Muthoot Finance Ltd. (MUTHOOTFIN) Q4 FY22 Earnings Concall Transcript

Muthoot Finance Ltd. (NSE: MUTHOOTFIN) Q4 FY22 Earnings Concall dated May 26, 2022

Corporate Participants:

Sanket Chheda — B&K Securities India Private Limited — Analyst

George Alexander Muthoot — Managing Director

Oommen K. Mammen — Chief Financial Officer

Analysts:

Abhijit Tibrewal — Motilal Oswal — Analyst

Deepak Gupta — SBI Pension Funds — Analyst

Gaurav Kochar — Mirae Asset — Analyst

Unidentified Participant — — Analyst

Nitin C — Kotak Securities — Analyst

Nikhil Agrawal — VT Capital — Analyst

Digant Haria — GreenEdge Wealth — Analyst

Nirmal Bari — Sameeksha Capital — Analyst

Prakhar Agarwal — Edelweiss — Analyst

Ajay Chaudhary — Total Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Muthoot Finance Q4 FY22 Earnings Conference Call hosted by B&K Securities India Private Limited. [Operator Instructions] I now hand the conference over to Mr. Sanket Chheda from B&K Securities India Private Limited. Thank you, and over to you, Sanket.

Sanket Chheda — B&K Securities India Private Limited — Analyst

Hi, very good evening to all of you. We have with us the entire management from Muthoot Finance to discuss the 4Q results. We have George Alexander, indeed, sir, and more whole time directors Alexander George, George and George, George and Alexander and George and Jacob. Also we are ready executive director [Indecipherable] Alexander with CFO who is Oommen Mammen. Without any further delay, I would hand over the call to the MD sir for the opening remarks post which we will continue with the Q&A session. Thanks a lot, sir, and over to you, George, sir.

Operator

Sorry, this is the operator. Management members we request you to please start again.

George Alexander Muthoot — Managing Director

Okay, thank you. Good evening to all. This is George Alexander Muthoot, Managing Director. Along with me, as suggested, we have the whole time directors as well as the CFO and the CEO, Mr. KR Bijimon also with us. We had the Board meeting morning and the Board has considered the financial accounts and the the gist of that would be the consolidated loan assets under management increased to INR64,494 crores, it is up by 11% year-on-year. The consolidated profit after tax also increased to INR4,031, up by 6%. The stand-alone assets under management increased to INR58,053 crores, up by 10% and stand-alone profit after tax increased to INR3,954 crores, again up by 6%.

There are few key milestones for this year, which is the consolidated AUM has crossed INR64,000 crores in this financial year. And the consolidated profit after tax also crossed the INR4,000 crore mark and the networth also has crossed INR18,000 crore mark and we have also paid a 200% dividend on the face value of the shares, involving a payout of INR803 crores. The branch network is 5,581 compared to 5,451, a 2% increase. As I said earlier, the gross assets under management has reached INR64,000 crores, the consolidated profit to INR4,031 crores, both these are 11% and 6% higher than the previous year.

We are witnessing signs of recovery in the economy. The RBI rake hike may not dampen overall demand scenario. And we are also expecting borrowing cost to go up gradually during this year. Gold loans are a great help for people in times of need and as the economy recovers and overall economic demand revise, our focus will be to make the most of the opportunities and keep innovating further. Gold loan AUM grew by 11% during the financial year ’22 and we remain optimistic about a growth of 12% to 15% in the gold loan AUM for the financial year ’23 as well. The digital initiatives have all done well. It is — all these are giving us good results. And we want to also expand our loan term services to more and more branches in India.

The Q4 results highlights steady performance in this quarter. We had disbursed fresh loans to 4 lakh new customers amounting to INR4,664 crores and and to 4.89 lakh inactive customers, amounting to INR4,759 crores in this quarter. We could register a 6% increase in profit after tax for the 12 months. With respect to subsidiaries, following the rise in demand in the economy, the collections from microfinance, vehicle finance, home loans have improved. We aim to further improve our collections in these segments. However, we will continue to adopt a balanced growth strategy given the ongoing macroeconomic environment and we continues to be cautious on the microfinance and the vehicle finance business. I think this is a gist of what was discussed — what is the results of the company and its subsidiaries, which were considered at the Board meeting. Now I think I will leave it to the audience for their queries.

Questions and Answers:

Operator

Thank you very good, sir. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal — Analyst

Yes, thank you for taking my question, sir. Sir, three questions. First, what has led to this weak gold loan demand in your core customer segments which were typically this, I would say 40,000 to 60,000 kind of a ticket size gold loan customer? That’s the first question. The second question is, sir, on the yields, if I understand right there was a yield compression of about 200 basis points sequentially that we saw in the fourth quarter. Do you believe that this is the new normal for the sustained yeilds that you can make or do you think that the competitive intensity in the last, I would say, 2, 2.5 months has eased out significantly and the yields have also bottomed out and then incrementally you can deliver higher spreads in FY23? Sir, lastly, I mean, from what I see the gross Stage three assets is still elevated, about 3%.

Is it because, sir, I mean — your peer who reported last week they suggested that they had made some changes in their accounting norms in terms of recognition of NPAs. So earlier they used to consider even collections received in one month following the end of the quarter while reporting the NPA as on the end of the quarter. So have you also done something similar or is it because the auctions were lower during the quarter? And sir, lastly if you can share what was the quantum of auctions and the accrued interest as on March ’22?

George Alexander Muthoot — Managing Director

Okay, thank you. Your first question was about the low or the average ticket size. The average ticket size is definitely gone up from 40,000 to 60,000 — 40,000 and 60,000 to much higher levels. It is actually the part of the growth in the economy only. So people who are borrowing earlier are borrowing more, that’s all. It’s only a — what I should say, upward movement of the customers. The yields in spreads, yes, we consciously had done teaser rates on the yields so that we could get more customers and it is quite successful. We were able to get quite a lot of new customers during the last quarter and also during the end of the third quarter.

So to that extent, it has been successful. We have been able to grow our AUM. We have been able to attract lot of customers who were [Indecipherable] going elsewhere. Of course we have now discontinued the very low yield schemes and because the period of that or the period of the low interest scheme which we started as we wanted to discontinue. And so know we should see more customers coming. Since we have got these customers we will see that we made — we continue to retain these customers going forward and probably the yield also should start inching up. So certainly, what we did was a conscious decision to acquire customers. It was for a limited period and that period is over, and now we have gone back to the — we have discontinued the very low interest schemes.

And your next question was about the Stage three assets. Yes, we have not made any changes there.

Oommen K. Mammen — Chief Financial Officer

We have been always following the — based on the number of days past due, so there is no change as far as we are concerned, the classification. The quantum remains higher because that is a conscious call as we have been telling in every call that we are not too much worried about Stage three assets because ultimately we are going to recover this amount. Just we are giving some more time to the customers to pay their amount last few quarters —

George Alexander Muthoot — Managing Director

Your specific question was about whether we have changed the — made any change? We have not made any change. Is the NPAs less or high? It is just because we are giving more time to the customers to repay and we are not concerned about — we are not unduly concerned whether we are going to lose because our — the gold safe, the asset is safe and we will not lose money there.

Oommen K. Mammen — Chief Financial Officer

Auctions for the quarter is INR2,100 crores and the accrued interest is INR2,071 crores.

George Alexander Muthoot — Managing Director

2-0-7-1 is accrued interest. Auctions we’ve done is INR2,100 crores.

Abhijit Tibrewal — Motilal Oswal — Analyst

Sir, thank you so much. If I can, sir, squeeze in one follow-up question. Does the weak gold only demand that we seeing today, does that worry you or do you think this is just cyclical and gold loan demand should improve in the coming quarters?

George Alexander Muthoot — Managing Director

I don’t think we see any weak demand. The demand is not weak, it’s just probably the hangover of the — March is only the — what usually happens in the first two weeks of April. I think demand is picking up and it should pick up. But I think we are back to normal. We don’t in fact —

Oommen K. Mammen — Chief Financial Officer

We grew by INR3,300 crores in the fourth quarter. So it’s not a weak demand for us. We have been able to grow unlike our peers. So — and finally we could do a double-digit growth for the full year. We grew by 11% in gold loan for FY22 though we lost first quarter due to the third wave and third quarter because of the larger auctions. In spite of that we could do a double-digit growth. So that is quite a good achievement which we could do in spite of all the headwinds.

Abhijit Tibrewal — Motilal Oswal — Analyst

Thank you, sir. That’s all from my end. Wish you and your team the very best for FY23.

George Alexander Muthoot — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of Deepak Gupta from SBI Pension Funds. Please go ahead.

Deepak Gupta — SBI Pension Funds — Analyst

Hi, good evening, sir. Thank you for taking my question. My question is firstly just continuing with the previous participant question on interest yield, where do you see interest yields for your company ending up, given the fact that I think this has been the sharpest decline quarter-on-quarter ever from Muthoot Finance. So, at what level you think interest yield is likely to stabilize for the overall book?

George Alexander Muthoot — Managing Director

Interest yields maybe probably decline because in the last four, five months in the last year — last four to five months in the last year, we had started the new campaign, the new campaign of the low interest scheme and that low interest schemes had actually given us benefit. Now that we have discontinued the low interest schemes, we should go back to the old — the earlier yield scheme. But of course since the borrowing cost has come down, probably the yield may not be high. But we will try to maintain our price, that is what we would be we will be trying to do. Our achievement will be not more on the yield, but on the spread.

Deepak Gupta — SBI Pension Funds — Analyst

But, sir, given now incrementally our borrowing cost will be going up, right, given the way interest rates are shaping up? So, to maintain the spreads, you will have to increase the interest rate, if I’m not mistaken?

George Alexander Muthoot — Managing Director

I think we will have to do is, the whole world rates are going up, then our customers will also understand that rates are going up. Then we will have to do that. So, usually we try to keep our spreads almost same. We will try our best to keep our spreads same and that is what is actually — what should we say, our focus should be on the interest spread. If the rates — borrowing rates are going up, then the interest rates not only for us, the whole world will go up, whole world means for all the borrowers it will go up and and that —

Deepak Gupta — SBI Pension Funds — Analyst

I understand, sir. So, is there any spreads that you want to call out that these are the kinds of spreads we want to maintain?

George Alexander Muthoot — Managing Director

Yeah. We were looking at about in the range of 10%, maybe plus-minus something here, but the general rate should be in the range of about 10%.

Deepak Gupta — SBI Pension Funds — Analyst

Understand, sir. Sir, secondly, just wanted to understand, this quarter your cost-income ratio has been extremely high. Obviously I understand it is because the interest income is low. But how do you see your cost-income ratio shaping up for your company in the next few years?

George Alexander Muthoot — Managing Director

I think if you take the overall total year, it will be the same. The quarter — some quarter extra payments may be there in some quarter, but if you look at the year as a whole, it is the same, if you look at it for the full year because some expenses come in some quarters and that is what the cost-income ratio. We should be able to maintain our cost because our per branch AUM is also little going up only. So I think the cost-income should be as it is, we will continue as in the previous years’ ratios.

Deepak Gupta — SBI Pension Funds — Analyst

Sure, I hear that. Sir, thirdly, on the [Indecipherable] reversal that you’ve done on the impairment, if you could just share some perspective on that, what exactly was this on account of?

George Alexander Muthoot — Managing Director

Sorry, can you just repeat the question?

Deepak Gupta — SBI Pension Funds — Analyst

Sir, for this quarter you’ve done INR70 crores of reversal of impairment of loans —

Oommen K. Mammen — Chief Financial Officer

For the quarter.

Deepak Gupta — SBI Pension Funds — Analyst

For the quarter, yes. So what exactly —

Oommen K. Mammen — Chief Financial Officer

We review this probability of default and loss given default every month, year-end. Two things have happened, one, our NPA for December was INR2,100 crores, now it has come down INR1,700 crores. So that has reduced the provisioning requirement for the quarter. Second, the ratios have come down a little bit lower. So that also has played a role in terms of reversals.

George Alexander Muthoot — Managing Director

But all said and done —

Oommen K. Mammen — Chief Financial Officer

It is for the quarter. For the full year, it is not a reversal.

Deepak Gupta — SBI Pension Funds — Analyst

Understand, sir. And sir, last question is on your Sri Lankan subsidiaries. Given the crisis which is taking place in Sri Lanka right now, what is your view on the subsidy and I know it’s very capitalized, but how do you see that shaping up over the next 12 months? Thank you.

George Alexander Muthoot — Managing Director

One thing which we have — when we turn Sri Lanka itself we have decided that we would be going more on the gold loan front. And today as we speak, the gold loan business is 75% of the total portfolio. Only the rest is some small trader loans, etc. And as you would understand that because of the depreciation, the value of the Sri Lankan rupee and the value of the dollar and Indian rupee also going up, the gold price has really shot up there. So what we are given is all gold loans and that is today very, very, very, very safe, the margins etc. are extremely safe there. So as a portfolio, we don’t see any issues.

But of course — but we have been talking to our people in Sri Lanka, the situation is not as bad as some of the newspapers etc. say. I think they will all survive. So things are getting better also. Today I also — there depreciation of the Sri Lankan rupee has I think bottomed out and probably it will start going up again. So, overall the economy and the country will revive. As far as our portfolio is concerned, it is extra strong today.

Deepak Gupta — SBI Pension Funds — Analyst

Sure, I hear that. And sir, just last question from my end, your credit growth guidance last quarter, last year you had made 12% to 15% guidance, you’ve ended at 11%. So would you maintain the similar kind of guidance for FY23 in terms of credit growth?

George Alexander Muthoot — Managing Director

I think we will maintain the 12% to 15% guidance. We will maintain. So it’s our job to see that we see — we’ll try our best.

Deepak Gupta — SBI Pension Funds — Analyst

Sure, sir. Okay.

George Alexander Muthoot — Managing Director

This is why we are here for.

Deepak Gupta — SBI Pension Funds — Analyst

Sure. Thank you, sir.

Operator

Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead.

Gaurav Kochar — Mirae Asset — Analyst

Yeah, good evening, sir. Thanks for taking my question. Sir, in the previous question you answered spread is 10%, if I’m — correct me if I’m wrong. The current spread that we are making is 10.91% for the quarter and for the full year it’s much higher. And even if I look at your last year — even if I look at last year, the spread was anywhere between 13% to 13.5%. So, where does this 10% come from?

George Alexander Muthoot — Managing Director

No, 10% is something which we said the bottom rate, something 10% is — we are happy with the 10% even. If good years we can make 11%, 12%, 13%; very good years, we may make 13%. Probably anything above 10%, 11%, that’s what is reasonable and I think we should be able to do that.

Gaurav Kochar — Mirae Asset — Analyst

Okay. So, sir, given that the teaser rates have now — I mean, you have stopped doing loans at teaser rates. Should we expect that spreads will only improve from here on, currently 10.93%, at least from these levels should —

George Alexander Muthoot — Managing Director

Yeah, but the teaser rate impact will take some more months in this quarter also. So it’s not that the moment we stop teaser rate, it is — so the impact of that will take in this quarter also but finally and that’s what I said, 10% to 11% and around 10% is what we should see the spread. I think that is quite reasonable.

Gaurav Kochar — Mirae Asset — Analyst

Okay. Sure. Sir, for the full year, anything that you’d like to guide for FY23 full year?

George Alexander Muthoot — Managing Director

I think we have guided at 12% to 15% yields, gold loan AUM growth, sir.

Gaurav Kochar — Mirae Asset — Analyst

No, I’m talking about spread, sir.

George Alexander Muthoot — Managing Director

Spread, that’s what I said, we will try to maintain 10 — around-ish 10%, probably something about 10% or so, it all depends on how things are panning out also.

Gaurav Kochar — Mirae Asset — Analyst

Okay, sure. And sir, on the growth front, while this quarter if I look at INR2,100 crore, if I had just for that INR2,100 crore auction, the growth is around INR5,400 crore. That’s roughly 10% of your AUM. So if the growth is that strong, the demand is that strong, why the guidance is only 12% to 15% for the next year?

George Alexander Muthoot — Managing Director

Yeah, see it’s all — in the fourth quarter, we did that. In the first quarter we did not do anything. Second quarter, we were able to do something. Third quarter we had again the similar auctions also. So there are so many headwinds also coming across. So we didn’t want to give a very high guidance and then underachieving it. We have always been saying 12% to 15% and that is what we would be trying to do, probably. We may be able to do better also. Thanks for your good calculation of INR5,400 crore.

Gaurav Kochar — Mirae Asset — Analyst

Sure, sir. And sir, on the liquidity, now that you’ve given that margins maybe for next quarter also may be under pressure and the growth will be probably soft, just [Indecipherable] why do we keep so much liquidity on the balance sheet because maybe year and a half back when the growth was very strong, 25% to 30%, having 15%, 17% liquidity on balance sheet was reasonable. But now if the growth is going to be soft and at least the cost of money is getting dearer and dearer, is it not prudent to cut down some liquidity which we are carrying, around 18%, 20% liquidity as a percentage of borrowings. Would it be fair to reduce this over the quarter or so?

George Alexander Muthoot — Managing Director

We also would like to reduce it, but understand always that we are an NBFC. We are not a bank. We don’t get any support from regulators with regards to liquidity, etc. We have to find our own means and ways. And I think keeping a liquidity — we know it has got a negative carry, but it has always helped us only and we don’t want to take any risk or any risk, I don’t say a risk at least, we don’t have anything negative on our side with regard to liquidity. That is why we are keeping something extra. I know it carries a negative, but then that is — we should consider it as part of the NBFC or part of the company — the type of business we are doing. So, we are an NBFC, always remember that, that is what we have to find our own way for —

Gaurav Kochar — Mirae Asset — Analyst

If I look at, sorry — if I look at the pre-COVID run rate, the liquidity used to be 7%, 8% of borrowings or even lower than that even FY18, ’19. During COVID one would understand that there could be some liquidity crisis and the growth was also strong during COVID at least for FY21. So to that extent liquidity — excess liquidity on the balance sheet was maybe the right way to go. But now given that there is multiple headwinds as you pointed out on growth as well as challenges on pricing, would it not be fair to let some of the spreads compression getting absorbed by pruning down excess liquidity? What harm —

George Alexander Muthoot — Managing Director

Sorry, it is not only the COVID, even before COVID our problem with liquidity etc. was always the IHS will — what is it — AL&FS and VHF and all those things, actually unsettled all the lenders to us. See, all the lenders to us, they become unsettled when such a thing happens. And I don’t rule out any such things. I can’t guarantee that such things won’t happen in future. So keeping liquidy is, I know it is cost — it is what should say. So we have been suggesting that the Board is also comfortable saying that keep a little liquidity. This is because if some of these things happen, all these — all the lenders to us will get panic and at that time we will be left to ourselves. That is what I said in such a situation there is no reserve bank or regulator coming forward and saying we will support you. I don’t think so.

Oommen K. Mammen — Chief Financial Officer

Moreover, there is a liquidity NCR requirement, liquidity coverage ratio requirement for NBFCs. So that is about 60%. For that we have to keep some amount. And always rating agencies also prefers different agencies have got different thumb rules, especially the foreign agencies. So they also are more comfortable, probably that is also the reason why some of the rating agencies did not downgrade us. I’m talking about international agencies during the COVID period even though they have done for some other NBFCs.

So all these plays — factor plays a role in terms of maintaining a high liquidity. Even with all this limitations we are trying to do some rationalization in terms of liquidity so that negative carry comes down to the minimum. So we are trying to do that. And if you look at last quarter also, our borrowing cost has come down. So within all these restrictions we are trying to do that. Probably we will fine-tune this in the next couple of quarters.

Gaurav Kochar — Mirae Asset — Analyst

Sure, perfect. Just last question from my side, how do you see the the MFI environment for fiscal year ’23 and any sort of growth targets for your microfinance subsidiary? Thanks.

George Alexander Muthoot — Managing Director

I think MFI is a sector which is — which will go — continue to grow. It is a sector which everybody, all governments wants to grow and that is the only way government can put money in the hands of people. So there will be support from the government and support from banks, everybody will support it and I think going forward also MFI will continue to grow. Of course, when we look at — compare an NBFC gold loan with MFI, it is quite different. But then MFI is a separate business altogether. I don’t see — I think there is potential for MFI going forward also.

Oommen K. Mammen — Chief Financial Officer

The new regulation is also —

George Alexander Muthoot — Managing Director

New regulations also supporting MFI — the new regulations which have come about interest rates etc. are supporting MFI.

Gaurav Kochar — Mirae Asset — Analyst

Yes.

George Alexander Muthoot — Managing Director

Only with the calibrated growth. But then there is potential there.

Gaurav Kochar — Mirae Asset — Analyst

Sure. Any number that you would like to give?

George Alexander Muthoot — Managing Director

No, I think they have a target — what is our MFI target?

Oommen K. Mammen — Chief Financial Officer

[Indecipherable]

George Alexander Muthoot — Managing Director

No, there is — I think they have a reasonable growth — and our MFI the last quarter or I don’t know, three, four months back, we got only 32%. It has got INR1,000 crores of total — this year.

Gaurav Kochar — Mirae Asset — Analyst

Sure, I’ll take that offline, sir. Thank you so much and all the very best.

Operator

Thank you. The next question is from the line of [Indecipherable] Mishra from UBS. Please go ahead.

Unidentified Participant — — Analyst

Hi, sir. Thank you for the opportunity. Couple of questions. One is on the growth, what it is — would it be a fair assumption to understand on —

George Alexander Muthoot — Managing Director

Your voice is not clear, your voice is not very clear, sir.

Unidentified Participant — — Analyst

One second. Hello?

George Alexander Muthoot — Managing Director

Yes. Okay.

Unidentified Participant — — Analyst

Sure, sir. Sir, would it be a fair assumption to understand that these rates for the customers, the customers have got attuned to lower rates because of the competition in the last two odd years, post COVID and because there was some amount of regulatory arbitrage with that. And going forward also we would see lower rates and lower yields? That’s the first question. The second question is on the promoter holdings and is there ways the businesses can be split among this family, has that been decided, has that been written down somewhere that if there is a split among the promoters, some amount of business would go there and some would — can go here, that’s the second question, sir.

And the third question would be on the liquidity side, you just answered it. But we are carrying huge amount of liquidity despite having a very strong collateral, sir. Gold is absolutely liquid and I’m really perplexed as to why a rating agency would look at — would not look at us differently despite us being a NBFC because on the — on one side of the balance sheet we’ve got an absolute liquid collateral and today there are multiple agencies who can lend to us, it’s not that banks or mutual funds, we can go through some other source of funding as well. So the liquidity is also fairly perplex. And despite the LCR norms and quite all the answers you just gave, if you can answer these questions. Thanks.

George Alexander Muthoot — Managing Director

Thank you. Yes, you’re right, probably in the last two years etc., banks have been giving — supporting people with the lower rates during the COVID etc. But that is one set of people, probably some set of — one set of people who would have enjoyed and they may be expecting lower rates. But this — the potential or the base for gold loan is so large that there’ll be so many others who will not — who will still be willing to pay a higher rate for a quick loan from an NBFC. So we don’t see any issues there with having some customers who have now got attuned to a lower rate. I think some customers, probably. They will also — they may be like that, but the others, the large number who are not so interest-sensitive and still continue to use gold loan as a comfort gold loan and the quick gold loan.

Second question is about split in the family with regard to this — there is nothing like that here and I think the promoter family continues to hold all the 75% or whatever we had at the time of IPO, we still continue to hold, we have not sold even one share till now. I think we have not thought about such things. The second — the third point, again, you said gold loan being absolutely liquid collateral. But the unfortunate fact is we know it, every —

Oommen K. Mammen — Chief Financial Officer

I think you —

George Alexander Muthoot — Managing Director

Nobody is willing to acknowledge it. I think I’ll take you to one of the meetings with the Reserve Bank or one of the —

Oommen K. Mammen — Chief Financial Officer

You asked the question in this forum, good, probably some of the representatives of the agencies are also participating. So they are also listening to it, good that you asked this question.

George Alexander Muthoot — Managing Director

We would like you to accompany us to some of the regulators, maybe when we talk to them or to the rating agencies, etc. We — sir, we would also love to keep very — because before all this IL&FS crisis etc., we were working with very little collateral. We were saying that our gold loans is so liquid that if there is any issue in the company, the first people to run to the branch will be the gold loan customers to take back their gold. But that didn’t cut lot of ice with many of the agencies who may said — said that may be so, but we would like to see some iquidity in your balance sheet. Anyway, that’s a big question here and there, sir. But finally we have to look at our side — our side, we have to look at it. And for that we are keeping this liquidity, sir.

Unidentified Participant — — Analyst

Right, sir. Thank you. If I can just squeeze in one last question, sir, data keeping question, what proportion of the AUM is below INR1 lakh and what proportion is between INR1 lakh and INR2 lakh and what is above INR2 lakh?

Oommen K. Mammen — Chief Financial Officer

I’ll just update this number, maybe we can take the next question.

George Alexander Muthoot — Managing Director

While we have answered the next question, we will update this also.

Unidentified Participant — — Analyst

Sure.

Operator

[Indecipherable], do you have any further questions?

Unidentified Participant — — Analyst

No, thanks.

Operator

Thank you. The next question is from the line of Nitin C from Kotak Securities, please go ahead.

Nitin C — Kotak Securities — Analyst

Hi, this is Nischint here from Kotak. Just two questions, one is on the spread side we are running ahead of what spreads you would want to maintain. So why do you really want to stop the teaser rate, you should probably continue or maybe you could — you can offer some better rates to the customer.

George Alexander Muthoot — Managing Director

Yes, sir. We always wanted to give a lower — whether it is the growth rate or the spread rate, we wanted to give a lower one and probably achieve better, isn’t that better than saying a higher rate and achieving lower. Consider it in that sense only.

Nitin C — Kotak Securities — Analyst

Sure. Is it something that you are expecting the cost of funding to increase in a significant manner?

George Alexander Muthoot — Managing Director

No, there are so many issues and things coming up every time. So we just didn’t want to give a too optimistic number, that’s all. It’s really that view.

Nitin C — Kotak Securities — Analyst

The second question is really on branch opening and I believe one of your competitors mentioned that RBI is not very sort of forthcoming with branch openings, there are constraints or there are a lot of delays in getting approvals from RBI about for permission of opening new branches. Are you facing similar sort of a problem?

George Alexander Muthoot — Managing Director

Yeah, we are also facing delays from the regulator for branch opening. Anyway, at that time, we will — we are now trying to do business in the existing branches, which itself is good, but few branches extra would have been better, that’s all.

Nitin C — Kotak Securities — Analyst

And just trying to understand, the branch opening application goes to the central office or does it go to the respective state office?

George Alexander Muthoot — Managing Director

It is — all our correspondence are with the local office, but then of course they consult the central office and make 99% of the decisions.

Nitin C — Kotak Securities — Analyst

And in your discussions with the regulator, what could really be a concern that a regulator has? Has anything during COVID monetization of gold is something which has actually helped people a lot at the bottom of the pyramid. So what is it that is concerning the regulator and why is it that they are sort of a little more cautious with [Indecipherable].

George Alexander Muthoot — Managing Director

I think some of it may be a local issue only, local issue. Anyway, even if we ask they will not come out with a real reason, they always —

Oommen K. Mammen — Chief Financial Officer

Probably earlier banks were facing this challenge in terms of the branch licensing, probably now we are facing delays. No particular reasons could be activated, at least we have not heard anything, any particular reason for delays in terms of branch approvals. So we give the applications, it’s for them to process it and send it back to us.

Nitin C — Kotak Securities — Analyst

But there are no red flag — no red flags raised in any audits for any of the gold loan company. Is that a fair point to say?

George Alexander Muthoot — Managing Director

Yes, sir. If there is a reg flag, we will stop the business.

Nitin C — Kotak Securities — Analyst

I’m not saying for you, I’m saying that for anybody else in the industry.

George Alexander Muthoot — Managing Director

No, sir. Everytime there’ll be some aches and pains, that’s all. Otherwise, nothing, no red flag.

Nitin C — Kotak Securities — Analyst

Perfect. Those were my questions. Thank you very much and all the best.

Oommen K. Mammen — Chief Financial Officer

Yeah, there was a earlier question in terms of loans above INR1 lakh, so loans above INR1 lakh will be 58% and loans below INR1 lakh will be 42%.

Nitin C — Kotak Securities — Analyst

And between above INR2 lakhs?

Oommen K. Mammen — Chief Financial Officer

I don’t have above INR2 lakhs, above INR3 lakhs will be 22%.

Nitin C — Kotak Securities — Analyst

Sure, in terms of AUMs, right?

Oommen K. Mammen — Chief Financial Officer

In terms of AUM, yeah.

Nitin C — Kotak Securities — Analyst

Perfect, thank you very much.

Operator

Thank you. The next question is from the line of Nikhil Agrawal from VT Capital. Please go ahead.

Nikhil Agrawal — VT Capital — Analyst

Hi, sir, good evening. Thank you for taking my questions. Sir, I just have one question with regard to the auction, first of all, the number you mentioned INR2,100 crores, what proportion of that would coming from quarter two ’21 [Indecipherable] amount of INR52,000 crores of the —

George Alexander Muthoot — Managing Director

Sir, it’s not very clear. You are little fast also.

Nikhil Agrawal — VT Capital — Analyst

Okay. Am I audible now?

George Alexander Muthoot — Managing Director

Yes, sir.

Nikhil Agrawal — VT Capital — Analyst

Sir, am I audible now?

George Alexander Muthoot — Managing Director

Yeah, audible.

Nikhil Agrawal — VT Capital — Analyst

Yeah, with regard to the auction amount of INR2,100 crores that you mentioned, would it be possible to quantify what proportion of that is coming from the quarter two financial year ’21 disbursement of INR50,000 crores?

George Alexander Muthoot — Managing Director

Quarter two — quarter two I will just — quarter two, it will be INR2,800 crores.

Nikhil Agrawal — VT Capital — Analyst

Sir, it was mentioned that there were some loans that were not auctioned off and they were [Indecipherable] last quarter. So is there any number from this INR2,100 crore that is referring from that quarter?

George Alexander Muthoot — Managing Director

Always — it will be always there, it’s a continuing process, whatever is left there, it needs to be auctioned in the succeeding quarter, it will be auctioned. There is nothing that we keep a particular account etc. Some customers would have asked for some time, we would have given them some time. If they are not coming within that time, in the next auction we will just auction it off.

Oommen K. Mammen — Chief Financial Officer

The number we gave is the auction done in that quarter, not pertaining to any loans became due in that quarter.

George Alexander Muthoot — Managing Director

The auction actually done.

Oommen K. Mammen — Chief Financial Officer

[Indecipherable] from any quarter. The loans could have become due in any of the previous quarters.

Nikhil Agrawal — VT Capital — Analyst

Okay, sir. Sir, with regard to the non-gold loan business, which is 9% of the gold business right now, is there any plan to increase this proportion in the coming future?

George Alexander Muthoot — Managing Director

Increase proportion of what?

Nikhil Agrawal — VT Capital — Analyst

The non-gold loan business?

George Alexander Muthoot — Managing Director

Yeah, if there is a requirement — if the — if that subsidiary, you are telling about subsidiary, if the subsidiary is doing well and it needs more AUM, we will do it, but as of date we would love to do more of gold loans. But having said that we would not hesitate from going into any of the subsidiaries also with the appropriate time, but probably in the next three, four quarters we we don’t see a big need for growing those subsidiaries.

Oommen K. Mammen — Chief Financial Officer

Microfinance raised some funds in the last quarter.

George Alexander Muthoot — Managing Director

Yeah, are you asking about capital allocation?

Nikhil Agrawal — VT Capital — Analyst

Right, sir. That would be another question with regard to the capital allocation for equity infusion as you mentioned in MFI, so that is another question. But I was asking about the proportion of non-gold loan business coming — going forward.

George Alexander Muthoot — Managing Director

Non-gold business today is about 9% — 10%, probably 1%, 2% depending on the comfort we get in that sector.

Nikhil Agrawal — VT Capital — Analyst

And sir, with regard to the equity infusion in MFI?

George Alexander Muthoot — Managing Director

MFI, equity infusion is done actually.

Oommen K. Mammen — Chief Financial Officer

It’s done.

George Alexander Muthoot — Managing Director

It’s done, it’s has come, INR275 crores have come.

Nikhil Agrawal — VT Capital — Analyst

All right, sir. Sir, just one last question. So the 17% reduction in GST, how is [Indecipherable] look at it, sir, where they will come from?

George Alexander Muthoot — Managing Director

17% reduction in?

Nikhil Agrawal — VT Capital — Analyst

The GST numbers from quarter three?

Oommen K. Mammen — Chief Financial Officer

So, NPA was INR2,100 crores and right now as of March, it is INR1,700 crores. Is that what you’re asking?

Nikhil Agrawal — VT Capital — Analyst

Yes, sir. How do we —

George Alexander Muthoot — Managing Director

This means that during the quarter some of the customers loans got closed and the new customers coming into NPA are lesser, that’s all. It is a — what should I say, it’s a moving number, it’s a moving number.

Nikhil Agrawal — VT Capital — Analyst

Okay, sir. Thanks, sir —

George Alexander Muthoot — Managing Director

[Indecipherable] any old NPA account lying there, it is very dynamic. All the NPAs which are there are not more than three to four months NPA, that’s all. We don’t have any very long outstanding NPAs and all. It’s just very, very moving. What you see it this quarter will not be there in the next quarter. It will be a new set of numbers in the next quarter. So it just happened that in the next quarter, many people would have taken it off and that is why the NPA is lesser.

Nikhil Agrawal — VT Capital — Analyst

Okay. Thank you, sir. Thank you. Best of luck for future quarters.

Operator

Thank you. The next question is from the line of Digant Haria from GreenEdge Wealth. Please go ahead.

Digant Haria — GreenEdge Wealth — Analyst

Yeah, hi, sir. Sir, [Indecipherable], we are the largest player. So we don’t have the option of not participating in the large ticket gold loans and maybe from whatever I know large ticket gold loans above INR2 lakhs have lot of competition. So in that segment we will continue to face yield pressure because nobody is just backing off. But as Muthoot, as we have 4,000/4,500 branches, are we doing anything special to ensure that even though less then INR1 lakh ticket size where pricing is still intact, that grows faster than the higher ticket loans. [Indecipherable], is it possible and as a company what is our strategy here or any thoughts on this?

George Alexander Muthoot — Managing Director

Yeah, I think what you said is right theoretically, it is right that we should be concentrating more on the lower INR1 lakh ticket size, lesser than INR1 lakh ticket size. Yes, that’s a good strategy and we always continue to do that for customers also. We are always — we don’t differentiate between customers as a big customer or a low customer etc. But yes, the numbers which you said, INR1 lakh and INR2 lakh may be too low. Probably, it is the INR5 lakh and INR10 lakh etc. which should be seen as a big ticket customer today. The money value is so low now that the INR1 lakh and all, everybody can get INR1 lakh etc. So — but the strategy which you said is very apt and correct, and always we are conscious of that and we try to to support the smaller customers always because we know that it is a better set of customers who are just don’t go here and there just because of some interest rate differential etc. So we know that and we are aware of that and we have strategies to see that the low customers don’t go away from us.

Digant Haria — GreenEdge Wealth — Analyst

Sir, because these small ticket customers, everything will probably happen at the branch level, it’s not easy to pull them, it will be your branch guys who will have to do very hard work. So —

George Alexander Muthoot — Managing Director

Yeah, you’re absolutely. You’re absolutely right, sir.

Digant Haria — GreenEdge Wealth — Analyst

Okay, sir. And sir, just your thoughts on why this took us back, the competition has increased, the yields have been under like, you know, there are lot of random players offering random [Indecipherable]. So do you see this settling anytime soon or it is still maybe 6, 12 months more before we reach the new equilibrium level because we were doing 8% in gold loan business, we are probably be at 7% now. Where is our equilibrium and the sector equilibrium, any thoughts on this? I’m not looking for specific answer, but just your observation.

George Alexander Muthoot — Managing Director

I think there are — as you said correctly, the correct word is random players, many random players have now started coming into this, that’s a good terminology. I’m sure those people will lose interest and go away, sir. We saw this happening in 2011 also. 2011-2012, so many players came in, they were not serious players, I wouldn’t call them random players, non serious players, of course. Your terminology random looks quite nice now. Okay, but this non-serious players will lose interest quickly, sir, because gold loan is not a very easy, the processes etc. and things are not easy and non-serious players will just back off after a while. Given them some time, probably as you said one or two quarters.

Digant Haria — GreenEdge Wealth — Analyst

And sir, I get it, the random players will go, but just some players like say SBI or a federal or a [Indecipherable], they have somewhat build a book at least and I’m — and I think maybe in the next few years we will still have — those will still remain. So, any aggression from those — you know the random players might go, but at least the middle tier or the middle tier players who are —

George Alexander Muthoot — Managing Director

Yeah, I think banks being serious players in this can work wonders in the sense that it will attract more and more customers to the gold loan sector, sir. That is the advantage we see. When banks also start doing gold loan, the most of the stigma to gold loan etc. will vanish. And more and more people will start maybe using the gold loan model and that is what I see. Banks there — only I should see the positive side of it. On the negative side is probably a little bit of competition, but then the positive side is that more and more customers will get attracted or will think of gold loan as a good option and that itself is good. State Bank and these banks have been doing gold loan for the past decades. There all the banks which you said have been doing this for last decades.

Digant Haria — GreenEdge Wealth — Analyst

Right, sir. Sir, thank you. That’s it from my side. Thank you and all the best to the team.

George Alexander Muthoot — Managing Director

Thank you.

Operator

Thank you. The next question is from the line of [Indecipherable] from SBI Pension Funds. Please go ahead.

Unidentified Participant — — Analyst

Hi, sir. Just — thank you for the opportunity, sir. Just one question, could you please elaborate on the other expenses which has gone up like almost 15%, 18% this quarter?

George Alexander Muthoot — Managing Director

Give us a minute. We can take some other question at the meanwhile, if there is anybody.

Operator

[Indecipherable], do you have any further questions?

Unidentified Participant — — Analyst

No. Thank you.

Operator

Thank you. We’ll move to the next question from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.

Nirmal Bari — Sameeksha Capital — Analyst

Yes, — for the opportunity — question —

Operator

Sorry to interrupt, sir. Your voice is breaking up in between.

Nirmal Bari — Sameeksha Capital — Analyst

Yeah, thanks for the opportunity. My question is — despite so [Technical Issues].

Operator

Sorry to interrupt, sir. We are not able to hear you clearly. We would request to please join the queue back.

George Alexander Muthoot — Managing Director

Okay. Anyway, I will answer the earlier question that administrative expense of 2021 was INR[723] crores. And in this year, it is for the full year, it is INR[7,421] crores. I think there is hardly any increase. If it is quarter on quarter, it is maybe a seasonal thing only. But for the full year —

Oommen K. Mammen — Chief Financial Officer

Quarter on quarter, Q4 it is INR206 crores. Q3, it is INR183 crores. So the increase is about INR20 crores.

George Alexander Muthoot — Managing Director

No, but take it as a whole year, sir. It is INR723 crores versus INR742 crores.

Oommen K. Mammen — Chief Financial Officer

I don’t think it is any material increase.

George Alexander Muthoot — Managing Director

Thank you. Can we go to the next question?

Operator

Yes, we will move to the next question from the line of Prakhar Agarwal from Edelweiss. Please go ahead.

Prakhar Agarwal — Edelweiss — Analyst

Yeah, hi, sir. Just a couple of questions, one, to understand the logic behind introducing a teaser rate when we are saying that we are not seeing demand — gold loan demand which has gone down. So what was the logic behind first starting with the teaser loan and if that is because of the competition that we were seeing then, why had we stopped it essentially when obviously our target spreads is lower than what we are running on the book as we speak?

George Alexander Muthoot — Managing Director

Yeah. The teaser rates was for a specific period. It’s for a specific purpose to get new set of customers. We have achieved that and that we have discontinued it.

Prakhar Agarwal — Edelweiss — Analyst

Sir, what was the logic — so if we were saying that gold demand has not come down, gold loan demand has not come down and we were seeing a [Indecipherable] demand, what was the logic of introducing the teaser scheme? Is it because of the competition that we were seeing that we introduced or what was the logic behind introducing this?

Oommen K. Mammen — Chief Financial Officer

One, the rate of interest has come down in the market. Home loans, everybody advertise at 6% and suddenly some of the players start at a very low rate. Acceptability as a product, being a market leader we need to ensure that product is accepted by the staff as well as the public. So when we do large scale spending on advertisements, we need to do something which is acceptable to the customers. So that’s why these had mentioned that was for a period. There was a specific objective, now that objective is met, we are moving on.

Prakhar Agarwal — Edelweiss — Analyst

Okay. So, just in continuation with that as well, so when I — when we look at this fact that probably other guys were offering lower rates and all those stuff, so why our business promotion expense for the quarter is, first, there is a write-back of INR14 odd crores and even for a full year when I look at your promotion expense that has gone down significantly. What explains that?

George Alexander Muthoot — Managing Director

Promotion expense should have been probably the advertisement and the things — advertisement is definitely required. Probably in the last year advertisements, I don’t know the exact number, the advertisement, I mean less because of this COVID etc., we would have done less advertisement. Now that the things have opened up, we would have started more advertisements. I’m not exactly sure about the number. Those numbers are just small proportion to the total business.

Prakhar Agarwal — Edelweiss — Analyst

Sir, just to give a number, for this quarter we have reported a write-back of promotion — business promotion expense of INR14 odd crores. So what explains that write-back?

Oommen K. Mammen — Chief Financial Officer

Probably there will be some provisions which we have made in the past and we would have reversed.

George Alexander Muthoot — Managing Director

Business promotion [Indecipherable].

Oommen K. Mammen — Chief Financial Officer

Business promotion.

George Alexander Muthoot — Managing Director

Yeah. Some provisions which we made would have been reversed. Yeah.

Prakhar Agarwal — Edelweiss — Analyst

Okay. And just a couple of more questions. In terms of teaser rate when you offered, what was the sort of rates that you guys were offering and what was the AUM that you garnered from that loan — from that rate?

George Alexander Muthoot — Managing Director

Actually we went up to — 6.9% was the lowest teaser rate which we did. We got sufficient business there also. I don’t have the exact number here with me.

Prakhar Agarwal — Edelweiss — Analyst

Okay. Just one last data — just one last question. When you talk about FY23 growth of around 12% to 15%, any indication of what is yield per gram growth that you are looking at and what is volume growth that you’re looking within that 12% to 15% growth range?

George Alexander Muthoot — Managing Director

I didn’t understand your question. Volume growth and gram rate? What is that?

Prakhar Agarwal — Edelweiss — Analyst

So, value versus volume, when you talk about 12% to 15% of overall growth, what is coming from volume and what is coming from value under your assumptions?

George Alexander Muthoot — Managing Director

We don’t look at value at all. We look at only the AUM. AUM is rupees, money. Only that is what is looked at. If you are thinking about gold per se, that is not our gold, it is somebody else’s gold. What is — there is no need of any numbers for the gold, it depends on the gold price. So what we are talking about is the value of the AUM.

Prakhar Agarwal — Edelweiss — Analyst

So value of the AUM will grow because of two things, one is number of customers addition and second will be AUM per gram addition because of that particular customers. So I’m just asking between these two, have we sort of any — seen any bifurcation as to what is the sort of number of customer additions that we foresee for the full year, next year?

George Alexander Muthoot — Managing Director

Number of customers, we don’t have a list on the number of customers. On the value of the gold, the value of the gold depends on the gold price at the time of lending. If the gold price goes up, the value — the rate per gram will be higher. If the gold price is down, we will have to reduce the lending. So it is dependent on the gold price only.

Prakhar Agarwal — Edelweiss — Analyst

Got it, got it. That is it from my side. Thank you so much, sir.

Operator

Thank you. The next question is from the line of Nirmal Bari from Sameeksha Capital. Please go ahead.

Nirmal Bari — Sameeksha Capital — Analyst

Yeah. Am I audible this time?

George Alexander Muthoot — Managing Director

Yes, please. Okay, you are audible now.

Nirmal Bari — Sameeksha Capital — Analyst

So my first question is actually on the yields part only. This quarter, the yields came down primarily because of the teaser rate and all. But given the competitive intensity, have we also reduced the top end of the rate which was earlier I believe at 20%, 22%. Have we reduced that now?

George Alexander Muthoot — Managing Director

No, the top end rates still continues.

Nirmal Bari — Sameeksha Capital — Analyst

Okay. That is despite the interest rates that had come down last year, we didn’t change that, right?

George Alexander Muthoot — Managing Director

Very few people reached the top rate. Top rate is only when the loan gets in the books by maybe 11, 12 months. 95% of the customers [Indecipherable] before that.

Nirmal Bari — Sameeksha Capital — Analyst

Yeah. Okay. And the second part is on the accrued interest. You said the accrued interest is about INR2,071 crores. So what was the normal figure for this, if you could give the data for FY20, March-end FY20 that would be helpful.

George Alexander Muthoot — Managing Director

Yeah, give us a minute please. Any other questions?

Oommen K. Mammen — Chief Financial Officer

So there was a question on business promotion, there is a reversal of INR14 crores. So that is on account of reversal of some of the earlier provisions which was in excess, it’s got reversed in Q4. That’s why for the quarter it is coming as INR14 crores as reversal. And in terms of the provisions as of March 2020 —

Nirmal Bari — Sameeksha Capital — Analyst

Provisions as of March 2020, the interest rate [Technical Issues]

Operator

Sorry for that. Sir, we have lost the connection from management. Just hold while we reconnect. This is the operator. We have the line from management reconnected.

George Alexander Muthoot — Managing Director

Yeah. Can you hear us?

Nirmal Bari — Sameeksha Capital — Analyst

Yeah.

Oommen K. Mammen — Chief Financial Officer

Okay. So March 2020, the accrued interest was INR1,557 crores.

Nirmal Bari — Sameeksha Capital — Analyst

Okay. The final question on our vehicle finance and home finance segment. So how are we looking at these two now in the current year and would we be looking to start growing that book or we will still continue to be cautious and —

George Alexander Muthoot — Managing Director

We will be — continue to be cautious, but we have started growing the book in vehicle finance as well as the home finance. We have started growing the book, it will be but a calibrated and cautious growth.

Nirmal Bari — Sameeksha Capital — Analyst

And do we have some targets for that in the current year?

George Alexander Muthoot — Managing Director

Yeah, we have given some small targets for them also, probably not a big number to write home about, but then they have started that.

Nirmal Bari — Sameeksha Capital — Analyst

Okay, sir. Thank you. That was it.

Operator

Thank you. Next question is from the line of Ajay Chaudhary from Total Securities, please go ahead.

Ajay Chaudhary — Total Securities — Analyst

Thank you, sir. Thanks for this opportunity. My first question is on the average ticket sizes. While I understand that it has increased, but on the braches side when you’re deciding on the branch manager or branch productivity, are you including the branches, any specific regions that they need to have some portion of their loan generated to X percentage of ticket size or some portion of loan to have a ticket size higher than this, is there any kind of division or regional that you have done to the branches?

George Alexander Muthoot — Managing Director

No, it depends on the type of customers coming there. If it is a high value customers, they take a higher loan. Low value customers — it depends on the geography also. In that particular area, if it is sometimes low ticket customers maybe more, we have not made any differentiation.

Ajay Chaudhary — Total Securities — Analyst

Understand. That’s helpful, sir.

George Alexander Muthoot — Managing Director

Thank you.

Operator

Thank you. That was the last question. In the interest of time, I now hand the conference over to management for closing comments.

George Alexander Muthoot — Managing Director

Can you hear us?

Operator

Yes, sir, we can hear you.

George Alexander Muthoot — Managing Director

Thank you all. Thank you all participants for participating with us. Your questions and your suggestions are always valuable to us. We definitely value it, that is why most of our senior management is also attending this. So please continue to guide us, please continue to give us your good valid opinions. And finally, rest assured that we, from the management, which will work hard and see that the company and stakeholders, all the stakeholders, so this is borrower, lender or the equity investor benefited by way associating with Muthoot. So thank you all. Thank you.

Operator

[Operator Closing Remarks]