MAS Financial Services Ltd (NSE: MASFIN) Q3 2026 Earnings Call dated Jan. 29, 2026
Corporate Participants:
Kamlesh Gandhi — Chairman and Managing Director
Darshana Pandya — Director and Chief Executive Officer
Ankit Jain — Chief Financial Officer
Dhvanil K Gandhi — Whole Time Director
Analysts:
Unidentified Participant
Abhijit Tibrewal — Analyst
Abhi Jain — Analyst
Shreepal Doshi — Analyst
Nidhesh Jain — Analyst
Presentation:
operator
Foreign. Ladies and gentlemen, good day and welcome to Mass Financial Services Limited Q3FY26 earnings conference call hosted by Motilal Oswal Financial Services Limited. 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. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touchstone phone. Please note that this conference is being recorded. Conference over to Mr. Abhijit Tibriwal from Motilal Oswal Financial Services Limited. Thank you. And over to you sir.
Abhijit Tibrewal — Analyst
Yeah. Thank you. Ikra. Good afternoon everyone. Thank you for joining the Mass Financial Services Ltd. Earnings conference call to discuss their Q3 FY26 results. We have with us today the senior management team represented by Mr. Kamlesh Chandi, Chairman and Managing Director. Mrs. Darshana Pandya, Executive Director and CEO Mr. Dhwanil Gandhi, Executive Director Mr. Amkit Jain, CFO and the rest of the members from the senior management team. We will first have the opening remarks followed by a Q and A. With that I hand it over to. Kamlesha for his opening remarks. Thank you.
Kamlesh Gandhi — Chairman and Managing Director
Thank you so much, Abhijit. And good afternoon to all of you. And I’m very happy to connect to all of you once again. As you know that this call is for the. For discussing the quarterly results. So this happens to be our 123rd quarter. While I always like to connect to you on a quarter to quarter basis. But as I’ve shared every time that the company. We are building up this company not only for quarters but for decades and generations as we have done over last 30 years. Coming to the performance for the quarter, the consolidated AUM is at around 14,800 crores.
14,641 crores which is 18.28% rise in AUM. And the profitability consolidated is close to around 96 crores which is a 20.55% rise in consolidated PAT before the one time impact of the labor code. And all the numbers have been made. Very explicit in the press release and in our presentation. For your better understanding if I talk about the quarter pass by. Happy to share that the things are fairly improving at the ground level. How we gauge this improvement is by in terms of the eligible demand what we get. But at the same time we are. Cautious to jump to a very high growth immediately. But if you see on a quarter. To quarter basis, as I shared last time, Q2 growth over Q1 was close to around 4% in AUM this time we could discover and achieve close to 6% and also because this was characterized by the festive season. So in all we are seeing. Marked improvement at the ground level in eligible demand. And this will, as per our understanding and experience of all these years, will gradually improve over next two to three quarters, giving us an opportunity to come back to a trajectory of around 20 to 25% growth once again. Obviously we are already there at around. 21% in PAT, but also in AUM. We’ll be touching that within next couple of quarters. So that was on the AUM and profitability, the quality of the assets was very stable with net stage 3 asset at around 1.71 while carrying a buffer provisioning of 0.16% not netted off. And the quality of the assets were even very benign in our housing finance company which grew at around 23% taking the total asset under management to 851 crores this quarter. And as I always shared, and as we always maintain that risk and profitability will be priority over just asset growth.
But having said that, we are seeing, as I shared, we are seeing good opportunity in the market to grow to our original trajectory of anywhere between 20 to 25%. On the asset side, we continue to focus on MSME. Mel and SME are the two products in MSME. They registered a good growth quarter on quarter and year on year followed by wheels, that is two wheeler and commercial vehicle. We are yet to achieve that critical mass in used cars to define it as a different product and as I said see another 2, 3/4 before we can really gain some scale to define it as a different product and sellerized personal loan which we always maintain that we’ll be keeping it below 10% which stands at around 8.5% of our total AUM.
So this remains our asset configuration and this will be the focus going forward. SME and WILS will drive the growth. Forward while once again will play an important role. And so will be the SME playing an important role. But from quarter to quarter and time. To time the growth will be calibrated and adjusted according to the market situation. As we did this time, that commercial. Vehicle did not grow at the pace which we had desired. And that was for a reason of understanding the market better and how to have the experience on the static pool analysis. And then we can come back to. The original growth because there was a lot of overlap between the micro, the MSME borrowers and the commercial vehicle borrowers. That is what was noticed from various. Scrubs and the data we got. And so we were not very eager. To grow it at a very faster pace and hence the growth was little muted. But this is the advantage of being a multi product company that some other product can take over. We got good advantage in two wheeler this time more because the two distinct reason that there was a well tax developed for two wheeler and also because of the festive season. So this is on the asset side and we’ll continue to concentrate on these assets across our area of distribution. Our area of distribution remains throughout all the states of operation. That is Gujarat, Maharashtra, mp, Chhattisgarh in west, Rajasthan and NCR region in north and all the three states that is Tamil Nadu, Karnataka, AP and Telangana in the south.
We are consolidating on those distribution. We have stabilized on the number of branches at 208. We are in the process of sweating those branches and will increase the branches gradually. It has grown at a lesser pace than what we had anticipated at the start of the year. But the reasons were very obvious and. We all know that. So the direct distribution continues to grow steadily and in a robust manner. Whereas our distribution through NBSC, as you know contributes close to around 33 to 34%. Also stands in a very good state. Despite of all the headwinds that we faced in last one one and a half year. That will be a 15 years more old module now and we continue to maintain that that has contributed very significantly to the growth of the company and going forward it will remain so. Maybe the percentage over a few quarters might change in favor of direct retail. Maybe up to around 70, 30 or 75, 25 over few 4 to 6, 8 quarters. On the liability side we are sufficiently capitalized and we have a very strong. Balance sheet with currently equity of close to 2,900 crores and the debt equity of around 3.35. Capital adequacy of close to 23% keeps. Us in a very good stead for. Growth and for raising liability. We have adequate liquidity on hands and as I talk to you right now, we have tied up for liquidity up. To September this year. That is for the year 2627 and. By March I think we should be in a position to tie up for the whole year. So we are well in advance in tying up the liabilities. The only challenge what we take is how we can reduce the cost of. Borrowing still and thereby improve our profitability. And affordability for the borrowers. We continue to remain focused on technology that is very, very important as we reckon that technology plays a very important role not Only for efficient operations, but. For offering better services to the borrowers. So we are adopting technology and having a robust team of close to 100 people. As far as technology is concerned, we continue to pursue that very vigorously and very regularly across departments. On adopting technology, we have built an operate model and we will continue to operate on the same. On HR, we are close to 4,500. Strong team and the focus now will. Be to increase the efficiency of each and every personnel to the maximum extent and possible in order to generate the. Required returns on equity and assets. As far as the operational expenditure is. Concerned, if you see that it has. Stabilized on a quarter to quarter basis. Remains at around 36% of our cost to income ratio and we see that hovering around those percentage, maybe a percentage or 2 here or there without disturbing our ROA metrics. Because as I have maintained that whatever model we follow, we would be cautious of the fact that we remain anywhere between 2.75 to 3% on ROAS. And I’m very happy to share that with the tremendous efforts of team Mass. We are in a position to produce. The result quarter on quarter. And as I shared with you, this is 123rd quarter. There are more than 50 people who have dedicated their carriers and life to this company and that is by choice and we are very happy to do it for many more years to come. On the dividend part, we as required, consistent to our policy of declaring dividend and the payout will be maintained at 10% of our pet. This as on December, we are declaring an interim dividend of 1.25% on a face value of 10 rupees. So 1.25 rupees. Sorry, on a face value of 10 rupee.
Going forward, as I shared, we are confident that we will be in a position to have our growth anywhere between 20 to 25%. We can talk a lot, but the numbers and the performance speaks much more than that. That even during the last decade, as I shared with all of you in the last conference call, that if you see our performance from 15 to 25 characterized by very, very strong headwinds, we have been in a position to maintain our trajectory of growth and profitability which has come mainly through internal accruals which. Differentiates us and what differentiates us is. The stability of the management team and the resolve to take this company forward for another decade together while building up a very strong second line. So with this I would like to hand over to. With this I’d like to hand it over to Dashnathan. But before that, a word on housing. As I shared that we were at. Around 851 crores in AUM we grew at around 22%. But still we believe that the potentiality of growth at this scale should be anywhere between 30 to 35%. But as I told by prioritizing risk and the quality of and profitability. So the efforts are earnest, efforts are on to reach that figure of growth anywhere around 30 to 35%. Maybe within a quarter or two that company remains sufficiently capitalized and the liquidity and the debt there is also available. And if you have seen it, the numbers are small. But if you see the numbers in terms of profitability, in terms of asset. Quality, they really define the quality of operations there. And we need to continue that that the profit has grown in excess of 25% there. And we have seen that the quality of the assets, even this because the borrowers whom we see in the affordable. Segment once again have an overlap on. This over leveraged MSME segment. But still we could maintain a net stage 3 asset of 0.67%. And like everything in life is a package bill while maintaining that instead of 30, 35% we could grow at around 23%. But very confident that given our increasing distribution strength understanding of the market, it. Will be a matter of time there. Before we should reach our desired growth. So with this I’d like to hand over to Dashab and to take you through some of the critical numbers followed by Ankit and then questions from all of you. Thank you sir.
Darshana Pandya — Director and Chief Executive Officer
Good afternoon everyone. So to start with the consolidated numbers, the Q3 quarter we had a very strong performance and we could achieve the AUM of 14,641 crore as compared to 12,378 crore in December 24. That is 18.28% growth. And in terms of PAT it is 97 crore and as compared to 80 crore and growth percentage for PAT is 20.55%. Coming to the standalone performance asset growth in asset is 18% from 11,677 crore to 13,782 crore. Total income there is a growth of around 23% from 390 crore to 481 crore. Profit before tax grew by 21% from 105 crore to 127 crores.
Profit after tax there is a growth of around 20% from 78 crore to 93 crore. So this is the comparison of Q3.26 versus Q3.25. If we compare the performance of nine. Months. Total income there is a growth of 25% from 1103 crore to 1383 crore. Profit before tax there is a growth of 19% from 301 crore to 359 crore. And profit after tax there is a growth of 18.65% from 225 crore to 267 crore. So the comparison. For better understanding of the performance we have excluded one time impact of Labor Code provision of around 4.24 crore. Coming to the quality of the asset, stage 3 gross stage 3 asset stands at 2.56% as compared to 2.53% in September 25. And net stage 3 asset is 1.72% as compared to 1.69% as on September 25.
And here we still continue to carry a management overlay of 17 crore 60 lakhs which is 0.16% of our on book assets. Coming to the performance of our housing finance company, the Asset grew by 23% from 701 crore to 859 crore. Growth in income is 29% from 20 crore to 26 crore. Profit before tax there is a growth of 55% from 2 crore 98 lakhs to 4 crore 64 lakhs. Profit after tax grew by 40 from 2 crore 39 lakhs to 3 crore 45 lakhs. Comparing the nine months performance there is a growth of 26% in terms of total income from 59 crore to 74 crore.
Profit before tax there is A growth of 37% from 8 crore 82 lakhs to 12 crore. Profit after tax there is a growth of 32% from 6 crore 93 lakhs to 9 crore 20 lakhs. Here also we could maintain the quality of the asset. As on September the gross stage 3 asset was 0.94%. As on December it is 0.97% and net stage 3 asset is 0.67% as on December as compared to 0.66% as on September 25. Here also we carry the management overlay of 3 crore 70 lakhs which is 0.6% of our on book assets.
So this was the. These are the key numbers of the performance for Q3. Now I’ll request Ankit to take us through liability and asset management.
Ankit Jain — Chief Financial Officer
Thank you ma’. Am. Good afternoon to all. To elaborate on the liability management for this quarter, we maintain an average cash and cash equivalents of approximately 1000 crore with the unutilized cash limit of around 200 crore as of December 31 the company also holds sanction facilities totaling to more than 3,500 crore comprising of various instruments like term loan, NCD direct assignment, coal lending which we utilize for the coming quarters. During the December quarter, the company exited direct assignment transactions amounting to rupees 850 crore. Furthermore, we currently have sanctions of approximately 1600 crore in the form of direct assignment and co lending.
Our strategy goal Is to maintain 20% to 25% offset under management as out book through direct assignment and co lending. The company also did a tranche of Sekirakan transaction in the form of PTCs of around 100 crore this quarter which was subscribed by HDFC Mutual Fund. We have a cashier facility of approximately 1400 crore spread over 13 banks of which we maintain utilizing levels at 70, 75% and keeping rest as a liquidity buffer. In terms of long term borrowing, the company raised Rs. 670 crore through term loans during the quarter with an average maturity of three to five years.
We also have strengthened term loan pipeline of approximately 1150 crore. Additionally, rupees 250 crore was raised through non commodity ventures which were subscribed by various Treasuries and retail. In terms of asset liability, we are strongly poised position in terms of structural liquidity and our liquidity position remains adequate with positive cash flows across all competitive buckets. Our capital adequacy ratio remains strong at 22.85% with tier 1 capital at 21.48 and a debt equity ratio of 3.35x. The average cost of borrowing for the quarter stood at 9.53% which was around 10 basis point lower than the last quarter.
And we see similar reduction in cost of borrowing in the current quarter. Also the incremental cost of borrowing is at around 9% to 9.25%. So this was on the capital liability management and we are open for QN data.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question May Press Star N1 on their Touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijain from AJ Capital. Please go ahead.
Abhi Jain
Hi, good afternoon. Am I audible?
operator
Yes, go on.
Abhi Jain
Ok. Good afternoon sir. So my first question is that I’m seeing slide number 16 and 17 in. The investor deck and the stage 3 provisioning has declined to 39.9% this quarter from 41.3% last quarter despite state 3 assets going up to 2.61% from 2.58% now I just want to understand why not increase provisioning since you already have an exceptional Tier 1 capital buffer, right? And clearly that we have seen that. In the later DBD baskets like 90 days and beyond 120 days there has been an uptick in this quarter. Just thinking from an institutional investor perspective, a higher provisioning is always a mark of truly fortress balance sheet. And given that Mars has such a great history of being one of the industry leading benchmarks in terms of risk analysis, the provision covering ratio has always been a bit that why keep it at 40 odd percent clearly when we have capital buffers. I just wanted to understand that.
Darshana Pandya
So there are two aspects, fundamental aspects. Which you need to understand that as I’m First I’ll talk as a sector in NBFCs as compared to banks that. Especially in NBFC the borrowers whom we. Saw 90 DPD does not necessarily mean a loss. And secondly the provisioning is done as. Per the ACL calculation. We are under Indes now. So under Indes the provisioning are done. As per the five years historical data. That’s if something goes into 90 DPD what is the collection I am doing. From those 90 DPD bucket. So that varies from depending upon the collection efficiencies from time to time and every time the one quarter is added and the last quarter is taken out. So based on the last five years of data and this is the best thing to happen after India’s because otherwise there was lot of provisioning. The provisioning was done as per the whims and fences of the company but now it has to be data backed. So as per the data analysis, if it is proved that we can recover. This much amount basis the five year. Data then the provisioning varies on a quarter to quarter basis, maybe by a percentage or two depending upon the collection we make from the recoveries. And secondly according to India’s while we are maintaining this. Let me share with you. We are maintaining this management overlay because we had an opportunity to maintain that during the COVID time. So we have not used that management overlay and we are continuing with this management overlay and have been positioned to convince the auditors otherwise. It has been a very clear cut mandate that no understatement or no overstatement of profits as per the India’s philosophy. So we are mandated to maintain the provisions as per the five years data of recovery once the asset goes into 90 DPD. And as I told you that in our case asset going in 90 dpd for the borrowers we’ve been representing to RBA a lot because formally it was 180 days.
I think that was few years ahead before. But in our case when we saw. The informal class of the society when it is around 90 DPD, that means losses is not given. And you can see from the historical. Data that we have been in position to recover those amounts. So this provision is guided by this. To fundamentally as I told you that. The recovery is possible. And number second is it goes by the data of the last five years.
Abhi Jain
I mean that’s helpful. But this was wondering that because we are in industry leading in you know, capital buffer with an industry leading in terms of risk management, higher provision covering also, you know, puts us there in that league. So yeah.
Darshana Pandya
Point.
Abhi Jain
Okay. And secondly sir, by when do you. See this stemming of the GNPA? I mean I know now most of the NBFCs and banks are now sounding off that, you know, they are at the end, the very fag end of the cycle of this increasing gnpa. But given that, you know, a large chunk of our portfolio is still SME, do you see that by in another. Quarter or so this GNPA cycle, has. It peaked now or do you still see that it might still take a few more quarters to subside?
Darshana Pandya
I think within it should stabilize for. The industry as a whole within next two quarters because as the name suggests. The cycle, this was a cycle where. Borrowers are over leveraged with a loan anywhere from 12 to 36 months. And we are already almost two years in this cycle. And the new lending has been done very prudently and very rightly so. So we have all reasons to believe. That within next two quarters we should see this stabilizing. And as I shared in the opening remark, that how we gauge the market stabilizing is by the way, we get the eligible demand. There is a lot of demand. But what is the eligible demand is the point in question. So we are seeing that gradually increasing and we have reasons to believe that within next two quarters it should be fine.
Abhi Jain
That’s it from my side. Thank you. Thank you for insights.
Darshana Pandya
Thank you.
operator
Thank you. The next question is from the line of hardik Doshi from Y12 Partners. Please go ahead.
Unidentified Participant
Yeah, thanks for taking my question. You know, my first question was again around the operating expenses. So this quarter we had an expansion in nim. And even if I Look at like, you know, our direct lending versus channel lending, it’s largely, you know, remaining constant around this 1/3, 2/3 or 66%. Yet in spite of that, you know, our cost to income ratios also kind of continue to remain high at 36.6% and even at OPEX to ratios going at 3 point, I mean 2.9%. Right. So I understand that you know, we are expanding the new geographies but where do you think this stabilizes and you know, do you think this can start coming down eventually?
Kamlesh Gandhi
So as I maintained earlier also that if we see the complete picture, we’ll be more focusing on roas driven by the NIMS minus the operational cost and the credit cost. So depending upon the yields what we generate, we are a multi product company. If some product of a higher yield is doing well, so then then the yields will increase. But at the same time it will. It will entail higher operational and credit cost. So difficult to give an exact number on what will be the opex. But what we would like to maintain. Is, and how we work is that, that we see to that that the ROS between 2.75 to 3% will be maintained. So if you, if you see over quarters there can be a fluctuation in the operating cost, right from below 2% to right now nearly 3%. But our arrows has been maintained. So we would like to focus on maintaining the roas while the operational cost. And the credit cost will be the. Function of the asset created over a period of time. So. Difficult to assign a particular number. But if you see on a quarter to quarter basis you almost stabilize last. Year, last quarter also it was around 36% on cost to income and this. Was this quarter also it is around 36%.
Unidentified Participant
Okay. Okay. So I guess, I mean to some. Extent now the micro enterprise loans have started to grow at a faster pace. And so maybe that is why there’s more cost associated with that as well.
Darshana Pandya
Hi. It depends upon which we are a multi product company. And as I always maintain that we rather determining the growth, we discover growth. We keep our standards constant and tight and as and when we get the. Opportunity, we grow that product. And we are not overly bothered by certain product not growing at the desired. Pace for a quarter. We wait for the right time to come. So if you get an opportunity in. A particular product then the configuration will change and that will also change the OPEX yields. But ultimately the ROS will be maintained.
Unidentified Participant
Got it. Okay. If you know if I, if we. Look at our segments, right, I mean we Obviously still very big on the micro enterprise and on the SME front and both of them accelerating. But now, you know, we are getting kind of a sense from the CV side that you know, the cycle seems to be kind of picking up also and two wheelers volumes are strong. So you know, while you mentioned that over the next two three quarters you will go towards the 20 to 25% growth rate given that all engines seem to be firing, you know, I mean can we see like you know, Even levels above 25%? 25%.
Darshana Pandya
Hardik is doubling your Evum every three. Years and in lending business we have seen over all these 30 years that the common denominator for any problem has been growth. While I don’t deny that since few of the quarters we have grown at even at around 26, 27% also. But the stated objective is to grow. Between 20 to 25% because it is not only the market forces that determine the growth, our capability to handle a particular growth given our standards of risk. And profitability, that is what makes us. Feel that this will be a number which we can achieve and a responsible commitment which we can make to our investors and lenders. As I told you, if we can discover better growth, why not? We have the capabilities in terms of capital, debt, everything. And in past, sometimes we have crossed, we have touched up to 27% if any. I don’t remember the exact quarters, but if there’s an opportunity, why not? But yeah, no, I mean, I’m just, you know, I mean like for example, through a down cycle as we went through the last two quarters, I mean, you know, we went below the 20 level, now we’re at 18. Similarly, I’m just curious, you know, in an upcycle you would want to go a little bit above as well. Right.
Unidentified Participant
Got it. Okay, just one last question is, you know, I mean there’s been a marked improvement on the 30 day and 60 day DPD. Anything that you changed that you know, resulted in these. I mean, I’m guessing this is more of a normalization of those accounts. So maybe can you give some color on any change in collection practices or what, what is the cause that improvement?
Darshana Pandya
That’s a very continuous process at MAS. That we go on adopting new, new. Things to see to that how we can increase our collection efficiencies, that is one of it. But the second part is that the overall capabilities of the borrower to pay, let me be very honest. Our credit assessment and collection can play a role up to certain levels, but beyond that it is always the Borrower’s capability and intent to pay. That makes a, makes a lot of difference. So as I told you that within last quarter we are seeing the things. Improving and the result for this I attribute to the borrower behavior rather than me claiming that we have done something differently. But we always, we continuously try to do what best can be done. But this I attribute majorly to the borrowers behavior of their increasing capabilities to pay on time.
Unidentified Participant
Okay. Okay. Thank you so much.
operator
Thank you. The next question is from the line of Sripal Doshi from Equivorous. Please go ahead.
Shreepal Doshi
Hi sir. Thank you for giving me the opportunity. My question was on the assets quality. My question was on the asset quality side. So we were pretty early to sort of indicate to the street that you know, things have started to improve in last quarter itself. Could you share your views? How are things shaping up, let’s say with respect to those industries now, especially textile, gold, gems and jewelry. I think these were the names that also some of the companies in the FMCG space. So how are those industries, you know, sort of trending now and what are the kind of changes that they have made from their business model point of view which is helping, helping them as well as us as a lender to see some moderation in the DPD that we have reported.
Dhvanil K Gandhi
Hi Shrikal Dhuanli. So we have been tracking these industries and at the ground level also we have been monitoring them closely. So two, three things have played out. One is that there was a lot. Of. You can say, uncertainty and noise around tariff and other. So two, three macro events had come down together around, you can say around two to three quarters ago. And at that time we have started. Indicating that we are going a little. Slow on certain industries and certain geographies. And those things had come together and these are informal borrowers so they take some time to adjust. But now we feel that the tariff issue is behind us. The MSMEs have adapted and adjusted to the market scenario. So textile wise we are opening up in Gujarat, we are still not very keen on opening in south India. On textile, we are more comfortable opening up Gujarat. So we are seeing some green shoots over there in the power performance that we monitor every month. So textile overall in Gujarat and around Gujarat, say Rajasthan and Maharashtra, we are positive on that now from this quarter onwards, fmcg, we are still seeing some slowdown.
We have not seen any marked improvement in the FMCG sector. So we will still keep that under caution list or maybe negative in some. And agro seems to be going through a cycle currently. So in certain geographies like MP Madhya Pradesh where there is more agri related mandis, APMCs, those kind of industries that is going through a temporary cycle is what we are seeing. We don’t see any structural issue per se, but our monthly PAR data is showing slight elevation in there in MSME segment but nothing which is too concerning. So. Gen Z only we are not funding since a very long time so we wouldn’t have much idea and data on that. But that is an industry which we have avoided since a long time now. So overall if we talk about as mentioned in the opening remarks, we are seeing improvement in the approval ratios as well. We are seeing improvement in the top of the funnel, how the type of cases which are coming in and how the ratio is improving over there. So ground level post GST cut I would say and the festival that momentum has continued.
So we are positive overall on the MSME considering that.
Shreepal Doshi
Got it. Thank you for the detail answer. The second question was on the LOS that we were trying to sort of update. So we’ve already got BRE in place for our product bouquet. Just some update on the LOS side. If you could provide.
Dhvanil K Gandhi
So yes, so LOS for all our products is up and running. BRE for all our major products is up and running and now we what based on the second round of tweaking what we are doing is that we are trying to fine tune the scorecards further now. So based on backtesting historical data and the data scientist team that we have built at Mass at an initial level we are trying to work with them and trying to work on scorecards and trying to see that how we can establish green, yellow red channels for quick approvals, quick turnaround time.
So two Wheeler is one product where we have seen tremendous progress in terms of tech where real time approval, real time disbursements is something which is now happening in SME also we are working on scorecards so products which are in a way where underwriting there are two things. One is where data availability is high like a product like an SME. Those are the products we are focusing on. First and second is no frills product like two Wheeler where asset, Basic Income and bureau these are the only things that you can underwrite. So we are focusing on those products.
Mel and CV are still more touch based oriented products where person needs to. Go to the ground. Data is not available in abundance, formal data is not available in abundance to run models on those. So those are still more touch and field based products. But SME2 Wheeler are the two products which have seen marked improvement on the technology adoption so moving in the right direction and then hopefully further improvements and enhancements will keep getting added on quarter on quarter.
Shreepal Doshi
Got it, got it. So just one more follow up here. So we’ve seen pretty sharp during the quarter any also the other income. So I suppose there is some policy change there. So if you could just you know, for the betterment of the crowd as well, you could give some color on that. What is the reason behind Sharpe Price in other Income and Sharpe Price in opex?
Ankit Jain
So as I shared last time that whatever business we do through fintech for better control of cash flows, the complete. Interest is first booked and then the revenue shared. So that, that, that is, that is one of the major reason in the. Increase in opex because right now we. Are working with 3,4 fintechs on various products and in that we take the complete revenue first in our bank account. And which is taken as an income. And then whatever we pay them as revenue is being taken as an expenditure. So that is. That is a major reason on what you see Rice. Got it.
Shreepal Doshi
So just last question was on growth front. So as you highlighted that you know growth in next couple of quarters should bounce back. So which are the segments that gives you more confidence who would be the leaders for our from our five product. Bouquet. Which segment will do relatively better?
Ankit Jain
I think according to me SME and. Will set to do better and that will be the area of focus because all said and done, MEL is a low ticket size product and as we grow our balance sheet size we are more focused on some higher ticket size loans because that gives us a better quality of borrowers also. So depending while our focus will be. More on Wheels and SME that should contribute more on our growth front while NEL and SPL will continue to contribute steadily.
Shreepal Doshi
Thank you so much sir for answering all my questions and good luck for the next quarter. Thank you.
operator
Thank you. Ladies and gentlemen, in order to ensure that the management will be able to. Address questions from all the participants in. The conference, kindly limit your questions to two per participant. Should you have a follow up question, please rejoin the queue. The next question is from the line of Ishan Kupta from Choice Institutional Equity. Please go ahead.
Unidentified Participant
Hi sir. Good afternoon. Congratulations for a good set of numbers. So my first question would be. Although the company is focused on scaling the MSME and wheels business, but the sequential growth observed in Q3 in the CV segment was negative. So can you explain the drivers for the negative growth? And moreover the growth in the SPV. Segment was marginal sequentially. So although the ceiling upper cycle upper ceiling is 10%. So what led to a marginal growth in SPV.
Kamlesh Gandhi
So CV and as earlier also we had communicated that we are. I would. Not say restructure, but we are relooking at certain underwriting models. And also at the ground level some portfolio analysis was showing some stress in some pockets. So we had taken some conscious call to slow down the growth there. So when we say wheels two three products contribute, that one is two wheeler commercial vehicles. So that slow growth in slightly lesser growth in commercial vehicle was compensated by two wheeler if you see the Y1. Wise as well as the Q on Q growth. So as a whole when we say wheels two wheeler CV will contribute. CV now looks better. So next two quarters we feel that CV growth also should starts slowly inching up and coming back to normal spl. As earlier growth was looking higher on a smaller base. But now as the product has scaled up since almost now 8 to 10 quarters we will see the growth in and around this percentage. So two things. One is that we want to keep 10%, we have some headroom, but we are going little conservative there. So we are currently roughly at around 8.6 I think or 8.7% of AUM.
So we expect this number to hover around 25 to 30% in terms of SPL growth. So that’s the outlook that we have. But going forward next two quarters we. Feel SME2 Wheeler and CV slowly and gradually should start coming back in terms of better numbers. But generally the CV business is strong in the second half of the financial year. So it was specific for your portfolio because in general for the industry the growth was spectacular for other companies too for quarter three. So I think across the peer set there were certain quality concerns and for us also we were looking at certain we had picked up some early signals of stress in certain pockets and portfolio. And when we talk about CV. It. Is a market wherein multiple sub products are there. So we are present in the small ticket size light commercial vehicle segment which is used in nature. So we do used vehicles in nature. So there are the informal nature of the borrower and some early signals that we were seeing. We had gone little conservative. But slowly and gradually we expect that to pick up now.
Unidentified Participant
Thanks for that. My last question would be what would be the benchmark level for capital adequacy ratio around which you would consider equity fundraising? So historically we have kept that once.
Kamlesh Gandhi
Our. Tier one on book touches around 18 odd percent. Historically we have done a raise There. So last year when we did the qip, that was the level at which we had done so wouldn’t be right on our part to commit exactly. But the levels at which we start thinking on capital raise lines is in and around year one on book of, you know, 89%.
Unidentified Participant
Thank you sir. All the best for the next quarter. Thank you.
operator
Thank you. The next question is from the line of Madhu Chanda Day from MC ProSolutions. Please go ahead. Hi.
Unidentified Participant
Congratulations on a very good quarter. I have couple of housekeeping questions and then a general question. The first one is if you could share the disbursement number for the standalone business. Hello. Yes. It is around 3,600 crores. What is it?
Ankit Jain
No, 3,661. You have to consolidate it which was given in your press release. Is that the standalone number? 3591. 3599. So 3600 crores on standalone basis and. Around consolidated is 3660. 3660, yeah. If you could, if you could include. This number as a part of your. Deck, that will be really helpful going forward. And my second question is a little bit on the distribution side. So I mean as you have explained that you know your costs are littering going forward. I mean is the growth driver going to be from the existing geographies or how are you seeing the traction basically from the newer markets of north say up or the southern markets like Karnataka etc that you have entered? Where is the growth going to come from? Basically. Yes. So we are seeing positive traction in south and north both. So currently we have limited presence there but have plans for next financial year for expanding both in north and south. So in north Uttar Pradesh we are not covering directly as a part of Delhi ncr. Whatever comes in Uttar Pradesh we are currently working on, but Uttar Pradesh we plan to start next year with around five, six branches. That’s the initial plan and that that should contribute to growth. And in southern market also we will deepen the network from the current branch network that we have so we can expect the initial feedback.
And what, what we have, what market feedback and feedback from our team we have received is positive. We have to work little hard on building up a more stable team because whenever you enter a new geography and when you recruit and we prefer to recruit locally from our peer set, there is generally one or two times where the teams get churned because of the setting of process. And now finally we feel that the team has more or less stabilized. So the amount of business that we would expect. The efficiency that we would expect should start going up.
So we can expect that north and south to perform meaningfully well from next financial year onwards.
Unidentified Participant
Okay, thank you. And just a small housekeeping. There was a slightly higher capital consumption in this quarter. Is it because of the loan book mix or there’s something more to. Has to do with the off book portfolio. That is what we assigned to the bank.
Kamlesh Gandhi
So this was less by percentage or so. So we had to keep some capital buffer on the provide capital on that.
Unidentified Participant
Okay, thank you. Thank you and all the best. Thank you.
operator
Thank you. Ladies and gentlemen, a reminder to all, please limit your questions to two per participant. The next question is from the line of Siraj Khan from KS Capital. Please go ahead.
Unidentified Participant
Sir. A good set of numbers. First of all, one thing that I. Wanted to know on the asset quality side, could I get the MSME and SME so like a broad classification of MSME book and the non MSME book asset quality, if that is possible.
Darshana Pandya
So MEL and FME together and the rest. So you’re talking about gnpa, NNPA for the. Yes. Yes. So in our meal book Our GNPA is 2.87% and in SME it is 1.49%.
Unidentified Participant
Okay. And the, the rest of the book. The two wheels and SPL is 3.45%. Two wheeler is 3.35% and as CV is 4.14%.
Darshana Pandya
4.14.
Unidentified Participant
Okay, great. So I mean structurally, yes. I mean the SME loans are, are good. So you’d want to, you know, go for that. But then the yield differential, I mean. One thing that I was also wanting.
Darshana Pandya
To understand, I mean with the entire, you know, rate cut situation and everything, how do you see the margin that is one and also the spreads. I mean your cost of borrowings are fair. And do you when do you see. The CRED rating happening? Upgrade with respect to and CARE is still at AA minus. So when do you see that coming. Up and view on how will you. Maintain the spreads and the yields given the current situation with respect to the. Competition being also high and you focusing. On a high, slightly higher ticket set because ideally the yield there will be comparatively lower than the other products. So as I said earlier, we will start with roa. The complete operations will be based whereby we generate anywhere between 2.75 to 3% ROA. Ideally we like to keep NIMS anywhere. Between 7 to 8% depending upon the. Configuration of the product and then taking into account 1 to 1.5% of credit cost and around 2.5 to 3% of operational cost. Once again that will vary according to the configuration of the product but ultimately we will end up anywhere between 2.75 to 3% ROA. So right now we are already at around 2.84 or 2.87% ROA. And aspiration to reach 3% should come from a rate cut or maybe more operational efficiencies and other factors what we can work upon unlike technology and all. So this is how we would like.
Unidentified Participant
To operate on a strategic intent. A quick data cable question you mentioned regarding your rejection ratio or the approval ratios. So could you also, you know, bifurcate the way that you give the, you know, asset quality segment wise product? Right. If you could, if, if product quality is not possible then overall what is your improvement in the improvement with approval ratio or, or improvement in the rejection ratio? Because the asset quality has been quite steady, I mean although it’s been inching up but minuscule compared to your peers. That is a very good thing that you’re doing. So you know, just wanting to understand how does the funnel work work down from logging to sanction to disbursement that way. Right.
Darshana Pandya
So when, when we see broadly if you look at Mel SME two wheeler where the numbers are on a positive trajectory and as I earlier remarked that approval ratios are getting better over there. So earlier during, during I would say when things were not that great, 2/4, 3/4 ago, the number had gone down to around 14, 15% kind of a number and now that has come up to around 20 odd percent. So broadly it is on an improving trajectory. And this is, this is right from you know, inquiry to final dispersal. So, so this is at a very initial stage, if we do initial screening that then, then this number goes up to 50, 60% but I’m talking about that an inquiry comes, we don’t know anything about the customer, we pull the bureau after that, then what’s the approval ratio? This is broadly across the product.
This is, this is the kind of number that we, that we enter. So this is a number that we keep tracking to get an idea and a feel of how the demand and customer quality and the balance sheet of the customers is behaving. But we don’t really stress upon this in terms of any performance measure or indicator to our team but a number that we keep tracking from time to time.
Unidentified Participant
Good sir, just your overall outlook on. The housing finance book. How do you look to scale it up? And a suggestion in if you could, you know, kind of Create a fact. Sheet or something like an Excel file that you know we could just pass. Through for the statistics of the whole ppt. Thank you very much.
Ankit Jain
That is, that is the fact sheet. Is under consideration and, and, and we will get back on that. That is something that the team is working upon. So hopefully we’ll get back to you on that. And housing as as mentioned earlier, slightly lower growth because we feel that these are long term loans. Again our average ticket size is around 89 lakh rupees. So we are working at the bottom of the pyramid kind of customer segment. So they are just recovering from some of the MFI and all of those stress and over leverage. So we went little slow this quarter but we feel that next two quarters after, within next two to three quarters the growth of the targeted growth of 30, 35% should start coming back.
So this 22 will keep on improving sequentially quarter on quarter 25, 27. That is what we are working upon and expecting. So overall outlook is very positive. The first target was 1000 crores. Might be delayed by a quarter or two then our commitment that we had put out. But other than that on track.
Unidentified Participant
Okay, thank you very much.
operator
Thank you. The next question is from the line of J from Nirmal Bung Institutional Equity. Please go ahead.
Unidentified Participant
Hello sir, thank you for taking my question. So just one question on. I’m not sure if you might have. I just want some outlook and color on how is your CV book right now? Because across all your peers CV are facing some steps. So can you just help me which help me which pockets do you see stress or which pockets are coming out of stress? So the CV book as we define it we are seeing some distinct stress.
Darshana Pandya
In Rajasthan 1 and 2 that are. Different areas and so is in MP 1 and 2. So we are seeing these two states under stress, Rajasthan and MP and we are deliberately going slow there. As for the early static pool analysis signals. Okay, so, and so what would be the collection efficiency for this book? As of now the collection efficiency for this book is around 88 to 89% with NNPA at around. What is NNPA in savings? GNP around 4, GNP at 4 and.
Unidentified Participant
NNPA at around 3.5%. Okay sir, and so do we. Is there any scope of cross selling for like if, for your CV book or I mean somewhere in your business? And if you can define what would be the, I mean if there’s a, there’s a cross selling opportunity, how much would be the loan on one particular customer? If we Go by that.
Darshana Pandya
So we, we are not very aggressive and keen on cross selling to our existing customer. So cross selling of our products say home loan to CV customer or CV to home loan customer. We are not very keen on those because whenever we take an exposure more or less, we have exhausted at least our internal limit in terms of the kind of exposure that we can take. What we are more open on is that if a customer after say 1824 months of repayment comes again for a top up or an incremental requirement of funding, that is something that we are more keen on in the same product, but that will be in the same product.
So that gives us two advantages. One is that retention number two, we have the track record that this guy has. This customer particularly has repaid successfully over a period of 12, 18, 24 months. And we can review the financials again and they then take a phrase exposure. So rather than cross sell, we are more keen on retention and giving top up after 1824 months.
Unidentified Participant
Okay, perfect. Understood. And so one last question if I can squeeze in. So currently we are being rated by CARE and acute. So is there any scope or other. Any talks with Crystal for, for a rating on any of your instrument?
Darshana Pandya
We have been dealing with care since decades now and we in the past. Have never done rating shopping going from one rating to other. So we would as of now continue. With the same rating agencies. That gives better understanding to the rating agencies and also to all of you on the consistency of the type of rating that is. So currently we would like to having multiple dating agency. They charge certain percentage of their limits. So getting multiple dating agencies increases the cost also.
Unidentified Participant
Okay sir, understood. Thank you and best of class.
operator
Thank you. The next question is from the line of Nadesh Jain from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity. I have a question on SME and micro enterprise loan. What percentage of this book is unsecured? And specifically in micro enterprise loan I see that ticket size is quite small at 80,000 rupees. So how are we originating these loans?
Kamlesh Gandhi
The micro enterprise origination is direct in nature where we have teams on the ground, we have feet on street on the ground who will move in clusters of the city, the business clusters of the city based on the geography. So we have identified around 200, 300 clusters. And they will move around, meet the customer, talk to them, understand the requirement and then try to convince them that if they have a requirement they can take a loan from us. So it is majorly direct. The direct FOS based origination in Mel SME Origination involves direct plus working with DSA partners as well.
So those are slightly larger borrowers. So over there we work with intermediaries as well from time to time to originate.
Nidhesh Jain
And what percentage of book will be unsecured in both these segments?
Darshana Pandya
SME secured in nature. SME will be secured against hard collateral like property or hypothecation of current assets or receivables. So it will be secured in nature. MEL will be unsecured in nature. Because of the ticket size that we have. But it is, but we take cover under sovereign guarantee schemes like CGFMU and cgd. Cgtms. Sure answer. From a scalability perspective in micro enterprise we would have already reached roughly 5,6 lakh borrowers. So from a scalability perspective, how do you see this book playing out from medium to long term perspective. So our MEL book is a mixture where we also work with certain NBSE partners. Our MEL ticket size is slightly larger than what you see average. But from the scalability point of view you can see that we have increased the ticket size limit up to 10 lakhs. So slowly and gradually as the balance sheet size grows, the idea is that our ticket size should also grow. So if you look at the trend on the ticket size also it is on a growing trajectory and going forward within next say two to three years, we anticipate that this meal ticket size should be closer to 3 to 4 lakhs.
That is what we anticipate and we are working towards that because of our. Ability to. Because of our ability to fund at a more competitive rate and. Also onboard more formal borrowers. And we are also tinkering and piloting with embedded finance product as well. So we are working with one payment company wherein, which, which falls under our meal program where the average ticket size is closer to one and a half lakhs. So we fund to these small shopkeepers, merchants of these payment, the. The mom and pop stores that are there and they are funded through their history with the payment company. So we are working on that as well. That will also slowly and gradually help us in increasing the ticket size.
Nidhesh Jain
Sure sir. Thank you.
Darshana Pandya
Thank you.
operator
Thank you ladies and gentlemen. We’ll take this as a last question for today. I now hand the conference over to the management for closing comments.
Kamlesh Gandhi
So thank you so much and it was nice talking to all of you. For any of the queries you can reach out to our IR department and we’ll be happy to answer those questions. Thank you so much.
operator
Thank you. On behalf of Motilal Oswal Financial Services limited. That concludes this conference. Thank you all for joining us today. And you may now disconnect your lines.