Muthoot Microfin Ltd (NSE: MUTHOOTMF) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Sadaf Sayeed — Chief Executive Officer
Praveen T. — Chief Financial Officer
Udeesh Ullas — Chief Operating Officer
Analysts:
Mayank Mistry — Analyst
Jay Prakash — Analyst
Somil Shah — Analyst
Anand Mundra — Analyst
Ashlesh Sonje — Analyst
Kamal Mulchandani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to Muthoot Microfin Limited Q3 and FY ’25 Earnings Conference Call hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your Touchstone 4. Please note that this conference is being recorded. I now hand the conference over to Mr Mayank Mistry from JM Financial. Thank you, and over to you, Mr. Mistry.
Mayank Mistry — Analyst
Thank you, Venu. Good morning, everyone, and welcome to the Q3 FY ’25 earnings conference call of Microfin. First of all, I would like to thank the management team of Microfin for giving us the opportunity to host this call. From the — from the management team, we have Mr Thomas Muthoot, Chairman and Non-Executive Director; Mr Sadaf Sayeed, CEO; Mr Praveen, CFO; Mr Udeesh Ullas, COO; and Mr Rajat Gupta, AVP, Investor Relations. I would now like to hand over the call to Mr Sadaf for his opening remarks, post which we can open the floor for Q&A. Thank you and over to you, sir.
Sadaf Sayeed — Chief Executive Officer
Thank you. Thank you, Mayank. Good morning, everyone. Thank you for joining the earnings call for Microfin for Q3 FY ’25 results. First of all, I would like to give an overview of the macro-environment that we are operating in. So quarter three was expected to be a little bit better quarter because of the festive season, but there were number of challenges which came around in this quarter as well. As you know that previous two quarters, there have been challenging — challenges of macro nature which micro industry has been facing. In Q3 also, that got exasperated because of the floods and cyclone. So we faced the cyclone pangle in Tamil Nadu and we had issues which are brewing up in because of which the portfolio was getting affected and the quality of the asset was getting affected. But having said that, Batooth Microfin has always outperformed the industry as continued to operate with a better risk management policies. So we have the national climate insurance. So damage from the Fengal cyclone was minimized. However, since the cyclone happened in the last end month of the quarter, so part of the benefit that we have received from the insurance companies would be taken to effect in the final quarter, Q4. Part of it is already taken. I’ll go about that in detail in the presentation and when we do the discussion. But overall to lay the summary, during the quarter, we reached INR12,400 crores of INR404 crores of asset under management, which is around 8.3% growth year-on-year and just about a 1% decline over the previous quarter. Our strategy was to calibratedly do disbursements and not to go aggressive in the current environment. So we have continued to play on that strategy. And hence we have disbursed around INR2,035 crores of loans, which is a decline of around 21.5% year-on-year and 23.9% quarter-on-quarter if we look at. In terms of our distribution network, we continue to calibratedly expand our distribution network. We have now reached to 1,651 branches. We — this has increased around 16% year-on-year and 3.6% quarter-on-quarter. Our active client base also has increased by around 4.5% year-on-year. There is a minor dip in the quarter-on-quarter. We — this is on the back of our strategy that our focus is to focus on our existing good customers or reduce new customer acquisition a little bit because most of our new customer acquisition was coming through the north, which was UP Bihar and other states in the north. There we have controlled our disbursement. So the new customer acquisition has dropped a little bit. Earlier, we used to have around the mix of new to and new to existing of 50-50 that shift has changed a little bit to around 40 60 and going-forward, that will remain for the balance of the period. In terms of our GNPA, we have increased a bit around 74 basis-points increase in GNPA to 3.03% year-on-year. And if you look at quarter-on-quarter, around 33 bps of increase. Considering the macro-environment and the industry, this is a reasonably good performance in terms of controlling the GNPA. The collection efficiency has come down to around 93%. If you exclude the overdue collection and sort of a pre-closure, it’s around 93%. And if you look at including the pre-closure, it is around 95%. Our net NPA stands at around 1.27%. This is something which we will elaborate because we have gone ahead in this quarter taking an incremental provision, ensuring that any sort of uncertainties that are there are taken out. Of course, there are certain things which are still playing out in the macro-environment, but most of the over-leveraging related issues which were there have been taken care of to a large extent. If you look at the financial performance quarterly, we have done really well in terms of our income has increased around 17.7%. Our PPOP has increased 39.6% year-on-year. Our cost-to-income has come down almost 550 basis-points. Quarter-on-quarter, it’s also 125 bps reduction. Our net interest margins have improved around 23.1% of INR420 crores is the net interest margin. Our overall net interest margin has also increased around 13%, 30.5%. And if you look at the PAT has of course come down because of the credit cost that we have taken. The PAT is around INR38 million, around INR3.8 crores. But we have maintained a very healthy CAR. Capital adequacy ratio is around 30.51%. So we have gone in our strategy where we want to remain very healthily capitalized, have adequate provision cover and also at the same point of time, remove all the shops from the system and take whatever credit cost upfront. It’s same thing, if you look at for the nine-month period, our income has increased around 24.7%. Our PPOP has increased by 43.1%. Our cost-to-income ratio has come down to 43.27%. This is a 389 bps reduction year-on-year. Our NIM has increased by 28.5% if you look at NIM stand-on a Nine-Month period, our NIM is around 13.07%, so which is in-line with what we have given our guidance of maintaining a NIM between 12.75% to 13% and we are confident that we will be able to maintain that NIM. Over the — for the nine-month period, the PAT is around INR178 crores. So this is where we are. The key point is that in terms of our operating expense and operating efficiencies, we have maintained that. Our operating expense has not gone above drastically. It’s still at around 6.1% opex that we are incurring OpEx to AUM. And in terms of our operating efficiency, it is improving consistently. Our cost-to-income ratio is coming down consistently. The challenges with the credit cost, which we are addressing upfront. The important highlighted point that I wanted to share with you is, if you look at the over leverage, which is the key concern, it is coming down significantly. If you look at as a percentage of portfolio, in QT Q2, the four and above customer were around 10.9%, which is almost 11%. It has come down to around 7.1%. Even our Madur plus 3 customers, which were around 13.5% have come down to 12%. At the same time, our contribution to the unique customers has increased, which is 27.6% to around 30.1% and also in the plus one, which is around 26.5% in Q2 has gone to 28.7%. So overall, we are calibratedly putting the guardrails and we have effectively utilized them. We are sincerely following the guidelines which have been given by various SROs and ensuring that those are effectively implemented so that the over leverage reduces. Of course, the guard have had an impact. We have introduced a slide, which shows the rejection rate. So the rejection rate has increased by 15%, but we think that’s a short-term cost. We should be able to build a much healthier portfolio with the guard rails that have been implemented and we are committed to it. We have sincerely followed it up and implemented that. We have even put over and above certain filter above the guardrails within our systems where we do not lend any customer more than 30 plus. And of course, we have a scorecard system which is there. As we see the environment developing, I think the focus of everyone is coming at around the credit-focused lending, which is something that is there. One of the advantages that enjoys right now is that we have always focused us at a separate underwriting vertical, so which is yielding results now. Also, we have had a strong collections team, which is also helping us. So because of increased delinquency, since we already have a team, we don’t have to incur additional cost to build that team. Some of the other competitors are building team. That’s why the operating cost for them is going up. So in a — in current environment, we have a steady-state return and as soon as the environment improves, which we are seeing in terms of our collection efficiency, definitely that will improve. If you look at our ex-bucket collection efficiency at an organization level, it is at a 99.5%. If you look at there is a statewide month-wise breakup also we have given. It is showing an improved trend month-on-month, the collection efficiency on ex-bucket is improving. In rest of India, it has reached around 99.2%. The key states where Kerala, it’s at 102%, which means some advances are also there. And around Tamil Nadu is 99.4%, so which is our two key states where the collection efficiency is improving. Even in Karnataka, the bucket collection is 98.3%. If we look at overall collection efficiency also month-on-month, it is improving. Ladoo is at 95.4% and Kerala remains a very, very profitable and robust market for us. It’s at around 98.8%. We are touching around 99% collection efficiency even now. And in other states also, there is a uptick in collection. I think the chart may show that October the collection efficiency is higher in November, it was lower and then December again in. So October has to be looked at from a point-of-view that there were certain advanced collection for Diwali as well. So that collection efficiency has to be looked at from that perspective. But overall, we are seeing a positive trend in terms of improvement in collection efficiency in December. And also in January, we have had a positive traction in terms of our collections. Disbursements, we are doing calibrated disbursements, wherever we think that there are higher possibility of risk, we are slowing down on collections or the disbursements and focusing on collections and wherever we think that we have a better control and the collection efficiency is good. There we continue to maintain a robust disbursement. Having said that, of course, this year, it would be not a growth of very large number. We have given a guidance of 5% to 7% growth and we hope to maintain the asset quality. That is the focus that is there on — for this financial year. That’s all from my side. I’m happy to answer any questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on your touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question comes from the line of Jay Prakash with L&T. Please go-ahead.
Jay Prakash
Hi, sir, good morning and congratulations. Sir, how much portfolio do you have in Karnataka? And what is the frequency we are certainly in — as you as you know, the new ordinance is coming by the Karnataka government.
Sadaf Sayeed
Yeah, I think the two questions there. One is on the ordinance. So I’ll preserve my remark, but I’ll give you my perception of — my personal perception, not the company’s perception. In terms of our exposure, we are just about less than 10% exposure of our overall portfolio in Karnataka. And in terms of the regulation, I think from a practice of curbing unregulated lending, I think it is something which is good. I think it should be welcomed by the regulated entities. I think this will remove unnecessary over leverage and coercive practices that have been followed by people who are not the authorized or regulated lenders. These are local money lenders which use strong arm tactics also, which gives a bad name to the microfinance business. So I think in — it is something which is very good. As things stand, I have seen the draft. I can’t comment on it till the time it becomes the bill, but as the things stand, regulated entities are out of it. So I think overall in the long-run, it is a good policy to control the lending practice of unregulated organizations. In short-term, it might have a little bit of an impact, but in the long-run, I think it’s positive for lenders like us.
Jay Prakash
Okay. Okay. So did you actually your collection efficiencies also decreased there, 98.7% in Karnataka right now, as you mentioned in your PPT. Is — you are thinking that this collection efficiencies also decreased by in January and in December — sorry, in February.
Sadaf Sayeed
I can’t comment on January, February numbers as of now, but I think what we are witnessing, it is steady. It is steady in terms of what it was in December. That is where it is holding as of now. We are not seeing any incremental deterioration that much I can tell you.
Jay Prakash
Okay. Thank you. Thank you so much.
Operator
Thank you. Next question comes from the line of Somil Shah with Paras Investment. Please go-ahead.
Somil Shah
Hi, sir. I would like to know your revised credit cost guidance for this year?
Sadaf Sayeed
Yeah. So if you look at our revised credit cost guidance, we have given a guidance of around 7.5% to 8.5% as overall credit cost for the full financial year. Again, I would like to emphasize this as the budgeting like basically preparing ourselves for the worst and hoping for the best. So that is the strategy that we have adopted. If the environment in Karnataka does not play-out the way it is being anticipated as the worst, it might be better than that. But we — since we are very close to the end-of-the financial year, we didn’t want to give a very optimistic picture and end-up at a very bad situation. So I think we have taken into consideration that even if Karnataka legislation, the way it was originally thought of that it will curb lending and all of that. If that plays out, then what could be the credit cost, that is the kind of thought process we have taken into building that credit cost guidance.
Somil Shah
So just a quarter back, we had guided for 3.25 to 3.75 credit cost guidance. And in fact, you were saying that we will be touching a lower bank. And now suddenly in 1/4, I mean, how come we are — I mean increasing so much of freight?
Sadaf Sayeed
No, that’s a good question to ask. Basically at that point of time, we didn’t had a — I said that there would be such an ordinance that will come in and there was no expectation of any sort of a cyclone. So both of the things have come in, which is like something which you can’t build-in a model. So both of them are in a critical area of operation where we operate. Samiladu is one of the largest kind of portfolio. We had 25 districts which were impacted because of cyclo. And in Karnataka, we have 10% exposure. Of course, we are anticipating, we are hoping that it will be not as bad as what it is being perceived. But if the work comes through, that is what has been baked into the credit cost. So both of these things were not visible to us in Q2.
Somil Shah
Okay. So I mean, we can see more pain in the coming quarters because current credit cost is around INR5.4%. So do you anticipate more pain in the future quarter?
Sadaf Sayeed
Yes. So we have budgeted for that. That’s what we are guiding towards that we would go with a strategy that we will provide and write-off whatever we are — is necessary upfront. We don’t want to go light on the provision. So if you look at overall coverage, we have 89% coverage of the provision. If you look at standalone Stage 3 versus Stage 3, it’s 58.8%, but this is because we have taken a large write-off in this current quarter. We — the current quarter, the credit cost, which has gone up to around INR247 crores is also because we have taken a certain INR164 credit cost because of our write-off and there is some ARC transaction that we have done where there is an INR83 crores of credit cost. So we have taken upfront the hit if the things hold normal as it is and there is no intervention that comes in through the Karnaga, I think it will be much better than what it is for the Q3.
Somil Shah
And so we do have an insurance against this, right?
Sadaf Sayeed
Yes, for the natural clamity, we have the insurance. As I explained, as of now, we have received around 32% of the claims because it happened in the month of December and by the time the claim settlement happened, we had received certain claims — sorry, I’ll update 59.8% claims. The balanced claim also the money we have received, but that did not get settled in the month of December itself, it was received in the month of January. So we will settle those. So impact from that would be much lesser, but the impact is in a sense that the disbursement do not happen at the same pace and there could be a spillover effect as well where there is no claim as well.
Somil Shah
Okay. So out of this expected credit cost loss of 7.5, how much would it be insured?
Sadaf Sayeed
And the insurance is with respect to natural clamity insurance only and there is a credit life insurance. In terms of any sort of loss due to operating collection efficiency, there is no insurance on that.
Somil Shah
Correct, correct. Okay. That’s it from my side. Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Anand Mundra with Mytemple Capital. Please go-ahead.
Anand Mundra
Hello. Yeah, thank you for the opportunity, sir. Sir, just wanted to understand more on our credit cost guidance. You also mentioned that you want to take all the pain in this financial year itself. So is it fair to assume that from Q1, we can expect normalization in our credit cost?
Sadaf Sayeed
Yeah. So if we take the hit in Q4, most likely if things don’t get — we don’t get any other surprise in Q4, we should be able to kind of get back to normalcy in Q1. That’s the idea. The increased credit cost is taken just to ensure that whatever is the shop of this portfolio, we take it in this year only. We don’t carry this for the next financial year. So Q1 is expected to be much, much better quarter.
Anand Mundra
All right, all right. And sir, you’ve also done some kind of accelerated provisioning in this quarter. So could you just highlight like is it like 180 plus is completely written-off or something of that you would want to want to give color on?
Sadaf Sayeed
Yeah. So we have done an ARC transaction, which is around INR344 crores of portfolio that we have received a valuation of around 45% on that transaction, which translates to around INR155 crores. The — it’s a 85 kind of a transaction, so we have received 15% cash upfront, but the investment remains INR134 crores. Because of this, we have taken an accelerated write-off of around INR83 crores. So this is all 90 plus pool which has been written-off. So certain 90 plus pool has flown in from, say, which was Stage 2 prior to the transaction just as the transaction happened, they were in Stage 3. So we have taken that hit upfront. But definitely we are seeing better collections from the earlier pool as well. So there would be definitely some write-backs, which will come in. But to the extent of INR83 crores, we have taken an accelerated write-off.
Anand Mundra
Okay. So all of it is due to the ARC transaction.
Sadaf Sayeed
Yes. This is because of the ARC transaction. Also, we have created a buffer which we had created last-time of around INR32 crores of management overlay, we continue to carry that.
Anand Mundra
That is sitting on Stage 2,
Sadaf Sayeed
Correct.
Anand Mundra
That is sitting on Stage 2. All right. And on the ARC transaction, on the SRs, we are carrying 100% provision, what is the provision that we are carrying on the SRs?
Sadaf Sayeed
So basically since we have written-off all the uncertainties, there is no requirement of provision specifically to SR, they go as an investment. They go as a rated paper. If there is a rating deterioration, then the provision is required. So as of now, they sit as an investment on our book and whatever is required in terms of we have taken the write-off.
Anand Mundra
Got it, got it. And sir, if I see sequentially, actually our PCR provisioning across Stage 2 and Stage 3 seems to have actually reduced in-spite of there being a higher credit cost. So I mean, I would have expected — I mean, I was kind of expecting that our PCR would have gone up because we are preparing for the worst in Q4. So why is it in this quarter we not increased the PCR in these two buckets?
Sadaf Sayeed
So since we have taken the write-off this quarter, if we have — we have already taken around INR247 crores of credit costs, which includes around overall write-off around INR211 crores. Sorry, INR21 crores on the account of a portfolio which is on the balance sheet and INR83 crores on the account of ARC transaction. So around INR104 crores we have kind of written-off. So we feel that — in terms of cover, we have adequate cover because of the asset that was impaired and really severely affected. We have already taken out. But if you look at overall cover, we still maintain around 89% cover. And if you look at a couple of quarter back, we had a similar 89% cover overall the asset. If you look at overall provision against Stage 3, it was 89.1% in Q1, which was an improvement over Q4 number of 85.1%. It is still at 89%. Stage-3 specifically, it has gone lighter because we have utilized that for write-off in the ARP transaction and the credit cost guidance that we have given is only for the purpose of increasing that provision. So in the coming quarter, definitely that will increase.
Anand Mundra
Got it, sir. And sir, so is it because you mentioned that Jan has been — so December you’ve given the data December has seen better collection efficiency as compared to November and Jan you’re seeing stabilization. So is it fair to assume that par accretion has stabilized for us and in the — in the coming yes, sir, please.
Sadaf Sayeed
You please complete your question.
Anand Mundra
So is it fair to assume that bucket like 30 plus or something will see stick because SMA zero market for us has seen a — I mean has seen a decline quarter-on-quarter. It’s mainly the Part 30 plus, which is seeing a bloat up. So is it fair to assume that piece will be — will also get stabilized now?
Sadaf Sayeed
Yes. I think that’s the correct interpretation. Our bucket collection has reached to around 99.5% overall if you look at for Pan-India and that has been the kind of collection efficiency in the past financial year also where you had 50 bps, which will go into ZO+ and then you recover majority of it. So not much of aggression happens into the higher buckets. What remains to be seen, what is the recovery efficiency on the cases which have flowed in the last couple of months because the collection efficiency for previous month was not as accurate. I think that is where the whole collection vertical comes into effect. We have a strong collection steam and we have seen good collection efficiency coming out of that. In fact, if you look at December was better than November, if you look at our year collection perspective and even if you look at the collection from January, that was even better. So month-on-month, we are seeing better collection on the earlier accounts and we feel that we will be able to roll-back a better than what we have seen in the previous quarters and previous months. But however, part of it will flow-through, that’s why the credit cost has been built-in. We have also seen that customer with a better vintage have better collection efficiency. If you look at quarter-on-quarter, this is also included in our presentation.
Anand Mundra
Correct, correct, yes. So is there for any number that you would want to give us for what kind of credit cost that kick — can we expect for Q1 of the next financial year?
Sadaf Sayeed
I don’t want to jump again and give a guidance in a very kind of long-shot. Given what development we are seeing in Karnataka and also overall situation, I think we will go quarter-by-quarter. We will play as it comes. For Q1, we anticipate it to be a normal quarter and in a normal scenario, our credit cost is 2% to 2.5%, that is what we anticipate. But of course, any sort of guidance we will be able to give post the closure of the financials.
Anand Mundra
Okay, sir. And sir, the 2.0 guardrails that have been implemented from Jan 1, partially implemented from Jan 1. So in that, is there any kind of regulation or any kind of restriction on giving insurances?
Sadaf Sayeed
No, there is no restriction in terms of nat care insurances, the only thing is that it should not be kind of clubbed with the loan in a sense that it should not be deducted from the loan amount. It can be taken from the customer. So there is no such restriction that is there in terms of giving nat cat insurance. So that is there. I think if you look at the Guardrail 2.0, 90% of that is already implemented, only one aspect of it, which is a three lender restriction, which will come in April onwards. I think rest of it has already implemented.
Anand Mundra
Got it. And sir, one final question. When do you start seeing disbursements improving sequentially?
Sadaf Sayeed
Yeah. See, in terms of availability of funds and our team readiness and branches, we have everything in-place. We don’t want to go out aggressively in an environment of uncertainty. So we are calibratedly kind of doing disbursements wherever we think the disbursements area is good, we will do. So we will wait-and-watch. I think the normal study state disbursement guidance is around INR2,000 crores per quarter at the moment. If the situation improves and if the ordinance, which does — which will come out in a couple of days’ time if it is in favor as we are expecting, then I think it may go up a little bit, but at the moment we are maintaining our steady base.
Anand Mundra
Got it. So but at least I mean because ex-market collection efficiency is seeing improvement, can we expect Q4 to have a higher disbursement in Q3.
Sadaf Sayeed
Yeah, that’s our anticipation, but again, we will see how the things develop. We plan — we have planned that way, but it is subject to the macro-environment, how it plays out?
Anand Mundra
Got it. Thank you. That’s it from my end. Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Ashlesh Sonje with Kotak Securities. Please go-ahead.
Ashlesh Sonje
Hi, team. Good morning and congratulations. Sir, first question is on the — on the individual loans book, which you have created. Can you share what is the portfolio outstanding in this book in this quarter as well as the previous quarter? And it would be great if you can start sharing the portfolio size in these other products as well? That is question one. I have a couple of other questions. Second one is, you indicated something on the lines of the slowdown in disbursements in Tamil Nadu impacting your provisions for the Tamil Nadu exposure. Can you just elaborate on that point if I heard it correctly? And the last one is what is the carrying value of these SRs which you have from the recent? That’s helpful. Thank you.
Sadaf Sayeed
Yeah. Yeah. The first question on the individual loan. So basically, if you look at our — I don’t have the slide number, there is a slide where we have given the breakup of the portfolio. So 96% of our portfolio is the income generated group loans, which is the livelihood solutions that we have put in. The rest of the portfolio around 3.5% is the portfolio, which we have individual loans and other health and IG loans, which is sanitation loan and some secured loan 1%. So the portfolio in terms of value stands at for secured loans, INR126 crores for health and hygiene loan stands at around INR200 crores. And for life better solutions, which is again individual, but it stands at around INR11 crores. Put together, they are around INR437 crores. That is the portfolio that stands. This is a slight reduction from what it was in the previous quarter in certain buckets. Health and hygiene has gone up a little bit by INR70 crores. But if you look at individual loans like Solution, which we are calling it, which has gone down by INR5 crores and a secured loan as which was in the form of gold has gone down by around INR40 crores. Yeah. So overall, it stands at around INR447 crores as of today. The second question was regarding Tamil Nadu. Sorry, can you repeat the second question?
Ashlesh Sonje
If I heard you correctly, you said that the higher provisions which are taking in Tamil Nadu is partly offset by the nat cut insurance, but it is still high because of slowdown in disbursements. If you can just elaborate on that point?
Sadaf Sayeed
Yeah. So basically what happens is if when the cyclone happens and the customer doesn’t is not able to pay, then she moves into the buckets. So those of the customers who have moved into Stage 1 or Stage 2, there would be a provision created for them. Of course, we have received some of those cases, we have received the settlement amount, but that was received in January. So our provision will carry that amount, but that settlement that we have received in January, we will settle that with that amount. So that — to that extent that a provision will be setted off, we will get that back. But again, the ability of the customer to continue to pay is something that we have to see. So that’s where I think the challenge would be in terms of how many of those customers will continue beyond the kind of a nat cat claim that we have got. So claim depends upon the severity of the damage. Somewhere you will get three installments somewhere you will get six installments, somewhere you will get the whole loan. So that is how it works..
Ashlesh Sonje
Understood, sir. And just the last one was on the carrying value of the securities.
Sadaf Sayeed
Yeah, carrying value. Praveen, you want to take that?
Praveen T.
So the carrier value is INR134 of the investment AS
Ashlesh Sonje
Thank you. Those are all my questions.
Operator
Thank you. Next question comes from the line of Mayank Mistry with JM Financial. Please go-ahead.
Mayank Mistry
Yeah, hi, sir. Sir, I have two questions. First is on the margin trajectory. So given that now there will be a narrow customer-base led by this cartridge, so narrow customer-base to maybe you have to focus on people who are — who do not have more than three lenders in the book. And so would this lead to even lower wins given the higher competition led by all MFIs focusing on the same category of customers, while favorable customer quality would also prompt you to give loans at a cheaper rate? So that is first question. Secondly, our Stage 2 has also increased by 90 bps sequentially. So how much should we expect this to slip into NPAs? I mean, could you elaborate on how this movement has been so higher in this quarter? Yes. Thank you.
Sadaf Sayeed
Yeah. I think on the first question in terms of the competition and our ability to maintain ourselves as a priority in the eyes of the customer. See, one thing, if you can look at the data, the unique customer is increasing for us. From 27%, it has gone to 30%. And if you look at on the count basis, it has gone from 32.9% to 34.8%. So which is something as an indication that we are able to retain our customers and they are having a trade line only with us, which is a comforting sign. It is not necessarily because of the operations that we are having in North where we are acquiring new customer. It has more to do with our core market area, which is Kerala and Tamil Nadu. So we are witnessing lesser competition in Kerala and Tamil Nadu. Players who had come to Kerala from North and all that, they have considerably stopped disbursement. There were a couple of players on where there were restriction from RBI also in terms of disbursement. So that also benefited us. We will continue to be among the preferred because in terms of our pricing, it is very competitive pricing. We have cut rates almost three times in the last 12 months, we have reduced rate by 115 basis-points and we have adopted a strategy wherever we will have a reduction in our cost of fund, we will pass-on to the customer. So that way, I think we’ll continue to have better customer engagement. Apart from that, we have a customer app, which is very, very efficient way of kind of engaging with the customer, which actually kind of differentiates us from any of the competitors. The customer can actually checker eligibility, draw the loan and also repay installment, checker, installment, checker loan through the app. And we are doing an integration at the level of a super app of our company of our growth in the super app where the customer would have much more revenues of like buying insurance, buying saving products, booking bus tickets, some — many other facilities paying utility bills and anything. So it will become one-stop solution for financial services for the customer. So I think those kind of services that we are offering is ensuring that the customers are more engaged with us. But the key part is that our key market is Kerala and Tamil Nadu. In Kerala and Tamil Nadu, we are seeing comparatively lesser competition than North. You had another question, sorry, mind I missed on that.
Ashlesh Sonje
Yeah. The second question was on the Stage 2 increase, which has gone up I think 90 bps sequentially. So would like to know, I mean, what kind of slippages are we expecting from here to Stage 3? And what kind of recovery are we expecting, let’s say, since today our GNPAs are at almost 3%. So from this, how much is expected to be recovered either through insurance or through our own collection — in-house collection team?
Sadaf Sayeed
Yeah. So traditionally, we have seen around 44% to 45% recovery on the Stage 3 asset over a life of that asset, so which is in a period of around two years after the maturity of the loan, so around 44% recovery happens on that. On the Stage 2 asset, the recovery is slightly better. We get around 69% to 70% recovery. Traditionally, I think we remain to see how the collection efficiency pans out because in Karnataka, because of the environment, we are not pursuing too hard with the customers. We are doing soft collections there. So there would be impact a little bit. But overall, I think the collection efficiency would be there, but there would be some slippages which will come into Stage 3 from Stage 2, definitely. Traditionally it has been around 30% to 40%. This time it could be slightly more than that. That’s why we have built-in the higher credit cost that we are saying. Incrementally, addition to the Stage 2 has reduced because now we are at a 99.5% collection efficiency and whatever even go zero plus that 50 bps that also gets collected mostly. Very few cases go into higher bucket. But cases which have already slipped, collection efficiency that we expect on that should be in the range of — between depending upon the environment 50% to 70%.
Ashlesh Sonje
Okay, sir, sir, but our credit cost guidance is extremely elevated now. So from 3.5%, we have given 7% almost, it comes to, I think more than — more than 6% again in Q4. So is my calculation correct?
Sadaf Sayeed
Yeah. So see, basically, as I said in my opening remarks, we are preparing for the worst and hoping for like or hoping for the best. So we have given a guidance where we feel that extreme situation where Karnataka pulls out a legislation where operations is not possible and collection efficiency drops significantly. If that does not play-out, which is likely the case, I don’t want to second-guess that. So that’s why we have built-in that credit cost guidance. Our expectation is that if that does not play-out, then the credit cost would be much lesser.
Ashlesh Sonje
Okay. Just one last, if I can squeeze in. So basically, we are not expecting this credit cost to be spilled over even in the next year, right?
Sadaf Sayeed
Like for sure. So the thought process is that whatever has happened in this year, we will take the hit this year. Next year should be a clean. That’s what we are trying to do. That’s why the elevated credit cost we have built-in whatever has to be provided, we will provide in this financial year. And Q1 should be barring if there is a new event happens, there shouldn’t be any issue.
Ashlesh Sonje
Okay, sir. All the best for the upcoming quarters. Thank you.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question. Next question comes from the line of Kamal with Investec Capital Services. Please go-ahead.
Kamal Mulchandani
Hi, sir. Thank you for the opportunity. Sir, can you please help us know what was the interest reversals during the quarter
Sadaf Sayeed
Praveen, you would have the number on-hand.
Praveen T.
Sorry, can you repeat? Get that question
Sadaf Sayeed
In versal during the quarter
Praveen T.
You are asking about interest spread or sorry
Sadaf Sayeed
Interest reversal
Praveen T.
Double gone yeah, so we had so from the NPA recovery, we have additional recovery of around INR12 crores, which is adjusted to the write-off and the interest reversal for this specific quarter is around INR21 crores.
Kamal Mulchandani
Got it. And sir, like despite everything we have been able to maintain our NIMs very well. So would you like to guide something on the NIMs part, like how have we able to maintain the NIMs very well?
Sadaf Sayeed
Yeah. So I think that is one of the key. Thanks for asking the question. So our NIMs are improving. We have around 13.07% NIM that we are maintaining. And we have been able to reduce our borrowing cost slightly a bit. Year-on-year cost of fund has reduced by 14 bps. Quarter-on-quarter it has remained almost same. But the overall cost of fund has reduced by around incremental cost of fund has reduced by 3 bps. And largely it is driven by our ability to do PTCs at a very effective rate. So one of the strategies that we have adopted is that we are going through a PTC route to tap the PSL market instead of doing direct assignments because direct assignments are coming at a higher-cost considering that banks are concerned with the risk that is there in the asset. So — but PTCs are coming at a very fine cost. We have done PTCs at around 8.8% as well and around 9% as well. So that is really helping us to reduce our cost of fund. And hence our net interest margins are remaining good. And that is all helping us to maintain. If you look at — if you look at fundamentally, the PPOP has improved almost 40%, so which is a very good sign and the cost-to-income has come down significantly almost 550 basis-point year-on-year. It’s at around 43.2%. So on the efficiency of the capital and also operation is still there, it’s the credit cost which is the variable because of events, which is causing otherwise I think fundamentally things are moving in the right direction
Kamal Mulchandani
Just also wanted to ask that, are we facing some attrition level issues even at the branch manager level and on the overall level, if you could highlight that? And what is the incremental collection team we have built to cater to the asset quality issue going on.
Sadaf Sayeed
Yeah. I think on the attrition issue, we have taken certain steps. So right now, the attrition is well within control. One of the thing is that, of course, because of the environment, there is not too much growth in the sector. So there are not too many opportunities. So people are not jointly jumping the ship. And the second thing is that we have taken calibrated steps. So earlier, we were operating in a model where we did not had residential facilities at our branches. Most of the microfinance companies offer residential facility. But we have noticed that because of this, some of the people were reluctant to join or maybe after joining, they were leaving us. So we have created 140 such facilities where we saw a little bit higher attrition where we are providing accommodation to our staff. So these are standalone kind of places where at a nominal charge to the employee, we provide residential facility. So it’s kind of a mess where people can stay, eight to nine people can stay and they pay INR500 kind of monthly charge. And for us, it’s an incremental cost of around INR3,000 per employee. But definitely it saves around a lot on the attrition, but it is not everywhere, it’s less than 10% of our branches where we have started this facility. That is one-step. The second step that we have done is that we have focused on hiring a lot more female relationship officers. So traditionally, there has been a perception that female would not be able to travel too much and there are difficult towers in our operations to work early-morning and all that stuff and necessity of the bike. So I think that we have overcome. We have identified females. We have at the field officer level who are willing to work. And the only augmentation that we have done to our policies, earlier we were posting everyone 60 kilometers away from their base location. But for female staff, we are giving that relaxation that they can be based out of that similar location. They would not be lending in that same-area. They would — they can be based within that 30 kilometer areas. Also, we have tied-up with couple of EV providers. We are providing bikes to these people on a lease model. So the lease would be in their name, of course. We will be facilitating that and they would have the two-wheeler also. So we are tracking this very closely. Now our female employee base has almost reached around 7.5%. This will — we are hoping that it will increase beyond 8% in the remaining period. And we are tracking the efficiencies also. So in terms of our productivity, they are at par with the mail staff and in terms of collection efficiency, they are slightly better. And it also works well in the environment where we are operating currently because of the regular follow-up with the customer and unnecessary perception that there is harassment as female is interacting with our female customer that will give a better synergy so I think on to the narrow point is that the attrition is well within control and it’s coming down in terms of the collection resource, Udeesh, you have the numbers on that?
Udeesh Ullas
Yeah. So we have added another 200 people in this financial year. So right now, we have close to 512 people in the collection team. Apart from that, we have added Delhi callers also. So we have added around 20 tele callers mostly for the North India, which is based out of Delhi. So yeah. And tele callers, they do the calling and generate the promise to pay date and the field executives are going and collecting payments from the customer. So last month, we have seen a better collection. We have collected almost around INR15 crores of collection from the delinquent bucket and this quarter also we are adding more people to the collection team.
Kamal Mulchandani
Yes. Can you also quantify the like number of like the employee attrition part, like if you could just give the number what is the current —
Sadaf Sayeed
The employee attrition has come down to around 30% now, which was slightly higher earlier. So the industry was seeing almost in the range of 50%, but it has come down to 30% now, which is a normal case in terms of microfinance operation?
Kamal Mulchandani
Okay. Got it, sir. And lastly, if you could just give a comment that with the implementation of from post April, like how do you think the entire scenario would pan-out for the entire MFI industry? Would we again see a cycle where there would be some increased level of credit cost to the borrowers whom the funding would not be provided. So what’s your view on that?
Sadaf Sayeed
So in terms of the Guardrail 2.0, as I mentioned earlier, 90% of the points are already applicable. Only one incremental point, which is from a full lender cap, we’re going to move to a three lender cap, which is going to come in-force. So if you see our numbers data, we are already defocusing on the three lenders. Wherever there are three lenders or four lenders, we are actually not lending to those customers. We are focusing much more on the unique customer or plus one or plus two customers. So from that perspective, I think it’s in-line with our strategy. It will not impact us at all. Overall, I think in the industry per se, I think it will be good that leverage on a borrower will come down and it might have some temporary pain, but I think in the long-run, it should be beneficial for the industry as well.
Kamal Mulchandani
Okay. Thank you so much for the answer. Best of luck.
Sadaf Sayeed
Thank you, sir.
Operator
Thank you. A reminder to all the participants that you may press star and one to ask a question thank you. Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to Sadaf Sayeed for closing comments.
Sadaf Sayeed
Thank you. Thank you, everyone, for giving us this opportunity and joining our call. Once again, I would like to emphasize that if you look at fundamentally, the company is seeing improvement in the income aspect, maintaining steady net interest margins and improving on the cost-to-income ratio. The temporary dip in the profit is because of a call that we have taken consciously to take incremental provision and accelerated write-offs. And in the coming quarter also, we have given a guidance, which is 7.5% to 8.5% given the uncertainty, but we are hoping that it will be much better than that given the macro-environment, we have given that guidance. But if that does not play-out, the fundamentals are very clear that our net interest will remain consistent. Our income from operation and PBOP will remain in that zone. What we have seen around 40% growth year-on-year, it will continue. But I think we have to, as we said, play quarter-by-quarter. So we have given the guidance of this quarter and we are running a strategy where we want to take that hit only for this financial year and this year. In the next quarter, Q1 should be absolutely clean quarter, given that there are no other macro events. So that is a strategy. Overall, I think the — we are in a steady-state. We have not seen any challenge on the liability side. We are getting adequate funding. We are getting good rates on our borrowing as well. So fundamentally, the business stays strong and steady. This is a time where we need to be a little bit more conservative and cautious. So that is what we are doing. We are hoping for the better quarter in the next coming months. So I think I’ll close at that and appreciate the you’re joining this call and all the support. Thank you very much.
Operator
Thank you. On behalf of JM Financial, that concludes this conference. Thank you for joining us. You may now disconnect your lines.