MAS Financial Services Ltd (NSE: MASFIN) Q4 2025 Earnings Call dated May. 02, 2025
Corporate Participants:
Unidentified Speaker
Kamlesh Gandhi — Founder, Chairman
Darshana Pandya — Director and Chief Executive Officer
Dhvanil Gandhi — Director
Ankit Jain — Chief Financial Officer
Analysts:
Unidentified Participant
Abhijit Tibrewal — Analyst
Shreepal Doshi — Analyst
Hardik Doshi — Analyst
Ankit Gupta — Analyst
Sarvesh Gupta — Analyst
Shubhranshu Mishra — Analyst
Aditya — Analyst
Bhavik Dave — Analyst
Presentation:
operator
Ladies and gentlemen, you have been connected for MAS Financials Limited conference call. Please stay connected, we will begin shortly. Ladies and gentlemen, you have been connected for MAS Financials Limited conference call. Please stay connected, we will begin shortly.
operator
Foreign. Ladies and gentlemen, good day and welcome to MAS Financials Limited Q4 and FY25 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. Conclude, 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. I now hand the conference over to Mr. Abhijit Tibhrawal from Motila Loswell Financial Services. Thank you. And over to you sir.
Abhijit Tibrewal — Analyst
Yeah. Thank you, Manav. Good afternoon everyone. I am Abhijit Tiberiwal from Motila Loswal. And it is our pleasure to welcome. You all to this earnings call. Thank you very much for joining us for the Mass Financial call to discuss. The Q4 FY25 earnings. To discuss the company’s earnings I am. Pleased to welcome Mr. Kamlesh Gandhi, Chairman and Managing Director. Mrs. Darshana Pandya, Director and CEO. Mr. Dwanil Gandhi, Executive Director. Mr. Ankit Jain, the CFO and the. Rest of the senior management team. On behalf of Motila Loswal, we thank. The senior management of Mass Financial for. Giving us this opportunity to host you today. I now invite Mr. Gandhi for his opening remarks. With that over to you sir.
Kamlesh Gandhi — Founder, Chairman
Thank you Abhijit and good afternoon everybody. I’m very happy to connect to all of you once again. While you must be having the information on the numbers from the presentations and the press release. But let me take you through some of the headline numbers while Darshavin will take you through the detailing and then we’ll be open for question and answers. So friends, 2425 the year gone by we could close at around 12,850 crores on a consolidated AUM. And very happy to share with you that we crossed an important milestone in profitability of more than 300 crores on a consolidated basis and also on a standalone basis.
And this is an important milestone in the journey of Mass as you know that we have always believed in a fundamentally very strong growth. So if you see from the point of view of the quality of the assets and be it from the capital adequacy, the two of the very important marker for the strength of the balance sheet the capital adequacy stands at around 24.7% with around Tire 1 capital of more than 22% and in terms of next stage 3 assets at around 1.62% which is maintained in the last quarter. I must share here that teammaster endeavored very hard to get these results just on.
I will take you through asset liability operations HR briefly for you to understand the strategic intent of the company going forward. While many of you are aware that we are a company who have more than now close to 30 years of existence, we’ll be completing 30 years on 25th of of May, that is this month only. So if you see the presentation, the 120 quarters of consistent performance across cycles and from a humble beginning of 2 crores, we are currently at this 12850crores and at a very strategic inflection point. Doing the same thing forward will take the company to a very formidable size but very importantly while maintaining the fundamentals of the company.
So as you know the capital Adequacy is around 25% net stage three is 1.62%. We have maintained this throughout the journey and will continue our endeavors on the same line. In terms of the asset growth we could register a close to 20% growth on standalone and concentrated basis and on a concentrated basis we could register an increase in pat by close to 23% and also on a standalone basis on a yearly profit is more than around 20%. On a quarterly basis we are close to around 19 19.5% in AUM and around 19% in profitability. As shared with all of you that the priority this year will be risk management and profitability rather than just the AUM growth.
So we are happy that we could execute on the lines of our strategic intent on the important assets. What we create the loan assets is the msme, the wheels, two wheeler and commercial vehicle and also to an extent some portion of used cars and also personal loans has been introduced since last one and a half to two years. So we’ll continue to focus on this asset. All the asset class have performed satisfactorily and we’ll continue to focus on all the assets with SME and this being the key driver for the growth this year as we envisage and once again we personally believe that this year we’ll be in a position to register growth anywhere between 20% to 25%.
It’s a range bound guidance that we always do because we always believe that it is always prudent to discover growth rather than determine growth and grow at any cost. So while the fundamentals will be maintained, the endeavors will be there to grow anywhere between 20 to 25%. On the liability side, while Ankit will take you in detail, we as usual had more than adequate liability. If I share with you current for the current year also we are almost having a closer of Q1 and Q2. We are just awaiting like everyone in the economy that how the reduction in repo rates are passed on to the enterprises and to the to the user of the capital at large.
We also await that and when optimistic that we will also get the benefit of the same this year. On the very important part which I’d like to share with you on our technology front on technologies as shared with you earlier, we have already introduced bien ML alloys and VRE enable credit processes. We operate on built and operate philosophy. We have a team of more than 100 people in our technology department and that has worked very nicely for us. Given the size and given the requirement which is constantly dynamic in nature, the in house technology team is really helping the company to gain in efficiency, scale and speed.
In terms of distribution, we could not add as many branches and that was a deliberate decision of the company. Looking at the overall scenario and the stress going on in the economy, we thought it prudent to limit it to 204 this year, that is in 2425 going forward, presuming that the things will be normalized within a quarter or two. We anticipate to add close to 50 branches this year and that will once again set our path for a higher retail distribution as compared to our RSA distribution. While our distribution through NBSS has held on excellently in terms of growth and in terms of asset quality, both in terms of HR, we continue to be a strong 4200 team once again with a very stable top and middle level management.
We have personally experienced and are of the view that a stable top and a middle level management adds lot of value. In realizing the strategic intent of the company, we are fortunate to and by our policy of collective responsibility as I always share that we fail and succeed together. Success is not attributed neither the failure attributed to one person or few persons. We understand that we have to create the right ecosystem within the organization to succeed and to realize our strategic intent. So the HR philosophy on this line will be carried forward and we intend to build up a team which will add value to all the stakeholders.
In terms of the housing finance company, the subsidiary, we could register a very healthy growth of 28% in AUM and corresponding growth in PAT of close to 26% while maintaining a very benign asset of close to 0.7%. In terms of our next stage 3 asset. Despite of the fact that our average ticket size is sub 10 lakhs and we sell to the middle and the lower income group of the society. But once again on the extending credit we it is due we have been working in this company also and we are very confident that this year will register a growth anywhere between 30 to 35%.
Once again a range bound guidance which will be decided from time to time as we go through the year in terms of asset quality and profitability. Happy to share with you that we have declared a dividend. The final dividend of 70 paisa per share. That takes the total dividend to 17% on the face value of share. One rupee was declared in the last quarter and the total payout amounts to 10%. In consonance to our policy of applying back 90% of the profit back in the company and 10% being distributed as dividend going forward we maintain our growth guidance of anywhere between 20 to 25% while maintaining benign quality of assets.
While maintaining ROAS anywhere between 2.75 to 3%. And we are confident that to achieve that in medium to long term. I met many of you personally during our QIP race and I had shared with all of you our intent to be close to 20,000 crores in the next three and a half to four years. We are well on track towards that growth with sufficient capital at place through internal accruals and already the capital raised last year. So this is a brief commentary from my side. I would request Darshana then to very briefly take through the numbers so we have sufficient time for the participants for that for the query.
Thank you. Over to you Dashnavan.
Darshana Pandya — Director and Chief Executive Officer
Thank you sir. Good afternoon everyone. So as shared that we have crossed the milestone of 12,000 crore and on consolidated basis our AUM stands at 12,868 crore. Riffat is 83.40 crore for the quarter ended to 31st March as compared to 10,721 crore AUM and 70.10 crore of Pact. If we look at which is 20% growth in AUM and around 19% growth in Pact for the year ended. For the complete year Pact stands at 314 crore which is growth of around 24% over the previous year. If we look at the standalone numbers our AUM is 12,100 crore and PAT is 80.82 crore for the quarter ended 31st March as compared to 10,125 crore and 68.05 crore.
AUM and PAT respectively as on 31st March 24. So if you look at the total income numbers there is a growth of 26% from 330 crore to 417 crore of total income. Profit before tax grew by 19.52% from 91 crore to 109 crores. Profit after tax there is a growth of around 19% from 68 crore to 81 crores. These are the numbers on quarterly basis. On yearly basis the total income grew by 23.69% from 1229 crore to 1520 crore. Profit before tax grew by 23.84% from 331 crore to 410 crore. Profit after tax due by 23.48% from 247 crore to 306 crore.
If you look at the AUM breakup, our micro enterprise loan grew by 9.31% so it stands at 4,793 crore as compared to 4,385 crore in March 24. SME loan book is now 4,502 crore which is 21% growth. The last year number was 3,734 crore. Two wheeler loan book grew by 17% from 670 crore to 785 crore. Commercial vehicle loan book is 979 crore. It was 747 crore last year which is 31% growth in commercial vehicle loans. Salaried personal loan is from 588 crore to 1039 crore. That is 76% growth in book. So this is on this growth we can see on the lower base of aum.
So it is relatively new product for us. Overall configuration 77% book is of MSME. 15% is coming from our wheels portfolio and 8% is our salaried personal loans. And if you look at the growth contribution, 60% growth contribution is from our MSME segment. While other products also contributed meaningfully. Coming to the quality of the portfolio, our gross stage three asset is 2.44% as compared to 2.41% in December 24 and net stage three asset is 1.62% as compared to it was 1.62% in December 24 and we still continue to carry management overlay of around 17 crore 60 lakhs which is 0.818% of our on book assets.
Now coming to the housing performance, our growth in AUM in housing book loan book is 29% from 596 crore to 768 crores. Total income on quarterly basis grew by 26% from 17 crore 68 lakhs to 22.24 crore. Profit before tax there is a growth of 24.46% from 2.62 crore to 3.26 crore. Profit after tax grew by around 27% from 2 crore to 2.64 crore. These are the numbers on quarterly basis. Now coming to the yearly numbers. Asset under management it’s 768 crore. Total income grew by around 30% from 62 crore to 81 crore. Profit before tax grew by 26% from 9 crore 58 lakhs to 12 crores.
Profit after tax grew by 26% from 7 crore 58 lakhs to 9 crore 56 lakhs. Here also our quality of the portfolio remains stable and strong. The gross stage 3 asset in our housing loan book is 0.94% as compared to 0.96% in December 24. And next stage 3 asset is 0.65% as compared 2.7% in December 24. Here also we continue to carry the management overlay of 3 crore 30 lakhs which is 0.58% of our on book assets. So. So this was all about the numbers on performance. Now I’ll request Ankit to take us through capital and liability management.
Ankit Jain — Chief Financial Officer
Yeah. Thank you, ma’am. In terms of capital liability management, a company through its efficient liability management was able to maintain as its liquidity on balances of around rupees nine hundred crore and unutilized tax credit facility of around 350 crore. In addition, the company as of 31 March has sanction on hand to a tune of more than 3,000 crore in the form of various instruments like term loan, ncd, Direct assignment, Gold lending. In the last quarter company did around rupees 725 crore direct SMN transaction. We further have around rupees 1,700 crore in the form of direct assignment and co lending sanction which will be utilized in the coming next two quarters.
The out book percentage to the total AUM stands at around 20%. We as a company aims to maintain 20 to 25% of AUM as off book. Through direct SML and co lending. The available capital facility is around rupees 1400 crore. Out of which utilization level generally maintained at 70 75%. And that portion is kept as an equity buffer. We raised more than 1,000 crore term loan during the quarter with an average maturity of three to five years further we have more than 1400 crore sanction on hand in terms of term loan and NCD in terms of capital market we raised rupees 325 crore NCD during the quarter in terms of asset liability maturity pattern we have well placed whereby there is positive mismatch in all the community buckets and as told miquidity very fit.
The capital industry remains strong at 24.72% with TMN capital of 22.58% debt equity of the company is at 3.37 times the cost of borrowing for the quarter was 9.81%. The incremental cost of borrowing during the quarter was 9.60%. VNU says that due to recent rate cut by RBI and further expected rate cut the cost of borrowing to come down between 25 to 35 basis points for the whole financial year 2526 through our journey towards AUM of rupees 20,000 crore our strive is to further diversify the sources of fund. We plan to raise funds through ECB’s external, commercial borrowing foreign and increase capital market exposure at competitive cost.
So this is on the capital liability management and now we are open for Q and A rounds. Thank you.
Questions and Answers:
operator
Should we begin the question and answer session?
Abhijit Tibrewal
Yes please.
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press Star and two Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. We have our first question from the line of Sripal Doshi from EQS Securities. Please go ahead.
Shreepal Doshi
Hi sir. Good afternoon and congrats on a decent set of numbers. So my first question was on credit costs. So while margins have expanded and even operating profit has been pretty good but the credit cost has also gone up for the quarter and I think that is getting allocated to stage two and stage three PC are increasing. So what is the thought process behind this? The reason behind this?
Kamlesh Gandhi
As you know that we follow ACL method during such time where the portfolios are under stress to a certain extent in our case it has been very marginal. It is reflected on the ACL calculations. So basis the ACL calculations and taking a conservative view we have increased our PCR by 2% this year even on the stage 3 assets and stage 1 and stage 2 is as per the calculation based out of ACL calculations which is taken on the basis of last 5 years average.
Darshana Pandya
Yes sir. And forward looking parameters are also there.
Kamlesh Gandhi
Including the forward looking parameters.
Shreepal Doshi
So sir, but if you look at our stage 3 GS3 number is broadly stable. Even the bucket device details that we give 1:1 to 90 DP. Even that is broadly stable. And however, last quarter you had highlighted that we are staying away from sectors like textile and fmcg. So is it something that you envisage in that in our pool in our portfolio already creating some issues and therefore we are increasing the buffers. And how do you see these two sectors incrementally doing for us? Have you seen some moderation in the.Stress
Kamlesh Gandhi
when we calculate ecl? There are macro factors also taken into account besides the portfolio quality. So taking into various aspects of macro and looking at the overall stress in the environment, the macro factors will contribute to the higher ACL provisioning. Withstanding the fact that might not be warranted for our portfolio only on the basis of the expected losses. But the expected losses also have future macro events. And the way the volatility is there right from the political front to the behavior of the portfolio. And we all know the the areas of vulnerability. So that is all taken into account in ECL and that is what will increase that marginally.
And on your question of these two sector of textile and what was the other one? So as we have discussed earlier as well that these two sectors were highlighted for us from the risk and rate angle that here we should be cautious. So incrementally we have slowed down the business in this and this decision was taken based on some stress that we were already seeing on the past portfolio that we had created. So yes, incrementally we are very cautious on building these on these sectors. But on the past portfolio, whatever stress will come is something that we’ll have to manage and take it forward.
But incrementally we are going slow here.
Shreepal Doshi
Okay, so incrementally also we’re going to be cautious in this segment. I thought there were some green shoots. So there is a thing of that nature is what you are highlighting.
Kamlesh Gandhi
We know we see that at least for next till June. And we will review it again because we have to give it after the changes are done. We have have to give it some time to see how the collection patterns are. If the collection improvement is there in the past portfolio and the world macro is looking positive, then within one or two quarters we can look at opening up a few of these sectors. But for Q1 they will be under. They will be still under the watch.
Shreepal Doshi
Got it. Just two more questions. One is on the retail channel partner. So that I mean the thought process was to bring it down going ahead. However if you look at this quarter or for the year end it is closer to 36%. So how do you see it moving in 26, 27 time period the share of retail channel partner book.
Kamlesh Gandhi
So that is as I shared in the opening comment that this year we could. We were cautious in opening new retail branches. So we were around 189. We could add on.
operator
Ladies and gentlemen, please stay connected. The management line has dropped. We’ll reconnect them. Ladies and gentlemen, thank you for patiently waiting. We have the management back with us. Over to you sir.
Kamlesh Gandhi
So am I talking to Sripal now?
Shreepal Doshi
Yes sir. You’re audible.
Kamlesh Gandhi
So Sripal, I’ll start sharing with you that this year we could not open the branches as much we would have wished to. And that was a very conscious decision on the part of the company. While our medium term and long term objective remains that within next two to three years this will be anywhere around close to 30% or less. Maybe in a year or so it might. It will not be very linear always. It can be sometimes up and down but in medium to long term it will be less than 30% because of the fact that our retail distribution will increase while this distribution has also behaved very nicely for us.
Shreepal Doshi
Sure. One last question was to Amit, just one question there. On the term loans that we’ve raised during the quarter, so what is the differential on the cost of borrowing versus let’s say what we would have done in two Q3Q time period.
Ankit Jain
Cost of borrowing for the quarter was 9.81 and the incremental cost of borrowing was 9.6 around. So whatever first term loan which you raised is between 9.5 to 9.6% whereby visa was. If you compare last quarter it was between say it was between 15 to 25 basis point mode.
Shreepal Doshi
Got it. So that is the benefit that we are seeing in the margins as well. Right.
Ankit Jain
The banks also despite there’s not been a MCL cut or a very few banks have cut MCL last month but they are, they are able to pass it through space cut.
Shreepal Doshi
Okay. So going like in. Let’s say in one Q when we will have larger number of banks passing on the mclr, you know, changes. So then how much more benefit do you season.
Ankit Jain
The passage of MCLR cut will be on a lag basis because the major of the loan will be linked to one year mclr. So as and when it is readjusted then only this will pass though we will also negotiating with various banks for cutting the spread. And therefore we have given a guidance that by for the whole year we see that despite 50 basis point already cut and further rate cut expected by the RBI. We envisage that 25 to 35 basis point overall cost of borrowing coming down for the whole year.
Shreepal Doshi
Thank you sir. Thank you so much and good luck for the next quarter. Thank you.
Ankit Jain
Okay, thank you.
operator
Thank you. We have our next question from the line of Hardik Doshi from White Whale Partners. Please go ahead.
Hardik Doshi
Yeah, hi, can you hear me?
operator
Yes, please.
Hardik Doshi
You know I just want to ask regarding the salary personal loans. You know that is a segment that has obviously grown very quickly over the last few years. I remember a couple of years ago. We were talking about capping this at about 10% of loan book and then re evaluating. We just wanted to check what the thought process is now going forward on this segment.
Kamlesh Gandhi
It remains the same in medium term. We don’t intend to increase it more than 10%. We’ll wait and watch as to what how the portfolio behaves. Salaried personal loan was introduced because of two basic strategic intent. One is to be present on the consumption side also. So as we increase our asset side that can help us to build up assets assets and second is we can get some alpha in roas. So if both the, if it stands the litmus test of both we will once again revalue it. But currently it stands at 10%.
Hardik Doshi
Okay. And how many fintechs are we tied up with now? And you know, how concentrated is the, you know, our relationships on this fintech side from a sourcing perspective?
Kamlesh Gandhi
We are tied up with around 4 to 5 fintechs as we talk to you right now and we are evaluating their performance from time to time. They are strictly supposed to originate the business as per the credit screens given to them and that is closely monitored. So currently there are around four to five fintechs with whom we have tied.Up
Hardik Doshi
and it would be fairly diversified among these four to five fintechs in the sense that not one person is accounting for more than 50% let’s say of the.
Kamlesh Gandhi
They’re well diversified. But it all depends upon the level of comfort we have with each of fintech. But we’re well diversified.
Hardik Doshi
Okay. Okay. And I think you know, the last couple of quarters we indicated that growth could kind of slow down because we were cautious on in terms of the asset quality. Now it seems like you will for the next, for the coming year, you’re comfortable in the 20 to 25% range. So is there an improvement on the ground? You know, what are the trends you’re seeing?
Kamlesh Gandhi
If optimistic, we might think that majority of the problems are behind us. Still a quarter or two, we need to watch out very closely. So we have demonstrated our capabilities to grow anywhere between 20 to 25% in the past. Much on the higher side, that is anywhere between 23 to 25% in situations like this, we remain at the lower end of the spectrum. So while it will still take around a quarter or two for us to gain that confidence to be on the higher end of the spectrum, but let us keep our finger crossed, if things improve fast, we can be at the higher end of the spectrum but confident to be in range bound between 20 to 25%.
Hardik Doshi
Okay, got it. All right, thanks so much for your time.
Kamlesh Gandhi
Thank you.
operator
Thank you. We have our next question from the line of Ankit Gupta from Bamboo Capital. Please go ahead.
Ankit Gupta
Thanks for the opportunity and congratulations for decent set of numbers in tough times. So my first question was on channel partners, especially on the microfinance side. Now you did allude to some, you know, challenges on the SME and you will evaluate or reevaluate, you know, how the situation is by end of Q1. So on the, on the microfinance side, the lending that we do through our channel partners, so you know, where do you see the cycle? Are we, you know, have we bottomed out in terms of delinquencies and you’re seeing some improvement in terms of collection efficiencies and all with your channel partners.
Kamlesh Gandhi
So in terms of channel partner and if you are talking about micro finance in particular, since one and a half year we have been very cautious on partnering with my MFIs. So if you say currently also our participation with MFI is very negligible because we were not very confident the way the credit was dispensed. So if we talk about our MFI channel partners, their contribution isolated, still see that will be very limited. We would like that sector to once again have the credit discipline, the credit discipline, what we expect from them and then the demonstration of the portfolio before we can really do some more business with them.
But currently we are very cautious and we are doing with very select few and we don’t see that going up in next quarter or two.
Ankit Gupta
And have you seen some improvement on the ground with some of the lending, some of your lending partners?
Kamlesh Gandhi
The improvement is twofold. The portfolio which was created Very aggressively. The consequences of the same has to be borne by them through write offs. Or. Through write offs and just reducing the profit or bringing in more capital. But post their understanding of the ground level and post the tightening of the credit screens. The newer portfolio. Now this bifurcation the way it used to happen that the portfolio during COVID and portfolio after Covid. Here also it is portfolio before tightening and after tightening. So the portfolio after tightening is behaving nice for them. As for the information we have.
Ankit Gupta
On the, on the credit cost side, you know, we have seen we have cautiously taken some incremental provisioning on the higher provisioning. So for FY26, do you think this the higher credit cost will continue or you think it will taper down a bit? Maybe if not in the first half, then second half.
Kamlesh Gandhi
Difficult to assign some numbers to that. But if I, if I share with you that the credit cost, as we always have shared with all of you is that our commentary has been that it will be anywhere between 1 to 1.5%. It will be range bond. And I think that will, that will be within that range only. So here also if you see on the, if you see the credit cost on the closing AUM it is around 1.0 1.06% on an, if you take, if you average it out it is 1.17% as compared to last year of close to 1.04%.
So we think this will be range bond, but we will be conservative.
Ankit Gupta
Okay.Thank you.
Kamlesh Gandhi
Thank you.
operator
Thank you. We have our next question from the line of Sarvesh Gupta from Maximum Capital. Please go ahead.
Sarvesh Gupta
Good afternoon sir and congratulations for a steady set of numbers. The first question on this growth guidance of 20 to 25% that is excluding the housing finance company. Right.
Kamlesh Gandhi
Housing finances. If you see that even I grow my housing finance at 35% it is not going to move the needle much on the concentrated basis is because of the scale because we are talking about housing finance reaching from say 800 odd crores to maybe thousand 1100 crores. So if we take a 30, 30%, 35% growth it will be anywhere between thousand to 1100 crores against our AUM on standalone going from 12,100 crores to close to 14,750 crores or so. So it’s not going to move much needle. When we talk about 20 to 25% it is more in at the standalone business and housing finance.
We would, we would endeavor very hard for a growth between 30 to 35% in our housing Finance company both put together will be the same as the standalone numbers. Very close to standard numbers.
Sarvesh Gupta
Understood. And sir, this year the environment was bit challenging. So you tone down your growth rates but did you see from of that in your housing finance also? Because there also I think the AUM growth slowed down meaningfully from I think 44% in FY24 to 28% last year. So did you see some impact there or why did it slow down meaningfully in terms of the growth?
Kamlesh Gandhi
If you see our housing finance companies or the products across parent the common thread is we sell to the lower income and the middle income group of the society. And that and the challenge in question is the over leveraging of this sector. So that has percolated to the housing finance business also. I personally believe that this is also not the right time to grow housing finance at a very brisk or an exponential pace. What 28% we could register was on a lower growth. Had I been say 10,000 crore here, I would have not grown more than 20% here.
Also looking at the current situation. So you are right in a sense to gauge that here also we were cautious in our growth.
Sarvesh Gupta
Okay. But overall sir, how do we view the situation? So we toned down the growth and the branch expansion last year. But do we see this getting incrementally better or is the situation the same? How do you assess that on the ground situation for the segment of the borrowers you are lending to see?
Kamlesh Gandhi
If you think over 30 years we have seen so many cycles. Cycle means that once something goes down it has to go up, Right? So we have been down since last two years and by the tenure of the loans and because of the various factors and hopefully there are some positive factors like reduction of rate of interest, steady economic growth and all. We would say that we have all reasons to believe that within a quarter or two we should see some normalization in the credit behavior of the borrowers and that should give us the confidence.
Lending is all about the confidence and the lesser you are wise in the hindsight and more you are wise in the foresight that safeguards the interest of all the stakeholders. That is what we have firmly believed in. So I think that as the name suggests cycles we will be at the end of the cycle within next to one or two quarters things should start normalizing giving us the confidence and we being at the higher end of the spectrum of the range given of 20 to 25%.
Sarvesh Gupta
Okay. Now sir, this quarter I think you had some headroom in your NII because of the equity fundraise so given that we are also seeing, you know, high OPEX growth as well as credit cost growth, so you know, these higher OPEX growth and credit cost growth, were they more discretionary in nature that you had some headroom in nii, so you sort of used it for doing more one time investments in OPEX and higher provisioning, or does it depict the picture of the requirement as it was for the business this year?
Kamlesh Gandhi
It’s a combination of both. When we take into account our annual budget, when we know that we have some more money to spare and more money to invest, invest for the future, that is done. And secondly, there are certain things which I would not have helped irrespective of whether I would raise capital or not, that is provisioning and the macro factors. And as I shared with the earlier caller, also that the provisioning increases more of the macro factor taking into account as far as ACL is concerned, rather than because of the behavior of our own portfolio.
So it’s a combination of both.
Sarvesh Gupta
And the final question on the nims. So when the rates were being raised, we did not see much of an impact on our NIMS because of the MCLR sort of a breakup in our liability side as well as other things that we did. So in a rate cut environment, do we see, you know, maybe one year, two years out our means to be better or do we see that it should remain the same given that we did not sort of have an impact when the rates are going up?
Kamlesh Gandhi
So when the rates were going up, we had an opportunity to reprice the loans because of the shorter tenure of the loans was one of the factor where we could maintain our NIMs. Once again, just as the reduction does not happen immediately, the increase is also does not happen immediately. It is MCL are linked, so it is a lagged effect. So in our case, in the borrowers whom we sell, a 25 basis point reduction in my cost of fund does not necessarily mean that we are going to pass on debt to the borrower and it does not move the needle for them too.
So a 25 basis point, as Ankit alluded to in his earlier conversation, that presuming that there will be further rate cuts and there will be a lagged effect during the year, we envisage that can be a 25 to 30 basis point improvement in borrowing cost. And provided we preserve all those increase NIM into and factor it into profitability, the NIMS will increase.
Sarvesh Gupta
But then in case of a large rate cut over, let’s say 3, 4 times 25 basis points then ultimately we’ll have to necessarily pass it on, right? Or do we expect some savings to be kept at our end only?
Kamlesh Gandhi
So when it is substantial it has to be. But as I told you that all the players are sailing in the same boat as we are. They are. Majority of them are on MCLR based borrowing. So everybody will take their own time to implement the rate cuts. But if there is an sustained rate cut, say for example percentage that I have now, MCLR being retained, it has been passed down and transmitted to MCLR 100% and everybody is borrowing at a lesser rate, we’ll be happy to pass on to the borrowers.
Sarvesh Gupta
Okay, thank you and all the best.
Kamlesh Gandhi
Thank you.
operator
Thank you. We have our next question from the line of Sir Bhanshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Kamlesha, Good afternoon. Thank you for taking my questions. The first part is on micro enterprise loans. It’s become a smaller part of the AEM as such, although it was our mother product. I understand we have been growing in SME but how do we look at it going forward in 2627 and what proportion of our loans are we sourcing from our NBFC intermediaries? The second part is personal loans. There’s been an asset quality reports especially with fintech origination. So how are we hedging the asset quality going forward especially with FinTechs? The third is there’s a new co lending draft guidelines which are out.
So are we thinking about anything in co lending in CLM1 or CLM2? How do we think about co lending going forward? Thanks.
Kamlesh Gandhi
Good afternoon. On the first question we have said it many times in the aura then it will further reduce and it will be replaced by the SME portfolio which we personally think is the right way for us as we increase our size. On the second part on the mel, I think usually by the partners in as far as Mel is concerned around around 40 to 45% is contributed by the partners. And in terms of your question on spl, we have been very cautious. If you see the SPL portfolio, forget about the percentage on a lower base.
But we have been very cautious on two counts that we are extending loans based on very strict credit vision and number. Second, we have kept for ourselves a guardrail that we are not going to have more than 10% of this business in medium term as we see right now. And through the fintech partners they have to operate as per our credit screen. We get an advantage of the DLG guidelines of having a question of 5%. So we see to that that the credit screen so behaves that that is within the our credit screens plus the losses built into the price plus 5% DLG makes us manage the risk in a more comprehensive manner.
With a risk of sounding immodest I can tell that we are crushing the risk there rather than managing the risk there. And co lending I think is once again the guidelines are work in progress. If I take take you to the process of co landing it was only CLM1 in the beginning and then because of the operational problems CLM1 could not pick up and hence CLM2 was introduced Prima facie as it appears from the guidelines they are more insisting on CLM1 while there has been adequate representation from all of us that if this has to gain some scale CLM2 is equally important.
But let’s see how it’s how it pans out. And we’ll be constantly endeavoring for to have good partnership with the banks where we align strategically when we align operationally. While we will not target for a particular amount to be raised through co lending this year. One follow up question on the personal guardrail what are the specific ticket sizes and foils that we operate in and what is the ticket size below which we don’t go or above which we don’t go? In personal loans and the FOIA what are the ranges for foyers and ticket sizes and if we have specific negative geographies or negative PIN codes we have specified to the pinpoint players.
So starting from the last point, depending upon the early warning system that we get from time to time and on the on terms of foil we we see we have it. We have a different way of calculating FOIA whereby we don’t just see the fixed obligation to income ratio but we also see the total expenditure depending upon the family size and depending upon the income the FOIA can range anywhere between 30% to 50% depending upon the size of the income and the ticket size. Our average ticket size is around 1 lakh 75,000, 135,000 and usually we are not comfortable going above 5 lakhs and below 75,000.
Shubhranshu Mishra
Thank you so much and best of luck. I’ll come back.
Kamlesh Gandhi
Thank you.
operator
Thank you. We have our next question from the line of Aditya from Security Investment Management. Please go ahead.
Aditya
Hi sir. Thanks for the opportunity. Sir. We had slowed down the loan growth considering the tough credit environment previously. But sir, on the flip side, what factors would you be looking at when you decide to change the stance and you know, press the pedal to accelerate Growth some qualitative understanding if you can give that would be helpful.
Kamlesh Gandhi
I would, I would like to share my views. Not the right word if I use the word educate but let me tell you that being in the lending business for 30 years at 20 25% loan growth results into doubling your AUM average three to four years and that’s a tall order. So if any of the company leave aside mass in any of the lending company growing between 20 to 25% has to be understood in the right perspective because just to share with you to grow AUM is the easiest thing in lending business but to complete the cycle of profitability and maintaining the assets is very important.
So I would, I would not quite agree that we have slowed it down. We have calibrated to a certain extent. If it is 19.5 or 20% or 22% or 2% here or there is not going to make any difference. And as I’ve shared earlier also that we are not going to get, we are not going to get over excited by any of the positive happenings in the market because after all we have to manage the portfolio anywhere between two to seven years. So if that things are good right now but I don’t know what is going to happen three years hands so my capabilities to handle the portfolio across cycle will be the guiding principle for my loan growth.
So we continue to maintain that 20 to 25% for any lender irrespective of what we do at MASS is a very good number. I would request all of you to understand this in the right perspective and as I’ve shared with the earlier callers also that if we find the situation conducive we’ll be at the higher end of the spectrum if we are picking up 23 as the mean if we think that the situation are still challenging we’ll be at the lower end of the spectrum as we are right now that is around 20%.
Aditya
Understood sir. Secondly now if I look at this line item gain on financial gain from assignment, you know that has increased by more than 20% this year. While I don’t think our assignment book AUM has increased to the same extent. So if you just help us understand why is that the case.
Ankit Jain
So the GM assignment is on the transaction done and not on the outstanding and therefore we can’t match it with the offending of books. So suppose last year we would have done a 2000 crore direct assignment but this year we would 2500 crore and therefore the you know, assignment will differ.
Aditya
Got it? Got it. Understood.
Kamlesh Gandhi
We are also circumspect of the fact that we bring the assignment income to a to that level which is very close to our amortized income. So we don’t, we don’t get into any loop.
Aditya
Understood. But other assignment transactions which we are doing, are they now coming at a lower cost than those that we did previously?
Ankit Jain
So. Right not. But we see that as the MCLR reduces for majority of the transaction done with PSU bank whereby the loans qualify as a private sector lending and retail lending for them, we see that as the MCLR comes down, the spread will improve.
Aditya
Understood? Got it sir. Secondly, on this OPEX cost which you mentioned briefly to one of the participants, just wanted to understand, you know in spite of lower branches being opened this year and higher shares from MBSE Partners, our OPEX to OEM has still inched up, you know from around 2.1 2.2 to 2.4 2.5% levels this year. So just wanted to understand what is leading to these higher costs and where do you see the OPEX orum ratio settling for us?
Kamlesh Gandhi
We can share the details with you offline but nothing out outlier in this we invest in technology from time to time. We invest in personnel from time to time the number of personnel have increased from in numbers from as it as compared to last year year. So there’ll be number of factors which can cause a slight increase in the operational cost. But overall on the yield metrics front we are not worried on that being spiraling out out of control.
Aditya
That I understand. But sir, do you expect you know OPEX cost, the growth in OPEX cost to be higher in higher than the EUM growth going forward as well or do you think both of them converging?
Kamlesh Gandhi
No, it will be higher as we change our model more towards retail and as we invest more in technologies and a few of the other factors. So it will be slightly higher than the AUM growth.
Aditya
Understood? Understood. And sir, what was the write up amount for this quarter and the PCR which we have increased this year? Do you expect PCR to increase going forward as well?
Kamlesh Gandhi
The detailed right of amount will be shared Ankit you can share the detailed write off amount in for the benefit of others to get the chance. And secondly the PCR increase will be dependent on so many factors on the behavior of the portfolio which we understand understand is under our control but also as I shared earlier on the macro parameters which is not under our control. So this will be the two factors under which the PCR will be calculated under the ECL method as mandatory Under Indes.
Aditya
Understood, sir. I’ll join back in.
operator
Thank you. We have our next question from the line of Bhavik Dhave from Nippon India Mutual fund. Please go ahead.
Bhavik Dave
Yeah, Hi sir. Sir, one question is on the macro that you’ve been talking about. You mentioned that maybe 1h would be a bit more challenging and then things might improve. Just wanted to understand your thoughts on what data point are we looking at that makes us believe that maybe second half will be better than the first half? Anything that gives us confidence. Because in the first quarter we’ve had it, we’ve added some provision to stage one, stage two and we’ve seen increase in 30, 60 and 60, 90 buckets. What exactly gives us the confidence or what are we tracking in terms of data points to show that maybe 1h will be the end of it and 2h will be better?
Kamlesh Gandhi
Macro contains so many aspects, but from the point of view of the customer behavior on the Internet, on the economy as a whole, the customers who are under stress will be completing the life cycles of the loan by H1. So what all stress had to happen would have happened. What all provision and losses the companies would have taken would have taken. And the early green shoots are that the new loans which are generated with prudence of extending credit where it is due, those are behaving nicely. So it is fair to assume that because of the aggressive lending, this class of the borrower across segments and across sectors registered a higher delinquencies.
And that is what led to the situation what we are into right now. So the new loans are behaving. So if the prudence is maintained, we will get an advantage of an industry level stress being gauged at a lower rate. That will be one major macro factor. Second is a continuous indication that the interest rates will reduce, whereby we had no such few quarters back, that the interest rate will reduce, maybe offset by few of the events worldwide. But internally we see that the interest rate will reduce. And third is a lot of push of liquidity by the Reserve bank of India with an intent that the growth should not suffer.
With our continuous interaction with various regulators and government agencies, we have made to understand that there will be sufficient liquidity in the system so as to ensure that the growth is not suffered. It is incumbent on the lenders and various players in the ecosystem to exercise prudence and do their work. So these are the few of the positives which we think should give us a positive sign on macros.
Bhavik Dave
And that means that it’s fair to assume that what we provided for stage One stage two, from here on, even if they maybe slip to stage three, the credit cost that we took this quarter should be broadly at the higher end. And then from here on, as we look into the first half and maybe one or two quarters and then going into second half, that number should start trending downwards. Is the fair assumption right on a percentage credit cost
Kamlesh Gandhi
that the range bond. Will be one to one and a half percent of credit cost as we envisage right now that we maintain through cycles also. So I think that should stand understood.
Bhavik Dave
And second question is sir, on the margins, you alluded to one of the previous participants that you’ll be able to maybe improve your margins considering your cost of fund benefit your customer segment does not need, maybe you might be able to hold on to your yields even in a falling interest rate environment. Considering the 7,500 basis point yield, sorry, repeat cut, do you still think that you will be able to maybe maintain our yields in some sense, considering the competitive intensity in the market is reasonably high even at our segment, do you think we can maintain margins in and around this range or you think, still think that an improvement in margins from here on a 20, 30 basis point improvement over the next 11 1/2 year is possible?
Kamlesh Gandhi
As far as the competitive landscape is concerned, as I shared earlier that each player will have a lag defect on a different way, but majority of the borrowing is done MCLR. MCLR is anywhere between 3 months, 6 months, 12 month basis reset MCLR. So if anything, any repo rate cut right now, and if an MCLR is reduced today itself, the first impact I can get can be after three months or six months depending upon my reset tenures. So we can very safely presume this year that whatever rate cuts happens this year it the earliest, what it can be transformed, transmitted to the borrowers can be in Q4, not earlier than that because everybody will get the impact then.
But in the meantime, if we have some cycles whereby there are MCLR reset happening in between can help us to increase our margins by maybe 0.25% or so.
Bhavik Dave
Understood. And last question sir, we are at almost 2.8% ROA and we’ve maintained a very fine balance in around this range. You think that going into next two, three years, is there a, is there a line item that you think that can be, that can be used to maybe improve our ROAS or do you think this 2.8 is a very optimal ROI and this is where we want to be?
Kamlesh Gandhi
I think we would always aspire to be at around three and we see that on economies of scale, on reduction in slight rate of interest or a substantial rate of interest. But we that can be offset by passing on to the borrowers also. But with the economies of scale and all, we firmly believe that as a team we are putting pressure on ourselves to touch 3%, maybe sooner than later. But our internal targets are 3% and we give a range bound target of anywhere between 2.75 to 3.25%. Presuming that there are a few things playing out which are very positive in terms of still reduced credit cost, reduced interest rates, more penetration, whereby we we can charge higher yields also.
So combination of many factors, if it is done at a full throttle, can be around 3.25, 2.8 is optimum, 3% is the aspiration.
Bhavik Dave
Understood. This is very useful sir. Thank you so much. All the best.
Kamlesh Gandhi
Thank you. Thank you.
operator
Thank you. We have a last follow up question from the line of Sripal Doshi from Equida Securities. Please go ahead.
Shreepal Doshi
Hi sir, just one question was on the LOS LMS and the BRE that we had highlighted and I think you also highlighted in your opening remarks. So just if you could update us. Is it implemented across products for the BRE as well?
Ankit Jain
So bre, except for I think one or two products we have implemented for all the products we started with MSME which was the major part. So over there we are seeing good results of the BRE that we have implemented now. BRE also is something that we have implemented for now, but we have to continuously work on finessing it. So. So that will be a constant work in progress. But one important, you know, psychologically also is that we have, we have put it out there and, and whatever changes and whatever the fine tuning that we have to do, we will keep doing from time to time.
But, but the implementation has been done. Sorry, just to add to what Daniel told that BRU is also the function of learning. So currently all the, all the bre, all the rule engines are clear in place depending upon what we already know. But as there will be constant changes. Say for example we restrict PIN codes very frequently where we are not comfortable so that all frequent changes will happen in VRE from the learnings. So the BERE is already at place. The implementation and its efficacy the way we want will be attained in due course of time.
Shreepal Doshi
Got it. Thank you so much. Thank you.
Kamlesh Gandhi
Thank you.
operator
Thank you. This brings us to end of the conversation and I would like management if they have any closing comments.
Kamlesh Gandhi
No, I thank all of you for joining this call. And as usual, Team Mass remains dedicated to its mission of excellence through endeavors. And we are very confident, as shared with all of you, to register our robust and appreciate fundamentally strong growth going ahead. Thank you.
operator
Thank you so much, sir. On behalf of Motilal Oswal Financial Services, that concludes this conference. Thank you for joining us. And you may now disconnect your lines.