Muthoot Microfin Ltd (NSE: MUTHOOTMF) Q3 2026 Earnings Call dated Feb. 10, 2026
Corporate Participants:
Sadaf Sayeed — Chief Executive Officer
Analysts:
Pratik Matkar — Analyst
Mayang mystery — Analyst
Varun Dubey — Analyst
Anil Tulsiram — Analyst
Ashlesh Sonjay — Analyst
Prithviraj Patil — Analyst
Nitin — Analyst
Himanshu — Analyst
mun — Analyst
Prati — Analyst
Presentation:
operator
Ladies and gentlemen good day and welcome to the Muthut Microfin Limited Q3FY26 earnings conference call hosted by GM Financial Institutional securities Limited as a reminder all participants line will be in listen only mode and there will be an opportunity for you to ask question after the presentation concludes should you need assistance during this conference call please signal an operator by pressing Star then zero on your touchstone phone Please note that that this conference is being recorded I now hand over the conference to Mr. Pratik Matkar from GM Financial Institution securities Ltd. Thank you and over to you sir.
Pratik Matkar — Analyst
Thank you Good morning everyone and welcome to the Q3FY26 earnings conference call of Muthut Microphone Ltd. First of all I would like to thank the management of Murthut Microphone for giving us the opportunity to host this call from the management team we have Mr. Sadaf Saeed CEO Mr. Praveen T CFO Mr. Udees Ulla to and Mr. Rajat Gupta AVP Investor Relations I would now like to hand over the call to Mr. Sadhav sir for his opening remarks post which we can open the floor for Q and A thank you and over to you. Sir.
Sadaf Sayeed — Chief Executive Officer
Thank you Prateek Good morning everyone and thank you for joining earning call of Muthoot Microfan Ltd. For the third quarter financial year Before I get into the financial performance I would like to take a moment to highlight that Matoot microphone in a recently concluded global Financial Inclusion summit organized by the Access Development Services has been recognized as the financial Inclusion institute of the year we have also won the award for responsible finance for sustainability these are very very prestigious award this recognition not only reflects the success and the way the business is done it also reflects the values with which we have built this organization and this business with a focus on responsible lending and focus on inclusion now coming back to the performance for the quarter I’m glad to tell you that Matoot Microfin continues to grow with the growth our asset under management has reached 13,078 crores which is a growth of around 5.4% year on year on asset under management and for quarter on quarter around 4.1% the most important aspect is that we are back to our normalized disbursements we had dispersed in that last quarter 2,492 crores which is on average around 850 crores of disbursement.
Prior to that we were disbursing around 650 crores per month. We are back to around 850 and in the quarter and quarter four we will be back to around 1000 crores of disbursement per month. So we are looking at healthy disbursements taking place. Most important is our initiatives that we had started in terms of diversifying. They are paying rich dividend. We have our individual loan which is matut small and growing businesses. These are all our customers who have been with us for several years. One such case study we have shown in our investor presentation this time more details would be uploaded on the website in form of the video.
These customers the portfolio has reached to 1097 crores. And this portfolio is performing really well so far we have almost 0 delinquency, 030 plus and the customers are paying very well. And the most important aspect is that this portfolio is entirely a digital collection. So not even one rupee is collected in cash. The entire installment is based on ENAT or UPI mandate. And all the installment by 5th of the month is repaid by the customer. What is more important to highlight is that bounce rate which is typically in retail lending is in the range of 25 to 30%.
For this portfolio it is hardly 9%. So 91% of our repayment are coming on the day of presentation itself and balance repayment also T plus 8 day. We are able to recover everything. So there is no flow from this business. And this has been going well. And month on month the disbursements are increasing. This is our initiative to build a right portfolio mix between GLG and non GLG book. If you look at current composition, our GLG non GLG composition has reached to around 88% JLG and 12% non GLG portfolio out of which was if you consider March number was 97.3.
So it’s a good progress and we are quite confident that as we had guided we would be able to reach at around 85 15% kind of a ratio in terms of our GLG and non GLG mix. And in the long run as we have guided we would like to maintain a 65, 35 kind of a ratio. This will help streamlining the risk in the portfolio that is there. Like it will be diversified among various products. And these products are more like technology based. Of course the underwriting is done which is Our USP that we are able to use technology and underwrite and our credit team at the branch is able to do the personal discussion.
So we are using the intelligence of underwriting, the human intelligence as well as technology through AI and through credit bureau through scorecard to underwrite these customers. At the same time technology to collect installment. So it will rationalize the cost of operation. One of the biggest highlight of this quarter’s result is that our OPEX has come down from 7% to 6.5%. There are three four reasons for that. The main reason is we have been able to scale up our business. So disbursement as I said are back to around 850 crores per month. And the second aspect is as we had highlighted at the beginning of the year that we would be implementing a cost optimization program where branch profitability would be in focus.
We had identified around 82 branches which we wanted to either rationalize or merge. So out of that 66 branches have been merged and rationalized and manpower has also been tightly deployed for that branches. So that has helped us to cut our cost and decrease the portion of profitable branches in our mix. That has helped us to cut the cost. Second is of course the individual loan portfolio. We have built this thousand crores of portfolio and the collection cost for this is very minimal because the entire collection is coming in a digital format. So that is also helping us to rationalize the cost.
And because of this rationalization of branches, scale up of business and diversification of our portfolio, our operating cost is coming down. It has come down from 7% to 6.5%. More importantly, our cost to income ratios are also improving. We have already reached around 54% of cost to income ratio we had guided for the year. We will reach at around 55. We are already better than that. Definitely in the coming quarter we will do better than that. We are on the path to reaching to our optimal cost to income ratio of around 43% which we had achieved in a couple of years ago.
It will take another nine to 12 months for us to reach there. But we are on that path. So that is something which is progressing well. The most important aspect for any lending business is the quality of asset. I’m happy to tell you that there is significant improvement in the quality of asset. Our GNPAs have reduced year on year by 137bips. They have come out at 4.4% and quarter on quarter around 21bps. Our net NPA has improved by around 7bps quarter on quarter. Overall the Credit cost which we had guided with a range of 4 to 6%.
For the nine month period it has come out at 3.7%. And for the quarter it has come out at 3.3%. And we are very confident the way disbursements are happening, the way collection is happening and the way I think the portfolio is building, we would be able to keep this credit cost much below the guided number, the lower spectrum of the guided number. So that is one thing that we are very confident. And in our diversification journey we had started three products. One was this madhood small and growing individual loans. Second was Microlab. That Microlab portfolio has also reached around 22 crores of asset under management at the end of the quarter and it has got some good traction.
There is zero delinquency in this portfolio. Of course it is our early days, but it is getting good traction and we are confident that we should be able to reach to the AUM that we had guided of around 50 crores. Apart from that, the gold business, which is the referral business, it is also growing quite handsomely. It has grown to around 74 crores of our AUM from our customers. And it continues to kind of grow steadily month on month. Most importantly, our collection efficiency last quarter has improved significantly. Our collection efficiency quarter on quarter has improved by 150 basis points.
It has come out at 94.8%. Our on time like which is X bucket collection efficiency is at 99.8%. So this gives us good confidence to get into the quarter four, which is a very crucial quarter for any financial services company. With the momentum of our disbursements which are taking place at a steady pace, and our portfolio mix which is improving and the branch profitability module that we have deployed, we should be able to deliver our committed roa. Our return on asset for this quarter has already reached to around 1.9%. We have reported a healthy PAT of around 62 crores for this quarter and around for the full nine months.
Around 99 crores of PAT. And if you look at overall increase in the net worth is 125 crores. And we believe that our strongest quarter is usually the fourth quarter. So we will definitely overachieve the path that we have achieved in quarter three. And this is on the back of all the matrices in the ROI tree. Improving the cost of fund is reducing for us. Our cost of fund has reached to around 10.4% which is a reduction of around 64 basis year on year. And our incremental cost of fund is 9.8% which is also improvement of 48 basis points year on year.
So our net interest margin have reached to around 12%. And our operating cost, as I said is rationalizing it is around 6.5% for the quarter it’s around 6.7% and it will definitely come down in the coming quarters. And most importantly the credit cost is coming down steadily and we should be able to deliver the guided ROA that we have guided of around 2%. We should be able to close the financial year close to that guidance that we have given. And as a strategy, our strategy of diversification is paying out well. The individual loan portfolio is growing healthily and it is contributing to the top line as well.
As a result, our top line, our income quarter on quarter has grown by 4.8% to 605 crores and our overall PPOP has also grown by 17.7% to 175 crores quarter on quarter. And as I said, the cost to income is rationalizing we are at 54.8% cost to income and in the coming months we will continue to kind of improve on this and build a healthy portfolio and a stronger business. I think I’ll conclude here with my opening remarks. One thing I would like to mention very categorically that we are getting good funding support from our bankers.
We have raised close to 2,700 crores in this quarter itself and we are raising money at a very competitive rate. Our ratings are stable and positive A plus and we are doing really well in terms of fundraise and we have been able to kind of issue NCDs and do PTC transaction at a very competitive rate. And this really helps us in continuing to grow and disburse loans. So from that side there is no challenge. And as of today we stand in compliance with all the covenant with all our lenders. So all the covenants which are there, which were there were because of the macro environment, they were breached earlier today.
As of today we stand in compliance with all the copies. So I’ll conclude my opening remark with this and I’m happy to take any calls, any questions from the audience.
Questions and Answers:
operator
Thank you very much sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.. t he first question is from the line Of Mayang mystery from Antique stock broking. Please proceed.
Mayang mystery
Yeah. Hi sir, congrats on a good quarter. Sir, wanted to ask, there is a substantial increase in your net gain on fair value changes. So what led to this rise? First question, can you repeat increase net gain on fair value? I mean is there some kind of recoveries that you have done during the quarter or something like that?
Sadaf Sayeed
So it is a regular direct assignment income that we earn. So we have done direct assignment transaction during the quarter. Because of that this income is increased. And also wanted to clarify as the collection everything is improving. So on the DA book, the upfront portion plus whatever eased on the actual recovery, the accounting happens. So we are seeing an improved recovery in the overdue accounts as well, which is increasing our EIS recovery also which is also forming part of the this portion. So that is giving us better yield. Yeah. I would like to mention that last quarter we had recovered from overdue accounts 57 crores.
This quarter we have recovered 62 crores. So there is improved collection from the field. So from over this, the DA portfolio also whatever you recover it accounts on an actual basis. So that is also contributing to that portion of income.
Mayang mystery
Okay. And sir, our borrowing speaks has significantly changed. I mean the PSV contribution has gone down significantly maybe because of the fundraiser to do during this quarter from retail or HNIs. So how should we see this impacting our cost of funds? I mean if you could guide on, you know how the cost of funding moves from here on.
Sadaf Sayeed
Yeah. So I think you can see the trend. Our cost of fund is coming down. It was around 11% last financial year. It has already come down to 10.43%. And if you look at incremental cost it is at around 9.8%. So we are quite confident that with, and this is, I can tell you a partial pass off of the rate change. The full passing down of the policy rate has not happened. That will also happen during the course of the balance period of this financial year and in the first two quarters of the next financial year.
That will also result in reduction of cost of fund. But you correctly pointed out we have strategically diversified our borrowing mix. We are focusing more on PTC structures and that that really has an advantage of giving us better rates because the transmission of rates in PTC is faster as compared to the term loans. Because term loans only get revised when there is a quarterly revision of the base rate or the like annual rate that they have. But on PTC the rate revision is immediately. And whenever you do the new transaction it is at the prevailing kind of a base rate for the bank.
So that has the advantage. Apart from that, our long term strategy is that we will have 50% from the banks and 50% from other sources which includes ECB, our NCDs, our CPs and other instruments that we want to borrow through. So we are working on that strategy. And going forward I think you would see more of non bank kind of a borrowing. A lot of development financial institutions and foreign institutions who are willing to do ecb. So we will be accessing that capital as well.
Mayang mystery
Any benchmark number that we are targeting on borrowings cost, considering that there will be no further rate cuts.
Sadaf Sayeed
So I think right now our incremental cost is at 9.8%. We think that overall cost will come down to around 9.7% in the next 12 to 18 months time. So that is where we think we will be comfortable with. We are hoping that yields on our portfolio will reach to around 20 to 22 and a half. And with 9.7% we should be able to deliver that 12.7% interest margin that we had projected.
Mayang mystery
Okay, so just one last question. I mean our tax bucket collection efficiencies in Karnataka and Tamil Nadu are ranging close to 100%. What I wanted to understand is how is the demand scenario? Because on the absolute terms credit costing remains in the similar range. So we understand that on a percentage basis with the growth coming in, obviously the credit cost will go down. But I would like to know the scenario. I mean has the things, has the, how the things normalized over there in Karnataka?
Sadaf Sayeed
Yeah, so I think there is no incremental pain in Karnataka at all. So whatever we are disbursing the collection so on them are absolutely perfect. If you look at overall, and I’m not specific of Karnataka overall in this financial year, 44% of our portfolio AUM is like built in this financial year in that portfolio the 30 plus is 0.7%. So the collections are pretty good in Karnataka also. They are recovering well. Our exposure in Karnataka was itself not very huge. It was around 10% of our AUM. It has come down to a level around 7% now.
And from that perspective that incremental collections are pretty good. The most important aspect is that our portfolio in the key state which is Tamil Nadu and Kerala is performing really well. If you look at our like slide 14 of our presentation, our strategic alignment. If you look at the portfolio in Tamil Nadu and Kerala, it is performing really really well. The collection efficiency are superior GNPA overall compared to overall Tamil Nadu it’s down 100 basis points from the overall GNPA. And Kerala it’s almost 250 basis down from the overall GNPA. The collection efficiency both places 100% and Kerala is even more.
And most important is our digital initiative, that is digital collection in Tamil Nadu it’s around 32% and in Kerala it is around 36%. So overall our digital collection has reached to around 27%. But definitely I think these are the key states will take us to the path to better kind of a credit cost mix and portfolio mix and growth.
Mayang mystery
Okay sir, thanks a lot and all the best for the upcoming quarters.
Sadaf Sayeed
Thanks. Bye.
operator
Thank you. The next question is from the line of Varun Dubey from Share India Securities. Please proceed.
Varun Dubey
Good morning sir. And first of all congratulations on being. Recognized as the financial inclusion institution of the year. And also congratulation on the strong set. Of results that the company has delivered. So if you can just throw some light on the yield movement, how has. That been this quarter? And because the company has guided for the net interest margin of 12.4 to 12.7 currently it stands at around 11.8. So what would drive the overall net. Incremental net interest margin for the company. And what would be the actual growth.Level for the company? If you can throw some light on that.
Sadaf Sayeed
Thanks Varun, thanks for your question. I think the most important aspect that we have to realize is the way the new disbursements are taking shape. So disbursement momentum is there. We are disbursing around 850 crore as we said per month. Now it has reached to around 1000 crores per month as of January and in the balance period of the financial year. And the new loans that we are doing is on the new pricing. The group loan is at 24.85 and the individual loan is at around 23%.
So the blended yield on the portfolio would be around in the range of 23 to 23.5%. This portfolio right now is around 44% of our book. And as this portfolio becomes a larger portion of our book, the yield will automatically start correcting. The basic challenge in the yield is basically because the denominator contains the NPA portfolio also. So that brings the overall yield down. But as we write off all the NPA portfolio that automatically yields will improve. And as I said, I think in the next two to three quarters we should be able to reach around 12.7% net interest margin.
We will be touching above 12 definitely by this financial year itself. That is what we are trying to do in terms of our net interest margin but more importantly on the credit cost we are quite confident it will be much below the lower spectrum of our guidance. And as a result our ROA would be in the range what we have guided for. Sorry, what was the second question?
Varun Dubey
So what would drive the overall growth.
Sadaf Sayeed
For the company going ahead from here? So in terms of growth we are looking at closing the financial year at around 14,000 crores of AUM. So we are quite close to the close of financial year. So we will be able to grow. We will be outperforming the guidance we had guided to for around 5 to 10%. But this will translate to around 14% growth. So that is what we will try and achieve.
Varun Dubey
Okay, so that’s great that you would. Be outperforming the guidance for FY26. Can you give any hint on the FY27 guidance or should we wait for Q4?
Sadaf Sayeed
I think the broad guidance is that we will look at around 20% growth for the next financial year. So considering that we will close this financial year at around 14,000 crores, we will look at next financial year to reach around 17,000 crores. The important aspect is that the portfolio mix will change considerably. Right now in this financial year we will end at 1885% JLG and 15% non JLG. By the next financial year end we should be close to around 7030 mix.
Varun Dubey
Okay. Okay. Okay. Thank you sir for that. And once again congratulations on your strong set of figures. Thank you very much.
operator
Thank you. The next question is from the line of Anil Tulsiram from Westpal Research Advisories. Please proceed.
Anil Tulsiram
Yeah, thank you for the opportunity. Sir, my question is on the predictability of the credit cost and ROA for the next five years. If I look at the last 10 years because of the unpredictable credit cost average ROA for the industry micropin is around 2%. So we have talked, we have spoken about the diversification but the individual loans again remain unsecured to the same set of the customer. So what I want to understand is what has changed structurally now that the credit cost for the next five years will remain predictable because every time crisis happens we take some steps and again next crisis we incur a 10% credit cost.
Yeah, that’s the first question.
Sadaf Sayeed
Anil, thank you very much for this question. That’s a very pertinent question for microfinance industry. So I think the the answer to this is like how our underwriting practices changing and that is for the industry to Reflect also. But I can tell you about madhoot Microfin. The one of the things that apart from our diversification of portfolio that we have done is a significant change in underwriting process. We have also changed our scorecard that we had built. We have strength and the way we are going about diversification. You’re right in a sense that MSGB individual loan is a unsecured loan.
But this is being given to a customer who has been with us for four to five years, have shown repayment track record and has a credit score of 700 and above. And so far that would have any delinquency in this portfolio. And there’s a proper underwriting which is done. There is a credit underwriting team which evaluates the customer like they do a personal discussion. We use technology also. There’s a bit of an AI also involved in this where a personal discussion between the customer is recorded. It happens in a vernacular language. It is recorded, it is converted into text and that from that text there is a credit appraisal memo that is prepared.
The credit appraisal memo we have designed around 15 questions which the credit officer has to ask the customer. And all of those relevant questions prepare the memo. Along with that, the photograph of the business, the photograph of the household. The AI reads the photograph and gives the value of the stock for the business and gives the standard of living for the household basis. The AI technology. Then we have tie up with finar as an account aggregator. We take information of the bank account and bank account, not only the average balances, but also what are the credits, what are the debits, what kind of saving habit he has, the customer has and any other saving or investment that the customer has, that information is there.
Then we do our own scorecard that we have built. And after all of these checks we lend to the customer the right amount of loan. And this is also done in a digital manner. We do akyc. We ensure that we do e sign of the customer and everything is on a NAT platform. So collection is done also efficiently. We are tracking this very closely. The fundamental I think microfinance is changing a little bit over the years with financial inclusion taking place. I think there is progress in the customer’s life journey also. So she also prefer a little bit of digital technology.
She prefers just remitting the installment through digital platform. So we do that because of that. I think the customer prefers us. Apart from that, we have risk management tools such as we have a natural calamity insurance. If the customer basically faces any sort of a natural Calamity. We have insurance for that and we get the insurance premium. We also look at ensuring that the customers cash flows are not disturbed. So we sell them personal accident insurance or insurance of lost wages as well. So if there are some sort of a challenge then they have that protection at a very nominal cost.
And we have a health initiative also which is we provide them E clinics so that the household health is being taken care of. So all of this is resulting in better selection of the customer, better repayment habit of the customer and right amount of loan given given to the right customer. So that is really helping us to come over the possibilities of delinquencies. I think your question was about long term credit cost. I can tell you the way we are going about the portfolio mix. We are ensuring that the event risk is minimized for us.
Right now the regulation allows us 60, 40 kind of a combination. Given a choice we would like to have a 5050 combination. But we will utilize whatever the regulation permits us right now. And we’ll build a portfolio where the individual loan portfolio, the lab portfolio and the gold portfolio has actually virtually no bearing of any sort of political kind of thing or any intervention that is there. So that really helps us to have a sustained collections. And we feel that in a long run if you look at five year period of time, the credit cost would be in the range of 2 to 2 and a half percent and our ROA would be in the range of 3 to 3 and a half percent.
Anil Tulsiram
Thanks for very detailed answer. Sir. My last question is on the growth again long term growth. So the general consensus is microfinance industry will grow 10 to 15% over the next 57 years. So and definitely we want to grow at a move. So can you elaborate more on your growth strategy? Not numbers but just what strategy we are going to follow. You already elongated on the diversification but if you can a little bit more detail about that.
Sadaf Sayeed
Yes sir, you’re right. In terms of the micromance industry we are trying to like outperform and be the outlier in the industry. We feel that 20% growth is what we are targeting annually for our portfolio. So for the next financial year and maybe the subsequent year we can definitely grow at 20%. The strategy of growth is three pronged. One is of course the branches where we are doing well we will deepen our penetration and ensure that the customers who are doing well with us, we have more wallet share with those customers. Second is strategically looking at areas where we can expand our business.
So we entered into Assam, this financial Year. We had entered into Unhra and Telangana last financial year. We will continue to deepen our penetration in these areas as the performance of this portfolio reflects us. The third strategy, as I said, diversification of poor portfolio and ensuring that the customer need is well understood and we are able to provide these products to our customers. One of the key difference between our microfinance business versus any other lender is we have a customer app. So all these individual loan that the customer is borrowing, they are doing the enact and UPI through our app.
So their use of our app is very much there. We are looking to understand customer behavior through this app and we will be able to offer more products through this app to our customers. So that will contribute to our growth overall.
Anil Tulsiram
Thank you. So that’s it. I’ll jump back the queue. Thanks a lot.
operator
Thank you. The next question is from the line of Ashlesh Sonjay from Kotak Securities. Please proceed.
Ashlesh Sonjay
Hi team. Good morning sir. First question is on your outlook for ROE. Let’s say over the medium term, FY20, 27 or thereafter, what is the kind of ROE you will look to deliver?
Sadaf Sayeed
Yeah. Hi Eklesh. I think if you look at from roa, I can give you a guidance. ROE is a function of the leverage that we will be able to maintain. See, we are looking at ROA for this financial year to be closer to 2%. In the coming financial year we will be crossing 3% ROA for sure. And in the sustainable manner in the long run period of 3, 5 years we would like to achieve around 3.5% ROA. And definitely as we grow we will raise capital. But the ballpark, if you assume there will be a leverage of around 4 to 4 and a half percent times.
So the ROE would be 14 to 18% ROE that we would like to deliver.
Ashlesh Sonjay
Understood sir. In the presentation you have given the X bucket, the current bucket collection efficiency. Number of 99.8% in Q2 as well as Q3. Can you also speak about the trends you have seen more recently in the months of January and February?
Sadaf Sayeed
So far yes, January has been very good. I think December was very good and January was also very good. In fact February so far has been very good because this is one month. We have got all four kind of full weeks. So there are more working days here. So the collection will continue to be good. The collection efficiency is improving especially in our homestead, Kerala, Tamil Nadu, they are doing really well. Despite January having pongal which was like four holidays. The collection was pretty steady and did really well, the more important part is that the customer who were not paying earlier have also started started to come back and pay.
And the collection on a month, on month basis the recovery from overdues has improved. Last quarter we collected around 57 crores from overdues. This quarter we have collected 62 crores. And standalone December month we collected around 23 crores in overdue. So if that trend continues we are hopeful that around in the Q3 which is usually even a better quarter, around 75 crores we should be recover from the overdues and overall collection efficiency will continue to improve.
Ashlesh Sonjay
Understood, sir. Lastly, can you share the par 1 to 90 number for September 25th and December 25th?
Sadaf Sayeed
So if you look at 1 to 30 is around December is 2.23% and this was 2.5%. And 30 to 60 is 1.3%. And 6 to 90 is 2.4% for Q3. So cumulatively if you include all three. So 1 to 90 is around 6%, 5.9% which was earlier 7.19%. It is basically 120 basis point reduction in the 1 to 90 bar.
Ashlesh Sonjay
So just to ensure I’ve got the right numbers, par one to 30 was 2.23% in December and 2.5% in September.
Sadaf Sayeed
It is 2.23 in. Yeah. Correct. Correct. Yeah. 2.23 in December and 2.58 in September.
Ashlesh Sonjay
Understood, sir. Perfect. Thank you.
operator
Thank you. The next question is from the line of Prithviraj Patil from Investec. Please proceed.
Prithviraj Patil
Hi. Thanks for the opportunity. So I just had one question on the yield. So if you can just give me what are the segmented yields in the portfolio and also an explanation on why the interest income is lower QOQ despite a growth in the au.
Sadaf Sayeed
Yeah. So I think there are two aspects. One is the interest is a function of your disbursement that you have done in the previous quarter. So because of the slow start there was kind of yield impact. But if you look at the yield perspective, the question that you are asking, the contracted yield versus what we earn for income generating loan which is a group loan, we are charging now 24.85 which was around 23% earlier. For individual loans we are charging around 23%. And for LAP we are charging around 20%. So on an average the yield for individual loan because it’s on every loan is at the same price.
So it’s around 23%. The LAP loan ranges from 18% to 22%. So average is 20%. And the IGL yield is around 24% now. And. So one more point to highlight. So we have since we have taken some write off also. So there is a write off reversal of is there interest reversal is there which is around 25 crores which is impacted. So that’s also one factor which is impacted. But if you look at the overall revenue including the EIS portion we are seeing an improvement in the in quarter on quarter and we can expect a further improvement in the upcoming quarters.
Prithviraj Patil
Thank you. Yes. Yes sir. Yeah, thank you.
operator
Thank you. The next question is from the line of Nitin from Green Capital Single family office. Please proceed.
Nitin
Hi, good morning, this is Nitin Shaktar from the Green Capital Single family office. I just wanted to as an investor try and get a sense of the turnaround in terms of you know what happened in last quarter of last year. You did a huge provisioning. Obviously all metrics point towards a turnaround from whichever angle we see it. So just wanted sort of an assurance from the company that yes we’re on the turnaround path and all metrics are good to go and we are back and seeing the worst behind us. Just want a sense of expectation from the management what we can expect some large drawdowns of provisions as per the course of business.
Just wanted to get a sense of that.
Sadaf Sayeed
Yeah thank you Nitin for your question. I think I can firmly say that we are back on the path. So it’s definitely a turnaround from the last financial year. In the last quarter of the last financial year we had to take a huge provision because there was a Karnataka legislation which came in in November and it had an impact. But so far we are not seeing any issue in the portfolio or any issue state that we are operating in. So we don’t expect any sort of provisions. We are already into mid of February so things are pretty smooth.
And we expect the balance 45 days also to continue to go in the way that the period has gone. So we don’t expect any extraordinary provision. Last year we had taken a management overlay of 230crores so we have sub assumed everything. We don’t require the credit cost is coming down and it will continue to be on that trend and income is improving. So definitely the profitability that we are guiding we are trying to overachieve that and we will be able to achieve and the next financial year what we are expecting is going to be a clean year.
All the challenges are behind us so we will be back to around three and a half percent ROA and with a growth of around 20% on our AUM.
Nitin
Okay, thank you. And all the best for the next year. Thank you.
operator
Thank you. Ladies and gentlemen, Anyone who wishes to ask a question may press star and one now. I repeat, participants who wish to ask question may press star and one at this time. The next question is from the line of Himanshu from MB Investments. Please proceed.
Himanshu
Hi, good morning. My question is if you can give me the breakdown of your secured versus unsecured book and the percentages, that’d be nice.
Sadaf Sayeed
Yeah. So. Hi, Manshu. Thank you for your question. In terms of our unsecured portfolio, it’ll continue to be around 95%. Unsecured portfolio, around 5% would. But the major distinction that we make is a JLG and non JNG portfolio which right now is around 88 to 12 as of end of quarter.
Himanshu
All right, thank you.
operator
Thank you. The next question is from the line of man from Growth Spear Ventures. Please proceed.
mun
Hi, sir. Sir, just to get the understanding on our payment address, from 1 to 90 days, how will the trend follow through and how will that follow through in our NPA numbers? Do we expect this to get cleaned of 1 to 90 days? Do you think that will follow on plus 90 days? How much of the same should be recovered? If. If there’s any sort of idea on that part, that should be very helpful.
Sadaf Sayeed
I think that’s a very important question to ask. So first thing is that on all the buckets, be it 1 to 30, 30 to 60 or 60 to 90, or whether you look at SMA Pool, so everywhere there is a good kind of a recovery and a kind of improvement. The 1 to 30 has come down from 2.58 to 2.23. Kind of a good 35 basis point reduction there. And around 30 to 60 has also come down from 1.47 in the last quarter quarter to 1.32. And in 60 to 90 it has also come down from 3.15% to 2.43.
So that’s point number one. The second aspect is that the overall cash flow in the rural buckets have improved because of disbursements coming back. Like we are also disbursing. Other entities are also dispersing and overall economic activity as we see the GDP and also the monsoons were good. So because of that lot of kind of benefit have come in or also the GST rationalization is leaving more in the hand of people that is improving the cash flow in the hand of the people because of which there is improvement in the recovery the biggest impact during the crisis was that where we used to be able to recover almost around 35 to 40% from 90 plus customer which had reduced down to around 22 to 25% it has now come back steadily.
We are back to around 30% from 90 plus and we are hoping in the coming quarters we will be back to around 40% recovery from the bad loans. So definitely from that perspective the NPA recovery would be good and the flow rates will also improve in the coming quarters. So as a result I think the credit cost will reduce and our ROA and PAT will improve.
mun
Got it. So two more questions. The first question is that the collection efficiency that you show, right. Is it with the rears or it’s without the rears. So just wanted to get the understanding that you already overdue here. Is that getting recovered or is this the portfolio’s collection efficiency that is without any sort of arrears.
Sadaf Sayeed
So X bucket collection efficiency is without the arrears because it is in current bucket. So there is no earlier there. And the overall collection efficiency includes the arrear but it does not include pre closure or any closure that has been closed.
mun
Got it. Got it. And the last question that I wanted to understand is that we came for IPO and what happened is that we raised capital and the cycle for MFIs turned out to be very bad. Right. We have sold out the capital on the balance sheet. Do you think that we can never afford, we can easily take some sort of multiple amount of debt without diluting the capital till FY27 or FY28 because we have the fuel and the cash that we use from IPO is not yet utilized for the purpose of levering up our balance sheet.
Sadaf Sayeed
So if you look at the current leverage, our debt to equity ratio is around 3.3 times. This has improved from a little bit. Like last year quarter it was around three times. Definitely we can continue to leverage on this capital for a while a little bit. But like regulatory we are allowed six time leverage but in realistic terms it never happens. So we would need to raise capital. But I think we will raise capital in some way down the next financial year or following year. Right now our internal accrual and growth in the portfolio is aligning.
So we are expecting to grow around 20% for which our internal accrual and the current capital base is good enough. So our capital adequacy is around 26.4% and our net worth has improved by around 125 crores. So which is around 2,760 crore. So which we will is sufficient for the time being. But yeah, we don’t rule out the capital raise in the next financial year.
mun
Got it. So with capital raise since the credit cost would come down in the normal way that was guided earlier and 20% sort of AUM growth, do we expect the ROE for next financial year to reach at least to 12 and a half to 15% sort of rates.
Sadaf Sayeed
So definitely I think the once you raise capital your overall cost of fund goes down then your margin improves. That is there but it also has an impact on ROE because your denominator for equity increases that will have an impact. But ultimately what we are guiding is towards the ROE of around 3.5% that we should be able to achieve.
mun
Got. Got it. That was very helpful sir. Thank you so much. All the very best. Thank you.
operator
The next question is from the line of Prati from GM Financial Institution Services Ltd. Please proceed sir.
Prati
Thank you sir. And this was a very good quarter from you. So I just have one question. The portfolio diversification is emerging as a necessary strategy for the all the MFI players and everyone is evaluating secured product like Lab Gold Loan. So I would like to know that is pure play microfinance growth has become structurally constrained or do you see there is a steel pillars available for mfi?
Sadaf Sayeed
Yeah. So I think Pratik, that’s a very good question to ask. I think right now everybody is recalibrating the model a little bit and how the strategy has to be kind of deployed. In terms of diversification we are slightly better placed because we have the in house knowledge of certain products like Lab. We have a housing finance company for gold, we have a parent company so we have a better understanding and also well established brand name. So for us this becomes an easy kind of go to strategy. But coming back to your important part is that whether it’s structurally becoming difficult to go back to the group loan kind of a model.
I think the focus is on retaining the existing good customers because the guardrails are in force. People don’t want to be the third lender or fourth lender. If you look at our portfolio also around 41% of our portfolio is unique customers and us plus one is almost more than 65%. So the focus is on that to make sure that the unique customers that we have we are able to have the maximum wallet share with them. Correction, the US +1 is around 72%. So I think that focus is there. So right now what people have seen is the customers who are new to Credit have a higher delinquency customer who have a proven track record are better.
So the focus is there. That’s why the focus of diversification and the household that we are catering to they are growing household, they have growing needs. So we are able to cater to their needs from the newer products that we are able to offer. So that is the strategy that we are adopting and many of the others are adopting. Adopting. We have adopted a little bit more scientific approach of making sure that we have a proper score underwriting and evaluation before lending. It’s not just a cross sell of the loan, it is proper underwriting and evaluating.
We have a rejection ratio of around 30% in individual loans as well even though having a 700 score. So I think that is the strategy that we have adopted for the I think industry. I think it will be evolution. People who are really small in size will find it difficult. There is an entry barrier because already like established players have access to those customers to become a third and fourth lender. A new entrant can’t lend so much. So I think people would like to protect those that database and those loyal and good repaying customer and continue to cater to them.
So I think for a short term I think that will be the approach. Once I think there would be a little bit of consolidation in the industry then you might see again people going back to acquiring more new customers and forming new JLGs.
Prati
Thank you sir.
operator
Thank you. The next question is from the line of Anil Tulsi Ram from Bestpass Research Advisories. Please proceed.
Anil Tulsiram
Yeah, thank you for the opportunity. So many of your peers are taking the CGFMU guarantee. So what’s your strategy and view on this?
Sadaf Sayeed
Now we have also applied for CGFMU guarantee. There are certain conditions that we have to comply with. I think we would be able to get that guarantee approved in the course of next couple of quarters.
Anil Tulsiram
Will it going to be tactical or you will have coverage for continuous convexity for five years on the entire unsecured part.
Sadaf Sayeed
This is tactical in a sense that we are going by higher risk states. We are applying for the cgmf.
Anil Tulsiram
Thank you sir. That’s it from my side.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand over the conference to Mr. Sadaf Syed for closing comments. Over to you sir.
Sadaf Sayeed
Once again thank you very much for joining our call for quarter three. As I said Madhood microphone is formally on the path of recovery and profitability. The growth is also firmly back in the organization. We are disbursing robustly and as our recognition and award indicates, we will continue to focus the path of responsible lending. We will use technology and we will use underwriting strength and know how of our field officers, trade officers and our risk team to ensure that we build a robust portfolio and a good diversified mix of our portfolio to deliver stable and sustainable returns for our investor.
We wholeheartedly thank everyone for believing in us and giving us the opportunity. I can assure you that things are going to get better from the here on as we get into a clean financial year next year. Thank you very much.
operator
Thank you on behalf of GM Financial Institution Services securities limited that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.