Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
Muthoot Capital Services Limited (NSE: MUTHOOTCAP) Q3 2026 Earnings Call dated Jan. 22, 2026
Corporate Participants:
Mathews Markose — Chief Executive Officer
Ramandeep Gill — Chief Financial Officer
Analysts:
Shweta Daptardar — Analyst
Amit Mehendale — Analyst
Rohan Mandora — Analyst
Vinod Krishna — Analyst
Tejas Khandelwal — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Muthoot Capital Services Ltd. Q3FY26 earnings conference call hosted by Ilara Securities India Pvt Ltd. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms.
Shweta Duptardhar from Elara Securities India Private Limited. Thank you and over to you ma’. Am.
Shweta Daptardar — Analyst
Thank you Ikra Good morning all. On behalf of Elara securities we welcome you all to the Q3FY26 earnings conference call of Muthoot Capital Services Ltd. From the management today we have with us Ms. Tina Muthoot full time Director Mr. Matthews Marcos Chief Executive Officer Mr. Ramandeep Gill, Chief Financial Officer 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 Marcos Chief Executive Officer for his opening remarks post which we can open the floor for Q and A. Thank you and over to you sir.
Mathews Markose — Chief Executive Officer
Thank you Sheta. Good morning everyone. First of all let me start by wishing you all and your loved ones a very happy and prosperous 2026. We are happy to connect with all of you once again to announce our Q3 results. While I’ll give the let Ramandeep our TFO do the broad numbers I would take you through the. You know all the things that happened in Q3. Q3 was extremely fantastic quarter for the entire automobile sector with the GST rate cut and the 50 season coming together it was a bumper quarter and all vehicle segments saw a huge growth overall for the calendar year.
The year has ended with almost 10% growth with two wheeler passenger vehicles leading the growth both almost touching double digit growth figures. So all in all it was a very good quarter for all the OEMs as well as the financials as well because the share of finance also increased. The new things that have happened in the credit industry is the emergence of the new to credit profile which is the below 25 age group borrower segment that has significantly increased the yoy growth of almost 11% in that segment and that is bringing in whole lot of new customers into this credit space and as usual Motor Capital Services always had a 50 plus percent share of NTB new to credit borrowers and therefore and we’ve had the core competence of underwriting credit for such customers.
So we’re proud to say that we’ve been instrumental in bringing lot of new people into the credit segment, into the formal credit as well as into the formal economy because most of these people also open new accounts while taking loans with us. So we are actually inducting more and more customers every quarter, every month into the formal economy as well. On the broad numbers, I think what has changed drastically for us this year and particularly this quarter is that now we’ve shifted our focus from earlier.
It was a hybrid model where we used to do Co Lending, B.C. As well as our own business. However, our focus has drastically shifted towards the self sourcing of motor capital services own business and through the businesses done by our group companies. So the share of group company business is constantly increasing while the share of co lending and BC partners is constantly reducing. That is strategic move to make our capital more effective because we are getting better yields on our own sourcing compared to what we were getting from the co lending and BC partners and therefore we decided to, you know, reduce that share.
That has seen slight drop in the overall numbers for us. But if you look at the share more closely, the MTSL owned business has grown by about 2025 percent whereas the share of the co lending has come down drastically by about close to 70% and that would see in the number. But as I said before, Ramandeer will take you through the broader numbers. I will take you through the tech initiatives that we have implemented this quarter. We have collection as our main focus because after the credit underwriting part, most important component of this business is how effectively you can collect and we have done a lot of tech investments in the collection piece.
So we adopted a new collection app from our loan originator, sorry our LMS which is Fin1, that’s called mCollect and we’ve also started issuing sales team. The first six months collection has been given to sales team and therefore they also use the mCollect app. And then we implemented a strategy builder on the collection side which you know, can predict which customer should be approached through which medium because some of them respond to SMS best, some of them respond to WhatsApp best, some of them respond to calls best and all of these was a manual process.
The collection strategy almost was a manual process that has been completely automated now and it’s an AI ML based model which predicts which customer should be approached through which mode and that has seen a lot of improvement. Our slippages, quarter on quarter has been coming down and we expect to continue the same trend in Q4. On the other initiatives that we have taken on the tech side we have brought in agentic AI based tele calling which is reducing our physical strength of telecallers and the cost has seen a drastic reduction and the number of calls that we are able to make has drastically improved.
All the team that used to take about one month to reach out to the customers can be done in just a matter of one day because of the bot is capable of making any number of calls. Also the of course the proportionate cost reduction is an added advantage to that which will accrue over over the next quarters. In our financials as well we were also able to launch a new product. We took baby steps in construction equipment finance. We had launched commercial vehicles last year and that time itself we had said that we would be going the entire journey of having all the products on wheels under our folio and as a step towards that we have launched construction equipment last month, last quarter and we started taking taking baby steps in that business Q4 onward.
That business also will start increasing and as I had mentioned before, the used two wheeler product is also ready and is under uat. So hopefully in January we will be able to go live with that also. So by the end of the calendar financial year we will have all of these products offered over the counter from our staple which is new two wheeler, used two wheeler, used car, used CV used construction equipment and the loyalty loan which is a pop up loan over and above our two wheeler customer base.
We also saw growth in our retail FD book as I mentioned in our previous call that we put up a retail liability sales team. So our retail FD book grew by about 26 crores in the quarter and that has been the best growth for us and we will continue leveraging on that growth story and our aim is to cross 100 crores by the end of March and that is where we will be reaching. So I think all in all the quarter was good for us in terms of both numbers. In terms of you are aware that the first two quarters were low in terms of profitability but we’ve been able to cover all of that and show Strong results in Q3 and we will continue to grow at a rapid pace in Q4 as well.
With that I would hand it over to Ramandeep to take you through the broader numbers. Over to you Ramandeep.
Ramandeep Gill — Chief Financial Officer
Thank you sir. Good morning all and a very happy new year to all of you. Talking about the numbers in this quarter we did 626 crore of disbursement. While doing that we have added 64,458 customer and we have taken our total live customer base to close to 6 lakhs. Now this has taken my total AUM to 3399 crore. With the balance sheet size of 3944 crores the borrowing for the company stood at 3198 crore which took debt to equity of the company at 4.81x and the CRA of the company stood at 22.49 percentage the GNP of the company on the on post we have reported 5.93 percentage whereas NNPA 3 percentage the total growth from the quarter three of last year till now the company has seen where in last quarter 3 of 25 financial year the total AM of the company was 28.
32 crore. That has grown up to 3,399 crore in this quarter. Now when we say in this quarter what we have done so last year the NCSL portfolio I just wanted to give you a breakup of the portfolio between NCSL and the CO lending as our CEO sir has said last year at the same time MCSL portfolio was 1911cr. Now in this quarter we are closing at 2712cr marking a growth of 42% in the MCSL portfolio. Only on the Co lending side we have reached at a height of 939cr as a CO lending closing portfolio. Now that has been brought down to 685 marking a degrowth of 26 percentage in the CO lending portfolio on year on year basis.
On the product side the company has four products effectively wherein two wheeler takes the overall share and that has been and there are two more products which have been introduced by the company in the last financial year which are used car and seaweeds. On two wheeler side the company has seen a year on year growth of 15 percentage whereas loyalty loan we have seen a growth of 149%. The products which has which were new to us are four wheeler and CV or from four wheeler side we have seen a growth of 84 percentage year on year whereas on CV side we have a remarkable growth of 476 percentage year on year.
Now talking about the NPAs of the company and what is the kind of impairment expense that we have incurred that people can also analyze in the in the financials as well product wise first we’ll talk about we’ll have splitted it into these four products which are two wheeler used four wheeler CV and loyalty loans. On my two wheeler the AUM of 2308 crores we have reported our NPA number of 214 crore. Of that the provisioning has been made as 111 cr. As a 50 percentage provisioning on used four wheeler the AUM stood at 136 crore with NP of 2.2.40 cr.
On that the provisioning is 2.81 crores. And on the CV side the closing AUM is 100 and 86 crore with 75 lakh of NPA. The provisioning here is 2.5 crores loyalty loan. The we are closing an AUM of 50 crore with an NP of 1.48 crore. Provisioning is 86 lakh which is 50 percentage on CV and used car. Since these are new businesses for us that is the reason impairment exp for these is higher than the npa. So overall impairment for this including stage one, two and three if we take on the NP it is more than 100 percentage.
Now talking about the business of the company. Last year at the same quarter we did 845 crore of business. In this year we did 625. Primarily the growth we can see in the MCSL portfolio. But yes in the other portfolio like partnerships we have seen a degrowth here rating of the company. In this quarter Crystal has upgraded us like A plus was there. Now that has become A plus with a positive outlook. A positive outlook with the A plus. Now from the revenue side of the company which we can analyze from the P and L as well.
The comparison has also has already been shared for the year on year. So for the first nine months of the last year the company has posted a revenue 336 crore. In the first nine months of this financial year the company has posted a total income and revenue of 463.85 crore. The finance cost of the company which was for the first nine months of the last year stood at 156 crore. That we have closed at 237 crore which can be which is basically a contribution towards the increase in the AUM. The opex of the company which was 123 crore in first nine months of the last year.
Now in this year we are reporting at 163.76 crore the impairment expense which was only 2.82 crore for the first nine months of the last year. Now therein we have seen it has gone up to 54.59 crore which has given us a bit of it in in the profitability of the company for this year. In this year the taking the conscious call because we knew that from the Q4 of the last year onwards slipp happening in the NPA. So companies has took a conscious call of taking my NP as of taking my LTV from which used to be 84.57 per percentage.
Now that has been brought down to 79 percentage. As an LTV on which we are operating the overall yield on which the blended yield on which the company is operating is 20.42 percentage. Whereas incremental yield. For the Q3 onwards the sourcing that we have done for Two Wheeler we are operating at 22.25 percentage. For CV we are operating at 17.39 percentage and for Four Wheeler we are operating at 18.36 percentage. Loyalty loans we are operating at 24.92 percentage. So this is this and we have also seen an income in the form of insurance income wherein we have taken a corporate agency at the start of this financial year in this quarter we booked an income of 2.31 crore.
The partners are Godigit, Lombard and across assists on the portfolio side of the company. The standard assets of the company surround 93.55 percentage and remaining contribute to the stage 3 asset which including of interest comes at 6.45 percentage. Bucket wise analysis we did on my zero bucket stood at 83.77 percentage which is fairly good as compared to the last quarters. On the source wise analysis when we do the dealer channel contribute 8 percentage of the NPA whereas alternate channel is contributing 7 and a half.
And on the segment wise analysis when we do our four wheeler four wheelers when we say used car this is contributing 1.75 percentage of the NPA and my CV is contributing only 0.40 percentage. CEO sir has also spoken on these slippages. Yes, in the. In the Q1 when the company has reported a loss at minus 4 crores wherein we can see the slippages as we when we say slippages which means percentage of flow forward towards my standard AUM it used to be 0.91 percentage. That has been gone down to 0.80 percentage in Q2 and in Q3 we have reported at 0.65 percentage.
So it’s a good achievement wherein basis on this we can see that the worst which we have seen in Q1 that has been over and Q2 we have seen an improvement and from Q3 onwards we are onwards and upwards. Specifically for the NPA side of the company when the slippages were so high. The rollback, the repos sale and the recoveries from those NPAs have been increased substantially in this quarter. So therefore what we have seen we have taken a detailed study wherein we have taken we have taken help from the outside consultant to build and to build an ECL for the company in in Q2.
In that we have seen the key what is the LGD for the various product in on which the the company has to operate. So for two wheelers since the company we have the data since inception we have taken the total LGD of the company which was coming to 28 percentage on a conscious call we have added 2 percentage extra there now on my four wheeler and my CVS wherein the company is not having enough information. Since we have started recently we have taken a market study of that. On that we have posted an LGD of 40 and 45 percentage.
That is what we have taken a feeler from the market. So which is which is fairly high. Therefore keeping the entire view where the where the LGD of the company should operate at we the PCR of the company was at 60 percentage and that too from last 12 to 15 months and seeing and seeing the trend wherein the Roll forward to NT has also been brought down from 0.91 percentage to 0.65. The company has taken a conscious call of bringing down the TCR from 60 to 50 percentage and therefore the release in the overlay has happened in this quarter.
Apart from them one more change has happened. We have also analyzed the portfolio wherein the company is not getting recoveries from those portfolio and DPD is fairly 450 days plus. So we have taken a portfolio of D3, D2 and D1 where no contribution is happening and because of that because of no contribution is happening from the from this portfolio the numerator keep stagnant. And when I said that MCSL portfolio is growing whereas we are consciously taking efforts of not growing the other partners, you know co lending and BBC portfolios are not growing.
So which is basically giving me a hit also in my overall gnp. This GNP has not been created. Now it is basically a. It is basically coming from the pool of D1, D2 and D3. So therein we have taken a call here wherein 14.09 cr of the entire pool has been written up by the by the organization in this quarter. So right of call has been taken with the factors that okay, the recovery is not coming from this pool from over a year so and DPDs overly come from 450 days in plus before taking that call what we have done we have also analyzed the static pool which I have also shared in the investor slide this time the month 5 and month 6, month 5 onwards to month 12 to month 18 we have analyzed that if a case is on the book then you know the NPA trend when it moves to stage 3 what is the contribution?
So when at month 5 we have seen it has gone to 1 percentage, at month 8 it has gone up to 3 percentage. In some period it has gone up to 5 percentage as well. Whereas for the sourcing that we have done from the last 12 months or so we have seen that month 5 has almost become 0 now and month 8 which used to be as high as 4 to 5 percentage that has been gone down to 1 percentage only and month 12 which has reached to 7 percentage has now been going down to 4 percentage. So with these factual things and seeing the improvement in the fresh flow, seeing the improvement in the stage three the entire calls have been taken which I have just explained.
Then there’s one more thing we also compare key if we take then what is the. What is my ECL versus IRAC of the company on as far as the RBI classification and following the RBI norms, IRAC norms the company need to have an impairment of 72.93 crore as again still we are holding an impairment of 120.91 cr which is 47 crore in excess from the IRAC knob and we want to keep it unless we see a further further growth in next further improvement in the NPA next 12 to 18 months from now onwards the securitized pool of the company remained at 554.34 crore whereas the non securitized pool which is own portfolio it stood at 2824.
When I say, when I say securitized it is basically contribution through pptc only and DA is a very small portion which is 2.72 crores. The ARCs which company had done two years back now two and a half years back that is performing extremely well. We have been able to bring it down the first arc by 72 percentage and second arc which we have done in September 2024 we have been able to bring it down by 40% because of the calls that we have taken last year. By doing this ARC we have been able to bring our GNPA down and as I said that during those calls that we want to attract more of PSU funding funding from the banks the results are there in the entire Financial year of last year we have taken 435 crore from the bank where in the first nine months we have taken 740 crores from the from banks only.
So therefore the relying on the higher cost funds from the market has gone down. That has also helped us in bringing the overall cost of funds for us. Now in this quarter one more thing we have closed the Green board also guaranteed transaction has also happened. That has also been shared in my investor slides as well. Wherein we have taken a contribution from Axis Bank 150 crore. Another contribution wherein we are closely working with another investor Trust capital. So that you know we’ll be able to close the close this deal in next month itself.
So that is something which is 300cr of fund that has been provided for a period of six years. So on a vintage of three years of my portfolio the churning will happen two times. Talking about the shareholding pattern of the company the promoter stood strong till now they are at 63.33 percentage. The retail. The retails standing at 26.31 percentage. And remaining is contributed by the corporates. Additional facilities which the company has borrowed in this quarter stood at 437.44 crore with an ROI of 8.82 percentage.
That 437 crore has a breakup of short term of 55 crore and long term of 382 crores. So by during this year and we always compare from quarter to quarter only. And this is a comparison which I want to say for quarter two and three. Whereas if we see the changes in the new entity raised by the company the rate has been gone down by 0.53 percentage. In my new CPS which have been raised by us from quarter two to quarter three it has. The overall rate has been brought down by 0.60 percentage. The PTCs have been brought down by 0.4 percentage.
Whereas working capital demand loan from the bank in Q2 that has been brought down by 0.06 percentage and in Q3 it has been brought down by 0.13 percentage. On the fixed deposit side of the company the company has made a remarkable growth in Q3 as compared to Q2 wherein the growth stood at 243 percentage. We have raised 25.81 year from the fixed deposit of the company Taking the total book at 67.28 crore. With aim to close at more than 100 crores by the end of this financial year. Talking about the structure, liquidity and the ALM that has been filed by us to rbi we have.
We can clearly say that there is no cumulative mismatch. As of now the liquidity of the company remains firm wherein we are always reporting and reporting. An LCR of the requirement from the RBA is 100%. We are hovering around somewhere on 115 to 125 percentage which is a very very good sign. The term sheets and the sanction on hand. Will has already provided us enough strength to say that you know we’ll be able to maintain this LCR for the next two quarters as well. So now and then, you know the overall investments in the overall yield which the company does.
In terms of my PTC investment SLR investment, the fixed deposit that we have with the bank we are carrying overall yield of 7 percentage. The in quarter two wherein I had a borrowing cost on my. On my ROI at 9.66 percentage. In quarter three I am reporting this as 8.82 percentage which is a very significant change or drop. And the XIR of 10.30 percentage has been reported at 10.09 percentage which it is also very significant drop. With this I would like to hand over the call to Shweta to take the questions.
Thank you so much.
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star n1 on their 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 will wait for a moment while the question queue assembles. The first question is from the line of Amit Mehendale from Robo Capital. Please go ahead.
Questions and Answers:
Amit Mehendale
Thank you. My first question is on loan book. Sir, how do you see loan book in FY27 and 28? And also there was a discussion last time on 2% ROA on the last call. So how do you see that? Do you see you hitting ROA of 2% in next year?
Ramandeep Gill
Matthew sir, you want to take loan book question first?
Mathews Markose
Yeah. Okay, I’ll take a loan book question. So this year we should end up closer to 4000 crores as against our initial estimate of close to 4500. And we kept it lower because after seeing the Q1 numbers on slippages we brought in lot of changes in our underwriting policies and some of the locations which were deemed as higher risk. We put some curbs there. And that is what Raman had explained that the average LTV has gone down from about 86% to about 79%. So those are all of those are a part of the credit intervention.
But having done that and seen the results on the existing, you know, portfolio and how the new portfolio that has been created this year has behaved, we are confident to go along with the growth path. So the earlier guidance that we had given as a part of our strategic objective is to become a 10,000 crore AUM company by 2028. We are not revising our guidance. So according to that we will calibrate our so next month when we go into our budget session we will build our budgets around that number so that we don’t miss that 2028 mark of 10,000 crores.
So that’s the broad guidance. This year we should close with around 2,500 crores of disbursement. And next year onwards you should look at anything close to 4000 crores as additional incremental disbursement. Raman, you can take the question
Ramandeep Gill
Second thing. Okay. Thank you so much for asking this question. So as I said in last quarter also which I missed saying when I was initially speaking to you, I have also said one more thing in last quarter that we’ll be doing a da, right? And that was also a part of the plan which we wanted to execute in Q3. Two reasons stopped us. Number one, the portfolio growth has to has to come. Now we know that overall portfolio because our partnership is not growing and doing a day at the same time. The growth will not come, number one.
Number two, the deals that we wanted to do, we wanted to do a fairly large ticket, you know, wherein the overall cost of the company has to go down. So that is the reason all those trends which I have shows, okay, my stage three asset trend in month five to month 12 is going down. That is all helping me in securing a deal now. So with that the overall costing of the company can also be saved. So we have tried that but the deal size and the rate of the deal has not matched as well. So in this quarter we want to do that with this.
This will help us in bringing up my overall ROA for the closing year. Second thing on on the next year then what will happen is based on my Q3 results wherein I have seen the slippages improvement. I am expecting the same slippages to continue right order. And sorry, I’m expecting some same same slippages which means point six five will become either will stay point 65 or lower but the overall denominator will grow. So which means the total NPA and the GNP of the company would be much lower. So those numbers also we have received internally, we are just working on it how it will look with this trend.
I am expecting a good ROA for the upcoming year as well. But most importantly for us that how we Close close this F5. So based on, so based on all the workings that we are having, we are trying to close one transaction of DA with a good NPA numbers at the end of next two months. So we are, we people will be able to communicate the exact ROA numbers which will be close to at the end of next next quarter. Call that how we are going to go in the upcoming financial year.
Amit Mehendale
Thanks for that. Sir. If I may look at the quarterly numbers. If your NII, for example Q3 is about 74 crores and Opix is about 58 crores. So if I do basic math, you know it leaves us with about 60 crores a year. And if I take a steady state 2% provisioning on the loan book that also gives me about 60 crores. So I don’t know how you know, you’re calculating but I don’t see you know anywhere any number anywhere close to 2%. And maybe you can you know correct my numbers, quarterly numbers that will help.
Ramandeep Gill
Yeah. Yeah. So I’m just opening that file only now. So when you say NIA for this quarter you have seen 74 crores. Wait a minute, I am just opening that as well. Yeah. So nia.
Amit Mehendale
Yes,
Ramandeep Gill
Yes you are right. Yeah. Sir, two things will contribute to that. This NII which I have also tried and shown there. But I will explain during with the maths only Here the incremental ROAS I am at 20.42 percentage which I have said in my call. And my incremental RO has become 22.79 percentage. So that ROI is something which is contributing towards the top line. Number two, my cost of funds are going down. And number three, the impairment cost which is which you have taken a 2 percentage. I am as of now is 1.25 percentage on the entire book.
And this is what we want to continue with the same. So with that I’m expecting good numbers because when, when you see that this the your overall top line will increase by 2 percentage on a business of around 2600 crore which is a basic average business. When you take the 2 percentage crore the 52 crore would be additional on that. Right? And when you see that 0.5, 0.50 cost, 0.50 per percentage of your cost of funds will also will, will go go down. And that is evident from the trend that we are Seeing right now, right.
We are expecting a good number. Like even if we raise say 1300 crore for next, for next year on that we point point five zero percentage would come around. If I am not wrong, it would come around 7 to 8 crore as a contribution towards you from the finance cost as well. So this is what we are expecting and I hope I am able to answer some bit of your question.
Amit Mehendale
Yeah, thanks for that. So just to you know Clarify, it’s a 2% on the entire book. You’re expecting yield to.
Ramandeep Gill
Yeah, I’ll tell you. I’ll tell you. So next year would be a beta on the 2 percentage of the book that has been created for 16 months. 12 months for next year and 4 months for this year. Okay. So the average yield was.
Amit Mehendale
Disbursing. Now currently for this quarter the new disbursements are at 2% higher. Is that correct? Yeah.
Ramandeep Gill
Yeah. Yes. Yes. Yes.
Amit Mehendale
Okay. Okay. Thanks for that. I think that’s great. My second question which is also a follow up on this is that you know, 1.2%, you know, assumptions. I’m not sure how sacrosanct this is because if you look at, you know, we’re adding 40 crores as an MP addition and I don’t see much recovery as well. So any color on how you’re taking 1.2%. Also if I look at steady state for many years, you know, at least it is 1.5%, 1.6%. It’s not 2%.
Ramandeep Gill
Yeah, I’ll tell you. So we have taken 1.25 percentage as. As. As my cost towards the impairment. So why I have taken them. So there are two parts to it. Number one is how my study, how my stage three npa, you know, will behave. So when we say that earlier it used to at month five, month eight, it used to flow at two to four percentage. Now it is at one percentage. Right. So that, that is something which is which. Which will help us. Number two, from the. Yearly from the, from the. Since inception when I.
As I also said in the call, we have also built a model with that. What sort of LGD that the company is operating since inception till now. So there are, there are recoveries, much recoveries from the NPA that we are seeing how those recoveries are coming. If we. Even if you see that the portfolio that we have sold to ARC three years back now from that 76 percentage recovery has also came. I mean this is the fasting, fastest moving ARC portfolio which you will also appreciate that fact. The portfolio which we have sold two years back to ERC on that also 40 percentage recovery has also come.
Right. So it is just like, it’s just like wherein we, if we are able to trace the HYP customer or if you’re able to repossess that vehicle and all. So therefore the chances of taking recoveries from those customer multifolds at the same time. So therefore I am expecting on the old book, yes, whatever happened in Q1 and Q2, wherein we have to provide impairment expense at a higher cost on that slowly the recovery will start coming. And that hit we have already taken in the account. So when that hit will or we have already taken that impairment expense will get reversed over a period of time.
And that is how we have seen in, in the, in the past as well.
Amit Mehendale
Okay, thanks a lot. I want to add
Mathews Markose
To what Raman has said. When you’re talking about a steady state impairment you are only considering two wheeler as a portfolio. But if you look at our incremental portfolio, we are adding more from the other businesses where the delinquency per se is much lower than the two wheeler. If two wheeler at 30 plus at an industry level is it’s about 7.6% to 7% these products have a delinquency of less than 3%. Okay. So the incremental book that we are building are on a. And that was precisely the reason why we wanted to you know, diversify into multi product and products which are much safer from a lending perspective.
So that book is increasing and obviously that will result in lower impairment and lower slippages going forward. So that will add secondly after the corporate agency license that we’ve already started billing insurance income as a, as a steady state stream of income and plus the fact that we’ve also added roadside assist as a additional product for cross sell. All this cross sell will also add to our top line revenue.
Amit Mehendale
Right sir, thank you very much. I have one quick suggestion before I end. You know, it will I think help if you know, if the management commentary at the beginning is limited to 10, 15 minutes so that in each the many participants get opportunity to ask questions. Typically all of us, all the analysts look at the PowerPoint before you know, attending the call. So maybe just a suggestion for my end and that’s it for my. Right. Thank you and all the best.
Mathews Markose
Okay, thank you. Feedback taken.
Operator
Thank you. The next question is from the line of Rohan Mandora from Equi Risk. Please go ahead.
Rohan Mandora
Yeah, hi sir, good morning. I just wanted to understand when you’re talking about 4000 crores of disbursements next year currently run it is around 600 odd crores. So like what are what will lead to the step up in the disbursement run rate to almost 1000 crores quarterly and 3Q being a good quarter where Vegas sales were good. Why did we not see an uptrend the disbursement run rate in cq?
Mathews Markose
Okay, I will take that question. So we had a steady disbursement of. So last year if you look at. We disbursed 2900 crores. This year because of as I mentioned, we had done policy correction and it took some time to stabilize. We will end up with about 2500 crores of disbursement. With the market expected to grow at around 10% this number is imminently possible. I don’t see that as a huge jump from the current levels. And these numbers are easily achievable. In fact we were heading towards that number this year till we put on the brakes in Q2, otherwise that number wouldn’t have been a challenge at all.
Rohan Mandora
Sure. So if you will,
Mathews Markose
Addition of new. Products which are at a much higher ticket size. So our principal product used to be two wheeler for a long time which has a average ticket size of 85 000. Our car loan average ticket sales is closer to 5 lakhs. CV is around 8 lakhs and CE that we have recently introduced as an average ticket size of closer to 15 lakhs. So the higher ticket size products and the portfolio growing there will naturally, you know, help us increase our disbursement numbers.
Rohan Mandora
Right. So ticket size angle is right. But in terms of the distribution of the connect, how will you originate these incremental loans? Some color around that. And specifically also on the policy correction part that you said, if you can touch upon what was the specific measure that you took.
Mathews Markose
Okay, so we did two things broadly. One was a location risk scorecard which is we’ve categorized locations into high risk, low risk, medium risk, severe risk, etc. And based on that then we also worked with Civil to build a customer level scorecard. So civil gives us a color coding of every customer instead of just giving a point in time score of a 750, 700 whatever. Sybil looks at the 36 month track on the bureau and is able to color code the customer into a green, yellow, orange and red category.
Green is very low risk, yellow is medium risk, orange being high risk and red being severe risk. We outright reject the red categories. And on the green, yellow and orange we marry that with the Location scorecard where you know, green across the board will get certain ltv, certain rates and all that, whereas an orange will vary with the risk of the location per se. So if an orange customer in a low risk location comes maybe we are, we tend to give them a higher LTV and a lower rate, whereas orange in a high risk location will give it a much lower ltv.
You know, the great gate criteria gets increased significantly so that only the good customer who genuinely want to come on board will come on board and not anybody who just wants to try their luck. So that’s what we’ve done on the credit side.
Rohan Mandora
Sure. And sir, you also alluded to 50% of the new originations are new to credit customers. Yes. 50%. Yes. In terms of your filtration criteria, like other than say the location or the cohort from where he’s coming, like one, what is the profile of these customers? That is a sweet spot for us. And secondly, like are there any customer specific parameters that we look into while underwriting these customers? And how has been the portfolio behavior of NTC versus existing customers existing to credit customers in the last two, three years?
Mathews Markose
Okay, so one more change that we have done other than the ones that have already spoken about is that we used to have some 90 plus schemes and any particular customer taking opting for one scheme, irrespective of the location, irrespective of the customer profile, will get the same LTV, same rate, etc. Across the country. That was our previous model. Now we have reduced this schemes only into three categories, Income, asset and no income. So income customer is one who has a credible income source who’s able to, you know, show an income document.
And based on that we do the underwriting. An asset customer is somebody who has a own house proof which we verify with an online document which can be verified online. So here it is not considerably enhancing the credit profile of the customer. However, we know that the customer is contactable because he will not run away. He has his own house which is worth some amount which is much, much higher than the loan that we are giving. And therefore he’s not going to run away, he is contactable. And therefore at some stage at an eventuality we will be able to, you know, either do a settlement with the customer or do a reposition, so on and so forth.
And the nip is the riskier segment where we have consciously reduced our, you know, LTVs to ensure that only the right profile who has some equity to give will get onboarded when the customer has an in this Business. The biggest part is about how much the equity customer is willing to put. If the equity is very low, the interest in servicing the loan becomes lower. But if equity is substantial, one we don’t incur a loss if we have to finally take a call of reposition. And to the customer, since he has.
An equity put in, he also ensures that even if there is a slight default, he continues to pay the loan and close the loan.
Rohan Mandora
I
Mathews Markose
Hope that answers.
Rohan Mandora
Yes. And lastly we have seen a 10% Q&Q drop in PCR with historical trend of 60%. So any specific thought process here?
Mathews Markose
I think Raman had explained we did. A complete remodel, done redo of our ECL model and it was done by one of the big fours. And they looked at last eight year data and looked at our LGD it was coming to only 34%. So when that was at 34% we didn’t see a reason to keep PCR at such a high level. And that was a conscious call that we discussed internally and with the board and finally decided to take that call to bring it down to 50%
Rohan Mandora
Will maintain around 1550. Yeah,
Mathews Markose
Yeah, yeah,
Rohan Mandora
Sure sir, Thanks a lot. Thank you.
Operator
Thank you. The next question is from the line of Vinod Krishna from Avendus Wealth. Please go ahead.
Vinod Krishna
Am I audible?
Mathews Markose
Yes, yes.
Vinod Krishna
Sir, if you can. Because you are, although you are, you’re getting into new loan products,
Tejas Khandelwal
Its
Vinod Krishna
Percentage is still small. So when you say in two years you are going to FY27 and 28 you’re going to go to 10,000 crore or 8,000 crore, do you think really that kind of a step up can happen in non two wheeler loans?
Mathews Markose
The step up can, this market is very big. Okay. So actually we’ve not even scratched the surface of the opportunity these products we wanted to see how it is going to shape up in the first year. So we went in a very very calibrated manner. So the credit policies were kept very strict. So if you see this year across the industry on CV passenger cars and two wheeler there was a uptick in the incremental delinquencies. But our delinquencies on these products are sub 1% and that is, you know, because we kept the gate criteria very very strict.
So now that we have some comfort, our RC pendencies are these products are the lowest in the industry. So all of those structural things which. Is required for this business to grow are currently in place. The credit team is in place, the business teams are in place, the SBUs are clearly verticalized. There is a separate P and L being monitored. The business heads are accountable for the P and L. So those structures which is required to scale up or basically to say a foundation has been clearly laid.
Now how much high the superstructure has to be built is up to us because the foundation is pretty strong. So. And the market is huge. So both these factors put together we don’t see a challenge in scaling up these businesses.
Vinod Krishna
And if you see in the last con call you have guided 800 crores at the conservative side but we have still only disbursed 600 crores. Any reasons? And how do you see about your year end guidance of reaching 4,000 crore?
Mathews Markose
Okay so thanks for asking that. So two things. So if you look at our last. Year quarter three we did 100842 crores and based on that our estimate was that. But in that co lending was 243 crores. This year in the 624 crores the co lending is only 40 crores. So somewhere this year we, you know we took a conscious call for two reasons. One, if you look at our leverage we are already at 4.8%. We had to conserve our capital and we didn’t want to do it at a low yielding product which was co lending. Two, our co lending partners were not able to match up with the FLDG requirement and therefore we said no, no I didn’t this is not the right way to go it.
So we curtailed that business and that. Is what is impacted. So it was a very very calculated call. We could have gone beyond 800 crores by increasing the co lending share. But we decided not to do that. It was a conscious call in the interest of the investors and the company. So
Vinod Krishna
What would be the Revised disbursement for Q4? Sir, what do you think we’ll end up at?
Mathews Markose
We want to without taking any co lending we want to restrict it to 600 crores for Q4.
Vinod Krishna
But next year you will go to cope around thousand per project.
Mathews Markose
Yeah. So obviously not from Q1. So the 600 can go to maybe 750800 crores in Q1. But then Q3 is the biggest. So next year Q3 we will really go hammer and pounds. That’s the plan. And by this time all these new products like construction equipment, used two wheelers would have stabilized, the teams would have stabilized and then we will be able to scale up.
Vinod Krishna
So any ROA targets that you can give for next to 12 years sir, and now you will reach there.
Mathews Markose
Will you Take that question. Yes,
Ramandeep Gill
Yes, I’ll take that question. So guidance for this year. As I said last in the last question as well, we want to see how the Q4 turns up for us. If we see a good, good number in Q4 both in the sign of you know, sourcing and Most importantly the NP of the company is going down obviously the the IM right now for one quarter I have to provide for an impairment of 15 to 18 crores. If that we are able to save then you know, then I will be able to save around for four quarters. I’ll be able to 6062 crores from that expense only that is something which will decide that where we are in terms of that see.
So in Q3 we have seen a good glimpse of my you know NPA going down in Q4 I’m expecting the same number. If that going to happen then obvious that one percentage, one and a half percentage which I am right now focusing on my impairment that will get released and that will be some something which, which, which would be a bare minimum number one. Number two, I have also told that my incremental ROI is going up, you know so therefore I am expecting a good contribution of 2 percentage on the entire book of 15 to 16 month in the next year.
And number three my cost of funds which is you know is going down that we have seen in this year the first nine months. I’m expecting the same trend to continue for next 12 to 18 months with contracting all these three crucial parameters for the entire business. So we can we can analyze the RO8 at RN that yet it is, it’s going to be good only I will not commit the commit one number at this point of time. But at Q4 I will be having a good view on the ROA for. The next year as well.
Vinod Krishna
So just follow up question on this. My last question sir. If you see in the last eight, nine eight years we have not gone not able to keep up our guidance and especially on the underwriting part. So can we say now that we have done the repair work in terms of our underwriting, collections, partnerships and whatever technology and you’re confident that at least 3% ROE will come at 10,000 course or are there anything more that you have to do in terms of teams and if you can because we have not got our guidance right in a big way.
Now
Ramandeep Gill
I missed your question last eight years. What
Vinod Krishna
The last eight years. If you see the track record we have not
Ramandeep Gill
We
Vinod Krishna
Have, we have changed our off late post Covid especially we have changed our Underwriting, we have put a new tech, new teams. So because we are not getting our guidance right. So are we like very sure that have we done all the things that we have to do to make sure that the, the 10,000 crore journey will be much smoother than what we had in the last.
Mathews Markose
So I don’t know about the last. Eight years because last two, last year we were at 2000 crores and today we are at 3400 crores. And on the AUM last year we had committed 3000 crores as our exit aum and we met that exit aum this year we had committed little over. 4000 crores but we curtailed it a bit. We will reach closer to our 4000 crore AUM. So I don’t know. Yeah, roa that been see we are. A largely two wheeler player and you know what happened in the what do you call microfinance segment that was a.
Sector issue, there were spillovers. So these are all kind of Black. Swan events which you can’t predict. But broadly on our numbers in terms of delivery we’ve been able to meet up with our delivery numbers. So I don’t completely agree there on the part that us eight years have not met our numbers. Yeah, there are blips which come because of these kind of events and we. Are strong enough to and or resilient enough to live through those. You know that was my comfortable time and still come out strong.
So I think that’s the strength of the company.
Vinod Krishna
No sir, that’s that. My point is if you see black Swans are happening at much, much, much more frequency than can be called Black Swan. So are we ready in terms of the systems and processes that we. That was my question. We
Mathews Markose
Are ready and we will continue. To, you know, invest in all the right technology, all the right platforms that at a group level the decision is very clear. So we will, we will be up the curve on all the, all the new interventions that come in at various points in time.
Vinod Krishna
Thank you sir. Thank you very much sir. All the best. Yeah,
Mathews Markose
Yeah. Thank you.
Operator
Thank you. The next question is from the line of Tejas Khandelwal from Prudent Equity. Please go ahead.
Tejas Khandelwal
Oh hi sir. Am I audible?
Mathews Markose
Yes you are audible,
Tejas Khandelwal
Yeah. So sir, I’ve been tracking the company for many quarters now and asset quality pressure has been building consistently and in every earning call each time I have asked about it the response has been very confident that things are under control, dat’s are going to happen and or profits will come through and God knows what not and even in the last quarter the guidance which you had given about 60 crores per for second half that was very unrealistic and this Q3 result is very disappointing because sir without that big Provision release of 20 crores the result would have looked very horrible.
And sir on the on the growth side with while the two wheeler sector showed very massive numbers this quarter but our advances grew just 3% quarter on quarter and if you look at disbursement so Those are down by 26% year on year. So sir honestly we feel very misled by the repeated optimism that has not matched the numbers. So I have one question that are we going to keep getting the same unrealistic positive commentary or can we expect a more realistic outlook from here on?
Mathews Markose
So I will take on the growth part. Thanks for putting this question very clearly. Since there was a deterioration in our credit quality as any company which is wise would have taken the call, we have also taken a call to calibrate our disbursement. It was not meaningful to continue with the same pace of growth without putting some checks and balances in place and that is what we have done. So therefore it has seen an impact on our overall numbers and that is also a result why our roas have also gone down.
One of the commentary that we had given last time is about we will be able to close a DA which as our CFO clarified that the DA transaction did not happen because our overall AUM did not grow to the extent that we had anticipated or we curtailed the growth. We had to take a call not to do that DA transaction but. All. The structural part we have put in place and we continue to believe that we are on the right trajectory. There could be some shortfall on a quarter on quarter basis but overall we remain committed to the broad numbers of growth and ROA that we are giving to our investors and we will ensure that.
Like as I said on the previous gentleman who asked the question said that eight years we’ve missed so that is not the case. From 2000 crores to 3400 crores we have grown in the span of 1 year and 9 months. And so that’s been I think a very significant achievement for company which has was only a two wheeler loan company. Now we have expanded so multiple areas that we have given a commitment on. We’ve been able to deliver number one diversification which is on from a two wheeler loan company to today a multi product company.
Number two on a geographic expansion which was a very very Kerala Karnataka centric business model to A Pan India presence. Number three on AUM growth, which we’ve shown that we’ve almost grown by 50% last year. This year also, we’ll end up on an AUM growth of closer to, I think 30, 35% which will still be better than the industry. Yeah. On the impairment part is the only place where I think we have missed the budget. So I tend to disagree with you on that because I think. But for that impairment part which we have, which actually pulled us down, and that is a very, very critical.
Because of which we had to curtail many other things on the periphery. But other than that, I think we’ve. Been very, very conscious on the commentary that we give, on the commitment that we give and we try to meet up those numbers. And it’s a very, very genuine effort towards meeting those numbers. That much I can assure you. We can have blips based on certain sectoral issues and things like that. But on the commitment part, we stand very, very strongly committed. The group stands very, very strongly committed.
And as a group, we are a group which has a whole lot of credibility and we will continue to keep those credibility impact. The current management is completely committed towards keeping the integrity and the credibility of the group and we will not fail the investor. That’s a very, very strong and firm commitment from our side. However, we may have those blips which are. Some of them are way beyond our control. Some of them are in our control, but maybe we could have done better. So those, those things happen in business.
And I fully accept, as the person in charge of the management, I accept the shortfalls and I am willing to correct that. However, I don’t agree on the fact. That we’ve not met any of the commitment where I have a complete disconnect on that. I hope I am able to answer your question.
Tejas Khandelwal
Yes, sir, one of the few commitments which you have made is on the growth side. So I agree that the AVM is growing and our top line is growing. But sir, this is profitless growth. And I think which is not for the shareholders because the company has shown very. Which I. Which
Mathews Markose
I agree. But then see, you are not giving time to the management also. So, for instance, we were trying to fix multiple things, okay, so we’ve been. Fixing many of those things. Some of the places we have slipped and I admit that. But you have to give some time to the management because he’s been able to show, you know, growth in so many areas like diversification of geography, diversification of product increase of aum. Then you have to Believe in us saying that, yeah, we will be able to show the last mile also on the profitability and we are fully committed to that.
Yes. Yeah. When you’re trying to fix too many things together, there will be one or two things which may slip. And I take full accountability of that. And we committed towards.
Tejas Khandelwal
Yeah, that I agree with sir. Since last many quarters you have spent so much on technology and restructuring your underwriting framework, still your NPAs have gone from 2.2% to 3.6% just year on year net NPS. And without that write off sir, the gross impact would have also looked very bad.
Mathews Markose
I agree again with you there. So I think one and the only. Factor which we have gone wrong is the curtailment of npa. And again as you say, technology is. Not something that you deploy today and you see the results tomorrow. It takes some amount of time for. The technology and the scorecards to work and the machine to learn and then give us guidance on what is the future. So that’s a work in progress and I can assure you that’s a very, very genuine work in progress. This is the only thing, if I.
Have to agree to that, the only thing that we’ve missed on curtailing is the NPA cycle which I had told in our previous calls also it was not just about of technology or something. We also had problem with people. There were people in, we expanded in the north but we did not get people or we had higher attrition in the north. And therefore north is where if you look at my standalone portfolio in south, it’s extremely good. It’s one of the best in the industry. I think it’s comparable to a private sector bank also that’s the way because there we already had a collection set up.
But then in the north that the. Slippages happened, it hit us very hard and it hit us very fast also which we took some time to go back and work on. But then everything that is required to be done has been done and will continue to do so. That’s the commitment from the side of the management.
Tejas Khandelwal
Okay. Okay. And the other expenses part, which other expenses has reached 28 crores this quarter. So where can this stop? I mean where can we expect this to settle at? On quarterly basis.
Mathews Markose
Raman, you want to take that?
Ramandeep Gill
Yeah. Yeah, I’ll. I’ll take that. So if you, if you compare the quarter versus quarter. Yes. You might see that other expenses has, has gone up and wherein the other expense is basically towards the function of that what all we are invest towards all the Technology towards my software. The wherein the expansion side of it has already been stopped now wherein whatever we wanted to incur for the expansion expansion side that has already been done. We are very conscious now. Whatever even if even for a single rupee that we have to do for and for towards the expansion towards the tech or whatever we have to do.
So that is something we are keeping in mind right from the start of this financial year as we suffered a loss in Q1 and now we know that whatever we will be spending on the other expense side also that is something wherein we’ll be, we are answerable to each and everything on that. So this is something, you know we are expecting that these kind of expenses are not growing that much. If they are growing then they would be having a direct impact on the, on the sourcing or top line. This is what we are expecting from it and we have started taking a view of, started taking a review on it as well.
Tejas Khandelwal
Okay. And sir, what growth can we expect in four wheeler and CV segment in FY27?
Mathews Markose
So our focus area is on the four four wheeler and CV. We should next year try to close a thousand crore plus disbursement on both these products put together. And there the runoff is very very slow because the AUM is just building. So as of now whatever I disburse is closer to what I add on the AUM in these two products. So it should be in that range.
Tejas Khandelwal
Okay sir, so those questions were from my side. And sir, I just hope that you do some, do some changes in your underwriting skills because the, the company has shown very poor underwriting. So thank you.
Mathews Markose
Pardon?
Tejas Khandelwal
No, I’m saying that I just hope you do some changes in your underwriting skills because the NPs are rising like anything.
Mathews Markose
Yeah, yeah we, we, we are doing that. We have already done that also. So you will see the results in the coming quarters on that.
Tejas Khandelwal
Okay. Okay,
Mathews Markose
I think.
Operator
Thank you ladies and gentlemen. Due to time constraint, that was the last question for today. Anna, hand the conference over to the management for closing comments. Thank you. And over to the management.
Mathews Markose
Yeah. Thank you very much all of you for coming on the call. And as I have mentioned before also you continue to challenge us in terms of your questions and we stay committed to the commitments that we are making. As I said before, we have been able to surmount many of the challenges that we have and we have fixed lot of those things. And I think one area that we still need to fix is the collection efficiency and the NPA bit which we are putting all efforts to do that. And I want to assure all the investors, on behalf of the management that you will see results on that in the quarters to come.
Thank you so much for your continued support and patronage, and we really appreciate that. Thank you.
Operator
Thank you very much on behalf of Elara Securities India Private Limited. That concludes this conference. Thank you all for joining us today. And you may now disconnect your lines.
Mathews Markose
Thank you.