration that again, I’m not giving you guidance yet, this is an aspiration that we have. Okay. 1.3 to 1.5% absolutely, if you were asking for this year.
Punit Bahlani
Right, right. Okay. And sir, on the write-off policy, could you comment like what’s the write-off policy? Is it?
Raul Rebello
So there is no change in the write-off policy. We like most vehicle lenders, we look at what’s the good time to write-off. We — again, the kind of recoveries that we see in the NPA pool gives us enough of — enough of input to decide when to write-off and we have not changed any write-off of logic if that’s the question.
Punit Bahlani
Got it. Thank you so much, sir. Yeah.
Operator
Thank you. The next question is from the line of Nidesh Jain from Investec. Please go-ahead
Nidhesh Jain
Thanks for the opportunity. Can you share some details on the — what is happening in Mahindra rural housing?
Operator
Sorry to interrupt, but you are not audible. Capital start.
Nidhesh Jain
Hello. Am I audible now?
Operator
This is better, sir. Please go-ahead.
Nidhesh Jain
Yeah. Sure. So I have two questions. First question is on Mahindra Rural Housing Finance. What is happening there and what is the medium to long-term strategy for that business? And in terms of capital requirement, how much capital we are likely to infuse in that business.
Raul Rebello
Yeah, thanks. So we — we have shared last-time that we plan to participate in a much holistic manner in the mortgage business. Before we — we really participate in a meaningful manner, it makes sense that we are clean and steady-state create a semblance of a reasonable amount of asset quality outcomes in the MRHFL business. You would have seen in that slide, we have done additional provisioning for this quarter. We believe that, that business needs to be set first right in order before we grow mortgages overall. I don’t know whether I informed you guys. We talked about a very senior resource from Bajaj Housing Finance, who was deputed there. He continues to work closely with the management team. In fact, he was seconded earlier. Now he has moved full-time to that business — to that entity and will ensure that very soon we see MRHFL set-in order. The team is working in that direction. We’ve already reduced a significant amount of manpower, OpEx will come down. And of course, asset quality we are sleeping to see changes — positive changes there.
From a capital adequacy that entity is adequately capitalized, there is no need. We are not growing anyway. We are looking at more rightsizing that organization and making sure the asset quality in that organization reaches a desirable level. There is no immediate exuberant growth plans there. So whatever capital is in that organization, it’s adequately capitalized.
Nidhesh Jain
And the mortgage business will be done through that organization only, right? Or —.
Raul Rebello
We will share plans. Share we plan to — we plan to play mortgages holistically. I did mention at the start, end of Q4, we will give you a slightly longer-range strategy view of Mahindra Finance. In that time, we will detail where mortgages will be done to what extent we done, what parts of mortgage will be done. Please be patient with us at the end of Q4 and when we have this longer-range view, we will share these details.
Nidhesh Jain
And second question is on ROA. ROA trajectory from 2% to 2.5%. How long do you think you will be able to reach there? And what are the levers you have to reach to 2.5% ROA?
Raul Rebello
Yeah. Again, I would say we’ve we are having a very detailed walk of our ROA plan. Please bear with us for another quarter-end of Q4. We plan to have a very detailed in fact, an Investor Analyst Day of sorts where we will — we will share much more details on the overall growth aspirations, asset category participation aspirations, digital AI capabilities that we have built. So all of that walk, you know, please be patient with us. We will share that in detail in the next four.
Nidhesh Jain
Okay. Thank you, sir. Thank you for my side. That’s it from my side.
Raul Rebello
Thank you.
Operator
Thank you. We have the next question from the line of Sonal from Asian Market Securities. Please go-ahead.
Sonal
Thanks for the opportunity. Apologies in at the outset, I’m happing a bit on the provisions part. But when I look at your FY ’22 numbers, the write-offs for the entire year were closer to about INR2,500 crores and a significant chunk of it came in Q4. So if you could just explain, I mean, how would this LGD work because right now we’ve reduced our PCR to 50% and end of Q4 FY ’22, I think we did write-offs of about INR1,200 crores. So I mean how gradual would this increase be from 3% to say, 3.3%, 3.4% or it could happen in next one year itself?
Raul Rebello
But I didn’t understand what is 3.5%?
Sonal
So currently, your total provisions — total ECL provision stands at about 3% this number was slightly higher in the previous quarter. And obviously with the news coming into your model, the requirement for PCR has gone down. Now if I look at your loan losses or actual write-offs for FY ’22, I think they were closer to INR2,500 crores. So I’m just trying to understand that year the write-offs were the highest. So how — when — I mean, we are saying that currently the total ECL is at 3% — Stage 3 PCR is at 50% and it will gradually move-up. But if I look at Q4 FY ’22 numbers, write-offs was slightly higher at about INR1,200 crores in that quarter itself. So I mean, just to understand when we are modeling, how do we kind of model credit cost because again, there would be this variable which would come into factor and then the provision coverage will go up.
Raul Rebello
Yeah. So you know the PCR number is again at the cost of repeating, it’s a number which there is the LGD and PD are the two big variables. The LGD is something which is basically based on cash flows that have happened for the 42-month period, right? The PD is a number which gets refreshed. Now to your question, I think the larger question is how will the PCR go-forward? The — I don’t think you can do a map to map on the end losses of FY ’22 because the end loss of FY ’22 would include pools which are not exactly in the LGD 42-month period. It could be of previous period. So doing a like-to-like mapping and trying to you know future forecast basis FY ’22 write-offs, FY ’22 write-offs would not be an accurate comparison, as I said, because write-offs happen from different pools, right? It happens from — sometimes and we also have settlement losses which come into the loan-loss. So I wouldn’t hazard a line-to-line comparison of looking at forecasting the PCR number with — with connecting the dots on the write-off for FY ’22 and ’23. As I said, we look at a gradual possible movement. And the other way to look at it is, if you look at prior to the COVID period, our PCR number, which is again the LGA number have always been in that 40 to 55 range. So I do believe that our normal LGD PCR numbers should also reflect that because they are still in the vehicle business and in fact, what’s happened from FY ’22 onwards is the end losses as well as the collection efficiencies have improved. In fact, the loan losses have come down. So we don’t see a big departure from the steady-state LGDs, which were let’s say prior to the COVID period.
Sonal
Okay. And at the beginning of the year, in the annual report, we had mentioned that we are planning to open about 120 to 150 branches in the current year, maybe over the next 12 to 18 months. So where does this stand today and how do we see this 100 to 120 branches being added and do we really want to add those in the branches given we want to control that OpEx element?
Raul Rebello
Yeah. So a lot of these branches serve for incremental revenue in the future, these distribution points clearly give us a huge amount of ability to acquire new customers as well as service customers and service dealerships. So as I said, we opened 25 in the last quarter, 35 totally in the year. These are mainstream actual branches. I did mention that we’ve got some hybrid branches which operate out of dealerships and some small format branches. So we will look at increasing the amount of distribution for our overall growth plans, not just for one year, two years, but for the foreseeable future. We do know that this — and branches by the way don’t increase only opex, there is a certain capex amount. So setting up a branch is important from a growth standpoint, it will attract some capex opex requirements. And that’s baked into our OpEx ranges that we’ve shared with you.
Sonal
And anything on the technology part, what is it that way —
Operator
Rejoin the queue if you have follow-up questions. Thank you. The next question is from the line of Jigar Jani from B&K Securities. Please go-ahead.
Jigar Jani
Yeah. Hi, sir. Thank you for taking my question. Just one question.
Operator
Jigar, your line is unclear. You are inaudible in-between. are we?
Jigar Jani
Is this better?
Operator
Yes, please go-ahead.
Jigar Jani
Yeah. So I was saying if you look at the GNPA number and the difference between the GS3 number, that difference, which is about INR6,200 odd crores of GNPA and a Stage 3 of INR4,500 crores, that seems to have been sticky since the last three, four quarters. When do we expect this gap to close between the GNPA and GS3? And secondly, just a follow-up on the same is that the gap which is there between the two numbers that would be sitting in Stage 2, but do we carry the Stage 2 provisions or a certain extra provision on this pool of assets.
Raul Rebello
Yeah, hi,. We do carry the same Stage 2 provision on this asset. If they are IRAC, but not India’s NPAs, they sit largely in Stage 2 and yeah, they would take the Stage 2 provision. This number, you’re right. I mean it’s difficult to get three EMI sometimes. So that’s why that tool has remained range-bound. But yeah, I don’t know what I shared earlier, we have reconfigured the collection team to be product-specific right now. It is our stated goal to start seeing this number go down, but your observation is right, it remained range-bound. It largely what happens is these customers pay one EMI and stay-in the same pool, getting three MIs or four EMIs is going to be a little more, especially in an environment like this is going to be a bit more tough.
Jigar Jani
But do you expect like slippage from this bucket or would it be like towards the end-of-the tenure you would be collecting probably these extra EMIs. That is how it would work.
Raul Rebello
More like that, more like that because it’s tough for them. So usually at the end-of-the tenure, the kind of forthcomingness of these customers to clear will always be there. Inter loan, it is inter tenure, it gets tough to plow back four.
Jigar Jani
Sure. So probably near the end of FY ’26 because our behavioral tenor is about two, 2.5 years probably by end of FY ’26, we should see this gap kind of closing.
Raul Rebello
Don’t have a ready comment. We’ll have to model it to see that.
Sandeep Mandrekar
All of this may not be from the last one year or the last two years. Since we have a — we have a tenure of four to five years, it will be difficult to say that everything will get over in you next two years’ time because you will keep on having new customers also coming in there.
Jigar Jani
Okay, understood. Understood. Thank you so much for your color.
Operator
Thank you. Thank you. Ladies and gentlemen, we will now take the last question, which will be from the line of Umang Shah from Kotak Mutual Fund. Please go-ahead.
Umang Shah
Yeah, hi, good evening. Thanks for taking my question. I have two of them. First is, I wanted to understand the thought process, when I look at your last seven, eight quarters data, I mean our asset quality has pretty much stabilized with our Stage 2 plus Stage 3 in the range of about 10 odd percent. However, our overall of ECL provision on the balance sheet has come down from 5% to now just at about 3 odd percent. And now in the current environment by your own admission where there is a bit of a volatility and you believe that there is a possibility that there could be some deterioration in asset quality, wouldn’t it have been a bit more prudent to not write-back these provisions into the P&L and maybe create some sort of a management overlay, especially given that in the past two, we have seen a lot of volatility as far as the provision coverages are concerned. Wouldn’t it have been a little more prudent to just hold back these provisions rather than writing it back into the P&L. Just wanted to have your thoughts such on this.
Raul Rebello
A fair point and you know the ECL model ideally should reflect what is the — what is the underlying LGD and PD. You’re right, management can decide to make overlay provisions. We did contemplate it. We just felt we’d be being a bit too cute and trying to you know trying to basically do artwork on-top of the model. At the right time, if you believe that we’ve got to start creating buffers, we will do it. In this quarter, we saw the LGDs work-in the manner. We didn’t want to kind of create something which is over and above the — what the model was — was prescribing because it is reflective of the collection that has happened of that pool. It will be our stated goal to continue to kind of collect and make sure that we keep these ranges. Of course, the — it’s not going to stay at this level, it will — it will marginally move-up. But it’s a valid observation. It was something that we definitely thought about and it’s not that we can’t do it in the future. If we believe that we can stomach some overlays, we will evaluate it at the right time.
Umang Shah
Okay. Sure. The second question that I have is about capital infusion into the subsidiary. Now while we appreciate that you have been supporting the housing finance subsidiary thick and thin, while material progress over past few years has been fairly limited, right? But again, if I look at it from a capital allocation standpoint, probably in a couple of quarters, we ourselves will start hitting a debt-equity of about 6 times. So how should we look at capital-raising for the parent entity, Mahindra Finance itself considering that Mahindra rural housing is also in need of capital.
Raul Rebello
Yeah, I I’m not sure whether you heard me earlier. I did mention that at these levels we are actively looking at at our Tier-one requirements and you know we do believe that in the in the recent or the upcoming quarters, you will hear from us and we are at certain levels, which we believe is the right time to evaluate augmenting 1.
Umang Shah
Okay. Sorry, I missed that comment. But thank you so much and wish you all the best for future quarters.
Raul Rebello
Thank you.
Operator
Thank you. I would now like to hand the conference over to Mr Anuj Singla for any closing comments. Over to you, sir.
Anuj Singla
Thank you, Raul and Finance for the opportunity again. Any closing comments from you, Raul?
Raul Rebello
So thank you. Thank you, everyone, for being with us on the call. I do understand we had a little bit of a delay in uploading the document, but I hope you’ve had the chance to answer — you had the — we’ve covered all your questions and we can also take conversations forward. I do understand the PCR cover was the — was a larger part of the discussion. We do believe that this quarter one of FY ’22 has given us, you know, a certain decline here. But overall, this the collection focus of the organization remains making sure we underwrite well, making sure we have the right balance of growth and margins and risks, that’s largely what we continue to prioritize for the organization. And thank you for all your questions and hopefully we have — we’ve addressed all of them. Thank you, Anuj.
Operator
Thank you. Ladies and gentlemen, we now conclude this conference. Thank you all for joining us. You may now disconnect your lines.