Muthoot Capital Services Limited (NSE: MUTHOOTCAP) Q1 2026 Earnings Call dated Aug. 06, 2025
Corporate Participants:
Unidentified Speaker
Mathews Markose — Chief Executive Officer
Ramandeep Gill — Chief Financial Officer
Tina Suzanne George — Executive Director
Analysts:
Unidentified Participant
Shweta Daptardar — Analyst
Tejas Khandelwal — Analyst
Sarvesh Gupta — Analyst
Prabal Gandhi — Analyst
Kshitij Verma — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to The Mudhout Capital Q1FY26 earnings conference call hosted by Alara Securities. 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 this 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 Ms. Shweta Dabtarda. Thank you. And over to you ma’. Am.
Shweta Daptardar — Analyst
Thank you Huda. Good morning everyone. On behalf of Alara securities we welcome you all to Q1FY26 earnings conference call of Muthood Capital Services Limited from the. Esteemed management we have with us today. Ms. Tina Muthoot Executive Director Mr. Matthews Marcos CEO Mr. Ramandeep Gill CFO we. Express our gratitude towards the esteemed management. Of Muthoot Capital to provide us the opportunity to host this conference call. Without further ado I now hand over. The call to Mr. Matthews Marco CEO. For his opening remarks post which we can open the call for Q and A. Thank you. And over to you sir.
Mathews Markose — Chief Executive Officer
Thank you Sheeta. Good morning everyone. Very nice to connect with all of you once again I’m Matthews Marcos Aswith I introduced the CEO of MCSL and. Before I hand it over to Ramandeer. For his presentation on the financial numbers. I just wanted to take all of. You through some of the developments in. Q1 and overall what we are doing as a company. So as you are all aware that. We are a very purpose driven organization working very closely with the common man in in improving their financial well being so our all our growth metrics remain intact and doing very well. So over the last one year we have doubled our own sourcing and our own AUM has grown by 100%. The new products that is the most heartening part is that the new products that we launched over the last one year which is the used commercial vehicles and the used car both of them. Have scaled and crossed 100 crore AUM.
With almost negligible stress on that. There is almost zero NPA on those portfolios. So those are the businesses that are doing very well both on the growth as well as on the quality side. So we are very happy about all those initiatives that we have done over the last one one and a half years. Further to improve our credit underwriting norms we have initiated a few of initiatives starting with. We have started Location as well as a sourcing channel categorization. We have based this on both profitability as well as the delinquency trends. So every sourcing channel today who is in the system, which is about close to 5,000 odd sourcing channels, gets rated based on their business volumes, profitability, delinquency numbers, and they get categorized into severe risk, high risk, medium risk, low risk and very low risk.
And based on that, we are able to offer, you know, benefits to them and to the sourcing from those channels. So that is one of the key initiatives that we launched about three months back we introduced risk based pricing which again initially we used to have a pricing model where it would be based on a scheme. So a person taking a same scheme anywhere from Kashmir to Kanyakumari would get the same ltv, same irrs, whereas now it is based on the risk profile of the customer and not based on the scheme that he or she is choosing.
We tied up with CBL to introduce Credit Vision Algos. What Credit Vision Algos does is that beyond numbers of that, that CIBIL score, usually when you go for a credit underwriting, you take the score from the bureau and that score is always a point in time score. Which means if somebody gives a score of 750, we would assume that the credit profile of the customer is good. But the customer would have gone through any of the three journeys in reaching 750. He could be coming down from a 900, it could be going up from a 500 to 750 or he could have been stable across the past three years on 750.
The difference is that the credit profile of all these three customers are entirely different. A person who is coming down from a 900 to a 750, his credit profile is deteriorating. Whereas somebody is going up from 500 to 750, his credit profile leverage in the industry is improving and a person who has been stable has been good across. But when we look at the point. In time score, we tend to make that mistake and rate all the three people similarly, which can make your credit underwriting decision slightly, you know, not so accurate at times. So to take care of that, we’ve now worked with civil algos to give us a other than the score, we also give a color coding which is green, yellow, orange and red. So green is the very low risk category, yellow is the medium risk category, orange is the high risk category, and red is severe risk category, which becomes a outright reject for us. So based on that, so we marry all these concepts which is the Channel categorization, the risk based pricing and the CV algos to then to arrive at a final customer LTV or a customer rate, so on and so forth.
So therefore it’s a complete holistic assessment of the customer that we do before offering him a loan. We have drastically improved our E match penetration over the last one year, starting from about 50% Enact and 50% M match in April of last year to about 82% Enact penetration now as we close our quarter. And our objective is to reach about 90, 95% in E match penetration. And that is imminently possible the way we have scaled over the last one year or so to add more value to the overall underwriting decision, we have recently tied up with one Money as our account aggregator.
What it does is that till now we used to do a penny drop to understand whether the account is there or not. Even if the account is dormant, maybe the penny drop would be a success. But now we hit the account aggregator and pull the account aggregator details, pull the account analytics details and then club it with the overall underwriting process. If the average balances are above a certain norm, we can also qualify these customers as a surrogate income under a surrogate income and offer them better LTVs and better pricing. And at least on other cases where average balances are at a moderate level, we know that the bank account is active and not dormant.
And therefore then we push the customer to a mandatory E match. So that again, because the success rate on an E match is significantly higher, manual match has a 50% chance of failure, whereas a enact has about 10 to 15% chance of going wrong. So that’s an additional initiative that we have taken at an enterprise level to improve our underwriting norms. We have taken another step. One of the challenges that is there in this business on the low ticket size, lower income segment is the fact that the customer contactability sometimes becomes a issue. So the faster you are able to get in touch with the customer and call them and index them through the system, get them to download your app and, you know, get them to transact on your app, the better for you.
But the challenge was that through our call centers we were able to, you know, contact only about 60, 65% in the first 15 days. And then because of the also the, you know, norm that you have to call those customers from that 114-0160 numbers, many of them come as a spam. So customers may not pick up the phone. So it takes a repeated call and reminders for them to finally pick up and it’s a huge human effort and there is a lot of drain on the system in terms of cost, etc. So now we’ve tied up with an AI based solution to do a automated calling.
What this does is that this bot can almost mimic the human. It talks like a human being, identical to a human being and it is able to take any kind of objection. So whatever the customer is asking you back, it, you know, responds like a human being would and takes you through the entire journey. And this will improve our customer contactability because a bot can call, make some 3,000 calls at one point in time, where a human being can make only one call at a time. So you can’t keep adding manpower to reach out to all those 20, 25,000 loans that you are doing month on month and which will of course double in the Q2 with the festive season coming in.
We have also made another significant change where the first, second and third EMI is completely mapped to the sales team. Earlier sales team had a, you know, shadow mapping where they were supposed to assist the collection team. But now we have made it mandatory. So the allocation itself goes to the SO sales team is also aware of the challenges of collection and therefore this, he will be mindful of all those challenges while sourcing. And this has also, you know, resulted in a huge improvement in our SO first, second and third EMI collection because collection team would be focused on the overall pool whereas this segment is only focused on that first segment.
So that that is a much smaller pool. And the efficiency level we have the last three months are non start with almost zero. And we are also improving the doing a lot of work on the data analytics side. Shortly we coming out with our own data lake platform which is almost on the verge of a closure. And there are a lot of analytics layers we built on top of it like the pre delinquency, the roll forward, the rollback, the normalization scorecard, something do on the origination scorecard, customer behavior, all those kind of analytics is being built, propensity modeling to do cross sell and upsell.
So basically what I’m trying to say. Is that the company has done a. Huge amount of investment on data on IT systems and on improving the quality of the sourcing that we have done. So while Raman will take you through the numbers in detail, you all are aware that there’s been a huge stress on the microfinance segment. And while we don’t have a great deal of overlap with the microfinance segment, we are very, very closely connected in terms of ticket sizes and the customer profile. And some amount of that stress has indeed spilled over to our collection. Also, I would acknowledge that there’s been no increase in the slippages from the pool.
So the slippages have remained constant across the last one and a half years in terms of percentage. But April, May, June has seen some lag in the collection. So impairment is always a function of how much the flippage and how much you are able to collect back. So April has been slightly slow. May and June has followed the same trend. While April was expected, even it was budgeted for May and June has been slightly an elongated period which we saw that collection being weakened. But then July we were able to recuperate and we are very hopeful and confident that Q2 would be much better.
And also this collection challenge has not been across. So that’s the other part of it because we continue to be very, very robust on collections in the south, the west and the east of the country. We’ve had certain pockets of issues in north like states like Rajasthan and Punjab, Haryana, those kind of states. But we strengthened our collection team, we put new people there, we added new agencies. So the results have already started showing in July and as I said, we’re very confident that they will bounce back in August and September. And finally I think we are at a great place now.
Our Q1 numbers in terms of growth has been very encouraging and we are now stepping into the festive season with Onam coming in September. So Kerala, the festive season starts now and it will be shortly followed by the rest of the north. So we are very hopeful of, you know, the time to come and yeah, I think I’ll hand it over to Raman now to take forward the financial numbers. Thank you all once again for all your support. Over to you Raman. Thank you.
Ramandeep Gill — Chief Financial Officer
Thank you Matthew Sir. I welcome all of you to the earnings call for the quarter one. So in this quarter I will take you through the financials now what number we have been able to achieve and where we have missed. So in this quarter the company has been able to acquire 65,000 plus new customers while doing a business of 620 crore which took our overall customer base to more than 5 lakh 70. This helped the company in, in achieving an AEM of 3239 crore and which took the overall balance sheet size to 3700 plus CRS.
Yes we, we do have one of loss in this quarter which amounts to 4.41 Cr which, which, which you know helps in the shareholder funds to achieve a 6.53.65 cr. Therefore we can also see minus in our EPS numbers too. The overall growth in the AUM can be seen as compared to the previous quarter one year on year the company has been able to grow approximately 50 percentage precisely 49%. As far as the AUM is concerned the growth has come from two wheeler first wherein the company has been able to achieve 48% as an year on year growth.
We started CV in the last year. I remember in the Q1 of last year call we said that we have started CV where in CV we started from 1st of April of last year and we are happy to announce that both CV and my used car portfolio have achieved more than 100cr as an AUM. So therein we can see in our four wheeler portfolio used car portfolio we can see a growth of 204 percentage whereas PV we have started in the last financial year itself and it has reached 200 crores quarter on quarter. If you have to talk about comparing the quarter 4 versus quarter 1 the AUM growth should at 6 percentage therein also we grew in terms of my overall retail business number in Q1 we did 497 crore.
In Q1 of this year we have flowed 61 618.48 crores whereas in quarter four we closed 644 crore. So we can see that. We can see that there is a there is a jump from Q1 to Q1 as compared to year on year as 20 percentage. If we jump whereas from quarter to quarter there is a small reduction in terms of my sourcing which comes at 4 percentage. Our dealer channel continue to contribute the most wherein in the in the year on year we can see both from dealer channel and from our alternate channel the growth remains at 42 percentage and whereas we can see dip in our co lending portfolio in terms of sourcing so it has been dipped by 80 percentage as compared to the quarter one of last year and from quarter four it has been dipped by 55 percentage.
We have also tried to analyze the yields of the company that because the end of the day yes we are focusing on the top line and on the expense part as well. As far as the top line is concerned we have analyzed the yield of the company wherein we can see that where the overall yield of the company on the total portfolio and what is the product wise yield of the company on the incremental business that the company has done in Q1 while 2 Wheeler we are at 22.15 percentage and loyalty loan we are at 24.85 percentage.
For CV the company is operating at 17.43 percentage and for 4 Wheeler we are at 18.37 percentage. Co lending we are having a blended yield of 12.21 percentage. In terms of the GNP of the company in the last year quarter one we were at 9.84 percentage. Now we are at 5.76 percentage. Yes we did one ARC sale as well in the last year as well and then in terms of NNPA we were at 3.41. In this year we are closing at 2.70 percentage. We can see a marginal jump as compared to the March 24th both in GNP and in the NNPA number.
The GNP was 4.88 percentage in March we have reported and NNPA was 2.30 percentage while the overall PCR for stage 3 remains at 60 percentage only and there is no change in that. We have also tried to analyze that overall yield of the company and this and and the finance cost, impairment cost and all other expenses wherein we have seen that finance cost as a function of my borrowing where we are whether it’s growing or not growing or you know where we are whether you know we have been able to bring down the cost. In quarter one we have seen that there is a dip on the incremental funding which the organization has raised.
As far as the impairment is concerned that is the only thing wherein we can see a huge jump. In quarter one of last year it was 4.86 crore whereas in this quarter it is 26.68 crore. So there is an additional impairment that the company has provided in this quarter of 26.68 crore and all other expenses to the AUM function remains stable around 6 percentage 6 and a half percentage as compared to the total receipts with the company which which contains the dues received by the company plus the overdue. So in that we have done an analysis in this quarter company has received 560cr in terms of my installments plus overdue plus foreclosure.
Out of that 82 percentage has came from my bank and electronic mode plus NSCH and 18 percentage is only in the cash whereas that component was way higher. If we compare in the if we compare to the quarter one of last year one more income which we have added. I think we have told in our March results as well there is an insurance income which we have added now one more partner which we have just started in the month of June as well. So with them the total income has grew. The other that from the insurance partners we booked an income 1.82 crores as an insurance income in this quarter and this will continue to grow in the months to come.
For the portfolio analysis of the company 95% of the portfolio remain as standard. Of that 82.76% remains at 00 bucket whereas for first bucket it’s 7.66 percentage and for second bucket it’s 2.96 percentage. So then there’s and we have also analyzed you know where is the entry. In terms of my dealer wise we are having a GNP overall GMP of 8 percentage whereas for alternate channel we are having overall 7 percentage and as compared to the commercial vehicle and my four wheeler portfolio EV we are having a 0.19 percentage as NPA and for four wheeler we are having 1.09 percentage as NPA.
As Matthew sir has told we have also checked our slippages on our standard portfolio that where we are going as compared to the last year as well. So therein we found the slippages were in the same range except for April and May wherein it has increased but the trend has started going down from June onwards only wherein we can see the total slippages to my standard AM of the company has gone down in the month of June and in the end after that. So therein yes we have seen a huge spike in the month of April and maybe when we talk about the total slippage of the company with that the company has been able to roll back in this quarter itself the company has been able to roll back 4 crores out of the slippages and the total recoveries which the organization had made in this quarter.
This is other than the rollback stood at 5 crores in this quarter itself and this number has has been going only after May. So June we have seen 2.5 crore from this number which is 50 percentage of the entire rolled back and recoveries and after that it has grown only as far as the provisioning of the organization is concerned. The company has been able to provide the same ECL whereas the PD and the PD and the LGB of the company remains the same and we still carry an overlay of 51cr whereas total provisioning stood at 60 percentage on my stage 3 assets for my effort.
Partnerships are concerned we are still continuing the partnership with Deal, VMI Freight Wise Capital and EVFIN by briefs for corporate loans which the company has sourced over the last years we have seen that there is 100 percentage efficiencies in bid in that portfolio. We have also analyzed the ARC recoveries. The first ARC done by the company in September 2023, another in September 2024. In both the ARCS we have seen a steep reduction now and their ratings has also been done independently and we have seen that fair recovery has been assigned to both the portfolios of my of my SR in the arc.
As far as the shareholding pattern of the company it remains unchanged. Promoters holds a large part which is 8.53 percentage. Our corporate hold 7.74 percentage and 1 percentage has been hold by other FIs. The banks have continued to show interest in this in our organization and we have been able to acquire a lot of sanctions from the banks specifically from the PSUs. We have got one sanction from the IOB. We have also got other two sanctions from two private players as well. So therein the bankers like in terms of private banker we do have highest exposure by ADF and from PNB we do have highest exposure in terms of PFCs.
In terms of my NBSC’s partner, the company has been able to raise funds to CP and the NCDs as well. Wherein the partners like Morgan Stanley, Wentwell, Barclays, you know they have been added in this quarter others remains in tech. The partners like AK Capital always supported Northern Arc and Vidriti. They were always there and they have also given term sheets after that. The overall cost of borrowing compared to the quarter one of last year has gone down both in terms of my ROI and both in terms of my XIRR. So we can see a reduction of 60 paisa in my total xirr and we can also see a reduction of around 40 paisa in my ROI.
So as compared to the quarter one. So we have also seen that total borrowing by the company in this quarter compared to the borrowing from the whole year that we have done therein. We have also seen reduction both in the terms of my ROE ROI and both in terms of my XR of the total funds. The rating of the company remains stable. It’s a plus stable in terms of my bank lines, NCDs, fixed deposits and CPs. One more rating additional rating which we have got in this quarter late in this quarter start up the of this quarter is basically the esg.
So it is the company. This was the first time the company has been rated by the ICRAI ESG wherein the score was 73 which is. Which is. Which called as. Which is called as a good score. In terms in terms of my ESG rating as far as the fixed deposit book of the company it remains at 44.40 Cr where in company has been able to add 5.67 Tr to the new fixed deposit and 0.62 from the renewals for structure liquidity and the ALM of the organization is concerned. There is no cumulative mismatch in all the buckets of as of June 30th which we have reported to RBI which is 1 month, 2 months, 3 months, 4 to 6 months, 7 to 12 months, 1 to 3 years, 3 to 5 years, 5 years and the top as far as the LCR of the company is concerned liquidity ratio we have to maintain 100%.
As far as RBA is concerned the company has maintained an LCR of 105.97 percentage as of 30th of June. To increase our investment portfolio and to also increase our HQLA for the LCR is concerned the company has started investing in T bills as well. Wherein the average rate which we are receiving comes to 5.34 percentage for two weeks as compared to the fixed deposit rate which which is also hover around in the Same range of 5.15 percentage to 5.30 percentage. We are getting investment. We are getting yields from our SLR investments etc investment collateral fixed deposit with the bank and and the unencumbered fixed deposit with the bank. The total yield of the company from the investment portfolio comes at 7.18 percentage. So that’s it from my side. Shweta, I’m happy to take the questions.
Questions and Answers:
operator
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press Star and one on their Touchstone phone please. 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 will wait for a moment while the question queue assembles. The first question is from the line of Tejas Khandewal from Prudent for Equity. Please go ahead.
Tejas Khandelwal
Hello. Sir. When the company had started seeing stress in the loan book starting last quarter. So then why did you pick up speed in reimbursement? Because couldn’t the company had kept cautioning it in its lending.
Mathews Markose
Yeah, I will take that question. So no, the stress is. As I told you, the stress is only in specific pockets and in those pockets we have strengthened our this thing by reducing LTVs and increasing rates and all that. So it is. It’s not a stress span India. Only in certain pockets of north which. I’d already mentioned while in my opening. Speech and those places we have taken the necessary steps. There’s no point in it’s actually detrimental to the overall objective if we go en masse and stop it just because. There are stress in certain pockets. If you would have seen a stress across then that would have been different. But that is not the case here. It’s a very very calibrated and thoughtful thought about decision.
Tejas Khandelwal
So. So what have you taken in the northern. Because there is as you said there is strength and target from. If I check the investment in quarter one so there is still 30% investment is in north so I’m not getting what changes have done development style.
Mathews Markose
So you will have to look at the last two months disbursement which is significantly come down in these two this thing and it is not that we are talking about a year long stress. No till March are there was no stress at all till March. We closed on a very high note in terms of our collections and everything. April we saw the stress, the initial. Fines were misleading because generally you tend to have. Everybody tends to relax a bit in April and we thought that was a thing and but when we saw the trend continuing in May we immediately made the correction. So we are very very nimble footed in all those decisioning making and it. Happens very very fast.
Tejas Khandelwal
Okay. But since we had target same steps from April and our last call happened in mid of May so we were very confident about the asset quality at that point also. And what’s suddenly changing.
Mathews Markose
As I told you the April signs are misleading. And so we thought we would be able to recover in May but that got a slightly elongated and went on till June end also. And that’s the reason why. This happened. And then. Okay, so one more thing to add here is that. So we had a national collection manager managing all regional collection managers across the country. So he had about 15, 17 people reporting directly into him. So we understood that his bandwidth was also getting choked and he was not able to focus too much. And he is based off Cochin. So his you know and understanding also of some of the smaller markets in north needs to be more. So we put up a zonal head for north who is basically from Rajasthan and who has worked with a very large NBFC and who has worked in gross marketing understands the nuances of that market. We put him, we hired him, we brought him on board and of course you know that all these have a period I need to issue an offer, there’s a three months notice period and all that. So it was a transition phase as well. But rest Assured we have taken all necessary measures. Okay.
Tejas Khandelwal
Okay. And sir, Even after this 27 crores of provision which is very massive still there is a rise in maintenance. So should we expect similar kind of write off or are you going to sale assets or bad loan to arc? So what should we look for?
Mathews Markose
No, no, no. We will not do any ARC deal or anything now because we don’t see that kind of a situation. We are completely in control on the numbers. Okay. As I mentioned already the July numbers have been much better and we will be able to recuperate in August and September. So there is no compelling need for that.
Tina Suzanne George
Can I just add something here?
Mathews Markose
Yeah, please Tina.
Tina Suzanne George
So I just want to clarify like the last two times that we did ARC it was because we had a backlog from COVID But ARC is not going to be our business as usual. We are trying to fix certain operation issues with respect to collections. We will do that first but we’re. Not foreseeing any sale of portfolio at. This point of time.
Tejas Khandelwal
Okay? Okay, got it. So there is also massive stage three assets in our two wheeler segment. So two wheeler segment NPA is 6.3% which is very, which is very high. So now if, now if the company is going to reduce this growth rate in two lending.
Mathews Markose
So two things on that we are not going to reduce the growth rate but we are going to increase the growth rate in our other two lines of businesses which is used care and CV which I said now we have one year behind us and we got a portfolio of 100 crore plus and the portfolio is behaving very healthy. So we are going to go hammer and tongs on these two business and scale up these two because two Wheeler for some more time will continue to be our Warhols. It has to be the revenue generating thing.
It is still, you know, compensating for the cost that we are, we have, you know, incurred in setting up these two businesses. Now the entire team on used car and CVE are in place but in terms of, you know, standalone P and L, they would still take maybe by Q3 to break even because the cost has already been put in place, the systems have been put in place, the people have come on board, the productivity is increasing month on month. But to reach that optimum level of productivity where they will break even little, we I think about October, November.
So till that time two Wheeler has to continue to, you know, support the other lines of businesses. And of course Two Wheeler is a business that we have done for 30 years. We know that like the palm of our hand. So while there will be cycles of stress, elevated stress, and there would be cycles of good periods as well. So it’s not a business that we. Are going to write off forever because. That has been the business which has. Brought us wherever we are today.
Tejas Khandelwal
Okay, okay, got it. And for these two segments which you have just said, this commercial vehicle and used car. So yeah, now if the company is going to focus more on these segments, but the yield on the disbursement of both of these segments is pretty low when we compare with two wheeler. So isn’t it going to pressure our net interest margin?
Mathews Markose
So, so two wheeler today is giving. Me about 22% and used car is giving me about 18 and a half. CV is about 17 and a half. Okay. And then you remove the impairment that I incur on two wheeler, then my net income would be much better on that in these two businesses. ROA would be better in a longer range as of now, because I am incurring a huge cost on the manpower and the IT systems that we have put in place. The business has not broken even. But in the long run that will definitely be a better ROA business or at least same ROI as a two wheeler business.
Tejas Khandelwal
So by when can we expect these two segments to be a substantial part of our loan book?
Mathews Markose
See, by October, November it should break even. But by the end of this year we will have a decent portfolio. So maybe about 50% of our portfolio. Coming from these two businesses.
Tejas Khandelwal
Okay, okay. Okay, thank you. That’s all.
Mathews Markose
And that is the direction that which in which we are moving. So a clear direction. Yeah.
Tejas Khandelwal
Answer I had last question on this stage two bucket. So stage two bucket. Bucket is still at 4.2%. So are you seeing any, any of that is turning into N in coming quarter?
Mathews Markose
See that is the, you know, there is a percentage that spills over from each bucket. That percentage pillow or slightly increased in April, May and June, which has been planned now in July. So now that will continue. So I think the certain percent portion will go. But there is always a rollback, there is a normalization. So all those efforts are always on. So those dynamics are not changing.
Tejas Khandelwal
What credit cost can we expect for coti?
Mathews Markose
Fair credit cost. Raman, you want to take that?
Ramandeep Gill
Yeah, yeah. First to answer on the stage two two bucket. I just want to add in here our stage two bucket which is leading to npa. Right. So those special clippages and I said it has increased in April and May, but from June onwards it started going down and further forward it has it has gone down. So yes, the 4 percentage was there. It will come down. But we cannot expect it to be, you know, to come down drastically. Second thing, as far as the impairment cost is concerned about the company. So we initially in our business plan we expected some 1.65 percentage as a cost of impairment.
But since our Q1 results, which is like one off, wherein we have provided around for the impairment cost only 3 percentage. So we are expecting, you know, even on the higher side. But we have as far as the last two months are concerned and still we are standing, you know, in the august first week, we expect to maintain it. And as far as the revised business plan is concerned, on our recovery side from the NPA, we expect to maintain between 1.65 percentage and 1.75 percentage only. But that too is on the higher side, as I said earlier.
So we are expecting it to go down. We are because the, because initially for April, we we knew that, you know, April recoveries would be low as we have seen the trend in our last financial year. Based on that, we expected higher NPAs. But due to the fact that May has gone up and that has spilled over to June, our overall impairment cost has increased. But from after that it is in the same chair. We, we know that, you know, it, the company has been able to take the trend of Jansen March in terms of recoveries are concerned. So I am expecting 1.65 still. If we have to provide an additional overlay for it, we will do that. But we have to see after Q2 only.
Tejas Khandelwal
Okay. Okay, got it. Thank you.
Mathews Markose
Thank you.
operator
Thank you. The next question is from the line of service Gupta from Maximil Capital. Please go ahead.
Sarvesh Gupta
Yeah, good morning sir and thank you for giving the opportunity. So one question is that traditionally, you know, we have been having all these problems related to browsing collections overdue. And we anyway knew that the situation on the ground with micro finance, etc. Is not good. Then despite all of that, why did we take the eyes off the ball? And that resulted in a low collection efficiency in April and May. And that is even more disappointing given that this entire new book was built in the last 12 months. A large part of your books has been built in the last 12 months.
These are new loans. These are not seasoned loans. Despite that, you know, the NPAs have gone up so much and somehow, you know, we did not do a good job in collections in April and month. And we know that June quarter anyways is a weak quarter also when it comes to collections. So why did we not you know, reimport the collections in the month of April and May and that was not even indicated in the last conference which was done in the mid of May.
Mathews Markose
Yeah, so very good question. The reason is not that we did not reinforce, but we also had a series of attrition in some of the northern states. So the person who was handling we had three regional collection manager of north one getting changed in the last one year. So and then every time there is a resignation and then the reappointment, there is a gestation period between this and then there is a lapse and then somebody comes and some people go all that happened. So there was a disturbance in that. So it is not that we were not aware of that.
But somehow the slippages in April and May were slightly more surprising than it used to be. So it’s not that. So these, these two areas or the north one, which I call that as Sanjab, Rajasthan, Haryana was a troubled territory for me. There are two things that happened from October of last year when the season hit, our numbers from those markets went disproportionately high. And then this collection attrition also happened during that time. So for me to plug these two took some time, that is the thing. But now we are in control and. That is why we are saying that. It is a pure operational issue which will. So which can be. So it’s nothing which is not in our control. Yeah. So while. So while we talk about the overall sector and all. But it is not for me the sector of course plays and it plays across the board. But for me this was something which compounded the problem which is in my control. So that’s why we are confident when we talk to you. Yeah.
Ramandeep Gill
One more thing to add on these slippages from Q1 of last year and Q1 of this year, slippages remains the same as you know, as a percentage of standard aum. Right. The only thing which has remained static and it has to be improved is basically recovery from these. Recovery.
Mathews Markose
Yeah. It has actually come down. So if you look at April or. Sorry May of last year, slippage on the base was about 9%. Sorry,.9%. Our MCSL pool that time was about 950 odd and about 9 crore was a slippage. It was about 0.9%. Now it is only about 0.8%. So it’s not that the slippage has increased but the recovery that time was much higher.
Sarvesh Gupta
You also talked about a lot of initiatives that we have taken. Right. So given that it is very much normal that your slippages should anyways reduce by point.
Mathews Markose
That is exactly so. That is exactly the reason why slippages have come down. So all those initiatives are being out in the positive direction. But then once there is a slippage somebody has to go there and aggressively collect. That is the part where we had this challenge because of the, as I mentioned, the attrition and stuff.
Sarvesh Gupta
And given that now that we are aggressively expanding into other product segments also. So shouldn’t leaders focus on the fourth geography of north because of South? Because you know like this is attrition is going to be a constant challenge on these because there is a competition is too much in lending. There are coaching all the time, new organizations are expanding all the time. What is our right to win in the geographies outside of south is something that I don’t understand. So if you are seeing traction in the other segments, might as well just focus on your core area rather than thinking about north which will be a constant pain point for you.
Mathews Markose
So if I have to remain a fringe player I can be in the South. If I look at two wheeler, two wheeler industry overall in south has come down to some 27, 29%. Okay, if I focus only on south, you are right, I will have a very nice portfolio and all that. But I will remain always a fringe player. But our growth ambitions are much larger. We want to be a Pan India player. We are, you know ambitions are to become a 10,000 crore company by 2028, God willing. So to meet those ambitions we need to be in the place where things. Are happening, where the growth is more so. For instance Kerala market used to be a 1 lakh 2 wheeler market till about 2018, 19 and now it is only a 35,000 vehicle market.
Kerala is my sweet spot. Extremely good in terms of collection. NPAs are very low. Muthur is a household name in the state. Every dealer is happy to welcome me but market is shrinking. So beyond a point if I am focusing, I mean I already am a second or third number player in that market. So that said the growth ambitions also have to be matched with the other things. These are markets that I have to be present if I plan to grow. So of course we are balancing it. There will be challenges but we will overcome it as and when it comes.
Sarvesh Gupta
Okay and finally, so what is your target for gross NPA and stage two by end of this year? And did I hear it right that you are still guiding for the same credit cost? Despite massive credit cost taken in this quarter which resulted in a huge loss.
Mathews Markose
We put 2.5 as as a growth, sorry GNP a target in as a strategic objective slight. Right now it is slightly at a elevated level. But our objective will always be to bring it back to those levels. Okay. And yeah Raman, you are saying something.
Ramandeep Gill
Yes sir. So by this, by the end of of the year, as Matthews said, we want to be in the same range between four and a half to five itself. In fact the initial business plan that we have made is in. Is in the same range. And one more thing which I want to add on, on in our initial business plan we know that you know in April slippages would be higher. And we have seen also based on that, we have also seen that, okay. In September, October when the season will come, slippages might be on the higher side.
As far as the overall GNP of the organization is concerned. If you’re able to achieve the sales number and we are able to stick on, you know, 5, 510 percentage here and there, we will be at 5. We will be at maximum at 5. 5 percentage as the total GNP of the company. Plus my other two businesses are growing which is used car and CV. That will help me in contributing the. In. In maintaining the overall GNP of the organization as a whole. But as far as my two wheeler concerned, yes, two V two wheeler will be. Would be somewhere around right now it is 6.25 percentage which is on the higher side. We want to be at five and a half percentage only on, only on our two wheeler portfolio.
Sarvesh Gupta
Okay, thank you.
operator
Thank you. The next question is from the line of Prabhul from Incred anc. Please go ahead.
Prabal Gandhi
Hello. Am I audible?
Mathews Markose
Yeah Prabhul, you’re audible.
Prabal Gandhi
Thank you sir. Thank you for the opportunity. So first question is when we Compare your slippage versus last year which were in the range of 4 to 4 and a half percent this quarter slippage has risen. Slippage ratio has risen to 6%. So not just the recovery but even slippages are going up. And the troublesome is that across all the segments, not just two winners but other segments also are throwing slippages and NPS for us. And what I’m not able to correlate is that when we say we have done lot of investments in asset quality and streamlining asset quality kind of with Sibyl and all, why is it not reflecting in our numbers when we compare other vehicle finances or other two wheeler finances numbers and their NPAs with ours, we seems to be on the higher side. So why all these investments are not translating into Numbers for us.
Mathews Markose
First of all, I think across the industry there has been a rise in GNPA in the QA as gone through the Q1 results of most of the companies who are into vehicle finance. And there’s been a similar trend and there’s been an increase in slippages. Of course. A company which is two. Wheeler is maybe 10% or 20% and other businesses form a larger part there. It will get compensated slightly because not looking at two wheeler alone but in our case 90% is two wheeler. So it becomes much more enlarged and you are able to see it much more because ours is much more closer to the micro finance segment than somebody who along with two wheeler also doing a CV and a car and a lap and those portfolios are much higher. Secondly, I would like to correct on the slippages. Slippages have not increased in terms of percentages.
They come down over the last quarter. It’s only the recovery out of the slippages which has come down. And slippages are very much within the and lower than that of last quarter over this period. Maybe you’re talking about the quantum. My book has more than doubled over the last one year. Last Q1 my NCSL book alone was 900 close to thousand crores. Now it is 2100 crores. So it’s more than doubled. So the quantum would be higher. But in terms of percentages the slippages have come down.
Prabal Gandhi
No. So when we say for example Manba Finance, which is which we have a cold ending partnership with, it is mostly into tool or financing and they have not reported such a sharp increase in their dividend. So this seems to be the investments are not translating into into our asset quality being better or even comparable to this.
Mathews Markose
See, Manba is not a Pan India player at all. They are only focused in Maharashtra and Gujarat. Okay. And you cannot compare a player who is only in two states. I would have been only in Kerala. I would have the best portfolio in the world probably. But that is not the case when I am in a state in 23 states. Now obviously you will have these operational challenges, okay. And I spoke very specifically saying that I had a specific challenge in in north where my collection team had high attrition and I’m trying to fix. And that doesn’t mean that I will run away from that market because then it shows that I’m not a serious player.
If I go there, do business for three months and suddenly somebody attrites and therefore I stop business, obviously market will reckon me as a non serious player. And they will not give me room in my, in the dealerships again. But if I am a serious player, I have to sustain. There will be some pain, but we will overcome all those things because the other parts we will continue to focus on where I am strong. So I think that’s how businesses are run.
Prabal Gandhi
Okay, second question is on margins. So we have been saying that as we reduce our share of coal ending which was as high as 30% few quarters back then, that would be supportive to our margins. So how do we see the share of coal ending moving for us?
Mathews Markose
That’s again a good question. I think that is what we should look at because all those commitments that we have given in terms of growth, in terms of reduction of cold lending portfolio, all of them are absolutely in line with what CFO and I have been talking to all of you over the past course of the last one year in our earnings calls. So all of them are in light. This was a very very operational and very specific thing where these numbers have gone up which we are fixing. So polanding we committed to you saying that we will be bringing down the percentage and it has come down and it is still shrinking. So for lending is the only book which has come down by almost 20% in Q1. So all of those we are in line with whatever commitment we are making. To you over the calls. Of course that is another and as.
Prabal Gandhi
A share of entire loan book how much would be the code ending now versus say last few quarters?
Mathews Markose
Raman, can you give the figure exactly that please?
operator
Mr. Raman, are you there?
Ramandeep Gill
Sorry, I was on mute. Sorry, sorry, sorry, sorry, sorry. Yeah, as a percentage of the entire book my co lending would be around 27 percentage as an outstanding balance.
Prabal Gandhi
And. How to think about margins going ahead.
Mathews Markose
So yeah co lending coming down. Co lending is typically at about 12 and a half 13% and that coming down and our own book is at 22%. So that will impact the margin by at least 100 to 150bps on, on the positive side.
Prabal Gandhi
So fair to assume that from the exit of exact number one Q we have a room of 100150 basis points over next one year from the absent.
Mathews Markose
Yeah, there, there would be overall so. If you look at all the factors on the you know, repo rate going down and therefore some transmission on our borrowing rates and then co lending portion coming down and therefore a resultant increase in the yield, all that will result in close to about 100bps of positive movement.
Prabal Gandhi
And so this is including as we increase the share of CV and reduce the share of two wheelers in the overall mix. This is incorporating that. We are seeing 100 basis point uptick from these levels.
Mathews Markose
Yeah, yeah, yeah. So all those have been factored into. CV will pull down the yield a bit. But then you know it has other advantages like longer tenor loans, a much better credit quality. So all those factors will play into that.
Prabal Gandhi
And with our profitability being at where it is and we targeting a faster AUM growth our capital consumption seems to be very very fast. So are you looking for a. For a gearing ratio host which you’ll start exploring equity capital? Because our gearing is now four and a half versus your rating agencies mentioning a comfortable level of five. Five and a half.
Ramandeep Gill
Okay. So sir, I’ll take it. So what we are doing right now see we are at 4 and a half x. We have already selected into our business plan that wherein we want to pitch in. So two things are there. One yes, we are already in touch with. With few investors wherein we are showing our results to. To. To them for the last four quarters. Number one. Second thing we. We are already in touch for this subordinate debt for a Tata for a Tire 2 Capital so as to maintain a good CRF CR for the company.
Third thing, we have also started exploring the transactions like DA now right from this quarter which will help us, you know in maintaining or which will help us in bridging the gap between the requirement of the dire one cat group. That is how we want to explore from this quarter itself. Because all our numbers related to AUM have all have been achieved so over and above whatever is the pool. So we are just speaking to various partners with respect to the banks and NBSCs wherein we can have a DA transaction as well. And we want to see okay if we can stretch up to Q3 without the further requirement of Tire 1 capital. And if required we can add Tire 2 capital right in Q2 only and the start of QQ3 then it would be okay. Otherwise you know we will go for the Tire 1 capital but that call will be taken after the results of Q3 only.
Prabal Gandhi
And suppose we go for Tire One Capital will our promoter having 62% stake would they be. Would they be comfortable continuing with that stake or we are exploring totally new investors in the market.
Ramandeep Gill
Yeah, so that call has to be taken though we a very good interest from the new investors also. But that call we have to take though promoters you know want to remain strong. Promoters are still 62.62 percentage. You know we. We do have a huge loss three three years back and promoters shareholding remains intact at that point of that time itself. So they, they, they want to be in, in the game while holding more than 51% as of now. So we’ll see this, you know where, where, how, how these things will happen and how this will turn out in future. So we are expecting you know after 22 results we are expecting to know to go to the market and speak to the investors if required.
Prabal Gandhi
Understood. Okay. Thank you sir. All the best.
Mathews Markose
Thank you.
operator
Thank you. The next question is from the line of CA Ship Verma from Breast Assured Group. Please go ahead.
Kshitij Verma
Hi team, am I audible?
Mathews Markose
Yeah, you’re audible.
Kshitij Verma
Yes sir, I just had a question. This issues which we had in the North India market, this was it after the 19th of March or before the 19th of March. And I’ll tell you the reason we are asking that why every caller is asking that is we were categorically said that the seasoning of the book and all the provisioning by the CFO said it will happen in Q3 first 2/4 you will see nothing. So this came as a slightly rude shock and we were not disclosed the same in the first call. So now suppose let’s take today’s cutoff date. Is there any issues in Q2 which we should know about which would reflect in the quarter?
Mathews Markose
Okay, so let us split this into three parts. First is on collection efficiency. Okay so our collection efficiency not just ours I think in collection efficiency in general in north and south are not the same. Okay. In south it’s better especially in markets like Kerala Karnataka collection efficiencies are much better when you come and specific to the product called two wheeler. So every time the collection efficiency when we look at we present the overall picture. But when you split it region wise and statewide there would be differences wherein the numbers at in Kerala, Karnataka south versus some of these states in the north would be different. Okay, so those differences continued to exist. Now two things played out. One is the increase in the portfolio over the festive season of last year when that portfolio increased and clubbed with the fact that there was some issue in the team in terms of collection. Both of them compounded to give us this. But having said that now we have the things in control. We now have specific journal head heading collection. There rules from that location. We have, we have all the agencies in place and things are in control. So will not give you any more. Road shots in Q2 for sure.
Kshitij Verma
Okay sir. And sir, when we were growing up all ending book in the in the North India market I’m sure we must have gotten some underwriting input from them also because I believe that time even after seasoning of portfolio maybe they were taking the credit loss hit first or something that you know we were getting a lot of the benefits grow on a lower nim. I understand but the NPA is also zero on that. So you know the underwriting transfer of knowledge it’s yet it is to help us but where the concerns are happening is you know we may want to hit a 10,000 for all book target 2028 but if it won’t be profitable.
We are, you know, we’re just. It’s like cold wine in new border. We are heading towards the ARC transaction in the future so we need to slightly check where you know at 10,000 crores if it’s not going to be profitable I rather be a MANWA Finance like a regional player with good books because the valuation of such companies are much higher. So just going after growth and also growing our NPA will not be as productive. So that was just a feedback I wanted to give. And secondly sir, next quarter onwards is once the PPT deck is uploaded if we have a day lag it would be appreciated because it’s coming very late in the evening normally. So this was just a feedback I wanted to give sir, nothing else.
Mathews Markose
So a good perspective, you know what you said. But again let me correct you on that. If it would have been a function of our credit underwriting lack of knowledge for the north then the slippages would have gone up. But as I mentioned before, slippages have not gone up. It is what we are recovering from, what has gone slipped which has come down. Okay, so therefore that is not the right assessment. While I appreciate the perspective that you have shared on being a smaller company with better ROA and all that. So yeah, that’s always an intellectual experience you can have. And I will let my CFO discuss on the on the other part which is about the uploading of the ppd. Raman, can you take that?
Ramandeep Gill
So PPT can only be uploaded after the results, right? Board meeting. So what we can do it. We can change our investor call timing from 11 to say around 2:00pm 3:00pm that can be done, yes, because last two quarters.
Kshitij Verma
Yeah, I don’t know if the other investors feel the same but if you. Had to have a little bit lag. It comes late in the evening, I’m sure many investors would.
Ramandeep Gill
I understand but once the board meeting is over then we have to upload the result and then only we are able to upload the investment to the apt. Right. So it’s all about the timing, what we can do from next quarter. Yes, we can, you know, we can have a slightly, you know, push our Investor call from 11am to 2pm so that you can get some sufficient time to, to
Kshitij Verma
people who want to study. Analyze and ask questions. It would be better for the overall community. I just felt I should be.
Mathews Markose
Yeah, yeah, appreciate, appreciate your points.
Ramandeep Gill
Yeah.
operator
Thank you. We will take that as our last question for today. I now hand the conference over to the management for closing comments.
Mathews Markose
Thank you so much. You’ve been asking very good questions and actually every time I come into the call I go back with a new perspective on how to run the business properly. So I think. Thank you so much for being patient with us. Thank you so much for being understanding. With us and thank you so much. For always coming up with something new to challenge us all the time. So we appreciate your patronage and we assure you from our management side, I assure you that we will work towards. Not giving you any more rude shocks. And standing up to your expectations and delivering on all the numbers that we are committing on the calls with you. Let me assure you we are putting, you know, our best foot forward, our best efforts to get to these numbers. Thank you so much.
operator
on behalf of LRA Securities. That concludes this conference. Thank you for joining us. And you may now disconnect your line.
Mathews Markose
Thank you all.