Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Mahindra & Mahindra Financial Services Limited (NSE: M&MFIN) Q4 2026 Earnings Call dated Apr. 24, 2026
Corporate Participants:
Abhijit Tibrewal — Moderator
Raul Ignatius Rebello — Chief Executive Officer
Unidentified Speaker
Unidentified Speaker
Unidentified Speaker
Pradeep Kumar Agrawal — Chief Financial Officer
Analysts:
Raghav Garg — Analyst
Piran Engineer — Analyst
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Presentation:
Operator
Good evening ladies and gentlemen. Please note this call is not for media representatives or investment bankers or commercial bankers including corporate and commercial fx. All such individuals are instructed to disconnect now. A replay will be available for investment bankers and commercial bankers including corporate and commercial fx. The replay is not available to the media. Good day and welcome to the Mahindra and Mahindra Financial Services Limited Q4FY26 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 be disclosed, please immediately discontinue this call. As a reminder, all participant lines will be in a listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that the conference is being recorded.
I now hand the conference over to Mr. Abhijit Tibriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal — Moderator
Yes. Thank you. Rutuja. Good evening everyone. I am Abhijit Kibriwal from Otilala Loswal and it is our pleasure to welcome you all to this earnings call. Thank you very much for joining us for the Mahindra Finance call to Discuss the company’s Q4 FY26 performance and business update to discuss the company’s earnings. I am pleased to welcome Mr. Lal Dibello, Managing Director and CEO. Mr. Pradeep Agrawal, Chief Financial Officer and Mr. Sandeep Mandrikar, Chief Business Officer Veers. On behalf of Muthila Loswal.
We thank the senior management and the investor relations team of Mahindra Finance for giving us this opportunity to host you today. I now invite Mr. Rebelo for his opening remarks post which we will open the floor for a Q and A. With that. Over to you sir.
Raul Ignatius Rebello — Chief Executive Officer
Hi. Good evening. Thank you. Abhijit and the Motilal Oswal team. And again welcome everyone and thank you for joining this call. As usual I would request you to keep the deck handy which we have circulated sometime back on the exchanges. I will refer to the page numbers as I walk you through the commentary. So first and foremost on behalf of all of us the Mahindra Finance team we are very encouraged with our Q4 results. We think we’ve ended the year on a very strong note. When I reflect on the entire FY26 on an overall basis we have done very well in terms of significant improvement in margins and on the risk front, if you look at we have set some records, our GS2 and GS3 numbers are at an all time low at 8.2% so very strong delivery.
The franchise has delivered on margin and asset quality and I would also underscore that growth has been quite reasonable. We did see the first half of the year being quite moderate and momentum started kicking in from Q3 and even in Q4 we continued with that momentum. With that summary of how Q4 and the year has been. Let me step into some key messages which is on page so on profitability for the full year. These are messages for full year FY26 you see PAT up 19% and for Q4 PAT up 55%. I will talk about overlays in the next slide.
The second key message is We’ve been speaking for a while on our business transformation through digital and AI. I’m happy to announce that all of this is now business as usual, at least on the digital front. We are making AI investments but our entire lending stack, which is the wheels business, has got 100% life. Third update on the asset quality. GS3 at 3.4 big reduction from last quarter and same time last year and GS2 plus GS3 at an eight year low. And finally we have been making investments across the board in terms of new products, new channel systems and we’ve also did a rights issue in the course of the year so we are very well strengthened to scale.
Now I’ve received questions in the past on the overlay so I’m going to jump straight to slide number 16 because there have been some questions on that so that you can appreciate the commentary with and without the overlay giving you some color on why did we create the overlap. It’s not about us seeing any visible stress, this is more about being prudent. And as any financial services company which is in the business of lending to customers across customer segments, we didn’t want to be reactive, but we wanted to be proactive in our approach and hence we felt the best way to reflect this prudence was by creating an overlay.
That overlay also is not a random number. It has been very well thought through through different customer segments, risk profiles, etc. And learning from the past and baking in some edge case scenarios if things go downside, being well calibrated on the ability to create a cushion to address that if things go south. So the management overlay that we have created in Q4 in rupee value is 217crores. Besides this management overlay as any lending company would be also prudent is creating a very strong liquidity chest.
While you will not see that in the Q4 numbers, but clearly we have also taken steps up there to make sure that we are well buffered up. We always keep very very comfortable liquidity chest coverage. We have strengthened that a little more. So that’s the broad message on creating that overlay. This was specifically to be more prudent. Coming back to sequence of slides, I’ll go back to page number five which is the highlights on profitability. So Q4ROA very strong at 2.4 whole year ROA at 2%. This is compared to 1.9%.
Last year our Q4 PAT grew 55%. Without the overlay this would have been at 84% and full year PAT growth at 19%. Without overlay this would have been at 30%. NIM expansion again very strong. As you would know when we looked at the levers for ROA expansion, the biggest ones that have been in the past leverage were credit cost. We had come down significantly and that was giving us overall ROA accretion. But one of the areas which we had actually gone in a different direction was in nions and I’ve been over the last couple of quarters talking about very concerted efforts that we have put in place in terms of portfolio rebalancing, asset choices.
In terms of which segments do we over index on whether it’s the used vehicle, tractor, etc. Good to report that we have been progressing well there and our fee based income also has been very steadily increasing and the treasury office has been doing a commendable job in terms of cost of funds which has given us an overall NIM expansion of 101 bps YOY and for the full year 60 bps increase in NIM. Moving to page number six, we’ve talked about our many years investments in reimagining the way in which we do our business front to back.
Happy to report that close to 50% of our entire disbursements in financial year 26 was done on the Udan digital stack and this is a cultural change. Our employees are much more productive now because of the enablers that we have given them in terms of the digital toolkits. And this in no way is creating any intimidation of customers as most of our customers need to be assisted. So this is both a digital and a digital stack which encourages customers to do it yourself as well as assisted modes of onboarding through our many associates on the field.
The second visible step up is our straight through processing capabilities. We are seeing a 40% improvement in STPs and we have our own CTC agent which we have nomenclatured as Samurai
Unidentified Speaker
Summer AI.
Raul Ignatius Rebello — Chief Executive Officer
In short and very happy to report that the back office is using these toolkits to get us a Tata efficiency in the 20% that we have deployed. Right now we are seeing loan back office approval that is from sanction to disbursement now being 80% faster.
Unidentified Speaker
The last comment I would make in terms of our ability
Raul Ignatius Rebello — Chief Executive Officer
To significantly step up our improvements is in using digital and AI for collections. 25% improvement in early bucket collections through the AI and L models Quickly going into asset quality you know that we have seen benefits throughout the year. Our GFP has estimated down to 3.4% 39 bits quarter on quarter. Our GS3 plus GS2 at record lows. Our credit cost at 1.5 accommodating for the overlay. Without the overlay this is at 0.9 full year credit cost. We’ve always said we’ll operate between the 1.3 to 1.7
Raghav Garg — Analyst
Range. We closed the year at 1.7.
Raul Ignatius Rebello — Chief Executive Officer
Without the overlay this would have been at 1.6. PCR cover which was close to 53% at the end of Q3 would have been in the similar range. But as we have buffered up the provision through the macro overlay provisions, the PCR cover is now going to 58.6. Quickly moving up to page number eight which is on growth and growth momentum. We continue to be a very very far ahead of the pack leadership in terms of tractor disbursements grew at 63% overall for the full year at 49%. Happy to report that our mortgage business through MRHFL has also started picking up momentum.
After making sure that we have ticked all boxes in terms of asset quality which is at 2.4%, we saw a reasonable 21% growth in in the subsidiary. Our SME business which we grow in the core NBFC has grown at 32%. Cross sell which is a key component. As we look at product per customer is now gone up to 2.4 and the balance sheet is well capitalized at 18.8%. Tire 1 at 16.17 16.7%. Quickly flipping to page number 10 what you would see in terms of our business AUM growth is at 12%. I am kind of now going to reflect on with and without overlay.
So if you look at credit Cost. In fact our credit cost without overlay was at 343 crores. But because we baked in the overlay it’s at 560 crores which is a 23% year on year growth. If that was not there it’s a 25% actually B growth in terms of credit cost. And our PAT for the quarter at 873 crores is a 55 growth in Q4. Of course without overlay this would have been 1000 crore plus. So we did deliver 2.4% ROA for Q4 2.9 if we made the adjustment in terms of overlay going to full year pack. Our full year pack at 2782 crores is a strong 19% growth without overlay as I mentioned earlier would have been a 30% at 3000 plus crores.
Moving on to page number 12, I just want to call out the structural changes that we have seen in our ROA tree. If you look at the row number three I think that’s the most commendable change in terms of what’s building in the ROA mix. 1.1% last year fee and other income has moved to 1.4. So that’s a good. And this is not one time we do believe this will stay. We’ve been pointing out whole of last year every quarter as you’ve seen this come up. It’s definitely encouraging to see us diversify our revenue streams.
I do call, I want to call out that because of the rights issue we would have seen some benefit in terms of the interest cost. But structurally what we have also done is we have created a very strong front end treasury team which is making sure that our incremental COF always is at the most formidable levels. You’ve seen a steep drop from 6.3 to 5.9. There are some on offs here in terms of and I did mention the rights issue but otherwise we do see ourselves operating in a very prudent manner in terms of our cost of funds.
Overheads have been rangebound at 2.7. Credit cost
Piran Engineer — Analyst
Has been in the range that we have committed
Raul Ignatius Rebello — Chief Executive Officer
To be at. Quickly moving to page number 14, our GS2 +GS3 numbers which I’ve said is commendable. Right now together it’s at 8.18%. GS2 climbing down significantly from Q3 and GS2 also climbing down significantly from Q3 level. Moving to page number 15, credit cost, you can see the bifurcation of credit cost over here with and without overlay. And finally moving to page number 18, I do now provide some commentary on our subsidiaries. It’s encouraging to note that our subsidiaries, if you look at each of our subsidiaries, all of them have stepped up significantly from last year’s PAT growth MRHL 58 crores versus a negative last year, our Sri Lanka subsidy 14 crores in INR terms, our insurance broking company 28% YoY growth and even our EMC for the first time in the black.
So the subsidies also are starting to show reasonable signs of step up. Before I conclude and hand it over to the question answers, I am concluding with the Last slide on 17 which is medium to long term priorities that keep all of us in the management team honest on our operating metrics and we do believe if we are extremely disciplined on our operating metrics it will keep showing up in our financial metrics. So these are our priorities going into FY27. Also that we will continue to defend and grow our views leadership.
We will continue to grow our mortgage business, our SME business, our leasing business and fee income. We will continue to have steady progress on our growth and margin aspirations and constantly keep our risks range bound to the business model and from a resilience standpoint and investments in capabilities. We continue to invest in distribution. We continue to invest in our underwriting and collection teams. We do believe we are operating in the age of AI and while we have made significant strides in digital and our digital spine today is giving us a lot of confidence in now leveraging the AI toolkits.
We were not a very avid user of digital the last three years. With the digital maturity curve improving, most of these capabilities are now going to be sweated out for AI. AI as I did call out, we’re seeing material benefits in collections and in back office. We will soon sweat that out even in front office capabilities on business. That’s it for me in terms of how we’re looking at our priorities for the year and now will pause, take a pause and hand it over back to the moderator for question answers.
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may please press STAR and one on the Touchstone 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. We would also request participants to restrict their questions to two per participant. If you have a follow up question please rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Ranish from ICIC securities please go ahead.
Unidentified Speaker
Yeah, hi sir. Thanks for the opportunity. Sir, my first question is on the even road side. Right. So now I’m assuming we are largely done with the process restructuring and also matters built AI digital capabilities. So when do you see growth accelerating from current level of 12%?
Questions and Answers:
Raul Ignatius Rebello
Yeah, thanks. So see when we look at the vectors for growth here, where we are as you know, very dominant on is the tractor business and we have demonstrated that last year. We see that momentum continuing into this year. Of course since the denominator is quite high, we may not see the same YOY growth of what we demonstrated last year because the base is higher. Other segments is the used vehicle business, which in this environment is also something that we are over indexing on. As you know some of the OEMs have called out with the constraints, maybe the inventories are also reducing so the used vehicle business becomes very attractive.
It’s one of our largest growing businesses and that’s also in a positive, I would say category of growth. Our passenger vehicle business has grown, you know, quarter four quite strong at 15% YoY and the growth also has been 14%. So that business, we have a dominant position, we are in the top three across banks and NBFCs and we continue to look at that business as a very strong growth enabler in the CV business we have made certain shifts in our choice selection. We have moved more to the SCV segment and found some part participation in the HCV segment and we’ve also now double clicked on the used CV business.
So we do see this segment as. And I’m not giving Q1 commentary of full year of next year. This is more. Yeah,
Unidentified Participant
Yeah, I get it.
Raul Ignatius Rebello
And finally on the diversification, our SME and mortgage business are also chugging along pretty well and that gives us an ability to overall aim for mid teen growth as we go forward.
Unidentified Participant
So would you like to put any numbers to it or
Raul Ignatius Rebello
Numbers to what next year? FY27. Yeah.
Unidentified Participant
FY27. Yeah.
Raul Ignatius Rebello
See we don’t give near term guidance but for any lender with our size and scale, aiming for a less than, you know, team growth won’t be prudent I think, or won’t become competitive. We know that growth at the cost of risk and cost of margins is not something that we do. So we will have to factor that in our choice framework. We are encouraged by the momentum we have seen in the H2 of last year and we are making sure that that momentum with all the other factors at play are factored in.
Unidentified Participant
Got it, got it. And thank you sir. And my second question is on these SMS segment outlook. Right. So when we look at the full year F26 business bank in SME are eventually 2% growing at 2% y o y even when you know, most of the time in FY26 the underlying trends were strong but now with likely increase in input cost or maybe some impact on order book as well. So how do you see a portfolio behavior of this particular segment over the next six to 12 months? And internally, you know, what’s the outlook, you know in your mind in terms of growth?
Raul Ignatius Rebello
Yeah, so see the SME business I just want to quantify here is we are reasonably relatively late clear, right? As in so our book at about 8,000 crores and our disbursements are. I wouldn’t say we are not a scaled player right now. So while our disbursement last year has been because we moved completely secured, we still have book growth at 32%. We do plan to continue to grow in the 30 40% kind of range considering our denominator being very low. Now you know that the MSME category is the second largest category in the lending business after mortgages and a very significant pool in not I would say the at least in the micro and small segment NBFCs do play a big role in the medium segment banks are largely participants.
We have in the last couple of years selected areas where we will over index on. And considering we are still our denominator, I mean our base is so low, we don’t think that we will have to make very, I would say conservative calls for the next year considering where we are in our growth journey. Built in distribution, product, manufacturing, services, trade choices as well as micro and small are good. We see the opportunity good enough for us to keep the growth momentum out. We are not this position of our cycle, you know, constrained.
Unidentified Participant
Got it, got it. So I mean we don’t expect any derailment because of the ongoing Gulf war situation.
Raul Ignatius Rebello
It’s not that we will throw all caution to the wind. We do know where the strains are, we do know where the stress points are. But as I mentioned earlier, we are relatively much earlier in our journey compared to much tenured players at 8,000 crore of book. As you know this is still less than 5,6% of our portfolio. The choice framework available to us for a growth ahead is not constraining in nature.
Unidentified Participant
Got it. Very helpful sir. Thank you.
Operator
Thank you. The next question is from the line of Piran engineer from clsa. Please go ahead.
Piran Engineer
Yeah. Hi team. Congratulations. The Quarter Just firstly continuing on the previous question on.
Operator
I’m sorry to interrupt you but we are unable to hear you.
Piran Engineer
Okay, can you hear me now?
Operator
Yes.
Piran Engineer
Yeah, thank you. So my first question is on cvs. When do we start seeing growth in, in the CV business back, you know, step back up. I understand you’ve been recalibrating for the last few quarters. When do we see that get over and growth pick back up there?
Raul Ignatius Rebello
Yeah, if you have anything I’ll address all your questions at once.
Piran Engineer
Second is on margins now. Margins again. Surprised positively I think last quarter when we hit the seven and a half percent number, you mentioned that there were one offs and we should take the nine month number of 7.1 as a more steady state number. Do you still hold that belief or do we. Should we now think of seven and a half as a steady state margin number? That’s it.
Raul Ignatius Rebello
Yeah. Thanks Viran. You know, let me go in reverse order. I’ll talk about the margin question first. See for the full year we are still at 7.1, right. And as I commented, what we see as levers for margin, what is structurally moved up which has helped us move to 7.1 which I think is more reasonable number to expect in the next few quarters is the contribution of fee based income that has gone up significantly by 30bps even from last year to this year. And while some of you had questions whether it’s one off, I had been mentioning for the last two, three quarters that we have made certain structural changes in the way in which we book this income and the way we prospect this income.
So we think that’s one big structural change to keep the NIM profile higher. The second leverage, while you would see our interest cost has come down, I did mention that one of the benefit was the rights issue which will slowly start as the debt equity moves it will start giving up some of those gains. But what’s again structurally shifted there is we have created a very strong treasury team and the way in which we get our incremental cough and we see that very very sharply on a month, on month basis I think there’s efficiency that we have built there.
So I do think that will stay for a while. Loan income which has been range bound as interests have fallen off, you would see our loan income while we have given up about 10bps what’s moving over there and what is structurally changing is the composition of tractor and used and some of the asset categories which will hold us in good stake. So these are the ways in which we have influenced the NIM profile which will have structural benefits for us in the medium to long term. But I would not want to call 7.5 as the new normal.
I would think 7.1 with some point 5, you know, some few bips here and there improvement as possibilities but not a 7.1 to a 7.5 for sure. That’s on the margin. Commentary on CV see Biran we have been, you know we’ve seen we look at CV from a cross cycle ROA attractiveness and we have made some calibrations in terms of what do we do in the CV playbook. We have swapped in used CV for certain segments. We have swapped out some segments which are extremely volatile and we have also swapped out some segments where the whole movement to fleet operators makes it not not very RO accretive for players like us.
But what we have also swapped in is fleet operators with co lending with some big banks. Now that’s yet to play out but in this environment, as you know with all the clouds above us, CV typically gets impacted first. So we would not very adventurously ramp up CV in this environment. We will do it in a calibrated manner going forward.
Piran Engineer
Got it, Got it. Okay. And just if I can squeeze in one more question. Before the conflict started and today, what has been the change in your cost of funds across bond markets and bank model? Incremental obviously no incremental
Raul Ignatius Rebello
Incremental but I’ll invite Pradeep in here for his comments but I don’t think we’ve seen any stated reset. So if you look at the quarter
Pradeep Kumar Agrawal
Four of FY26 the interest were already elevated in Jan, Feb and March because of the March being March the year end pressure on the liquidity as well as tax outflows along with the Gulf prices. I think March rates were much more elevated after March. We have seen certain despite in the capital market rate in the month of April and still the uncertainty is ongoing so it’s very difficult to predict the overall change in the overall what kind of incremental cough and all because compared to March April is much you can say lower.
So
Piran Engineer
Compared to Feb would April be the same because our bond yields are still 30 pips higher right? 10 year yield versus pre war levels. I’m just trying to get a sense whether our cost of funds incrementally will also be 30 pips higher or maybe 4050 pips higher.
Pradeep Kumar Agrawal
So again could
Piran Engineer
Have increased
Pradeep Kumar Agrawal
Only one instrument doesn’t give the market flavor. We may not be in the 10 year bucket to borrow any incremental fund. We may be. There are other instruments. For example, we do a lot of PSN lending. We do a lot of securitization pools. We do short term, we do working capital. We do ebay loans and all that. So I think it’s a mixed portfolio. So pegging the Entire portfolio to 110 years aid of 30 basis points may not be the right approach to decipher the cost of capital.
Piran Engineer
Okay. Okay, got it. I’ll take it offline. Thank you so much. Wish you all the best. Yeah.
Operator
Thank you. Participants, who wishes to ask a question, please press star and 1. The next question is from the line of Shubrancho Mishra from Philip Capital. Please go ahead.
Unidentified Participant
Hi Rahul. Good evening. Thanks for the opportunity. The first one is on the cross sell. We have pointed out cross sell than around 2.4 PPC. So just want to understand what is the cross sell opportunity within our client base? What is it presently as a percentage of disbursement at aum? And what is our total client base that we are banking on a monthly basis? What are the match presentations on a monthly basis? The second is on the opex. What percentage of the OPEX would be cost of acquisition and what percentage of the OPEX would be cost of collections.
And the third is. You did mention about some clarity about the mortgage business being run either in the HFC subsidiary or in our standalone NBFC license. So have we got any clarity about it from the board yet or. We’ll take some time on that. Thanks.
Raul Ignatius Rebello
Yeah, a lot of questions there, Subransha. Good to connect. First and foremost let me just make sure that you know whatever I disclose here I will always have to be consistent with what we put out in the public domain. So I may not be able to give you the granularity that you asked for. But since we put out the PPC number and I don’t think we put that out earlier, let me tell you why we think it’s a good time for now surfacing ppc. As you know we’ve been on this path of diversification for a while now.
And you can’t talk about PPC if you are a single trick pony and just do the vehicle business, right? So now that we have unleashed many more asset products and we’ve also got a corporate agency and we are looking at canvassing fee based products and we also have a deposit taking license and we’re looking at fixed deposits very actively. We think it’s the right time for us to sweat the customer franchise from an overall PPC. On the asset as well as non asset products. This number was under two a year and a half back which has now come up to 2.4.
What is the base that we can lever up? We have today close to a 24 lakh customer base which is live. We have a 1.3 crore customer base which has banked with us so far where we have data. So we look at the mature, we look at the matured and not live customer base and we also look at the live customer base and wherever we have consent from the across the group the the B2C businesses across the group which give us consent to canvas financial service products, we are actively looking at opportunities there too.
So it’s a large franchise. We’re just starting to I would say scratch the tip of the opportunity. There is potential to go ahead. We are very, very clear that we use this opportunity only when we have full consent. We don’t just randomly knock on any door. But the potential to level up this 2.4 is also there. And we will keep disclosing these numbers on a regular basis as we are able to, not as we’re able to. But we’ll keep giving you clarity on this
Abhijit Tibrewal
On specifically
Raul Ignatius Rebello
Cost of a lot of disturbance. So can mute regards to our opex. Again we don’t have a separate acquisition versus non acquisition. So maybe in future we can when we do our investor day and we can think about you know double clicking on all these granularity on I’ll jump to mortgages. I did mention that the boards are evaluating the best format of of currently doing mortgages. Needless to say, while we will come to you and I did come you know the outer timeline is Q1 of Pradeep. Remind me Q Q1 or Q2 of this year where we’ll come to the.
Yeah. We have taken time till Q2 to formalize our plans on doing it. But we are not in, we are not wasting time in the participation. Right. If you’ve seen the way in which the mortgage book has been growing, it’s after we have solved the pain points of asset quality and putting that at the back of us growth has now come back.
Unidentified Participant
Right. If I can just squeeze in one last question. What kind of credit cost are we looking at in 2728 and OPEX growth should be in tandem with the AEM growth.
Raul Ignatius Rebello
You’ve jumped one physical. Okay. That you’re talking about not 27. Right. You’re looking at 28
Unidentified Participant
Or maybe even just talk about 27 if that’s okay.
Raul Ignatius Rebello
Okay. Now thank you because we don’t give one year guidance. I was hoping to give you a lot of guidance. So credit cost. We have always said that our business model should factor or stomach a 1.3 to 1.7. We are confident to stay within that. There are clouds above us and part of the reason why we create some of those buffers are to make sure that we operate within the business model operates within those, within those boundaries. What is the second question other than credit cost?
Unidentified Participant
The opex growth in 2728, would it be as much as the balance sheet or more than the balance sheet? Less than the balance sheet
Raul Ignatius Rebello
We keep. And if you’ve seen over the last two, three years the operating job between revenue growth and OPEX growth has been widening to some extent. And for any organization our side, we believe that operating leverage should kick in and our revenue growth should ideally outpace our OPEX growth. So our OPEX to average assets has been range bound. But I don’t know whether we put that out. Our cost of income has seen a decent reduction.
Unidentified Participant
Understood. Thank you so much Raul, Best of luck for ensuing quarters.
Raul Ignatius Rebello
Thank you.
Operator
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Unidentified Participant
Yeah, so firstly again on this entire overlay provisioning, so again what quantum of book we would have created this you mentioned like maybe this is against some portfolio which maybe it might, if there is a slowdown or something we might see a risk to that portfolio and given that it’s again created in GS3. So if you can quantify that proportion of pool against which 217 is created.
Raul Ignatius Rebello
Yeah, so Kunal, this provision, you know I invite Pradeep here to kind of give more color on the mechanics of the provision creation.
Pradeep Kumar Agrawal
So Kunal, what we have done is that we have, this is the current geopolitical situation. We have taken certain macroeconomic variable which can have an impact on probable impact on the portfolio and this is that probable impact. We have quantified what could be the gross slippages in my portfolio and after calculating that probable gross slippages we have kind of worked out this overlaid number
Raul Ignatius Rebello
Just to add to that. So it’s
Pradeep Kumar Agrawal
Not, sorry, this is not any specific or segment specific. It’s more or less overall macro overlay in the entire portfolio.
Raul Ignatius Rebello
Yeah, and not just the geopolitical. I’m sure you would have caught the updates on the, you know, both IMD etc and we know we have a tractor portfolio which can get, can see some temporary or some kind of a stress. So we Just thought it best to factor in these two, three headwinds in creating the 217 crore overlay. I must also mention in the same breath that April 23rd days are upon us. 24th actually today we have not seen any material shift in our collection efficiencies or the April, you know, all the collection days of April are done in terms of we finish it by the 15th, 20th of the month.
Things are progressing quite well. This is just being prudent and as I mentioned in the overall in the commentary up front, being prudent is a good posture to take rise now. And that’s the reason and rational for creating.
Unidentified Participant
Yeah, absolutely agree. Because when we look at it overall, at least in terms of the trend, GS2, GS3, that’s directionally coming off okay. And maybe we, we had quite a volatile coverage all through. Maybe earlier it was higher, we bought it down again, we took it up to 53. Then we mentioned like it should be between 53 to 55 odd percent. Now again maybe because of overlay it’s getting back to 59 odd percent. So a lot of volatility out there in terms of the coverage. So but now maybe should we see this remaining in this zone or could there be a further risk?
Have we adequately provided for this and that’s the reason you are confident that 1.3, 1.7 is now a reasonable trajectory of credit cost after this provisioning?
Raul Ignatius Rebello
Absolutely. I mean see the 53 to 55 which I had given PCR was in a steady state. Right. And you would agree that businesses have to be agile and if we see certain things which are, you know, not a departure from normal and you would agree this is not extremely normal, it is prudent for us to factor that in. And I did mention that if you take out this 217crores we would be in that 53 to 55% now tomorrow, when I mean in the upcoming quarters, if we believe that there is no crystallization of the headwinds, we will be happy to revisit the PCR cover.
But it’s not going to be just an adjustment. It will be specifically since this has been created specific for the current geopolitical and the monsoon related headwinds that we see, we won’t be, you know, in any ways shying away from going back and releasing that
Unidentified Participant
One last clarification on this. So even if something pans out okay, because of this extreme situation, we will now see increasing GS3 but we will not require the provisioning against it. Or maybe we have classified that pool as well into GS3 for at this point in time, not really.
Raul Ignatius Rebello
See, these are specific provisions created for these two occasions. So it gives us the ability when and if there is no stress on this specific of these two incidents to kind of revisit the release of it.
Unidentified Participant
No, not the release. I am saying even is it considered in GS3 pull in terms of the portion on which we have created this that is also the part of 4578 GS3 or this is just the provisioning which is taken up to 1,7 crores.
Pradeep Kumar Agrawal
So I’ll tell you how it works. Maybe that will give us some sort of insight into this. See, this is a macro prudential overlay. As I explained, it’s an overall asset quality and it lies in the my overall GS3 provisioning. So that’s why you are looking at the PCR inching up to 58% or 59% whatever number. Okay. Now how it works out is that when we kind of take this kind of overlay, we also articulate the quarterly revaluation of this overlay. Because good governance cost for this overlays to be revaluated on the quarterly basis.
And the revaluation also it basically certain macroeconomic variables, portfolio quality, collection efficiency basis that we need to calibrate that evaluation every quarter. And if that evaluation comes to a point where we can release the certain amount of overlay along with the GST increase, that can be a scenario.
Unidentified Participant
Got it. Got it. Perfect. Yeah.
Operator
Yeah. Thank you. Yeah,
Unidentified Participant
Thank you. Yeah,
Operator
Thank you.
Pradeep Kumar Agrawal
I hope we have answered your question.
Raul Ignatius Rebello
We can connect if you need post this specific follow up.
Operator
Thank you. The next question is from the line of Abhishek M from hsbc. Please go ahead.
Unidentified Participant
Yeah. Hi, good evening and thanks for taking my question. Just one question on the fee part. So fee to assets of 1.4. Now you’ve got a lot of things that you plan for fees and increasing that. Where do you see that settling? Ideally, if not, you know, if not a year down the line, maybe two years or three years. But what do you think is a level you would want to achieve?
Raul Ignatius Rebello
See, I think in the medium term this 1.4, 1.5 is itself a reasonable number. We have covered good ground. What are the levers to further take this up? We have reconstituted our distribution channel branch. You know, we have 1400 branches which were earlier mostly fulfillment centers. They have been reorchestrated to become very active acquisition centers and cross sell centers. So the larger, if you see what goes into that Fee is basically investment income. You have dividend that comes in from the MIBL subsidiary and you have insurance income.
Right. All of this will keep growing but as they grow their composition might be in the same. The only way in which we can expand the headroom is by bringing in the core distribution to fire more. So as I said, the branch channel today has been reorchestrated well and I see good headroom for them to over index on. To take this to 1.5, 1.6 but beyond that in the medium term would be a little too stretched.
Unidentified Participant
Got it. And just in terms of your cost of funds from here and I’m just talking about the cost of borrowing not including the equity etc. Not out of that. Do you expect it to go up or you still have a lot of high cost stuff maturing this year and therefore you may still be flattish during the year.
Raul Ignatius Rebello
Pradeep will have a more accurate view. Pradeep.
Pradeep Kumar Agrawal
Yeah. So looks like if you look at the overall stock of borrowings which we carry in our books of accounts as well as the incremental kind of borrowings we may call it like you know the cost of funds which we have seen on the overall stock of borrowings in this quarter maybe towards the bottom. So because of the again we just discussed about the March like you know rates were elevated, April again has some spike but it’s still elevated compared to previous quarter. So that’s the kind of guidance I can give you overall
Unidentified Participant
How much of your borrowings are maturing this year?
Raul Ignatius Rebello
We don’t think even. Can we get back to you on that? I don’t think we have it right now handy and I’m not sure whether we have a page on it.
Unidentified Participant
Yeah, it’s just like you know, next one year restful maturity.
Raul Ignatius Rebello
Okay. Anyway
Unidentified Participant
I’ll take that offline. Just trying to figure know what is running off and what is the incoming cost but we can take it off anyway. Thank you and all the best which would be at what average cost?
Raul Ignatius Rebello
We’ll have to get back. We don’t have that. Yeah, no worries.
Unidentified Participant
Yeah, we’ll. I’ll connect it. All right, thank you. Thank
Operator
You. The next question is from the line of Mayur Parker from Wealth Managers India Private Limited. Please go ahead.
Unidentified Participant
Good evening gentlemen and thank you for taking my questions. My first question is a slightly very broad, broad level question and just to background liner before I go to the question, this is coming from a very longish perspective of our at the parent level also we had aspirations of 18% ROE and we have met that and the group has gone through significant transformations in terms of efficiency and growth from that perspective. That’s the background I’m just putting. And even our own company has undergone changes with respect to across management, across financials and operating.
There is a lot of appreciation for that. But still, I want to make a point here and that’s the question. When we look at the ROE structure, despite clocking 2.4 ROA for the quarter, we are still at 12.5% ROE. And I understand that it’s partly because of rights issue which is lying there. But even if we have to remove, you know, over the next one year, even if that goes out and say that the leverage becomes 5.7, you know, we would be, you know, sub 14% or close to 14% max, which we can go there. In terms of the ROE levels, I want to understand that does the management, or do we have aspirations to move ROEs to a slightly more higher team levels and if so, what would be the single largest lever for that?
Given that the top line, which is the nim is a market determined factor in terms of competitiveness and challenges. And you yourself are saying beyond 7% going to be slightly very difficult and even that will not move the needle. The asset quality is at its best in terms of where we are in terms of credit costs. So that is lever which is not going to move the needle. Again, the, the third lever is obviously the costs in between, which you can guide. But overall, trying to understand is over the next two years, three years, do we have aspirations to move to higher teams and if so, what will be the levers for that?
Raul Ignatius Rebello
Thanks Mayur. For a longish but important question, I’d invite you to just look at 32, page number 32 on your panel. It’s a reflection of while we are clearly not in any ways happy to be delivering a 12.5% ROE, but if you look at where we are coming from, it’s from 10 to 12.4 to 12.5. And of course the rights issue would have maybe neutered that a bit. I would just remind you that while the group chases an 18% ROE, we did say our first stop would be to get to 15. And if you look at the trend that I request you to look at in page 32, we have been trending in that direction.
Clearly we are not hoisting our flag and saying this is the best we can get. I’ve shared in the past the levers to expand roe and simplistically, ROE is The big lever. Now in roe, if you tell me what are the levers, NIM is a lever, OPEX is a lever. Credit cost is a lever. Right? Have we structurally attempted the ROA and his ROA moving in the right direction? Again, if you go back and look at how we have, I mean today we have hit two, but that’s been through not any one time gains here and there.
Structurally the name profile has improved. 60bps in a year is a significant improvement. OPEX has been range one because they’ve been investing. But I do believe OPEX is capped out now. We’ll be in the same range or maybe as operating leverage kicks in, possibly go down a little bit there. And finally, at a credit cost level, we are at the higher end of the spectrum, right? At 1.7, we are at the higher end of the spectrum. So there could be, if things play out well, there could be even ROA expansions on that side.
So is 12.5 the normal for us? No, we do want to get to a 15 very soon. And the 15 will be, you know, we’re trending in the right direction. The 15, as I said, will be the ROA expansion with the levers that I just articulated.
Unidentified Participant
Okay, so to summarize, you mean to say that there will be 20, 20 bips across the spectrum of all the three levers which are easily possible over the next two, three years, which is which one should be looking at. Right.
Pradeep Kumar Agrawal
So just to add over here, I think when you refer to The ROA being 2.4, I think the ROE which is computed 12.5% is basis the full year ROE of 2%. That point number one. Point number two, if you look at today, I’m trending at a leverage of four point around five to one maybe. And that I think in the endeavor is very clear that if you want to deliver ROE of 15% plus, then my 1 of the lever is very clearly I have to move to a dedicated ratio of almost 6ish to 1 the moment I lever that much along with the 2 to 2.2% of ROA, our endeavor is clearly to deliver a 15% of return on equity.
And that’s the first stop.
Unidentified Participant
So actually the leverage part itself will be a very big kicker. You mean to say in terms of delivering the first leg of Roe of 15%
Pradeep Kumar Agrawal
Today. If you look at, as you look at our, we are not, you know, we have aspiration to grow much faster compared to what we have been growing for a couple of years. And the moment you grow faster of Course you need capital and accordingly your leverage keeps on going up and that keeps on giving you helping, helping you towards achieving the right return on equity compared to along with roe.
Unidentified Participant
Okay, the second question I had was slightly near term picture, you know, being an auto focus nbfc. I understand there is diversification happening but largely I’m saying today it’s actually at the midst of many things in terms of, you know, possibility of fuel price hike, energy cost inflation possibly happening. And if I’m not predicting but just trying to say if inflation goes and there is a medium term interest rate situation, then we are El Nino taking effect. So our rural demand is at the at a risk.
The rural cash flows can be at risk, collection efficiencies at risk. With all this coming in play in this six months time period, possibly are you, are we, you know, whatever aspiration we have in FY27, optimistically in your opening comments, does that factor into these very large macro concerns which are expected, expected to play out in various degrees and I understand it’s very difficult to have a crystal gain, but does it factor and do we still believe that the next year is going to be steady and we can deliver into our growth path as we go ahead?
Raul Ignatius Rebello
So mayur again to keep it sharp, we have to be agile to what’s happening around this. We don’t trade off growth for risk or margins. As I mentioned, we are across the length and breadth of the country. We can take calls very quickly. We monitor every day, every situation. I think we have to lead with being prudent also. And you would see the reflection of being prudent is what I put out in page 16 which factors in some of the clouds which are hovering around us. It would be not so prudent if we didn’t recognize those clouds.
And the reflection of us being prudent was in creating a kind of an overlay of 217 crores. We are very agile watching the situation. We all hope Touchwood the monsoons are not as per what the forecasts are. If they are positive, we will clearly ramp up. If things settle faster, we will clearly ramp up. There are pockets of opportunity even in this environment and that agility is very well baked into our playbook.
Operator
Sorry to interrupt. May we request Mr. Mayor to please rejoin the queue. We have participants waiting for their turn. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, we would request to please limit your question to one per participant. The next question is from the line of Shreya Shivani from Nomura. Please go ahead.
Unidentified Participant
Yeah, hi. Thank you for the opportunity. So my one question is going to be on the AI implementation that you spoke about. Good to hear that. It’s become more BAU in the back operations team and the collections team. Is there any pilot or any other program on the AI fund being done for any other department? Also, if you can help us understand if there will be investments, OPEX investments made towards those in the coming years. Thank you.
Raul Ignatius Rebello
Yeah. If you just look at page number six where I have tried to detail out where we are looking at AI adding to dollar value for our franchise. Clearly the low hanging fruit was deploying it in collections and in our AIML models for underwriting. We are seeing good fruits of those investments right now. In terms of early bucket efficiency, I have detailed 25% improvement as well as release of costs in our call center because a lot of our calls, predue calls, early bucket calls, are happening through eight multilingual bots, giving us a steep reduction in the otherwise cost that we had in collections.
The second use case which is in the back offices from a processing I have detailed in serial number three. We have gone live in 20% of our business and we are seeing through our agentic which we have called Samurai Samurai. We are already seeing a very strong benefit in terms of tat. These are quantifiable benefits here and now in the deploy of our AI toolkits, we are still in the very early stages. As you know, the whole AI for BFSI segment is much more deployable. We have swapped in the AI toolkits where we think the here and now benefits are large.
But we are not shying away from making the most sustainable investments where we think the transformational elements of AI can kick in. Right. In the whole reimagination of our loan journeys. In terms of looking at AI resetting some of the workflows which will result into workforce, I’m not saying workforce readjustments, but workflow to workforce kind of playbooks, getting reset, all of that is part of the mix. So we have swapped in what we think are the here and now as well as long term factoring of the AI toolkits.
Unidentified Participant
It’s fair to say that the OPEX investment will continue right. In at least. I mean maybe not very quantifiable right now, but we should account for this in, in the years to come.
Raul Ignatius Rebello
Yeah, yeah. Some of it is capex, some of it is office.
Unidentified Participant
Right, right. Okay, that’s useful. Thank you. And all the best.
Raul Ignatius Rebello
Thank you.
Operator
Thank you. The next question Is from the line of Raghav from Ambit Capital. Please go ahead.
Raghav Garg
Hi. Thanks for the opportunity. I just have one question. So as per your FY25 annual report you made fee income from life insurance of about 150 crore out of the total fee income of 510 crores. What is that like to like figure for this year? FY26. So what is the fee income from life insurance sales this year which was 150 crores last year?
Raul Ignatius Rebello
I don’t think we have disclosed specifically because our fee income is a combination of three to four elements. There is insurance across, you know motor insurance, life insurance, health insurance. In that fee income we have investment income, we have dividend income. I am, I’m not sure whether. So
Raghav Garg
In FY25 I’m going to report that number is disclosed that income from commission services on life insurance is about 150 crores. I just wanted a life to like figure for this year.
Raul Ignatius Rebello
Yeah. Fair to say if most of our fee income is doubled this possibly would have doubled also.
Raghav Garg
Okay, so about 300 crores is it?
Raul Ignatius Rebello
Yeah. Yeah. I can get back to you Raghavan. But as I said our overall fee income through has doubled. So in most parameters this would have covered because the corporate agency license came in late last year and hence we’ve seen a good clip for this year. Fair to say it will normalize. We won’t see this kind of 2x growth in the coming year.
Raghav Garg
Understood. And see there’s been some chatter around the insurance regulator cutting down on first year commissions. What kind of risk would that pose to your fee income if that were to happen?
Raul Ignatius Rebello
See we got a corporate agency only last year. Right. And the later half. So whatever we do in terms of insurance is fully consented. We don’t sell any hybrid products. We sell all protection good for customer products. They see it in the way in which our claim payouts are very high. It saves many of our new to credit customers getting into family bankruptcy. So we are clearly not canvassing any product or our products are really really products which the insurance company, I mean the regulator would love us to sell.
I don’t see us in terms of our. The kind of clip growth which we saw from last year may not be matchable because the corporate agency came in last year. But sustaining in this growing in the same clip as our loan book growth or you know in the teen growth seems like a very reasonable delivery.
Raghav Garg
Can you give me the total new business premium source under light for last year and this year if that’s something that you can share.
Raul Ignatius Rebello
Not off the hand. I might have to kind of connect or you can connect offline to see if we can dig that out.
Raghav Garg
No problem. And I have one more question. Can I ask.
Operator
Sorry to interrupt you, Mr. Raghav. May we request you to please rejoin the queue? Thank you. The next question is from the line of Meghna Luthra from incurred equities. Please go ahead.
Unidentified Participant
Thank you for the opportunity. Sir, I just had one quick question. Is there any particular geography that you’re seeing is behaving differently, say in April or March?
Raul Ignatius Rebello
So you know what we usually see for a business like ours is any state or geography which gets into elections has temporary disruptions, which is not an outlier. This has been the template that any kind of lender would see. Especially if you’re lending to not the primest of prime customers. There are temporary disruptions. So fair to say with the Tamil Nadu and sorry, West Bengal and Assam, we did see that and we do categorize that as temporary disruptions and not structural shifts in collection efficiency.
Having said that, you know, the West Asia crisis has created a little bit of remittance problems in some states. So wherever geographies like Kerala, etc. Depend a lot on remittance based income, there could be some temporary stress there. But we do have ways of over managing some of that through collection and more intense engagement with customers in overcoming some of that. So that’s long story short in terms of where disruptions have impact. But I’m not calling out any serious red flags as we see it from now.
Operator
Thank you. Next question is from the line of Ashish Agarwal from Renaissance Investment Managers. Please go ahead.
Unidentified Participant
Yeah, hi. Thank you sir for giving me the opportunity. Now coming back to growth again like we have, I mean mentioned in our Parents Investor day released in November 27. Parents aspirations as well, that growth is expected at 18 to 20% in medium term. So are we towards that trajectory? I know you have mentioned that this year we will, it will be a function of risk as well. But are we on that trajectory or how do you see that growth in the medium term?
Raul Ignatius Rebello
Yeah, no, thank you. And the reference was important just to get every, every piece of understanding right. We said growth in the decade at 1820. That means from 21 to 31. We were citing that period, which means for the next five years we are baked in a 16 to 18% growth. Do we hold to that 16, 18% growth CAGR for the next four to five years? Yes. What are the levers to get to that growth, the wheels business will grow at close to market trends. The bigger growth will come in from 2, 3 categories which are more relatively new.
So we don’t look at 20, 30% growth. We look at 30 to 40% growth there in the SME business, the mortgage business, some of the new businesses in leasing and sweating out cross sell in PL for our existing customers. So long. You know the long answer short is yes, 16 to 18% is the CAGR growth for the medium term.
Unidentified Participant
Okay, thank you sir, that was helpful.
Operator
Thank you. The next question is from the line of Vinod Rajamani from Nirmal Brown. Please go ahead.
Unidentified Participant
Yes. So thank you for taking my question. I’m. I apologize, I joined slightly late so just on this management overlay. So your Q4 connection collection efficiency is quite strong at around 98%. Yet you’ve taken this additional management overlay this quarter. So any specific localized stress that you’re that sort of prompted you to take this, this management overlay especially when collections are doing well? That’s the question I have.
Raul Ignatius Rebello
Yeah. Vinod, I think you missed our opening commentary. The management over there was nothing to do with what happened in FY26 we just spelled out. And for your benefit I’ll repeat it. The management overlay is more keeping in mind the current headwinds which you are very aware of which is the some of the monsoon related guidances given by the two meteorological departments. Our April collection numbers also are pretty much in the clip that we want it to be. This is more prudence based on know overlay created more from an overall FY27 headwinds that we see right now.
If those headwinds pass us and are not headwinds, we don’t mind you know specifically releasing those provisions back. But this has nothing to do with the collection efficiency or FY26 in total.
Abhijit Tibrewal
Yeah, understood. Thanks so much. That was the only thing.
Operator
Thank you ladies and gentlemen. That was the last question for today. With that I now hand the conference over to management for closing comments.
Raul Ignatius Rebello
Thank you. Nothing much to add in closing comments. I’ll just repeat what I said at the start. It’s good to close the year on a positive note. Q4 was extremely, I would say robust in terms of serious profitability uptick which we have seen through margin accretion and through very strong credit cost and asset quality progress. I also want to call out a very hearty climb back to some of the growth which we didn’t see in the first half of the year. We were able to use the tailwinds of growth, especially in the wheels business.
And overall, as ended in FY26 in reflection, which has been, which was in my view a very strong year of. So
Unidentified Participant
As part of the, you know, the enthusiast management, it’s a, it’s for us a good year
Raul Ignatius Rebello
26, which gives us a lot of courage going into 27 to continue momentum at the same time being calibrated with certain headwinds.
Unidentified Participant
But
Raul Ignatius Rebello
The franchise is well set for sustainable growth over the long period. Thank you.
Operator
Thank you ladies and gentlemen. On behalf of Mahindra and Mahindra Financial Services limited that concludes this conference. Thank you for joining us. And you may now disconnect your lines.