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) Q4 2026 Earnings Call dated May. 11, 2026
Corporate Participants:
Unidentified Speaker
Mathews Markose — Chief Executive Officer
Ramandeep Gill — Chief Financial Officer
Analysts:
Tejas Khandelwal — Analyst
Unidentified Participant
Kshitij Verma — Analyst
Vinod Krishna — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Muthut Capital Service Limited Q4FY26 earning conference call hosted by Elara Securities. As a reminder, all participant lines will be the listen only mode and there will be an opportunity for you to ask question after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing Star then zero on your touch tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr.
Maneet Kim Awat from Ilara securities. Thank you. And over to you sir.
Unidentified Speaker
Thank you. Good morning all. On behalf of Killara securities, we welcome you all to the queue for FY26 earnings conference call of Mujo Capital Services Ltd. From the management today we have with us Mr. Matthew Marcos, CEO and M. Gill, CFO. I now hand over the call to management for opening remarks. Thank you. And over to you sir.
Mathews Markose — Chief Executive Officer
Good morning everyone. Manish, am I audible?
Tejas Khandelwal — Analyst
Yes sir, you are.
Mathews Markose — Chief Executive Officer
Okay, so good morning everyone and thank you for joining us today. On behalf of the management team, I welcome all our investors, analysts, lenders and stakeholders to the earnings call for Q4 2526. So if I talk about the year that went by, we had a calibrated growth amidst challenging and evolving macroeconomic environment. The first half of the year, you all know we saw, you know, the stress in MFI similar to the retail lending piece in the last quarter, as we all know we saw global uncertainties rising out of the geopolitical tensions, the war in West Asia, which you know, saw elevated crude oil prices, tightening of liquidity conditions and continued impact on consumption patterns.
And also, you know, it saw a significant rise in OPEX across sectors. But despite all these headwinds, I believe the Indian economy demonstrated resilience and it was supported by domestic demand, the GST rationalization that government had done and also the gradual recovery in rural consumption. So all of these were actual tailwinds for the Indian economy at ncsl. Against all this backdrop, we remain focused on strengthening the fundamentals of our business and executing our long term strategic objectives.
During FY25 26 your company achieved an AUM of 3500 crores including the managed book reflecting steady expansion across core and emerging product segments. We continue to diversify our portfolio with very encouraging traction in commercial vehicles, used car loyalty loans and also business from the group companies. While we maintained our strong presence in the two wheeler financing ecosystem, our strategic emphasis during the year was not merely on growth but also building a more sustainable, technology driven and customer centric franchise.
So at this moment I would also like to add that today based on our technology platforms we are benchmark in some of the areas at least even compared to large organizations. We made significant progress in our digital transformation initiatives through automated collection, digitization, account aggregator workflow modernization and strengthening of governance and compliance framework. More importantly, you know we’ve been, we’ve begun laying the foundation for becoming a truly digital and AI driven organization.
During the year we initiated multiple AI led interventions across the enterprise including AI based ticket segregation for compliance and grievance management, speech and voice analytics for customer interaction, smart debt collection initiatives, AI assisted collection monitoring, enhanced data driven underwriting and risk assessment capabilities. Today, 100% of our pre delinquency calls are done by AI agents. And gradually I believe by the end of Q1 entire X bucket calling will be done by AI agents only.
There will be no human interaction in these two buckets completely it will be AI driven. We are also progressively integrating technology and analytics into our audit and compliance tracking, operational workflow, broad monitoring and customer service servicing functions to improve efficiency and responsiveness. And this is a decision that we are doing across organize across the organization because you know, at MPG Group we clearly understand that the future of financial services will be shaped by institutions that can combine scale with intelligence, automation and customer centric digital capabilities.
So our investments, we have made a lot of investments in data lake business rule engine workflow automation and AI led process enhancement. And these are not isolated projects but these are actually a part of a larger strategic shift towards building a future ready organization. Doing while doing all of these, you know we’ve remained conscious of the threats stress emerging in the retail credit environment. Asset quality pressure across the industry, especially in the unsecured and semi urban borrower segments has been at elevated levels and this warranted a more measured and prudent approach.
So we have focused on balancing growth with risk discipline, strengthening collection infrastructure, improving digital repayment penetration and enhancing underwriting quality. Today we collect more than 80% through digital route, less than 20% is through cash collection mode. And as we look ahead, we remain optimistic about the long term opportunity in India’s mobility financing ecosystem because all the structural drivers are intact. Improving affordability with GST rationalization, recovery in rural demand, all of these fundamentals remain very very strong.
Also in the CV space, replacement demand is growing, growing adoption of digital finance continues to provide a strong foundation for a company like ours which is truly into the digital space. For the coming year we have outlined a focused roadmap. We are targeting close to 3000 crores of disbursement and we aim to get deeper penetration into, you know, the market that we are currently in. And we wish to expand through our digital sourcing channels and continue to improve on our operational efficiency and sustained investments in technology, governance and AI capabilities.
And our long term aspiration remains clear which is to build a scalable diversified institution and fully digital which will create value for shareholders. So I think with that opening commentary I would request Ramandeep to take over and take you through the detailed operational and financial performance of the last year and last quarter. Thank you. Raman, over to you.
Ramandeep Gill — Chief Financial Officer
Thank you Matthew.
Tejas Khandelwal — Analyst
Sir,
Ramandeep Gill — Chief Financial Officer
Am I audible sir? Yeah. Yes.
Mathews Markose — Chief Executive Officer
Morning
Ramandeep Gill — Chief Financial Officer
All. So this time have divided our call into four parts now for you all. First like we always spoke about the AUM then the asset quality of the company then we’ll speak on the GNPA and and then we’ll speak on the PAT talking about the AUM of the company including managed book which I’ll just explain Right now we have closed our AUM at 3441 crore manage book where when we say the company has been able to do a DA transaction first time in the last three fun three or three to four financial year. So this we have concluded with a pool of approximately 100 crore with the Hinduja in the month of March.
On the AUM front the sole portfolio of MCSL which was 2118 crore now has been closed at 2758 crores whereas the co lending portfolio which was 940 crore at the start of the year we closed at 595 crore. So there is a significant degrowth in the co lending portfolio which we have said in each and every earning call the retail portion of our business which which was around 59 percentage from the MCSL side. If we see Q4 in Q4 we were at 89.51 percentage from the MCSL right. So we earlier we used to be like 604060 through CO lending and then 40% sorry 40% through CO lending and 60 through MCSL that ratio has been significantly changed over the year.
In Q4 we were at 89.51 percentage only through MCSL and remaining has been contributed by the co lending front. So when we say on the AUM front of the company products which have contributed to this 3500cr namely a two wheeler wherein we have seen growth. Obviously the managed book was there where in DA we have done four wheeler when we say used car book which was initially at 86 crore at the start of this Financial year we closed at 155 crore. And when we talk about CV which was 61.25 crore at the start of the year we closed it approximately 240 crore at the end of this year.
So which is a significant jump. So this is broadly on the AUM of the company. Now talking about the asset quality of the company which is. Which has contributed towards. So in the last earning call I remember that the company which when when I said the percentage of flow Forward towards the AUM. So from the opening standard AUM when we were at 0.80 percentage was my flow forward at the start of the start of the year. Now when we see Q4 it is only 0.43 percentage. So we might see that GNP of the company which I have also shared it is coming at 6.41 percentage and 6.96 percentage with interest accrual.
I’ll just explain all the entire thing but first we’ll speak on the retail assets of the company. So when we say 0.43 percentage was my flow forward and we can see that 0.80 percentage has been dropped down to 0.73 percentage then 0.65 percentage then 0.55 and finally we have closed at 0.43 percentage which is a significant achievement in terms my NP analysis for the month for the year. Second thing which has contributed is my slippages which use which has. Which was around 18 crore a month starting at the start of this financial year.
Now that has gone up to that. Sorry that has gone down to 8,9cr a month which means we have been able to control the slippages from stage 2 to stage 3 asset management by almost 50 percentage which is again a very significant jump. And when we talk about the asset quality, the contribution that has been made through my retail segment. So retail segment when we say that we have also relied on. Okay there was a co lending portfolio, there is an MCSL portfolio. So what we have been able to achieve through MCSL portfolio the overall yield which was around 1818 and a half percentage at the start of the year Zenday deal that has gone up to 21.02 percentage because of the share that has been increased from the NCSL portfolio.
With that my two wheeler standalone as an incremental business from the two wheeler that gave me 22.02 percentage of the yield. My four wheeler is contributing 18.45% of the yield while CV has contributed 7.31 percentage and loyalty loan has contributed 24.92 percentage. So that has allowed the company to increase the yield, you know and by while focusing on the MCSL portfolio as a loan. So this was more or less the more or less on the aum. The asset quality of the company will now speak on the GNPA portion.
So we reported 6.96 percentage with the interest accrual and 6.41 percentage with the principal outstanding on managed book. When we computed GNPA 90 it is. It is 5.58 percentage. The sole reason which has contributed to the increase in the GNP while the flow forward has been brought down significantly. As I said I’m repeating it it’s 0.43 percentage. The sole reason was we have recognized one of our corporate loan which was up money. So we have recognized at the entire 15.51 cr as a NPA in March.
And then you know though we we know that you know and whatever that has to be provided for for that NPA that we have done in March. Now while saying that the one. One more thing this the entire loan we knew that that was in stress since September October of the financial year wherein we have been able to take the recoveries out of it. But as far as the DPD timer is concerned it has to be recognized as an npa. So we did. Now we know that provisioning is and all we have provided. On the other hand we are.
We are also happy about the fact that we have been able to secure this loan and then you know whatever, whatever we have we have classified as an NP in this financial year. I hope in the next financial year. In this financial year we have been able to realize that security and we’ll be able to bring down that NPA portion. This is one. So that corporate loan has significantly contributed towards the NPA. My total NPA as we close this financial is 194 crore. And then when we added this then around 1515 and a half crore.
It’s a big chunk of that NPA. So this is how the NPM movement forward for the company. Now four important sectors wherein you know we. I want to say that first the company has taken a call on the portfolio which was sourced pre Covid and that was lying in the doubtful 2 and doubtful 3 category. So around 12 crore of the portfolio has been taken out from the books wherein we have taken for the entire portfolio. We have taken the P and L hit as well. How did we classify this portfolio? We have classified this portfolio wherein no recovery has.
No recovery has happened for the company on this portfolio since June 2023 number one. Number two no change in the PCR it remains at 50 percentage and NNP has to be below 6 percentage. That’s the policy of the company and we are sticking on to it. We have also provided for 43 lakh 15,000 fraud loan accounts which is. Which are almost 8 instances that have been reported to us. And for that hundred percentage provision has been provided in the books for UP money. We have already spoken. And then there is another impact of one time hit that the company has taken apart from the right of account apart from the UP money.
And there was one more hit that the company has taken which was providing the impact on the new wage code so beta. So based on the. Based on the. Based on the financial impact that the company has taken which I have also explained in the Note 5 it was coming as 1.68 cr that has been taken for the valuation of gratuity and the leave enchantment. And then I have also explained at the start we have also done one DA deal which I have said in the Q3 but you know because of the effect that my Q1 performance because of my impairment was very high and Q2 it has been brought down Q3 we have seen some improvement.
That is the reason we have been able to we that we were sure that okay this portfolio has been classified for DA and based on our recent efficiency numbers that has given us enough confidence, you know to to make sure that we can close a DA deal as well. So that DA deal we have taken in the market of 100 crores and that has been successfully closed. And then these are the kind of things which we wanted to do at the start of this financial year. But we know that how the impairment was impacting and what was the kind of impact.
But we have left behind everything till Q3 and Q4 we have been able to do that DA for the first time and we’ll be able to continue also. At the same time the AUM has also also needs to grow which we have seen a growth in our MCSL portfolio. As I have already said last year our CEO has said that we will close around 600 crore of business and then we close around 562 crore of business which is a very close number of what we have said. Another income which is which has significantly increased over quarter one to quarter four.
And then we are. And then we are also planning that this income is going to further increase in this financial year is an insurance income that through corporate agency we have taken a 7.52 cr that has been classified as another income in my P and L. So that also we have. We. We have taken and we know that you know these kind of incomes wherein since we are a corporate agent so while while doing the cross selling and all these kind of incomes is are. Are going to increase. Second thing on my ECL versus IRAD the company is still carrying a 51.56 of the excess provision over the IRAC which which you also must have seen in the PPT which I have shared.
We did since we have we said that we have taken a call on the pre Covid portfolio. We have taken same call on the ARC as well while we did ARC because at that time the portfolio which has been sold to the ARC was the portfolio wherein we are. We are we are able to recover something out of the portfolio. That is the reason if you see my both my arcs are doing extremely well. The SR at the start of the financial. Sorry at the start of the arc was 103 crores. Now that has been brought down to 26ccr with the Phoenix arc and then similarly another ARC that we did which was at the start of this financial year which was around 41 crore.
So 2023 crore was the easy closing outstanding from those SRs. The best part about the entire financial year wherein we have been able to bring down our cost of funds by 60 paisa the borrowings from the bank till the last financial year which was only 435crore a year that has significantly jumped up and multiplied with 2x now it is 865cr of the total bank sanction we received during the entire financial year. There was no change in the entire shareholding pattern. Promoters still hold 63.33 percentage and remaining has been contributed by the retail and the corporates.
Then taking another update the total borrowings which the company has done every quarter as I said total in totality we have been able to bring down the cost by 60 paisa in the same format. We want to continue in this financial year as well. Only one increase that has happened in the entire cost of fund. Other that was around that. That was when when we did the CO lending PTC wherein we know that the partner which we have chosen obviously it it was a smaller partner. So that’s the reason the entire cost has been jumped up but that has not jumped with that.
That has jumped up with a small percentage only. Other than that the overall cost of fund has been brought down by 60 paisa. The fixed deposit book which was at the start of this Financial year which was hovering around 4045 crore from the years now. Now this year we have closed at 80.83 crores which is again a significant achievement. That and that too at a cost of 8.83 percentage. So this is what we want to continue. And for our structure liquidity and the ALM which we have filed we have not seen a cumulative mismatch in any single stage.
Whereas the LCR of the company was always 100 throughout the financial year and this one and at March we close at 129 percentage. As an LCR for the investment front the company has invested in SLR, PTC, SLR deposit, collateral deposit. We had with the banks from which we take. We took the term loan and fixed deposit with the banks. We have earned an overall yield of 6.98 percentage. At total the borrowing cost for the. For the entire. For the. For the Q4 versus Q3 at Q4 I was at 10.09 percentage.
Whereas in. Sorry in Q3. Whereas in Q4 we closed our total cost of fund at 9.48 percentage which is significant jump. In one quarter itself the cost of funds have been brought down. So another. Another update which we have said last. Last quarter we said we that we are in talks with the equity investments. We are in talks with the equity investors. So they wanted us to close our financial year so that they can see the results and all. And we have kept them updated throughout the entire JFM and we do have a call with them on the Friday itself immediately after the results.
So what we will do as the next step is we’ll just wait for the term sheets first and then we’ll try to close something out of it. Specifically within next two to three months from now onwards. That’s it. From my side. Over to you Maneet.
Unidentified Speaker
Manit. You can take it forward now we can continue with the Q and A session. Sure.
Operator
Thank you. We’ll now begin the question and answer session. Anyone who wishes to ask question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue you may press star and. Two participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assemble. The first question is from the line of Vinay Jadwani from an individual investor please go ahead.
Questions and Answers:
Unidentified Participant
Yeah, can you Hear me?
Operator
Yes Mr. Vinay.
Unidentified Participant
Yeah, yeah. I’ve been invested in Muthu capital for last 8 to 10 years. In earlier times there was a management with Madhu and Vinod Then there is management change. And currently as we know Ramandeep and Matthews has joined. So we were expecting good times since last two to three years. And we are still waiting for the for that to be 255. As you know debt holders, you issue debt securities and you take in all that kind of debt, they get interest. But we as an equity investor we are getting nothing in for last 8 to 10 years for the policy.
Once I was. I was asking that we should be getting dividend. Other finance companies also do profits and they are also doing finance like Mahindra Mahindra Capital. Much sorry Mahindra Mahra Finance and other companies they also give dividend to the shareholders. We are not even getting dividends. We are not getting adding capital appreciation. In all the last con calls we have been told that things will get better. What kind of patience are you expecting from the investor? Actually I don’t understand.
You should be. Either you are not gauging the future quite right or what’s happening, I’m not able to understand. But what we are getting is that only assurance that now things will improve. Now things will improve. It will clarify. That will be very helpful. Since we are waiting very patiently for last many years. How much patience could you expect from us? That’s my question.
Mathews Markose
Okay, so thanks Vinay for the question. First of all, you know when we took over the company the company was stagnant on 2000 crores for seven consecutive years. Right? From 2019 till 2023 and 24 when we took over. In the last two years the AUM of the company has grown from 2000 crores to 3500 crores. So there’s definitely. And this year we will. So within three years it will be more than 100% growth for the AUM. So that is very very clear that you know your patience is paying fruits. That is number one.
Number two on the profitability, our OPEX has gone up because of the fact that we have added many verticals. For 30 years we were only a two wheeler loan company. Today we are a multi product company. And that is the way I would expect the company to grow. We have now a fully grown CV vertical, a used car vertical and then we have renewed focus on fixed deposits. So we are a multi product company. Today we are starting online FD sourcing now. So on all the friends of business we are growing. But because of the proportionate expense in cost related to adding up new verticals and also the amount of spend we have done on the IT and digital infrastructure today we are a fully digital organization.
So we are. Profits have been slightly subdued to that extent compared to our growth. But you need to appreciate the fact that AUM by this year end would have doubled over the last three years. Okay. And that’s a significant move in terms of what has happened over the past so many years. Okay, so that is one on the division side. Raman, will you just take that question, please?
Ramandeep Gill
Yeah. One thing, sir, I want to add. When we took over this company, the GNP of the company was around 24.5 percentage, right? So it’s not easy. You know, where we need to start the entire process, the entire recovery is, you know, starting from the soft bucket. It used to be outsourced, which has significantly increased my cost of recovery as a whole. So we need to set up. That’s a sole reason that, you know, the companies enter into ventures like Cocoa lending, wherein, you know, we can substantiate, we can increase our business at the same time, you know, relying on the partners, you know, underwriting skills.
And we can see that, okay, different geographies we can enter, but, but our GNP should remain at a static level, at least for the incremental portfolio. At the same time, we took call on the GNP on the previous portfolio, which I already, which I explained as what we have done with the ARCS and how those ARCS portfolio are doing well. I hope that since those ARCS portfolio are doing well now itself after six, six, seven years, and then we have allowed them, you know, to, to. To. To become as a GNPA at the start, which is something, you know, which is, which is not in our control when we have joined on the dividend front.
Yes. Since, you know that the profitability was extremely lower. And I completely agree with you that being an investor for say, seven, eight years, I, I am also an investor in so many companies and all. I completely understand this pain. And, but the only thing is, you know, whatever was the form of the company, whatever was the thing, we have find, we. We have found out a way now that, okay, even if I just wanted to take it, take it further, even if the business here, you know, even if the business plan that the company has framed for this financial year, it has framed, keeping in mind that whatever new product which we have added and whatever was the existing one, which was in the form of two wheeler, we made sure that company as a whole has defined an ROA first.
And then based on that, everything has been said, okay, if this is the kind of growth we want to achieve, this should be a number wherein we should contain our impairment. We should contain our gnp. So this is where so that you know we should have something. We should have something very very good very good in the front of the shareholder. And this is not something I am saying that we have to. We have to speak speak it about after the end of this financial year quarter on quarter we want to see.
We want to show the shareholders that what kind of growth because we have found, we have found some formula. Okay. This is the. This is the kind of you know adjustment which we want to make. And even. Even if you see in Q4 multiple hits we have taken otherwise the profitability for the standalone Q4 would have been extremely good. So we have found a way obviously you know some calls needs to be taken which we we have taken that that is the reason the profitability for the year as a whole was extremely lower and Q1 was also a loss.
So that was the sole reason dividend was not there. But yes, we’ll just. We will make sure that you know this kind of situation and all which should not occur in future. That is something which I really wanted to say
Unidentified Participant
What happens whenever the results come out now first of all there’s a fear kind of a thing is this quarter is going to be okay my first 10 my first point is that see the impairment and again I see oh again I impairment increase 20 crore.
Ramandeep Gill
I just wanted to say something here. The impairment which you have seen here now that is also taking our impact of the right of account which we have done okay around 7 crore. 7 crores of impact that we have taken in the impairment for this and all these accounts pertains to pre covered error itself that also have explained while I was speaking okay overall impairment then that’s the reason I stressed on the fact that flow forward was only 0.43 percentage and then the overall stage three is going down, down, down.
That is the reason I am explaining this again and again. Vinay sir.
Unidentified Participant
So what kind of profitability for this year we can expect finally so that again we can think that now we’ll again have a. I can again wish and expect and wait for one more year. So what kind of profitability we can be we can expect for this year profitably because I am an equity holder and I just want to let debt holder look for interest. We look for. Yeah simple.
Ramandeep Gill
Oh, I understand your question. That is the reason if you see at the start of this call instead of you know saying that what is the kind of business that we have done I just took my call into the four factors which is very important for equity holder. What is my aem? Where is my asset quality, where it is going? What is the GNP now and what is the part of the company that is the reason I stressed on that. Now since I am again saying there. There is a formula wherein we. We are. We have started working.
Okay. Now I will not say like that by the end of this financial year you will be having this and that this is something, you know which is again planning planning something for you know next 12 months or so quarter on quarter. We wanted to. We wanted a shareholder to. To see the results. Now because as a first one thing which has. If even if you see for the whole financial year which you have said it, you know that the impairment expense that has you know gone substantially for the whole year I have booked 76 crore of impairment expense, right sir.
Whereas last financial year it was only 1880, 18 and a half crore itself. That is where the entire profitability juice has been taken into this. This we should appreciate that in Q3 it has gone substantially down and in Q4 it has gone against the substantially gone. Now now these calls where at the end of the year we have to take that okay. One corporate loan account said otherwise I have to take all this call in Q1 Q2 because once we know that okay this we have been able to manage till Q4 in sorry till till Q3.
So therein few calls we can take in Q4 so that everything should remain in control and we can have a fresh journey with the new portfolio. Whatever we have sourced while the new management has taken over. So with that you know we. We should start providing the result from quarter on quarter. So this is something. And then one more thing which I have just said and I just want to reiterate it. The entire profitability of the company which we have make in this financial year entire business plan has just kept in mind, okay.
There there has to be some good looking ROA of the company. You know pre tax ROA of the company should be two two and a half percentage. This is what we have taken into our account and these are the results which we wanted to show from quarter one itself. Okay? The business plan which we have targeted for April, May, June and the impairment and now this is getting reviewed every month with each and every income side and each and every expense side that is there any slippages as of now when we are saying that it is no.
So which means that okay, we are going in some something good that is that you know we are. We’re going to do. So this is what. This is the limited answer from my side. Vanessa, just keep. I’ll just. I’ll request one more thing. Please have some faith, you know, wherein we have.
Mathews Markose
And
Unidentified Participant
Having patience. Yeah, yeah, yeah.
Mathews Markose
Vinay Matthews here. I you know, invite you to have a. At any time as per your convenience. Have a personal one on one discussion with me. With me and Raman will which we will take you through all the changes that we have made in the company. All the initiatives that we have taken, all the AI things we have implemented, all the digital things that we implemented. We have completely revamped the institution. Okay. You have a feed to believe it. I’m okay. We can meet somewhere where you are. You are stationed in Bombay or somewhere.
Or we can have a call and I can show you the entire thing. Okay. About what you. We are doing very, very confident.
Kshitij Verma
Sure.
Mathews Markose
Thank you. Thank you.
Kshitij Verma
Thank
Mathews Markose
You.
Operator
Thank you. The next question is from the line of Tejas Kandar from Prudent Equities. Please go ahead.
Tejas Khandelwal
Oh, hi sir, thank you for the opportunity. As you have said that we have grown our aum, which I agree. But sir, the growth is meaningless because our profit is not growing at all. And our net NPs and gross NPs continue to deteriorate. And our net NPs are now above 4%. And at the time of such a bad NPAs, our provisioning coverage ratio still remains around 50%. Now this again raises the concern that profitability is being protected at the cost of balance sheet. And sir, even the. Even. Even in the last quarter provision reversal had materially supported our pat.
And now sir, we have now seen almost five to six consecutive quarters of weak performance. And. And our disbursement has also not grown enough. So sir, my question is now. Now even if you have replaced the new new head off collection. But sir, after all this. If the present management is unable to deliver a visible turnaround after such an extended period, then would the board consider bringing in the different leadership team or with the strong execution track record or something?
Mathews Markose
No, I think we’ll have to get some numbers. Right. First of all, you admitted that there is an AUM growth. Number two, you need to look at the split of the aum. Okay. When the new management came in, we did not have a sales team to do business. So the immediate step was to stop the AUM from further de growing. What we did was immediately build a few co lending partners. And in the first year and almost through the second year, about 60%, 65% of the growth was coming from Kohlending, okay? But by that time we built our own team and we built capability for doing our own business.
And with the fact that we saw some stress in co lending partners with our partners, as Raman has already said that one account has gone npa, we took a conscious decision to stop the co lending business as a whole. Okay? And at some stage our co lending business was 900 plus crores which was one third of our business. And that was a 0 NPA portfolio because that was the arrangement with the coal lenders where they would give only the best cases to us. So there was a pool which is now de growing which did not have an np and our pool is growing which will have naturally some amount of npa.
And that is why it is apparently showing us a higher npa. But it is not that our portfolio quality has deteriorated. It is the fact that the denominator which was zero NPA is flowing out faster than 900 crore last year has come down to 500 crore which will almost be zero by this year end. So whatever we are doing is our own business and which is our, you know, and we are confident about what we are doing to the board has, board is fully confident about what we are doing. We are appraising them on every initiative that we take.
Our AEMs are growing, we are moving the way our strategy objectives which have been defined by the company is going to be on our fully digital organization and AI driven organization and diversify the portfolio. So all these years, 30 years, we were only a two wheeler loan company which is, which is not a very good thing to do because two wheeler typically happens to be a higher delinquency product. Okay? So we’ve gone through all the cycles. We’ve seen that the organization is resilient, we’ve seen how we can turn around from different situations.
And therefore the board and the promoters are confident about the management and will continue to grow on terms of our profit being subdued. As I again said, we have made lot of investment. We have put two new, whole new verticals of CV and CE and there’s a India team. Now those two businesses are only, you know, being supported by the two wheeler business. They are not breaking even even now. So that the entire cost of two verticals is being borne by one vertical which is a two wheeler loan business which also went through its own challenges because of not just our own issues but the macroeconomic conditions.
Like we are very closely, you know, related to business, to the MFI segment. MFI saw huge stress. You Saw the MFI stress spillover to unsecured lending and secured lending. But despite all of that we’ve been able to well make small though it is smaller but we’ve been able to make profits across the quarters. Now two things you have to keep in mind. One, we are. The two wheeler business is supporting that stress. Two wheeler business is supporting outflow of a non NPA pool of co lending. The two wheeler business is supporting two whole new verticals which have come up.
The two wheeler business is supporting a whole new initiative of digitization. AI. All of this involves a lot of cost. Okay. After having done all of that we’ve been able to come quarter on quarter and show you some business. Of course I know this is not to the satisfaction of the investors. It’s not to the entire satisfaction of us also in terms of the results. But we are fully convinced about our actions and what we are doing. And we’ll continue to do what is right for the company. That’s my. Sir.
Sir,
Ramandeep Gill
One thing I want to add a few numbers. Sir, I think because sir has said that you know in Q3 we have done some PCR change and all. I’ll tell you sir, my NPA is. You know since you must be having this ppt you can also do the same number with me. We have reported NP of 209 cr. Okay. While in. While in Q3 we have reported 211 crores. You can just see PPT is with you. Okay. 211 crore. We have reported now that 21111 cr was the entire retail NPA. Out of that 209 just subtract 15 crore from the up money which was the corporate loan.
It would be 194 crore. 194 crore on a book of 3441 crore. It comes at a GNP as a percentage of 5.64 percentage as compared to 6.45 percentage in Q3. So you tell me sir, why that? You tell me sir that whether the NPA has gone down or increase. You compare Apple to Apple. You compare our PCR and then you say because the statement which you have made the NNP has increased NNP in my Q3 with the PCR of 50 percentage. That was a conscious call we have taken because we know that our retail. Retail portfolio is performing extremely well was 3.64 percentage.
Without and just comparing Apple to Apple with retail portfolio and NNPA would have been 2.82 percentage. So this is the kind of change which the company has made. Yes, Mr. Tejas, over to you. You can ask now.
Tejas Khandelwal
So. Yeah, yeah. So as far as I can see sir, our NPS have bottomed around Q3, Q2 Q3 FY25.
Mathews Markose
After
Tejas Khandelwal
That they are raising and NPS are. NPS will cross now 7%. So which is I think concerning. And the second, second thing is you have talked about the growth in aum. But sir, our disbursement has not shown any growth both quarter on quarter and both year on year. So I don’t know when, at the time when the entire auto sector is booming in India. I think you are missing a golden cycle. Yeah,
Ramandeep Gill
Yeah. Sorry to interrupt. First I want to take this question on the NPA. First you said around 7 percentage and all I want to know this calculation how you are doing it. Apple to Apple you do that retail to retail. Corporate loan up money was an excluding sector which we already told on that we already have a security with just exclude corporate loan. Then you inform us that where we are on the. On our npa. Because at the start of the coil I myself have said that we were at 0.85 percentage as a flow forward towards the standard AUM that has grown, gone down up to Q by, by Q4S 0.43 percentage.
That I have accepted that at the start of the year it was like. Like this. But now it has been, you know, it has been halved. It’s only 0.43%. So I wanted to know what make you say that, that it was seven percentage and all. I just want to know the statement, sir.
Tejas Khandelwal
I mean in presentation you have given the 6.96% of GNP.
Ramandeep Gill
Yes sir. Yes.
Tejas Khandelwal
It’s around 7%, right?
Ramandeep Gill
Yes, yes, very correct, very correct. So 6.9. That is the reason I’m explaining now while answering your question.
Tejas Khandelwal
That’s what I said. That gross increase running towards 7%.
Ramandeep Gill
Yes, that was
Tejas Khandelwal
My, that was what I said. And then second was on the growth which you have said that you’re growing but your disbursements are not growing and the entire auto sector is booming. So I think you’re missing the golden cycle. So that was. I said I don’t know what you’re talking about. Okay,
Ramandeep Gill
So sir, this is what it is. So when I again I’ll repeat that or this, or this 6.45 percentage, 6.89 percentage, whatever it is at the NPA when at the start of the. Your question, the question was that we have changed the pcr. This, that and I wanted you to have a comparison on the Retail to. To retail. That is the reason when I was explaining my call I said that the company has taken a up money as a corporate loan as a hit of 15 crore. As a one time hit that has led to an increase. If you reduce that component, you compare Apple to Apple your NPA would be 6.45 percentage in Q3.
Now it is 5.64%. So it is below 6. That is how my retail portfolio is getting executed now. Sir, over to you Matthew. Sir, for the aum.
Mathews Markose
Yeah. On the question of the growth again I clarified in my response earlier we were growing MCSL plus co lending. Today we are growing only MCSL and we are at the same level. Okay. So if I add co lending I can grow another by 50% which we don’t want to do. That’s why we are not doing. It’s a conscious call. We are very clear of what we are doing.
Tejas Khandelwal
What growth should we look at in FY27 on the AUM side and on the profitability side Also
Ramandeep Gill
One more thing that I want to take this question on the slide 7 which we have shared. If you can open, if you have that in front of it. In, in front of you. The growth which was which I wanted to say that NCSL portfolio was 2018 crore. That has gone up to 2758 crore. 29 percentage of the growth which we have recorded. Sir, I believe that is in line with the industry. The only, only answer to. To say that you know there was some degrowth that which was around coal lending which is. Which has been degrown by 40 percentage.
940 crore has become 595 crore. Okay sir. So we wanted to grow the MCSL portfolio in the same lines in this financial year as well. Sir.
Tejas Khandelwal
Okay. Okay. And on the profitability front. Have you decided internally?
Ramandeep Gill
So, so while, while. While doing the you know business plan for the company. The cumulative ROA which we have taken. You know. While because we know that you know two wheeler. Sorry two wheeler is an existing one while four wheeler and CV are the new ones wherein they, they, they they need to perform you know extremely well in which they are doing it as well. So we are. We. We are expecting that either of two will get a break even in this financial year. Okay. But we have not taken while computing the overall ROA pretext.
ROA we have computed the whole for MCSL would be around 2 percentage. This is what we, we wanted to say.
Tejas Khandelwal
Okay. Okay. Thank you so much.
Ramandeep Gill
Thank you sir.
Operator
Thank you. The next question is from the line Of Vinod Krishna from Evan as well. Please go ahead
Vinod Krishna
Sir. Am I audible?
Operator
Yes, Mr.
Ramandeep Gill
Vinod.
Operator
Yeah.
Vinod Krishna
So how far is our 10,000 crore and 3% ROE or 4% ROE target? And is are you now confident about the business model that you have said? Because you’re talking you have invested in digital AI and collections and sorry in sourcing from only our portfolio. So from. And also not because we have done for us, north is new. So how confident are you that your business model is set in north and about the growth and what do you say, how far is that 10,000 crore. So if I can, how confident are you from the way you are set up the new, new, new one, the new team has come.
Mathews Markose
So we are very confident about the 10,000 crores. That’s why we put up that number on board. And we also this year before budgeting we again went through all our strategic objectives. We have retained all of them. We are looking at 10,000 crore by 2829 somewhere there about. And the path this year is definitely cross 4000 crore AUM somewhere close to 4500 crore is what we are looking at. But we will look at the evolving situation. Because of the, you know, ongoing crisis and all that. We don’t know how it’s going to impact India.
You already heard TM say a few things yesterday as advisory. So we will look at the evolving situation. We want to go quarter on quarter. But we are very, very confident about our business model. We are confident about our team. We are confident about the locations that we have opened up in the North. All the locations are doing well and we will continue to scale there. We will go in a calibrated manner in North. We will not extend to all the markets. The markets where we are present currently we are comfortable.
We will continue to grow. Other than that we are expanding in newer markets where we did not have much deeper presence like Maharashtra and Tamil Nadu. Both of these are very, very good markets. But our presence was less where we are going deeper into that. And we are very confident about our business model and the team and the initiatives that we are taking.
Kshitij Verma
Thank you sir.
Mathews Markose
Thank you.
Operator
Thank you. The next question is from the line of Ankur from GEN Capital. Please go ahead.
Unidentified Participant
Yeah, thanks Matthews. Hemant, congrats. I think you guys have been negating a very, very tough environment. I think you complete 3 year olds also. So congrats on that first question. If you can give us more color on the team build out that you referred to. How is the collection and BD team shaping up?
Unidentified Participant
So Collection and the second what was the team you said?
Unidentified Participant
Business development team.
Mathews Markose
Business. Okay yeah so today we have, you know complete we divided the company into various, you know, SBUs. Okay strategic business units. So we have a business head for two wheeler business we have a business head for CAR ucl we have a business set for commercial vehicles and we have a business head for the group relationship business so which is all, all the group companies. So we have been only getting business from corp for a long time and that used to contribute Almost you know 85, 90% of the group relationship business.
This year onwards we are going with Muthoot microphone and the microphone has already signed up with us and also chits and Muthoot housing finance in a small manner while the volume will not be large but the objective at a group level is that when we do scrub on individual company base we see that lot of customers go outside of Muthoot’s ecosystem to take loans which is already available in the Muthur ecosystem. So that is something at a group level we are trying to keep in house. So all group companies carry, you know one needs to four target which is one customer should have four products within the group and all that.
So those kind of initiatives are happening. Wincor will continue to be the largest and so that is so those are the four business verticals. We have a head of collection who takes care of all the four business collections but he is supported by zonal heads in the north east and south west. Our portfolio is not that big so as of now we don’t have a zonal head there but as and when the portfolio grows we’ll have people there also. Other than that we have today a full blown, you know, what do you call audit function, compliance function, risk function, credit and credit team.
Most of our two wheeler credit has been automated through scorecards so largely the team is for CAR and CV which still is manual in terms of while the flow is digital but the underwriting happens with the manual intervention. We have a full blown now legal team. So all verticals, so some 17 HODs report into the CEO all of them are full fledged departments so all of these are investment and we’ve invested a lot in compliance and governance which is reflected in our upgrade in our recently conducted RBA audit and all that.
So all of these are resulting in you know, very good softer aspects of the business and of course we know that the investment on the business side is going into developing all of these so we are building our organization from the very foundation. Okay and the results are there to be seen, the promoters are happy, the board is happy and we will build it. We are confident about it.
Unidentified Participant
So given the current cost base, what kind of cost to income ratios we should look at? Let’s say F27 and F28. Is the cost most of the cost or is it more what cost coming in?
Ramandeep Gill
As I said earlier, you know the. We do have two new products in line which is used car and CVs. Right. So therein also the business is increasing extremely well and either of two will get a break even in this, in this financial year itself. So therefore we, when we talk about MC as a whole cost to income, yes, it is very high as of now we target, you know slowly to bring it down. And obviously the good target is, you know to remain at around 60, 40. Right. Which, which is not now as of now. But yes, for the, for this financial year we want it right now it is 85 percentage.
You know, wherein we are standing as of now. But you know, by when we know that the overall cost, when we say that for two things which is really helping us out now, fun which is 1, 1 cost which has helped us out throughout the entire financial year was the cost of funds that has gone down by 60 paisa. And then on the new incremental cost of borrowing, sorry, new incremental funds which you are going to raise which would be around 3,000 crore on that 60 paisa would be having a huge impact. Number one.
Number two, which I will say that you know the cost of impairment wherein we are seeing some good results starting QQ3 itself and Q3 and Q4 we are seeing, we are, we are hoping that if trend gets continue in Q1 and Q2 itself we will be having a good margin for our cost to incomes as well. So I hope, I hope that you know, Q1 would be good. And based on that for the entire financial year we can still project that. Okay. We will not achieve as per what we wanted on 60 percentage 60 to 40. But yes, we’ll be somewhere on 70, 75 percentage as a whole.
Unidentified Participant
Raman, two follow ups. One, how much equity are you planning to raise and will become from promoters? Second, you mentioned 3,000 crore. Is that the debt that you will take over what one, two, three years?
Ramandeep Gill
Understood sir. So two answering both, sir. Number one, as I said at the start of the college as well we got two investors during the last year itself. But you know that you know, Q1 was not that good and Q2 we improved in Q3 and Q4. Q4 we have been able to show some, you know, good. That is the reason I’m focusing on my portfolio as a whole. One surprise in the corporate loan has come other than that the results as for me as a CFO was extremely good and the performance of in terms of the. The asset quality has been significantly improved.
Okay, so we, so this, this, these results have been. So we have shared this with our new investors as well. Not confirmed though. But yes, you know they want to do some due diligence on the final results and all which they will start now and immediately after the AGM they will take the entire balance sheet to review and to reflect. So we are targeting around 400 crore wherein we the promoter also wanted to contribute. This round would be more in the form of CCPs. You know why? Because this would be more for milestone based.
The valuation of the company is not that great which you already know in the market. So that is the reason milestone will play a very significant role here Again so we wanted to target a 400cr itself wherein 200 would be upfront and 200 based on some milestone which we want to do. And then yes promoter wanted to, they always wanted to take a substantial share. Right now they are at 63.663 percentage. Obviously they want to maintain somewhere on more than 51 percentage throughout. So this is one second thing.
On the 3000 crore I said this would be my total borrowing which I am planning on that you know the cost of funds as I said because when we talk about the ROA as a whole it doesn’t. Sir, it doesn’t come only from the impairment and from all while saving the you know, small cost. And now it has become so big that 3000 crore percentage of 60 paisa that will contribute a lot in this financial year on the overall RO of the company. Sir,
Mathews Markose
I want to add something where Raman has left. So earlier I had mentioned in reply to Vinay saying that I invite all of you for a more detailed, you know demo where you we can take you through individually or collectively through the processes that we have put in, all the improvements that we have made which will actually give you more confidence in what we are doing. So that offer remains and I’m happy to invite as many of you are joining that thing. But in the current moment I want to add few initiatives that you know on the cost saving.
So our entire two wheeler today underwriting and we have also got AUA Kua license from you know Udai. So our KYC is going fully digital from this month onwards till now we Were looking at various options. Some was manual OCR and all that. Now we are enabled on face authentication and biometric authentication. Our entire KYC is automated. Our risk underwriting is automated through scorecards. So the last leg was when the risk credit underwriting becomes automated. We had about 30 odd people doing two wheeler credit.
Okay. That team will now get reduced to three or four because they just need to monitor the BREs. So that entire cost we move to the CAR and CV where we need people to do the underwriting even now. So while we are building these two businesses we will not be adding that much incremental cost because of the saving that we are doing here. On the second leg, the last leg of the disbursement process of two wheeler which was operations used to be manual where after the KYC is done then the underwriting is done.
Few people again some 40, 45 people were sitting and looking at files, looking at the invoices, insurance margin money etc etc. And disbursing the file. That leg we have developed an AI tool and made that automated. Today we are getting about 65% application level STP on that. So that over a period of time, the next two, three months. Because it’s a machine learning model which learns and improves, we will we expect to take it to 90%. In which case instead of this 45 people, I need only five people to do that entire legs.
As of now all these costs remain with me. The credit cards, the operations cost remain with me because I can’t send everybody home. But these are rationalizations that we are making which will in the time to come improve because even with increased volume I will not be adding more people because all of these are automation that we are doing. It will not reflect in any balance sheet, any P and L account. These are all things which I can show you if you have have a chance to speak to you individually.
And demo there are. There was a huge amount of cost that I was incurring in terms of, you know, name match, face match, address match, do you distance monitoring in each application. So there were geo distance restrictions. If a customer says beyond 4050 km we will not do that loan, etc. Etc. So all of these used to be API calls to external vendors which have now we have built in house and from the month of May it is in house. So that that used to be a 3,4 crore bill for me in a year which will not be there from this month.
So these are all you know none of these come in any of the published figures. These are all initiatives that will gradually improve efficiency as well as reduce cost for the organization. And these are the things that we are implementing and implementing with full support from the board and promoters and everyone. So we are very confident that we are in the right track.
Unidentified Participant
But since we had the chance to meet microfilm management in Bombay last week. So a lot of initiatives which you are talking about now, I think they’ve already done. So you have a good, good learning ground there. Just one question. If you guys can hold one investor day either in Kochi or Bombay and we can. That’s a good suggestion.
Mathews Markose
We will do that.
Unidentified Participant
Is it fine if we drop a mail to Deepa to coordinate that? Yeah,
Mathews Markose
Please do that. Please do that, Please do that. We will be more than happy to come and present all our initiatives.
Unidentified Participant
Yeah, so fine, enough. I will pick it up with Deepa and congrats and all the rest guys.
Mathews Markose
Thank you.
Operator
Thank you. The next question is from the line of Shitish Verma from Rest Assure group. Please go ahead.
Kshitij Verma
Hello, good afternoon. Am I audible?
Operator
Yes sir. Yes
Mathews Markose
Sir. Yeah,
Kshitij Verma
Yeah. My query was as you’re aware in the upcoming year we have certain, you know, events against us. For example they are saying there’s a El Nino problem, there’s a heat wave problem, there’s a war supply chain crisis. Are we worried about the ARC security receipts? We may have to take a write down because of it being in the legacy book.
Mathews Markose
As of now we see no challenge. I think these are peripheral issue. It still needs to be because India is still reliant on domestic consumption. The direct impact to any of these countries is very, very less. We still need to see how the crude oil prices are going to impact broad consumption. But we don’t see, as of now we have not seen any. The thing we had a detailed report coming to us from Crisil. Even Crisil has not, you know, while they have flagged off, they have put red flags in terms of overall slight slowdown and all that.
But they are predicting good credit growth, not much impact on repayments and all that. As of now we are not very concerned on any of these things. And if you look at the arc in the first arc we have only about 25 or 26% remaining and the second arc little over 40%. So the danger part is already behind us now.
Kshitij Verma
Okay, so answer certain banks, the major banks have taken some countercyclical provisions. We are not keen to go towards that. You are confident that because the segments we lend to us susceptible sometimes to macro shocks more. But we are confident that our underwriting will sail through it right on the new book or in the last one year book which we have built.
Mathews Markose
Yes, the last one year book has been behaving extremely good. So we have recently taken, you know, last quarter we took the credit Insights dashboard from one of the credit bureaus where it gives comparison between you and a peer group. So we can set the peer group. Obviously they will not give you one on one, but they allow us to set a peer group. So we have set a couple of peer groups and we do a comparison. We are way below the NPA levels in the incremental portfolio when we compare ourselves with the peer group.
So we are confident and yeah, I think if there is any drastic shock coming out of all these developments, we can’t predict. But as of now the way it looks at looks like I think we are pretty much confident on the. And that’s what I said, that we are looking at a calibrated growth. I don’t want to go very, very aggressive. While even today I think the industry is still steady state, on a steady state basis, it’s not shown any dip. So I would still like to tread with caution in terms of new onboarding and therefore we are not entering into any new geographies this year.
We are only going deeper in the places where we are already present. So those are the checks and balances that we are keeping in mind.
Kshitij Verma
Okay, thank you sir. That’s all from my side.
Mathews Markose
Thank you.
Operator
Thank you ladies and gentlemen. We take this as a last question. I now hand the conference over to the management for closing comments.
Mathews Markose
Thank you so much. You know, it was nice interacting with all of you once again. As I mentioned, I would, you know, we would like to organize a smaller group meeting with all of you and take you through all the, all the improvements that we have made in terms of our business, our investments and we want to highlight our, you know, thought process for the years to come. We would really love your participation in that so that you also get confidence. I know some of these questions come out of your own, you know, frustrations in may not be able to see the results that you are expecting.
But you know, as they give the bamboo analogy, we are building the roots and we are building a real strong route so that you will see that stem grow very fast in the time to come. So we are very confident about what we are doing as a management. Our board is fully in support of us, promoters are fully in support of us and we will deliver the results. We are confident about that. Thank you. So much and keep stay invested in us. That’s the assurance that we can give you. Thank you.
Operator
Thank you. On behalf of Ilara securities. That concludes this conference. Thank you for joining us. You may now disconnect your lines.
Unidentified Participant
Thanks, Maneet. Thank you.