MAS Financial Services Ltd (NSE: MASFIN) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Kamlesh Gandhi — Founder, Chairman
Darshana Pandya — Chief Executive Officer
Ankit Jain — Chief Financial Officer
Analysts:
Kaitav Shah — Analyst
Abhijit Tibrewal — Analyst
Ankit Gupta — Analyst
Unidentified Participant
Sanket Chheda — Analyst
Shreepal Doshi — Analyst
Manan Madlani — Analyst
Himanshu Upadhyay — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’25 Earnings Conference Call of Mass Financial Services Limited hosted by Anand Rathi Share and Stock Brokers Limited. [Operator Instructions] I now hand the conference over to Mr Shah from Anand Rathi Equities. Thank you, and over to you, sir.
Kaitav Shah — Analyst
Thank you,. Good afternoon, everyone. On behalf of Anand Rathi Institutional Equities, it is my pleasure to welcome you all to the Q3 earnings conference call of Mass Financial Services. It is our privilege to have hosted Mr Gandhi, Chairman and Managing Director; Ms Dharshana Pandia, Director and CEO; Mr Dwanil Gandhi, Executive Director; Mr Ankit Jain, CFO of Mass Financial Services, along with other top members of the senior management team. Without further ado, I now invite Mr Kamlesh Gandhi, our CMD to share his opening remarks, post which we will open this floor for Q&A. Over to you, sir.
Kamlesh Gandhi — Founder, Chairman
Thank you. Thank you. Thank you, Kaital, and good afternoon to all of you. I’m very happy to connect with all of you once again to review the quarter three performance for the financial year ’24, ’25. I think all of you must-have gone through the results. And just to give you the overview, while my colleagues will share the numbers in detail, we know that we were going through the challenging times and despite of that, as demonstrated over last 25 years, more than 25 years, next year we’ll be competing 30 years now. We have demonstrated a very robust financial performance. To start with on the AUM on a consolidated basis, we are close to 21.17% in AUM growth, around 25% in profitability on consolidated and standalone basis.
Very importantly, while maintaining the quality of assets. We have since some very negligible uptick, but that is quite understandable looking at the overall situation going on in the market. But happy to share with you that consistent to our belief and our endeavors of prioritizing risk management and profitability over just the numbers. And last-time I shared with all of you that we might register a couple of percentage low-growth, but that will be in favor of good-quality and profitability. I’m happy to share that with the endeavors of the entire team, we could achieve the strategic intent for this quarter. If I talk to you briefly, starting from assets, then taking you to liability operations and our distribution.
On the asset side, we continue to focus on MSME along with wheels and SPL. So that gives us a — a — this is our endeavor in lines of being a diversified asset company. So if you — if you say that the contribution of wheels and PL is gradually increasing in the overall pipe and that is in alignment with our strategic intent. But still we continue to be majorly driven by our MSME portfolio where currently close to 80% of our portfolio contributes — the contribution is from MSME with SME growing at a faster pace as compared to our MEL portfolio. And that is as per the strategic intent designed by the company and shared with all of you from time-to-time.
On the liability side, we are well-capitalized with a capital adequacy of around 25%. As all of you know that we had raised UIP in June last year, which was — which was our preparation for our next phase of growth from INR10,000 to INR20,000 crores. We are currently at close to INR12 — we have cost INR12,300 crores and the way we are going we see no reason that within the stipulated time period between three to four years why we should not be at INR20,000 crores and we are well-capitalized up till that level. We continue to attract the debt as per the requirement and the challenge obviously for the entire economy is the rate of interest, but anyhow, we were in a position to maintain the rates during this quarter, while the endeavor and the bucket list is that at how we can see a reduction in interest rates sooner than later.
On the distribution front, we continue to increase our direct distribution with around 200 branches as I talked to you and more than 14,000 pin cores we cater to through over 200 branches which works within the periphery of around 40 to 60 kilometers depending upon the product of being by a strong feet on strip with feet on strip with enabling hierarchy to help and monitor them and with enabling technology. Happy to share with you that our LOS for entire products is at place and we are — the sign signbacks for BRE is also almost over. And by March, we should be in a position to launch BRE enabled LOS, which will further increase operational efficiencies and which will add to better risk management going-forward. We continue to work with our NBFC partners that we have been — that will be a 15 years-old module now.
We work across products and the advantage what we get is deeper penetration shielding the company from unfavorable events like this, which we are going through because it is originated and guaranteed by the partners to an extent. So which shields us from the cyclical shocks that the portfolio may suffer from time-to-time. So that has been a very, very satisfying and a very rewarding product as far as we are concerned on the asset side and on the distribution. We continue to strengthen that also. On the operations, as I shared with you, technology plays a very important role. We have an in-house team, which is more than 100 now and we are expanding our team there also.
The ambition is that we don’t only satisfy the needs across the — across verticals, but be ahead in giving them few things which are very important and necessary for them for their operational efficiencies and better risk management. So that endeavor is at place and we are very confident that will yield better results in the coming quarters. On the HR front, we are including our housing finance unit, we are a strong team of 4,000 and we have a very strong second-line and a middle line, which can take the strategic intent of the company forward from time-to-time as demonstrated over last two more than 2.5 decades.
And we have a good leadership pipeline also, while we have very minimum attrition, but we have a very good leadership pipeline for anybody to take-over in any in case of any need and that is the result of our constant endeavor on those lines on building good leadership lines. So that was on the HR front. On-the-ground level, let me share with you that the situation is improving, but still remains challenging. As a lender we need to be more cautious and more circumspect. And by circumspect only during this time, over the last 30 years, I’ve seen that the moment the lender is little relaxed or is not circumspect, they have to bet the consequences.
So remaining circumspact and extending credit where it is due is the way of life for any lending institute. If you want to have a sustained and a consistent quality growth, we continue to believe in that. We’ll continue with the with the same fundamentals going-forward and have demonstrated and are confident that our stated objective of attaining anywhere between 20% to 25% of growth without compromising on the quality of assets and profitability across cycles, which stand — will stand true and will hold its ground for the coming years.
So with this confidence, I would like to hand over this to, who will take you through the detailing numbers in — you can be brief because the numbers are already shared, followed by Ankit on the commentary on liability management. Before I hand over, I would like to focus on two other things. One is our housing finance subsidiary. And there we grew at around — at a very strong growth of 29%. We crossed the INR700 crores mark there in our housing finance subsidiary with an asset quality of less than 1% of net Stage 3 assets and well provided for, including a buffer provision also.
There also we continue to pursue the same fundamentals of managing and prioritizing risk management profitability over just growth. And we see that company also registering a strong growth anywhere between 25% to 30% going-forward depending upon the situation and the opportunity we get from time-to-time. And within next couple of years, we see the housing Finance subsidiary to be a value creator for the parent too. We in consonance to our policy of dividend, we are declaring a dividend of 10% on the face value that amounts to INR1 per share given our profit — taking into account the profitability for the nine months.
So usually we decide an interim dividend in December once we get the direction and the site of the year profitability for the whole year. So that will — that will benefit the shareholders to that extent. And we have been a dividend-paying company since inception. So I’d like to hand over now to to take you through the basic numbers and then to Ankit and then we’ll switch on to Q&A.
Darshana Pandya — Chief Executive Officer
Thank you, sir. Good afternoon everyone. If we look at the numbers on consolidated basis, so we have crossed the INR12,000 crores mark this quarter. So on consolidated basis, our AUM stands at INR12,379 crores as compared to INR10,216 crore in the corresponding period. That is a growth of 21.17%. And if we look at the PAT on consolidated basis, it is INR80.40 crores as compared to INR64.41 crore, which is around 25% growth in PAT.
If we look at the standalone numbers, our AUM grew by 21% from INR9,672 crore to INR11,667 crores. Our total income grew by 21% from INR322 crore to INR390 crore. Profit before-tax, there is an increase of 24.36% from INR85 crore to INR105 crores. PAT has increased by 25% from INR62 crore to INR78 crores. And if we look at the nine months number total income has increased by 23% from INR898 crore to INR1,103 crores. Profit before-tax grew by 25.48% from INR240 crore to INR301 crore and PAT has increased by 25% from INR179 crore to INR225 crores.
So if we look at the configuration of the AUM, micro enterprise loan is now INR4,704 crores from INR4,344 crores, which is 8.28% growth in MEL loan book. SME loan book has increased by 24% from INR3,450 crore to INR4,273 crores. Two-wheelers, there is a growth of around 21% from INR671 crore to INR809 crores. Commercial vehicle growth is of 47% from INR661 crore to INR970 crores around. Salaried personal loan, there is a growth of 69% from INR544 crore to INR921 crore. As have shared, we have maintained the quality of the portfolio.
So our gross Stage 3 asset is 2.41% as compared to 2.36% in September quarter. And that Stage 3 asset is 1.62% as compared to 1.57% in September quarter. So this 1.57% is without lighting off the INR17 — around INR17 crore of management overlay. Now coming to our housing performance, here our AUM growth is of 29% from INR544 crore to INR701 crores. Total income is increased by 24% from INR16 crore to INR20 crore. Profit before-tax has increased by 21% from INR2.47 crore to INR2.98 crores. Profit-after-tax has increased by 19% from INR2 crore to INR39 lakhs.
And for nine months, there is a growth of 31% in terms of total income from INR45 crore to INR59 crores. EBT has increased by around 27% from INR7 crore to 8.82 crore and profit-after-tax has increased by 26% from INR5 crore 50 lakhs to INR6 crores 93 lakhs. Here also the — we could maintain the quality of the portfolio. So gross Stage 3 asset is 0.96% as compared to 0.93% in September quarter and next-stage 3 asset is 0.70% as compared to 0.68%. So this was about the performance for both the company. Now I’ll request Anki to give us a brief about liability management.
Ankit Jain — Chief Financial Officer
Thank you very much. Good afternoon to all. With respect to liability management, in the December quarter, we were able to maintain an average cash-and-cash equivalents of around INR850 crore along with unutilized cash facility of around INR300 crore. In addition, we had sanction on-hand to a tune of INR3,000 crore in the form of term-loan, direct assignment, co-lending and other instruments. In December quarter, we did around INR625 crore direct assignment transaction and co-lending, we further has around INR2,100 crore sanction on-hand, which will be utilized in the coming quarters.
As a strategy, we aim to maintain around 20% to 25% of AUM of book through direct estimon and co-lending transactions. The company has available capital facility of around INR1,500 crores, out of which we generally utilize and remains at 70% to 75% and rest is kept as an equity buffer. In the December quarter, we raised around INR675 crore through term-loan with an average maturity of three to five years. We further have strengthened on-hand of INR800 crores, which will be utilized in the coming quarters. Further, in terms of NCD, we raised around INR375 crores during the quarter. As a strategy, we are very strongly pleased in respect to structural liquidity for the period ended 31st December and where liquidity is adequate and the cash-flow in all the cumulative bucket is positive.
In terms of capital, we are — we remain strong at 25.34% with Tier-1 capital of increase to 1.3% and great room to raise Tier-2 capital as and when required. Debt-equity stands at 3.22 times in the current quarter. The cost of borrowing for the quarter was 9.84% vis-a-vis if we compare from last year, the same quarter was 9.86%. So the cost of borrowing has remained stable and we expect it to remain stable going-forward too. So this is on the capital and liability management. And now we are open for Q&A round. Thank you.
Questions and Answers:
Operator
Thank you, sir. [Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. [Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go-ahead.
Abhijit Tibrewal
Yeah. Thank you so much and good afternoon, everyone., just wanted to understand, I mean, this quarter almost every lending institution has acknowledged this tough macroeconomic environment, which you also acknowledged in your opening remarks. I’m just trying to understand of all these four to five key products that we are in, which are those product segments, which are those customer segments, all geographies where we are seeing things to be a little tough. That is the first thing that I wanted to understand.
Kamlesh Gandhi
See, as we all know, the micro enterprise loans where the borrowers are over-leveraged or are vulnerable to the slowdowns, they are the ones where we are more circumspect and we find little more difficulty in maintaining the quality according to our standards, right. Overall, we have maintained it. And that’s why you must-have said that portfolio has been grown in a very cautious manner by only 8% this year, followed by SME and two-wheeler and wheels have not seen that pressure. And as far as our SPL portfolio is concerned, it is 100% well-documented assessment and we are very strict in our assessment in our SPL also. So if you’re saying that this — this quarter we got a good opportunity to build that book obviously within the overall limit of not exceeding 10%. So overall, to summarize, the micro enterprise loans, the small-business class are the ones which are — which are facing more problems at the ground level.
Abhijit Tibrewal
Got it. But sir, I mean, is the problem now I mean, just pronounced only in the small-business entrepreneur, which is our MDL portfolio or are we seeing that some of these problems are also spilling over to the SME portfolio where the ticket sizes are higher, we are talking about slightly larger enterprises. And sir, a related question, I mean, again, because we are there in CVs as well, I mean vehicle financials who reported until now have talked about some delinquencies inching up in the — in particularly the used CV segment, I would say. So what are we seeing in our SME and CV portfolio.
Kamlesh Gandhi
So the stress — as you know, the stress is across. When I’m talking about MEL is a relatively higher stress as compared to other products. But as far as other products are concerned, we have more room for adequate assessment. So for example, in SME, we have more room for adequate assessment in terms of their GST in terms of banking, but still that portfolio also is seeing some stress in some pockets as compared to what we would have anticipated. But there the silver lighting, as I shared with you is that we can we can have proper guardrail set place through proper assessment because we have got better documentation there. And on the asset-backed front, our commercial vehicle portfolio is still very small to experience any such up large amount of stress. But right, since we are rebuilding that portfolio and we want to have a good contribution from the portfolio. We are more circumspect there. But overall, the stress is across the sector, across the borrowers, but relatively, MEL has a more stress.
Abhijit Tibrewal
Got it, sir. Thank you. And sir, the second question that I had was on the liability side. Ankit said earlier that we’ve managed to keep our cost of borrowings stable in the quarter and we expect the same going-forward as well and stability in cost of borrowing should continue. So just trying to understand, given that I mean, next month we will have again the MPC meeting there are again expectations that there could be a rate cut. So if you could just explain how are our asset side and the liability side positioned in case there is a rate cut in the coming months.
Kamlesh Gandhi
Rate cut, there are — there is a time lag in transmission because our majority of our liabilities MCL are backed. So we can get the advantage or a disadvantage, whatever the case may be on the MCLR reset. So if there is a rate cut say in February and followed by various dates of MCLR reset, we might get that advantage. And depending upon the market situation, the product, the competitive landscape and everything, the — if required, the same may be passed on to the borrowers if it really makes some difference because the borrowers whom we sell practically a rate reduction of 0.25% or something like that really does not matter.
And at times, we built-up some cushions if we get an advantage of whenever there is some rate cut. But eventually when there is a sustained rate cut, say, for example, from our 9.8% to it reduces to 9% over a sustained basis. That is where it starts trickling down to our borrowers also in terms of advantage. So if the rate cut is there, there will be a lagged effect and it depends upon what amount of rate cut is done and what amount has — and what really has to be really passed on to the borrowers.
Abhijit Tibrewal
Got it. And just a follow-up on that, sir. I mean, this was the liability side that you explained. On the asset side, I mean, most of it is on fixed-rate.
Kamlesh Gandhi
So they are fixed-rate. Our tenure — average tenure is around 36 months, so they are fixed rates.
Abhijit Tibrewal
Got it. This is useful. Thank you so much for taking my questions and I wish you and your team. Thank you sir.
Kamlesh Gandhi
Thank you.
Operator
Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go-ahead.
Ankit Gupta
Yeah. Thanks for the opportunity and congratulations for a very decent set of numbers in such a challenging environment. Sir, my first question was on in the past, we have seen that whenever we have come across such challenging times, we have put some breaks on our growth in terms of AUM. So given how the situation is looking like currently for FY ’26, what kind of growth are we looking at them.
Kamlesh Gandhi
We continue to maintain the guidance it will grow anywhere between 20% to 25%. That is the strategic intent, but not an hard-hammered rule. If the situation are favorable, it can be on the upper-end of the spectrum. We can grow at at 25% and sometimes at 26 27. And if the situations are not favorable and where one needs to exercise more prudence, it can be anywhere between, 20% 21% as we have demonstrated right now. But overall in the medium-term, we don’t take a quarter or a year within our calculations, we take a minimum three to five years. So once again, we are confident that we were INR10,000 crores in March ’24, we should be touching INR20,000 crores by March ’28, that guidance stands.
Ankit Gupta
So that is always good to know with Mas. Sir, on one question on the salaried personal loan. We have been reading about some stress developing on that side as well and other lenders have also been highlighting that on personal loans, there has been some stress developing and even on credit cards, we have seen the stress. So for — but however, if we look at our growth, we almost grew at almost 69% in this quarter on a Y-o-Y basis. So can you highlight, of course, we — our due-diligence and grade metrics are higher compared to other lenders, but like what has been the reason for such a high-growth despite challenging times across this sector — across the segment, as I by other lenders.
Kamlesh Gandhi
So given our distribution of 200 branches, almost nine states and the base as far as the PL is concerned, I think 69% can be reckoned as one mathematical number, but if you say in absolute terms, the AUM does not increase that exponentially. That is one. Number second, we don’t deviate from our fundamentals of discovering growth rather than just targeting growth. If we get an opportunity within our credit screens, within our understanding, within the parameters whereby we can maintain the asset quality, we would not mind allocating more capital there. And within the overall strategic impact, if you say that we don’t want to increase our salaried personal loan for coming 2 to 3 years beyond 10% of our AUM. So sticking to our mandate of sticking — being below 10%. And within that trajectory, whenever we get an opportunity, maybe on a year-on basis, on a quarter-to-quarter basis, and if we discover good growth at the ground level on a smaller base as the case is right now with us, that might contribute accordingly.
Ankit Gupta
Sure, sure. Sir, you did highlight about some you know like challenges on the MEL side and of course, microfinance companies have been growing through a tough time over the past three to four quarters. So any — any views on when do you think the — this issue is expected to be stabilized and the industry is expected to, if not return to growth, but at least the de the delinquencies and all start seeing some stabilizations.
Kamlesh Gandhi
I wish I’d know this. But just according to whatever data we have, our data is dynamic, you know. So the data what we have and the information what we have, I think we will still have another quarter or two before the industry can work normally, because if you see classically MFI loans are for 18 to 24 months and when it is loans for 18 to 24 months, we are already in the practically 3rd-quarter or you can tell it second-quarter of stress. So another one or two quarters can see us can see the industry is stabilizing because majority of the lender have tightened their belts on the credit screens, they’ve understood maybe at a high-cost that we should extend credit where it is due.
Ankit Gupta
So and my last question was on the SME side. You know, any segment or any particular like loan size where we are seeing some stress here was the stress is across the segment.
Kamlesh Gandhi
So we do our portfolio analysis from time-to-time and then discover few of the sectors which we might for a quarter or two try to watch and then take further exposures. Maybe in our case, currently, we are more circumspect on textile and FMCG and maybe that sectors will go on changing as we go-forward, but that is data-driven. And currently, we see these two sectors being watched very closely.
Ankit Gupta
Sure. And we — so these are just the sectors. It is not across the SME sector that you are seeing challenges.
Kamlesh Gandhi
As per our data analysis, these are the two areas which are showing some abnormal pressures.
Ankit Gupta
So okay. Okay. Thank you, you.
Operator
Thank you. The next question is from the line of Aditya from Securities Investment Management. Please go-ahead.
Unidentified Participant
Yeah, hi, sir. Thanks for the opportunity. Sir, you mentioned that the environment is still challenging. So as an organization, what are we doing to navigate through this environment? So have we tightened our four-year issues or any other risk parameters, which would help us deliver better asset quality going-forward?
Kamlesh Gandhi
See, as I told in my opening remarks that as lender, we have to be always cautious. And at mass, we believe with the risk of sounding contract, we are not just managing the risk, but to crush the risk as much as possible. That has been — that has been our policy. So for us, we don’t have to do anything much extraordinary because right from the inception, we believe in working in a way whereby we can minimize risk.
But having said that, when the environment is so, despite of all your efforts, you might see all your policies not working according to your plans. So we — we do the data analysis, we take the ground level information and from time-to-time, we still tighten our credit screen, tighten our origination of put breaks on the businesses, which we think we should not do for certain quarters as I shared earlier that we might — in SME, we might be more circumspect on certain sectors like textiles and FMCG, maybe in our two-wheeler or commercial vehicle business, we might be certain circumspect on certain branches and certain areas where we see early delinquencies. So that is a continuous process. But we have been doing this all times. Maybe the situation is benign, we don’t relax and extend credit very aggressively as demonstrated over all these years.
Unidentified Participant
So, sir, would it be fair to say our rejection rates would have seen an increase from the normal past history?
Kamlesh Gandhi
Yeah, yeah, it has increased substantially.
Unidentified Participant
Okay. Understood. Understood, sir. And sir, if I look at your capital adequacy, so in June quarter, it was around 28%, which has come down to 25% in the December quarter. So this seems to be a sharp decrease in two quarters. So while the loan growth has been good, but the capital consumption seems to be on a higher side. So if you could explain what has led to this? Is it majorly because of a higher-growth in personal loans?
Kamlesh Gandhi
Not really, because if you see higher-growth in personal, personal loan is hardly 8% of our total AUM. I think we can share those granulated data offline, but if you — if you see our capital adequacy is much more than what is required and we have increased the AUM from time-to-time and there are internal accruals also. If you’d like to add-on, Ankit, something to this.
Ankit Jain
So what we’ve done is because of excess liquidity, because of the capital raise, what we’ve done is also — if you see our was 22, which is not 20, which we can always increase as per our — because we have a on-hand. So strategically, what you have done because of liquidity on-hand, we have done our book lesser and because of on-book portfolio, it has resulted into a higher car. A lower car. Understood. But that is not it going-forward.
Unidentified Participant
Sure. Okay. And now, sir, as we increase our direct distribution, so how should we look at PCR because it is currently around 33%, so should this number increase going-forward?
Kamlesh Gandhi
Hi, yes, because if the share of direct distribution is increasing and PCR, as you know that with the advent of ACL ECL is at 100% data-driven based on the last five years performance of the portfolio and we would — we would — we would see the PCR bearing according to the quality of the assets. And. And secondly, PCR is also the function in our case of the guarantees that we get-in terms of CGTMSC and CGFMU from time-to-time. So that is also factored in while calculating PCR.
Unidentified Participant
Understood. Understood. So sir, those are my questions. Thank you, sir.
Operator
Thank you. The next question is from the line of Sanket from DAM Capital. Please go-ahead. Y
Sanket Chheda
Yeah, hi, ma’am. Good afternoon. My question was again on the personal loans. So it is about 8% of the EUM, but if you just see the EUM accretion to this quarter, which is about INR7,000 of that 2,400 is the personal loan, which is around 30% 35% of AUM accretion has come from personal loan. So just wanted to understand how much of it is direct and how much it is through the channel partners and are we — while the micro enterprise is muted for the since last one year, is it that we are stretched on the growth and maybe we are stretching on the personal loans as well to our threshold, which is now at least closer to 10%. Yeah. So just wanted to understand how much of it is direct and through channel partners and how are we getting that comfort? We mention that it stays in your and then only you grow that, but just a little bit more granularity on that would be helpful.
Kamlesh Gandhi
So as you know that we work with few of the select fintech partners of the country on the terms and conditions and on the credit screens, which we have mandated to them. We have been working with them since few quarters. And now that the systems and operations with them have stabilized. We don’t give short-term personal loans, we this loan around 46 months.
Sanket Chheda
Sorry to interrupt, sir. You’re not quite audible. Please come closer to the microphone.
Kamlesh Gandhi
So as I shared, that we are working with a few of the fintech partnersto smooth line the processes and personal loan is a product whereby fintech can play a very important role given the level of documentation that we can get through banking aggregators and the — whereby we can assess their salary credit or credited on-time or not their FYR through our endeavors with this fintech partners is paying-off now.
Around 55% to 60% of our business is through this fintech partners. And as far as we are concerned, we want to source PL on — on the digital way as much as we can because this is the product among all our products whereby it is assessed 100% on documents. So here we have a room to use digital — the digitalization to the maximum extent possible. And with the — with the help of digital partners, we have — we have the advantage of getting and security cover against guarantee also against default also to the extent of 5%.
So that gives us the — that gives us the confidence to grow that our credit screen, the quality of the portfolio we have created so-far and then growing on a smaller base and that too within the limit of not less than — not more than 10%. Coming to the question on the — having the growth between 20% to 25% and SPL replacing MEL, maybe on a quarter-to-quarter basis looks like in terms of number. But going-forward, we have a very clear-cut strategic intent to focus on our MSME business, which should contribute around 60% of the business. 25% should come from 25% to 30% should come from wheels and the rest through less than around 10% from unsecured personal loans.
So we will continue our endeavors on the same lines. And given our distribution strength directly from 200 centers, 14,000 cords and also the distribution through 150 NBFCs, we are confident to maintain the asset configuration going-forward while maintaining the growth anywhere between 20% to 25%.
Operator
Does that answer your question, Sankeep?
Sanket Chheda
Yeah, ma’am. And if you — if you could also maybe if possible highlight, highlight 5% that you work on as far as the channel partner is concerned, but what would be the pricing they would be offering? Possible to give some sense on that?
Kamlesh Gandhi
The net to the company pricing — the pricing offer to the borrowers is anywhere between 21% to 24%.
Sanket Chheda
Okay. Sure, ma’am. Thanks.
Operator
Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please go-ahead.
Shreepal Doshi
Hi, sir. Good afternoon. Sir, just had a couple of questions. Firstly on the micro enterprise loans. So while you highlighted that segment is going through some tough times. So just wanted to understand how is the end — how is our portfolio with the NBFC partner within this segment shaping up? Like because there are — because in that segment of small NBFC, there are some solvency risk as well which are emerging. So what is your assessment and how are we trying to protect ourselves? In fact, we’ve added some NBFC partners during the quarter. So what sort of partners have we added in terms of being comfortable to add.
Kamlesh Gandhi
If I share with you the partners whom we are working, they are very strong on solvency for the very reason that irrespective of the macro-environment, we have a system of assessment whereby we do a stress-test of their portfolio and then work-out the solvency and the liquidity risk. So under any stress position, they should be above the threshold of 15%. So currently, all the NBFCs, I not use the word majority, all the NBFs whom we work with have no solvency risk, irrespective of the fact that the delinquency might range from 2% to 6% depending upon the areas they are working or according — depending upon the products they have offered.
Secondly, the — we have a very close control on the day-to-day operations also and we work with the ones where we are more than satisfied to have any exposures. And if I share with you, these smaller NBS have proven their metal across cycles. We have been working with them for more than 15 years. And we have seen that be it demand, be it COVID, be it the liquidity crisis in the — especially suffered by them, they have — they have been in a position to sourther debt, they have not caused any systemic risk and add to that our due-diligence is helping us to navigate through all these tough times.
Shreepal Doshi
Got it, sir. Got it. So we are well-protected in terms of our exposure to them at least. So, yeah. Got it. Sir, second question was, sorry, sorry, sir, you were saying something?
Kamlesh Gandhi
No, I was just technology. Yes, we are well-protected.
Shreepal Doshi
All right. Sir, second question was on the two-wheeler part. So how are we seeing the stress in that segment because there would be an overlap of this MSE and MFI customer in the two-wheeler segment as well, particularly for us as well because we are in more of Tier-2, 3, 4 geographies. So how is that book in terms of — for us and for industry at large, your sense on how is this book shaping up on the stress side?
Kamlesh Gandhi
So as far as two-wheeler is concerned, you are right that we work-in tire two and tire 3 geographies where our borrower constitutes of three types of the profile. One is small businessman, second is agri and third is salaride. So that is — that is more or less evenly spread. Secondly, once again, if you see that despite of being one of the oldest two-wheeler financers, we have a very moderate book in two-wheelers for the very reason that we still follow the age-old practice of credit assessment even while extending loans on two-wheelers, which is not the market practice. Usually market practice reverse on the models and LTVs.
We still are the — are among the few NBFCs or I cannot claim the only NBFC. So I’m using this among the few NBFCs who insist a stability of own house even in two-wheeler. So given our guardrails right from the beginning, we — we see a marginal uptick. While you are right that there will be overlapping of the borrowers between MEL and two-wheeler and that will affect us also. So when there is a — there is such a large-scale pressure, you cannot be isolated. You can — you can be protected to the extent of your credit delivery models and that is what is happening to us. So we have sufficient guardrails at place. While we do see certain uptick in certain areas, especially in rural, not also Tier-2 and Tier-3, but especially in rural, whereby there is overlapping with the micro loan borrowers.
Shreepal Doshi
And sir, how will it be for the industry at plants? Like while as you highlighted that we are following the old-age practices, but how is industry when it comes to the stress levels and risk?
Kamlesh Gandhi
I think industry, depending upon the players, two players, the industry has 90 DPD ranging from 4% to 8% depending upon the way they are working. So the 90 DPD around that number. And then the capability is to recover, repossess, resell. So ultimately, the losses can anywhere between 3% to 6%, 7%.
Shreepal Doshi
Got it, sir. Thank you, sir. Thank you so much for answering my question and good luck for the next quarter.
Operator
Thank you. The next question is from the line of Manan Madlani from Kamakia Wealth Management. Please go-ahead.
Manan Madlani
Yeah, good afternoon, sir. Thanks for the opportunity. So my first question was regarding the cost of borrowing. So when do you see any upgrading of our ratings happening?
Ankit Jain
Already our rating was upgraded in March, whereby we were upgraded by CAR from A-plus to AA minus. And if you see on the relative sense, whereby MCLR — MCR of banks or majority of the banks have increased from — from March till-date at a — of around 30 to 35 basis-points. If you see our cost of borrowing has remained stable. So on relative sense, if you see per se, our cost of borrowing has remained stable despite of increasing the MCL this is majorly because of trading upgrade.
Manan Madlani
Okay. And the second question is on the OpEx side. So I get it that we are going to the direct channel and probably that’s why our opex is increasing. So where do you see this stabilizing down the line?
Kamlesh Gandhi
So as of now, as we see opex from current to 2.2% is 2.2%, right, which we — 2.2% or 2.3% on a medium, medium-term basis can be anywhere between 2.75% to 3%.
Manan Madlani
2.7% to 3%.
Kamlesh Gandhi
But that will not affect the NIMs or the ROAs because that will result into higher yields also.
Manan Madlani
Yeah, fair enough. And on the commercial vehicle side, how is the asset quality going on? Like any updates, particularly for that?
Kamlesh Gandhi
See, as far as commercial vehicle is concerned, I think our 90 DPD is around 5% and that is in sync or as best-in the industry can have. And going-forward, we would like to maintain this level.
Manan Madlani
Okay. I mean, I just had one little request. If you could just provide the, you know quality of assets individually you know by our segments, it would be great.
Kamlesh Gandhi
A point taken.
Manan Madlani
Okay. That’s it from my side. Thank you.
Operator
Thank you. The next question is from the line of Himanshu from Rock PMS. Please go-ahead.
Himanshu Upadhyay
Yeah, hi, good afternoon. My first question was the higher rejection ratio which we are seeing. Is it because of more leverage at the customer level or the income levels are under stress in the industry and hence higher rejection ratios we are finding or we are getting in MEL and SME category.
Kamlesh Gandhi
So it is a combination of both the things. And one is we have tightened the credit screens than earlier. So that is why more filters — filters are put in. So the — some of the proposals are filtered out in that. And second, the balance sheet numbers or the income numbers also for the customers have stagnated or deteriorated in some cases or the leverage has increased. So a combination of all of these two, three things results in higher rejections. We will not be able to pinpoint only to one specific reason, only leverage, but also the internal policy tightenings as well.
Himanshu Upadhyay
And one more thing. How difficult is getting the funding for small NBFCs or microfinance institutions? And are we seeing more opportunity to grow retail asset channel and better yields in that channel, if you just opportunistically for some quarters? Any thoughts on that would be helpful.
Kamlesh Gandhi
Thank you. So this is what we constantly ponder at association level also at FIDC that small NBFCs should be given more access to capital and debt. And while the role of smaller NBFCs is recognized, it is yet to be recognized to the extent where they can get liability to the extent they should get. So to answer your question, they really struggle to get timely liquidity from time-to-time. And that is where we have played a very important role. It has been mutual. I will now use the word that we supported, but we have played a very important role working with smaller NBFs right from 2011. And we have been working with smaller NBFCs from the very experience we had when we were small.
We were just INR2 crores in 1995, we had INR1213,000 crores as I talked to you. We have seen that journey very closely that despite of the best of the capabilities to manage assets, you might not get liability on-time and that is how we partner with number of NBFCs and have created a very good business model for us and has created a win-win situation. So while you are right, retail asset channel can be a good business. But like any other thing in-life, it’s a packaged deal. From the risk perspective, technically, we would not like this business to be more than around 30% 35%. So as we grow, the percentage will remain between 30% to 35%, but it will — that business will also grow continuously and we hope to have more engagement with that smaller NBS.
Himanshu Upadhyay
No, sir, I agree to what we stated and we have stated this historically also. My just question was, think for next few quarters when the situation is tight and we have a pretty good experience of working with many of these institutions. So do you think we can grow this channel and get a better yield in the market or you see the yields for what we used to get historically are the same even in times like now. So it won’t make much sense.
Kamlesh Gandhi
This is a — this is a relationship business and not a transaction business. Whenever we work with NBFC, it is a relationship business. So we don’t increase yields depending upon the situation in the market unless our cost of fund increases. And that is what has kept us in good speed in terms of relationships with all these NBFCs. So we would — strategically, we would not be doing that.
Himanshu Upadhyay
Okay. And one last thing. At the customer level, are we seeing the yields improve in MEL and SME level? And are people moving out of also of that business the market.
Kamlesh Gandhi
See, on the contrary, these are the time to calibrate everything because this is the time to tighten credit screens. When you tighten credit screen, you get borrower who are having better credit profile, the borrowers with better credit profile will demand better rates. So really not the time if you want to create a quality portfolio, extend credit where it is due, not a time to get higher yields. On the contrary, you might see some comparison on yields being offset by operational cost and credit cost.
Himanshu Upadhyay
Okay. Thanks for your insight. Yeah, these were my questions. Thank you.
Operator
Thank you. Ladies and gentlemen, that brings us to the end-of-the question-and-answer session. I would now like to hand the conference over to Mr Akshad Menyar from Anand Rathi Equities for the closing comments.
Kaitav Shah
Thank you. On behalf of Anand Rathi Institutional Equities, I extend my heartfelt gratitude to the management of Financial Services for their insights today. We appreciate everyone’s participation and we look-forward to connecting again soon. Thank you.
Operator
[Operator Closing Remarks]