Manappuram Finance Ltd (MANAPPURAM) Q3 FY23 Earnings Concall Transcript

Manappuram Finance Ltd (NSE:MANAPPURAM) Q3 FY23 Earnings Concall dated Feb. 03, 2023.

Corporate Participants:

V.P. Nandakumar — Managing Director and Chief Executive Officer

Bindu A.L. — Chief Financial Officer

Unidentified Speaker —

Analysts:

Pooja Ahuja — Monarch Networth Capital — Analyst

Aviral Jain — Siguler Guff — Analyst

Rahul Shah — Shah & Associates — Analyst

Abhijit Tibrewal — Motilal Oswal — Analyst

Shubhranshu Mishra — PhillipCapital — Analyst

Rajiv Mehta — YES SECURITIES — Analyst

Prateek Kothari — Unique Portfolio Managers — Analyst

Rishikesh Oza — RoboCapital.in — Analyst

Sanket Chheda — DAM Capital — Analyst

Neha Kshirsagar — KRChoksey — Analyst

Pradeep Agarwal — Systematix — Analyst

Bhuvnesh Garg — Investec Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Manappuram Finance Limited Q3 FY ’23 Earnings Conference Call hosted by Monarch Networth Capital. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Ms. Pooja Ahuja from Monarch Networth Capital. Thank you and over to you ma’am.

Pooja Ahuja — Monarch Networth Capital — Analyst

Thank you, Rochelle. Good evening, everyone. We welcome you to the Q3 FY ’23 conference call of Manappuram Finance. We are pleased to host the senior management of the Company who is represented by Mr. V.P. Nandakumar, MD and CEO; Dr. Sumita Jayashankar, Executive Director; Ms. Bindu, CFO; Mr. BN Raveendra Babu, MD of Asirvad Microfinance; Mr. Rajesh, CFO of Asirvad Microfinance; Mr. Kamal Parmar, Head of Vehicle Finance; Mr. Suveen, who is the CEO of Manappuram Home Finance; Mr. Bikash Mishra, CFO of Manappuram Home Finance.

I now hand over the call to MD sir, Mr. Nandakumar for his opening remarks, post which we can have the floor open for Q&A. Over to you, sir.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Thank you. Good evening, ladies and gentlemen. I welcome all of you to our Q3 FY23 conference call and wish you all a wonderful year 2023. I take great pleasure in presenting our Q3 FY23 results amidst the prevailing climate of optimism and the exuberance in the country as the optimism about India’s growth prospects is gaining traction as we march forward.

In fact, even as the world economy is bracing itself to deal with an impending recession, India continues to be an island of macroeconomic stability. The China Plus One strategy which refers to global investors’ attempt to diversify the investment from China and look for alternative business destinations, also spells advantage for our country. Various estimates by leading think tanks show that we are well on our way to achieve a GDP of $5 billion in another five years.

The spill-over effects would be felt across the sectors in the days and years to come and we are well placed to the opportunity. To be sure higher interest rates across the advanced economies and heightened inflation will drag down global growth prospects. India cannot be totally immune and we are likely to take a 100 bp hit in our GDP growth in FY ’24 compared to that of the current fiscal. However, we will retain the fastest-growing economy track our demography will be yet another advantage compared to an aging population elsewhere.

India’s prominent role in the global stage, including in major [Indecipherable] like G20 shows that it is not just our decade, but also our century. The three years starting with 2021 rightly be termed as a phase of survival, revival and growth as we negotiated the pandemic and begin to affirm growth projected.

In the last con call I expressed there is a need for a balanced and prudent growth strategy, I am happy to share that despite increased competition, we have recorded a net profit of INR393 crore in Q3, which is an improvement of 50.8% over the year-ago quarter, driven by profitability in gold loans and the turnaround in microfinance business.

Our gold loan AUM stands at INR18,614 crore, a decline over the Q3 of the previous year, but more or less steady sequentially. Overall, the consolidated AUM has reached INR31,883 crore in Q3 representing an increase of 4.9% over the year ended quarter. The Company’s microfinance subsidiary Asirvad posted an AUM of INR8,653 crores showing a growth of 22% year-on-year and a profit of INR70.5 crores during Q3. As the sector reached full benefit of the ongoing economic recovery, the share of microfinance in the overall profit pie is set to go up in the days to come.

Like in the previous quarter, we have seen a maximum growth in the Vehicle Finance business and according 40% increase year-on-year, with an AUM of INR2,112 crores, followed by home loans AUM depends — AUM of INR1,005 core [Phonetic] 23% increasing over the corresponding quarter in FY ’22. The strategy of diversifying into other sectors is gaining pace and this rebalancing is already reflected in the December quarter — December 2022 quarter results.

We will continue to press ahead with this policy of becoming a well-diversified NBFC. For instance, in the housing finance business, we are focused on a model based on co-location with parent branches and the focus on lot ticket housing loans. We have also decided to enter niche areas like financing, healthcare professional and small hospital with a good potential.

On the Company’s loan front, we have already disbursed INR500 crores. MSME and personal loans are another area, where we want to increase our presence to arrive at the right mix of gold and non-gold products.

For a more comprehensive review of the financial performance, I hand over the floor to our CFO Mrs. Bindu A.L.

Bindu A.L. — Chief Financial Officer

Thank you, sir. Good evening, ladies and gentlemen, and thank you all for joining us today. Coming to the operational overview, our consolidated AUM for Q3 FY ’23 was INR31,883 crores, representing 4.9% YoY growth and 4% growth sequentially. Consolidated profit after-tax was INR393 crores, which was up by 50.8% YoY and down by 3.9% QonQ.

ROE on a consolidated basis was 17% and ROA was 4.2% for the quarter. Our leverage is currently at 2.9 times. Our GNPA as on 31st December at 1.61% versus 1.95% during the previous quarter. Company had redeemed the USD loan $300 million, which was due in January 2023.

Cash-and-cash equivalents on a consolidated basis was INR4,879 crores and undrawn bank line was INR4,761 crores, our CP exposure is nil in the standalone entity and our ALM is well-positioned across all the buckets. Standalone borrowing cost has gone up by 59 basis points after the repo rate hike of 225 basis points.

Talking about the gold loan business, which constitutes 58.4% of consol AUM, whereas the remaining 41.6% comprises microfinance, loan against vehicles, housing and SME finance. Gold loan AUM has increased by 3% QonQ and down by 9% YoY. The yield at 22.4% against 21.9% in Q2 FY ’23. During the quarter, we were able to add 4.8 lakh new customers.

Average ticket size at INR55,015 and the tenor average duration of 73 days. LTV at 61.5%. Our standalone PAT was INR318 crores, up by 22.9% YoY and down by 8.7% QonQ. The total number of gold loan customers stood at 23.7 lakh and the gold loan book at INR18,614 crores. Online gold loan continues at 47% of the total gold loan book.

About the Microfinance business, Asirvad AUM stands at INR8,654 crores including gold loan AUM of INR548 crores, up by 13% QonQ and up by 22% YoY. As we are coming to the end of COVID related provisioning cycle in Asirvad, PAT for MFI business has increased to INR70 crore in Q3 versus INR56 crores in Q2 FY ’23, expect further reduction in credit cost and return to pre-COVID provisioning levels over coming quarters.

Our collection efficiency from MFI business during the quarter at 104% and disbursements towards MFI during the quarter was INR2,382 crores. Cumulative ECL provision in Asirvad is INR444 crores, net NPA stands at 1.7%. CRAR of Asirvad stands 21.6%. Vehicle Finance business reported an AUM of INR2,112 crores. It is up by 12% QonQ and up by 40% YoY. Collection efficiency at 102%, GNPA come down to 3.1% from 3.6%.

Home loan business, the total loan book of INR1,005 crore, which is up by 9% QonQ, up by 23% YoY. It operates from 74 branches and reported a profit of INR2.6 crore during this quarter and was INR12 crore for the nine months ended 31st December 2022. Collection efficiency was 100%. GNPA continues at 5.4%.

Loan to MSME and others stands at INR1,526 crores, collection efficiency is over 100%, and GNPA at 1.2%. Our lending AUM stands at INR521 crores with a disbursal of INR280 crores during the quarter. Provisions and write-offs in the standalone entity stood at INR9.8 crores compared to INR22 crores in Q3 FY ’23. The Board has declared an interim dividend of INR0.75 during the quarter. Our capital position is strong and the company is well-capitalized with a CRAR of 32.86%. Company’s consolidated net worth stands at INR9,279 crores and the book value stood at INR109.6.

Thank you. We can go for the Q&A now.

Questions and Answers:

Operator

Thank you very much. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Aviral Jain from Siguler Guff. Please go ahead. Mr. Aviral Jain?

Aviral Jain — Siguler Guff — Analyst

Yes, am I audible?

Operator

Yes, you are, sir.

Aviral Jain — Siguler Guff — Analyst

Yeah, my question was [Technical Issues]

Operator

Sir, I’m sorry. There is a lot of disturbance from the management line. May I reconnect you on the call, sir?

Aviral Jain — Siguler Guff — Analyst

Yes.

Operator

One moment please. Ladies and gentlemen, please hold for a moment while we reconnect the management. Ladies and gentlemen, the line for the management is reconnected now. [Operator Instructions] We have a question from the line of Rahul Shah from Shah Associates. Please go ahead.

Rahul Shah — Shah & Associates — Analyst

Good evening management and especially Mr. Nandakumar. My question is regarding the bread-and-butter of your business, that is gold loan, and that is 90% of the profit. What steps are we taking to gain market share and also what are the marketing strategies? Because whenever we search Manappuram Finance, we see other companies at the top of the Google search results and similar thing. So, have you thought about changing your marketing strategy and also making the website better looking and also the app better, the UI and UX of app better? Thank you.

V.P. Nandakumar — Managing Director and Chief Executive Officer

So, Mr. Rahul, a few years back we have told the market, we want to be a diversified NBFC. So our strategies are to become a diversified NBFC. That doesn’t mean that we forget our gold loan product. So the other — we are strengthening other sectors. At the same time, we are also strengthening gold loan, but here because of the increased competition, not only increased competition, but also the demand from our target audience was low. So it is slowly picking up. It was low, but it is slowly picking up now, because social spending has increased, it is picking up.

So this is an interim gap. That’s why the gold loan portfolio had a decline and the yield also had a decline. So that’s the one reason. We are not ignoring. We are strengthening both the gold loan and non-gold. The results will be evident in the coming quarters. In the result itself you’re seeing the gold loan which has — year-on-year, there is a decline, but at the same time quarter-on-quarter you’re seeing sort of balancing.

So in the coming quarters, we expect to gold loan also to grow along with other businesses and the profit also to improve from all sectors starting from Q4.

Rahul Shah — Shah & Associates — Analyst

And regarding the changing of the user interface of the app, making it better, easier for customers to use and more appealing. If you could answer that please?

V.P. Nandakumar — Managing Director and Chief Executive Officer

Can you repeat the question because the question — we couldn’t hear you.

Rahul Shah — Shah & Associates — Analyst

Yeah. I will repeat the question. It is regarding making the app better-looking and easier to use by changing the software of the app and making it more appealing for online gold loan growth. If I was able to portrait better this time.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Yeah. Yeah. So that efforts are going on to improve the app as well as website, that efforts are going on. And we have taken several steps and it will be published very soon.

Rahul Shah — Shah & Associates — Analyst

Thank you, sir. Really respect you. Thank you, sir.

Operator

Thank you very much. Our next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal — Analyst

Yes, sir. Good evening, everyone. Thank you for taking my question. Sir, my question mainly sounds like a continuation of the previous question, but just trying to understand this better. I mean, it’s a very good thing that we are now kind of looking to diversify into other product segments given in the high competitive landscape and we are naturally growing strongly in the non-gold businesses. But I mean, just trying to understand that have we made any changes in terms of underwriting or the management team post-COVID in the non-gold product segments which should now give us higher confidence to go strongly in the non-gold products?

And also, sir, looking at the competitive landscape, I mean, given that — I mean, you talked about demand is now slowly coming back in your target customer segment. But if we kind of continue to, I mean, cater to that customer segment which borrow gold loans predominantly at, let’s say, 20%, 22% do you foresee that there is a risk of losing market share in your core business, which is gold loans?

V.P. Nandakumar — Managing Director and Chief Executive Officer

I’ll answer the second part first then I’ll go to the first part. So see at 20% to 21% our target audience is coming back. That’s why even though the decline is there year-on-year, you see a balancing in QonQ. In the coming quarters you will see growth, may not be of that large scale, but slowly and gradually picking up from the third quarter onwards. This quarter also you will see growth and coming quarters also you will see growth.

It means that our target audience, which is borrowing for a short term and also the ticket size of around INR50,000 up INR60,000, they started coming back. You would have seen with the social spending like marriages at the bottom of the pyramid or social events like festivals etc. were much less in two quarters before, but slowly picking up. With that we see — we witness at the ground level that is reflecting in our business also positively.

Regarding the first part of your question, yes, our underwriting is good in non-gold. If you look at the quality — the asset quality in commercial vehicles, the GNPA has come down to around 3.1%, which is good — which is a good figure, good-quality asset if you look at other company’s assets also, parts companies assets also. It is also growing at a very fast rate. Even in MSME our GNPA is around 1%, which is the best, which is growing very fast.

In affordable housing also it is improving. We had the problem. The problem was the selling out of the real estate assets. So we are in the process of arriving at the deals etc. And in the Q4 itself you will see a considerable reduction in GNPA there.

In microfinance you have seen the Company has come back and in the coming quarters we are very hopeful, very positive about excellent results than the Microfinance business. So the underwriting is one of the best and we continue to improve according to the need, continue to strengthen, not improve, strengthen in accordance with the need. So from last quarter onwards we are very confident. We are expecting good results in all the segments, including gold loan.

Abhijit Tibrewal — Motilal Oswal — Analyst

Just a follow-up question before I ask my last question. So when you’re guiding that we now expect gold loan to start happening from next quarter onwards, gradually, maybe a modest growth to start with, assume that can happen at the same spreads in margins or these that we are operating now without dilution in any of those metrices with yields or spreads and margins.

V.P. Nandakumar — Managing Director and Chief Executive Officer

We are speaking to a yield of 20%, 21% and there is no further dilution. The growth is happening at that level because as I mentioned just now, our borrowers are borrowing two, three months and also the ticket size is small and the customer acquisition is also going in the same way. So as the demand increases, the tenure also get slightly increase. So the things are shaping up for good.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it, sir. Sir, just one last question in the interest of time. So I mean, I think I mean somewhere in media or on public forum you had commented a succession planning that the regulator also expects that as the company kind of lay out that succession planning. I recall in the last week of December we had appointed Dr. Sumitha Jayashankar as an Additional Director Executive on the Board of the Company effective from January 1st.

Sir, just wanted to understand, I mean is that appointment, more in the nature of a promoter coming on the Board. Or — I mean, what I’m trying to understand is, will she be actively involved in the business, just like you or going forward the idea is maybe we will appoint someone as the MD and CEO to run the business?

And sir, lastly before I kind of stop here, I mean, on the dividend payout, I mean, given our capital adequacy, any expectations or any thoughts around increasing the dividend payout to go in there?

V.P. Nandakumar — Managing Director and Chief Executive Officer

So the succession plan of the family, my daughter has been appointed as an Executive Director. She had been here few years back. She is a medical doctor. So now she has come as a full-time Director and actually involved in the business, she has taken up the growth of non-gold product to start with virtual finance now. As she is getting trained for succession. So the final call of succession of MD will be taken up by the Board later, not now. There is time by the time I retire. So the Board will definitely find out a suitable succession, don’t worry about that.

About the dividend payment, we continue with same dividend. For the time being, we have not increased the dividend, but in the coming quarters, most probably next year, Board may consider with a much more improved performance.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it, sir. This is very useful. Thank you very much and all the best to you and your team.

Operator

Thank you. Our next question is from the line of Shubhranshu Mishra from Phillip Capital. Please go-ahead.

Shubhranshu Mishra — PhillipCapital — Analyst

Hi, sir. Good evening. In terms of the SME lending and on lending sir, what is the yields that we are seeing on this book and where in this business before [Indecipherable] crisis as well, we tried to scale it up again we retracted from this business. So what has led to the change of heart that we are entering this business again and we are getting such high disbursements? That is first question, sir.

Second is that we have seen tonnage decline in this quarter in the gold loans. So how do we look at the gold loan growth, what is your guidance for tonnage growth, as well as loan growth? Also, as you can split the AUM into less than INR1 lakh as the percentage of the AUM INR1 lakh to INR2 lakh as a percentage of AUM and more than INR2 lakh as a percentage of AUM as of third quarter. And if you can speak on balance transfers out to banks and other NBFCs and if we can speak of competitive intensity. Thank you.

V.P. Nandakumar — Managing Director and Chief Executive Officer

So first I understand is regarding lending to NBFCs.

Shubhranshu Mishra — PhillipCapital — Analyst

Lending to NBFC and SME lending, both sir.

V.P. Nandakumar — Managing Director and Chief Executive Officer

And SME lending. So SME lending is going towards micro sectors where our average ticket size is around INR6 lakhs, which is mostly with security of monthly debt. So there we are lending around INR150 crores, INR160 crores now per month and growing at a rate of over INR100 crores per month, the micro lending, micro enterprises or mostly secured with mortgages, there this increasing month on month disbursals are increasing and the quality also that have been already mentioned about GNPA of 1.1% without any write-offs.

The NBFC lending, we’re lending to different sectors of NBFCs, where our average yield is around 13.3%. We have been in that business prior to COVID and post-COVID we have to restart from this business. That cost portfolio was almost wound down to nil during this COVID period. We have excellent experience, we are granting these loans to we have an assessment team. The team assesses the quality of the promoter, their credit rating and the board etc. etc. Only after underwriting that and found to be a good company we are lending to them and we have good experience. Whatever we have lend, here we continue with that experience. About 1 lakh to 2 lakh tickets the details will be shared by the CFO and balanced answer also in that those loans also the sales, yeah.

Shubhranshu Mishra — PhillipCapital — Analyst

Sir, what is the ticket size of the on-lending to NBFC? What kind of checks are we writing to them?

V.P. Nandakumar — Managing Director and Chief Executive Officer

The ticket size to NBFC is —

Bindu A.L. — Chief Financial Officer

INR12 crores.

V.P. Nandakumar — Managing Director and Chief Executive Officer

INR12 crores. And maximum is INR30 crores.

Unidentified Speaker —

On the gold loan up to INR1 lakh, that is 44%, up to INR1 lakh; INR1 lakh to INR2 lakh 33%; INR2 lakh to INR3 lakh 10%; INR3 lakh to INR5 lakh 8%; and the above INR5 lakh 15%.

Shubhranshu Mishra — PhillipCapital — Analyst

Can you repeat that, sir? It was a bit muffled.

Unidentified Speaker —

Up to INR1 lakh 44%; INR1 lakh to INR2 lakh, 23%; INR2 lakh to INR3 lakh 10%; INR3 lakh to INR5 lakh 8%; above INR5 lakh 15%.

Shubhranshu Mishra — PhillipCapital — Analyst

Great, sir. And if you can speak on the tonnage growth and the AUM growth going forward, sir?

V.P. Nandakumar — Managing Director and Chief Executive Officer

The tonnage growth, see the tonnage growth has little significance. Why? See the people borrow based on their need only. And you see the average reduction period around within two and half months. They are very much bothered about the cash flow because they intend to redeem within a short period of time. So unlike unsecured loans or other loans, they don’t borrow indiscriminately. When the gold price moves up the tonnage comes down and gold price goes down automatically the tonnage goes up. So in this business, gold loan business, the tonnage is often asked, but I don’t see — I don’t find any significance. Anyway, that will be shared with you.

Operator

Mr. Mishra?

Shubhranshu Mishra — PhillipCapital — Analyst

One question still remains unanswered about the competitive intensity and balance transfer to banks and NBFCs.

V.P. Nandakumar — Managing Director and Chief Executive Officer

In gold loan, we don’t track what is the exact transfer to banks, NBFCs, etc. because the FCs are short-term. What we see is most of these have taken back by our own customers.

Shubhranshu Mishra — PhillipCapital — Analyst

Right. Sure, sir. Thank you. I’ll come bank in the queue.

Operator

Thank you very much. Our next question is from the line of Manoj Oberoi from YES SECURITIES. Please go ahead.

Rajiv Mehta — YES SECURITIES — Analyst

Yeah. Hi, sir. This is Rajiv here. So, sir, firstly the question is on the MFI portfolio. So while ma’am has given the full ECL provisioning number of INR44 crores, can we get the ECL coverage on stage two and stage three assets out there?

Bindu A.L. — Chief Financial Officer

Yeah, so on stage three, based on the data our LCD stands at 67% and on stage-two, it is around 15%,14.5%.

Rajiv Mehta — YES SECURITIES — Analyst

So that is the provision on those buckets you’re already holding, right?

Bindu A.L. — Chief Financial Officer

So that is the coverage also.

Rajiv Mehta — YES SECURITIES — Analyst

Coverage also, yeah, okay. Yeah, yeah.

Bindu A.L. — Chief Financial Officer

[Technical Issues]

Rajiv Mehta — YES SECURITIES — Analyst

Correct. Correct. And ma’am what has been the collection experience in the recent quarter on stage two loans and the stage three loans. What has been the collection efficiencies?

Bindu A.L. — Chief Financial Officer

So, month on month, the overall collection efficiency is improving. So this quarter it is around 104%. The book also post-COVID disbursements increasing. So that is also helping us to improve the collection efficiency. And on the stage-three collections based on the data it is around 37% — so that is 33%. So that is the reason for LGD of 67%.

Rajiv Mehta — YES SECURITIES — Analyst

Got it and stage two collection efficiency will be around 85% there, the reverse of the ECL coverage?

Bindu A.L. — Chief Financial Officer

Yeah, right.

Rajiv Mehta — YES SECURITIES — Analyst

Okay. And coming to gold loans, you said that the new customers acquired in the quarter were about 4.8 lakhs. What is this — so how should we look at this run rate versus pre COVID? Was it pre COVID run rate much higher than this run rate, while it might be improving quarter-on-quarter right now, but versus pre-COVID?

Bindu A.L. — Chief Financial Officer

Better now. It is better now.

Rajiv Mehta — YES SECURITIES — Analyst

It is better?

Unidentified Speaker —

It is getting better than that of pre-COVID nowadays.

Rajiv Mehta — YES SECURITIES — Analyst

Okay. And in the incremental customer acquisition of 4.8 lakhs, what is the ticket size breakup or maybe what is the proportion of loans customers taking loans below INR1 lakh?

V.P. Nandakumar — Managing Director and Chief Executive Officer

See, if you look at the percentage there is INR1 lakh to INR2 lakhs, INR2 lakhs to INR3 lakhs etc., there is no much change as of now. But going forward we expect below INR1 lakh to improve, just slowly improving. So we will be able to share the improvement during the last quarter, it is improving slowly.

Rajiv Mehta — YES SECURITIES — Analyst

Okay, okay, so you are saying both at the portfolio as well as the incremental level, less than INR1 lakh portfolio is seeing faster growth.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Yeah, so, lower end of the segment that share is slowly improving. We hope that there will be improvement during the last quarter.

Rajiv Mehta — YES SECURITIES — Analyst

Got it. Yeah, sir, that was it from my side. Thank you so much.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Welcome.

Operator

Thank you. Our next question is from the line of Prateek Kothari from Unique Portfolio Managers. Please go ahead.

Prateek Kothari — Unique Portfolio Managers — Analyst

Hi. Good evening and thank you. Sir the low-yielding book, less than 12%, I believe our intent will be to run this down to 0%, right, eventually?

V.P. Nandakumar — Managing Director and Chief Executive Officer

Low-yielding products — first of all, it is not that low yielding now. We have increased that to some extent. We have increased the rate by 3%, 4% there. That’s why the yield is somewhere around 20%, 21%.

Prateek Kothari — Unique Portfolio Managers — Analyst

No, sir, my question was on Slide 18. We have mentioned that 17% of our AUM comes from below 12% yield which used to be 0 in FY ’21 —

Bindu A.L. — Chief Financial Officer

As you rightly pointed out, so our teaser rate schemes, which was around 7% schemes etc. that was stopped. That is zero now. That is what like we used to discuss on the teaser rate product. Within the portfolio 17% is below 12% yield. That is as part of gold loan scheme. This is there for many years. The people who are very sensitive to interest rate at a higher — lower LTV, we will be offering these kind of products.

Prateek Kothari — Unique Portfolio Managers — Analyst

Okay. Fine. And ma’am in the presentation for quarter two, you have mentioned that 18% of the book was below 12%. But I think last quarter it was mentioned 25%.

Bindu A.L. — Chief Financial Officer

Yeah. So this 12% if you see last time it was less than 12% and greater than 12%. So last time that 12% was clubbed with less than 12%, that is the reason this time we have modified greater than 12%, greater than and equal to 12%.

Prateek Kothari — Unique Portfolio Managers — Analyst

Okay. Okay. Fine. And sir, on the gold loan again, I think, overall level, I mean, pre-COVID etc. we used to do — and not considering the exceptional times we saw in between, you should do 5%, 6% [Indecipherable] we are at about 4.5% right now. I mean, is growth the only lever to reach there or what else do we have?

V.P. Nandakumar — Managing Director and Chief Executive Officer

Gold loan ROA is still at 6%. The overall ROA of the standalone book is at 4.6%. 4.2% in the consol.

Bindu A.L. — Chief Financial Officer

Standalone is 5.2%.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Standalone is 5.2% and consol is 4.2%. It is a decent ROA.

Prateek Kothari — Unique Portfolio Managers — Analyst

Sir, if we look at our standalone results the quarter three our ROE is 4.4% which used to be 5%, 6% pre-COVID.

Bindu A.L. — Chief Financial Officer

But standalone includes vehicle finance, MSME and this on-lending to other NBFCs. But the gold loan portfolio alone we are taking the segmental profitability. In that goal loans ROA is around 6%.

V.P. Nandakumar — Managing Director and Chief Executive Officer

So we are back to what it used to be earlier?

Bindu A.L. — Chief Financial Officer

Yeah, that is — earlier it was 8%, because our yields used to be — yield used to be around 24%. It was high. But still we are earning 6% ROA.

Prateek Kothari — Unique Portfolio Managers — Analyst

Okay. And ma’am auction numbers for this quarter?

Bindu A.L. — Chief Financial Officer

Auction, INR353 crore during the quarter.

Prateek Kothari — Unique Portfolio Managers — Analyst

Okay. Thank you and all the best.

Operator

Thank you. Our next question is from the line of Rishikesh Oza from RoboCapital. Please go ahead.

Rishikesh Oza — RoboCapital.in — Analyst

Hello. Thank you for the opportunity. Sir, my first question, you can guide on the loan growth there the gold business and also for the non-gold business.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Our target is to achieve a consol growth of 20% per annum. So that is our target. So we are gradually reaching that level of quarter growth of 5% gradually in the consol area.

Rishikesh Oza — RoboCapital.in — Analyst

And how much will be from gold, how much will be from non-gold?

V.P. Nandakumar — Managing Director and Chief Executive Officer

So this the consol one. So the segmental, there could be some variance etc., etc. Overall, our target is I have been telling for a long-time. Our consol target is a CAGR of 20% as well as an ROE of 20%, but we are not reached an ROE of 20%, but gradually quarter on quarter we hope there will be improvement and steadily we will reach that level of 20% ROE in a few quarters.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. And sir banks are offering gold loans at 12%. Do you expect pressure on your yield?

V.P. Nandakumar — Managing Director and Chief Executive Officer

This was done even during pre-COVID level to poor people who are borrowing, a very low amount etc. INR5,000, INR10,000 etc. This has been done for a long time. And that will not — but still our — this is a very small portion of the portfolio. We will maintain our yield at around 21%.

Rishikesh Oza — RoboCapital.in — Analyst

Okay. Okay. Thank you very much.

Operator

Thank you. Our next question is from the line of Sanket Chheda from DAM Capital. Please go ahead.

Sanket Chheda — DAM Capital — Analyst

Yeah, I will [Indecipherable] particularly on the book and then on the overall book.

V.P. Nandakumar — Managing Director and Chief Executive Officer

What is the question?

Bindu A.L. — Chief Financial Officer

Can you repeat?

Sanket Chheda — DAM Capital — Analyst

Yeah. I wanted to know our growth guidance for FY ’24 on overall book and particularly in case of gold loan. Do we expect some growth to start kick in from next quarter or maybe we will look for the FY ’24 in terms of AUM growth in gold and next quarter would still be flattish on gold?

V.P. Nandakumar — Managing Director and Chief Executive Officer

See, exact guidance of segmental guidance etc., we can’t give. But this is the target, 20% CAGR and 20% ROE. So in ROE, we are lagging behind that reaching that level is what I all said. Now, from the present level of ROE quarter-on-quarter you can witness improvement. In a few quarters now we will be able to meet both a CAGR of 20% as well as ROE of 120%, which is what our plan is. This we have been doing pre-COVID. COVID add itself challenges, now it is evident that we have come back and in the coming quarters, we are very really hopeful about achieving this.

Sanket Chheda — DAM Capital — Analyst

Okay, sure, sir. And anything on, say, opening incremental branches for the gold loans, any approval that we have received?

V.P. Nandakumar — Managing Director and Chief Executive Officer

Which one?

Sanket Chheda — DAM Capital — Analyst

Are we planning to open incremental branches for the gold loan business?

V.P. Nandakumar — Managing Director and Chief Executive Officer

See, we have currently around — 3,985, nearly 4,000 gold loan branches now. Every quarter our consolidated gold loan branches are increasing by around 100 times, quarterly. So this is being done.

Sanket Chheda — DAM Capital — Analyst

Okay. Sure, sir.

Operator

Thank you. Our next question is from the line of Neha Kshirsagar from KRChoksey. Please go ahead.

Neha Kshirsagar — KRChoksey — Analyst

Hello. Good evening, everyone. So my question is on the net interest margin. So considering the increase in cost of borrowings and even in this quarter, the consolidated cost of borrowings were up by 40 basis. So can you just give a guidance where do you see the margins going ahead?

V.P. Nandakumar — Managing Director and Chief Executive Officer

I hope the net interest margin would remain somewhere in this present range. In the last quarter, we have redeemed the high-cost borrowing of $300 million bonds. So that has brought down. And as some of the high-cost borrowings are redeemed, there may not be much change and even if there is a minor change in the borrowing costs, we hope that could be passed on. The NIM would remain more or less at the same range.

Neha Kshirsagar — KRChoksey — Analyst

And any guidance on the contribution from gold finance business in medium term? How much do you expect [Indecipherable].

V.P. Nandakumar — Managing Director and Chief Executive Officer

The gold loan, five, six years back itself, we have told that we want to be a diversified company. We want to maintain a minimum of 50% share of the consolidated AEM as gold loan. So we have 58% now. And in another two years, we hope it will be model as 50%-50%. This is what we have planned to five, six years back.

Neha Kshirsagar — KRChoksey — Analyst

Okay. Okay. That is it from my side. Thank you.

Operator

Thank you very much. [Operator Instructions] Our next question is from the line of Pradeep Agarwal from Systematix. Please go ahead. Mr. Pradeep Agarwal, your line has been unmuted. Please proceed with your question.

Pradeep Agarwal — Systematix — Analyst

Yeah. Hi, sir. My question pertains to the Asirvad gold loan branches. So if you can quantify what could be the AUM we have booked under Asirvad in gold loan?

V.P. Nandakumar — Managing Director and Chief Executive Officer

INR8,600 crores.

Bindu A.L. — Chief Financial Officer

Gold loan, INR550 crores.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Gold loan is INR550 crores and the balance is the parent.

Pradeep Agarwal — Systematix — Analyst

Balance is the?

V.P. Nandakumar — Managing Director and Chief Executive Officer

Helds with the parent company Manappuram.

Pradeep Agarwal — Systematix — Analyst

Okay. And sir, also as we have talked about getting MFI listed down the line. So if you can share what are your thoughts at this point in time in terms of listing — having a separate listing or value unlocking in MF.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Yeah. It will eventually get listed according to the requirement of its capital. So now the Company has a capital adequacy of around 21%. So we will maintain at a rate of around 20% capital adequacy. And when the market situation improves, we plan to raise capital there. Need not be through the listing at reasonable valuation. We may also raise private equity. And in one or two years the company may not be listed. When is it going to be listed that we have not planned anything as of now.

Pradeep Agarwal — Systematix — Analyst

Okay. Also while we have been talking about transfer to banks for last one to one-and-half years, so are we also witnessing any reversed cases where customers who have moved to banks are getting the cases again transferred to NBFCs because of inferior experience over there?

Bindu A.L. — Chief Financial Officer

That will also be happening, but as such we are not tracking that seriously, but there are cases. Customer shifting the gold loan from bank to here also.

Pradeep Agarwal — Systematix — Analyst

Okay. Okay.

V.P. Nandakumar — Managing Director and Chief Executive Officer

See, the advantage of banks is something and the advantage of NBFCs is something. So both have advantages and disadvantages. Our customers are the borrowing for a shorter term of around three months, four months, etc., and on an average ticket size of INR50,000, INR60,000, where they want that money very fast, they don’t want to lose their time waiting at the bank’s counter or at the counter of the lender. They want money in 10 minutes, 15 minutes and redeem also within a shorter time, say, 10, 15 minutes, so whereby they don’t lose their day.

So such customers continue coming to us and that is our target audience. They are mostly from that lower middle class and their borrowing was less post-COVID. If we see with activities increasing, economic activities increasing and their social spending also increasing, the demand is picking up. So that will cater to our requirement of growth in gold loan.

Pradeep Agarwal — Systematix — Analyst

Okay. Also one data keeping question. In the presentation, number of gold customers at one place is 2.4 million where in the press is 2.3 million and there were difference in previous quarter as well. So if you can highlight, is this because of Asirvad numbers included in some place? Which would be a right number 2.4 million or 2.3 million?

Unidentified Speaker —

Including Asirvad 2.4 million.

Bindu A.L. — Chief Financial Officer

2.4 million. Including Asirvad.

Pradeep Agarwal — Systematix — Analyst

Okay. This is because of that. Okay.

Bindu A.L. — Chief Financial Officer

Yeah.

Pradeep Agarwal — Systematix — Analyst

Thank you. Thank you. That’s it from my side.

Operator

Thank you. Our next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.

Bhuvnesh Garg — Investec Capital — Analyst

Yeah. Hi, sir. Thank you for the opportunity. My question is on gold loan outlook. So with the gold prices hovering above INR55,000 level for last one month, so what kind of demand we are looking at and what is — if you can quantify, like the demand in November-December versus what we are seeing in January? What kind of loan growth you are targeting in Q2?

V.P. Nandakumar — Managing Director and Chief Executive Officer

So the borrowing is not based on the gold price. As I mentioned earlier, the borrowing is based on their need. But when these customers borrow, they borrow at a range whereby they can redeem within a shorter period of time. So they will not borrow indiscriminately from whichever sources they will get, unlike other loans they won’t borrow. So even with the gold prices increasing there won’t be much impact as far as growth in gold loan business is concerned. The growth will be driven by the demand of money.

Bhuvnesh Garg — Investec Capital — Analyst

Got it, sir. Thank you.

Operator

Thank you. Ladies and gentlemen, we take that as the last question. I now hand the conference over to the management for closing comments.

V.P. Nandakumar — Managing Director and Chief Executive Officer

Thank you. So what we want to communicate, our intention is to be a well-diversified company. Our strategy in diversification would continue. That doesn’t mean that we ignore the gold loan. It will also get strengthened with demanding we see. Thank you for the questions, all the questions. The questions were good. We hope that we answered the questions to the satisfaction of the — to our friends who have raised these questions. Thank you.

Bindu A.L. — Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]