Manappuram Finance Ltd

NSE:MANAPPURAM

Q4-2025 Earnings Call

[Operator]

Ladies and gentlemen, good day, and welcome to the Manappuram Finance Q4 FY '25 Earnings Conference Call hosted by Motilal Oswal Financial Services Limited. [Operator Instructions] I now hand the conference over to Mr. Abhijit Tibrewal. Thank you, and over to you, sir.

[Abhijit Tibrewal, executive]

Yes. Thank you, Shesha. Good evening, everyone. I am Abhijit Tibrewal from Motilal Oswal, and it is our pleasure to welcome you all to this earnings call. Thank you very much for joining us for the Manappuram Finance call to discuss Q4 FY '25 earnings. To discuss the company's earnings, I am pleased to welcome Mr. V.P. Nandakumar, MD and CEO; Dr. Sumita Nandan, Executive Director; Ms. Bindu A.L., CFO; Mr. Raju Narayanan, Business Head; Mr. B.N. Raveendra Babu, MD, Ashirwad Micro Finance; Mr. Rajesh Namboodiripad, CFO, Ashirwad Microfinance; Mr. Kamal Parmar, Head, Vehicle and Equipment Finance; Mr. Suveen P.S., CEO, Manappuram Home Finance; and Mr. Robin Carole, CFO, Manappuram Home Finance. On behalf of Motilal Oswal, we thank the senior management and the Investor Relations team of Manappuram Finance for giving us this opportunity to host you today. I now invite Mr. Nandakumar for his opening remarks. With that, over to you, sir.

[Vazhappully Nandakumar, executive]

Thank you. Good evening, ladies and gentlemen. It's a distinct privilege to address you today at this earnings conference call. I am pleased to present a detailed account of our financial and operational performance for the fourth quarter and the financial year '24-'25. I appreciate your continued interest and support as we review our progress and strategic direction.

Let me begin by discussing our financial highlights. FY '24 '25, Manappuram Finance reported a consolidated revenue of INR 1,041 crores, representing 12.1 year-on-year growth. For the quarter ended March '25, our consolidated profit after tax before OCI and minority interest stood at a loss of INR 203 crores. And for the financial year, we recorded a profit of INR 204 excluding the microfinance subsidiary, A, the consolidated PAT for the quarter and the financial year stood at a profit of INR 423 crores and INR 1,843 crores, respectively.

The yearly performance had a growth of 5.9%. In response to increased regulatory scrutiny, we are actively participating for the RBI's draft gold loan framework issued on 9th April 2025 and submitted a representation on the same. I have confidence that the RBI's draft guidelines on gold loans will not disrupt gold loan industry. They are largely aligned with the practices already in place across NBFCs. I will ensure it will ensure a level playing field for all the entities. It may introduce additional procedures in the areas such as customer verification and gold appraisals. But these are unlikely to present any significant operational.

Moving to our microfinance business. The business reported an AUM of INR 707 crores, although the microfinance sector is currently navigating challenges -- that may take time to resolve. I believe in the face of recovery. We also implemented stringent rules over and above SRO guidelines resulted in a lower sourcing to sanction the rate of 34% in February '25 and 64% in September '25 from 64% in September '24. Disbursements enabled only incentives having a par lesser than 2% disbursement fully enabled at branch level based on portfolio quality. improving case load per FT branch team to handle regular bucket collection and disbursement. -- focused collection strategy by having separate team for card, 100% biometric verification of customers, ensuring a robust onboarding process and unique enhanced income scorecard.

Our vehicle and equipment finance AUM rose by 16.1% to INR 4,773 crores with an ROA of 1.2% year-on-year. MSME and allied businesses booked a growth of 5.8% to INR 379 crores. Looking ahead to FY '25, '26, we remain optimistic. We expect our gold AUM to grow strong, supporting digital onboarding and rural demand.

In the backdrop of recent Indo tensions, the reminder of the critical role of national security plays in fostering a stable economic environment. Geopolitical developments of this nature reminds us of broader environment in which we operate and the importance of national security. We express our deep respect and gratitude to the A for their unwavering commitment to safeguarding our sovereign.

I would like to express my heartfelt gratitude to all our stakeholders for their unwavering trust and continued support. As a company rooted in tradition yet driven by innovation, we remain committed to empowering lives through responsible lending and customer-centric solutions. With a clear vision, strong governance and shared purpose, we will continue to move forward, creating impact, building trust and driving inclusive growth.

Now I invite our President and CFO, Mrs. Bindu for a more comprehensive review of our financial performance. Thank you.

[A. Bindu, executive]

Thank you, sir. Good evening, ladies and gentlemen. Thank you all for joining us today.

Coming to the key highlights, the gold loan portfolio remains our core strength, accounting for 59.5 percentage of consolidated AUM compared to 55.4% in Q3 FY '25. Consolidated gold loan AUM stood at INR 25,586 crores, up by 4.4 percentage quarter-on-quarter and 18.7% year-on-year in spite of a heightened competition.

We added 3.1 lakh new gold loan customers during the quarter, bringing the total active customer base to 25.8 lakhs. Our average loan-to-value for gold loan is 57 percentage compared to 60 Notably, 82% of the gold loan book is now sourced through our online gold loan platform. Stand-alone profit after tax for the quarter was

INR 414 crores versus INR 453 crores in Q3 on account of lower yield in gold loan business, which supported a better growth for the quarter. For the stand-alone full financial year, profit was INR 1,783 crores, reflecting a 7.6 percentage Y-o-Y growth. AUM for Ashirth, including gold loan of INR 928 crores stood at INR 8,189 crores, which is down by 18.2% sequentially and 31.1% year-on-year.

The Indian microfinance sector experienced considerable stress in Q4 FY '25, primarily due to increased borrower defaults from over leverage. Interventions by SRO and operational disruptions led to higher credit cost and negatively impacted the profitability. Ashi worth posted a loss of INR 626 crores in Q4 FY '25 compared to INR 188 crores in Q3 FY '25. Net NPA at 2.46, which is INR 177 crores compared to INR 224 crores in Q3. CRAR at 21% for Ash entity. Our vehicle finance AUM stood at INR 4,773 crores -- during the quarter, the business has declined by 6 percentage but with a growth of 16.1% year-on-year.

Considering the asset quality challenges, especially from 2-wheeler and farm equipment business, we tightened the underwriting norms during the quarter. GNPA stood at 6.7 percentage. The composition of vehicle finance reflected a well-diversified portfolio with commercial vehicles largest share at 48% followed by cars at 31%, 2-wheeler at 5% and farm equipment 6%. The home loan portfolio reached INR 1,824 crores, a growth of 2.6% Q-on-Q and 20.8 percentage Y-o-Y growth. The business reported a profit of INR 23 crores during the quarter -- during the year. Loan to MSME at INR 3,079 crores with a disbursement of INR 366 crores. The lending to other NBFCs at INR 511 crores. The Board has declared an interim dividend of INR 0.50 per share for this quarter.

Our capital position is strong with a CRAR of 30.9% and the net worth at INR 1,432 crores. Return on assets for the quarter, 4.8% and our leverage remains conservative. Stand-alone GNPA 2.7% and compared to 2.46% in the previous quarter. Liquidity, our cash and cash equivalents, INR 3,808 with an undrawn bank line of INR 2,306 crores. CP exposure low at 1 percentage. And during the quarter, we have successfully raised INR 2,547 crores in term loans from banks. Thank you once again for your continued support and confidence. We are now open the floor for questions.

[Operator]

Thank you. [Operator Instructions] The first question is from the line of Shreya Shivani from CLSA.

[Shreya Shivani, analyst]

I have 2 questions. First is on the quarterly stand-alone performance. If you can help us understand with the movement in the net yield, it has declined sequentially. That is on the gold loan stand-alone book. That would be my first question.

And my second question is congratulations on your deal with Bain. So if you can help us understand your strategy around the subsidiaries. We have seen documents on the exchanges, which talks about how much of the proceeds from the funds will be directed towards subsidiaries. It's about 60% if you can help us understand how much of that would -- what is the initial plan? Or how are we looking at the 3 different segments that we have? And how will that scale up?

[Vazhappully Nandakumar, executive]

So I will take up the second part of the question first. The main capital, it is under the process of approval. We have submitted application to various regulatory authorities for approval and we are waiting for the approval. So the capital in the form of equity and 9% as the convertible debenture, totally 18% is coming into the parent company, Mance -- so the capital requirement of the subsidiaries will be met from the parent company depending upon the need.

So there is no specific amount. So whatever is required as per our projected growth plan. So if and when required, the capital will be infused on the parent. Second part of your question is quarterly stand-alone.

[A. Bindu, executive]

Yes. On the gold loan, if you compare with the previous quarter, we have seen a drop of almost 55 basis points in the income. That is the reason for the drop in during this quarter.

[Shreya Shivani, analyst]

Sorry, I didn't get that. We've seen a drop in...

[A. Bindu, executive]

55 basis points reduction in gold loan yield.

[Shreya Shivani, analyst]

So we-- have we offered new products -- new plans after our entire branch revision that we had done in last quarter? Is that one of the reasons for the yields declining?

[A. Bindu, executive]

So 2 reasons, we are analyzing the interest sensitivity. And in few branches, we are making the adjustments in the yield by offering new products. The aim is to attract the slightly higher ticket borrowers also with a comparable pricing. So we want to match with the market so that the growth rate will be better.

[Shreya Shivani, analyst]

Got it. So this has selectively happened over a few branches or widely happened across our entire system?

[A. Bindu, executive]

Selective branches...

[Shreya Shivani, analyst]

Select branches -- and would the selective branches be in some particular geographies? Or any color on that?

[Vazhappully Nandakumar, executive]

So we analyzed the sensitivity. Accordingly, these are being done. It is not restricted to a particular geography. So wherever we see across India, wherever we see the interest sensitivity, there we have implemented the schemes to attract customers, particularly targeting slightly higher ticket.

[Operator]

The next question is from the line of Shweta from Elara.

[Shweta Daptardar, analyst]

A couple of questions. So you mentioned last quarter that you had resubmitted the application for branch opening and you had a very positive response from the senior officials of the RBI. So any progress there for gold loan branches?

[Vazhappully Nandakumar, executive]

Yes. So we have submitted the application. And as the BI transaction it is under process with RBI. RBI has told us to wait until the transaction is over. In the meantime, what I want to highlight is there is a draft guidelines in the public domain or comments from the RBI in that the draft guideline indicates that the branch opening prior permission will be taken away.

[Shweta Daptardar, analyst]

Understood, sir. Ma'am, second question is for you. So just taking cue from the previous question. So you -- did I hear it right that the focus has been on higher ticket loans on the gold loan side, wherein the adjustment on yields happened. So if there was a focus on higher ticket gold loans, then what percentage share of gold AUMs have tenure of over 12 months -- and how are we faring or any re-change systems in line with the new norms which are put in the draft mode?

[A. Bindu, executive]

Okay. So the higher ticket, what we meant is around INR 5 lakh and above because where we felt that our pricing is not competitive. So that is the reason we are adjusting the price in the geography where we felt it is not competitive. And the new guidelines talk about 1 kg gold, et cetera, which we don't have many customers. So we are not talking about the new guideline. It is mostly between INR 5 lakh and above. But the majority of the customers below INR 50 lakh only.

[Shweta Daptardar, analyst]

And ma'am, how about the tenure? What percentage of our book is beyond 12 months tenure?

[A. Bindu, executive]

We don't have any loan contracts about 12 months. Gold loans... Earlier.

[Shweta Daptardar, analyst]

Okay. And ma'am, one last question. So on the MFI business, I mean, I definitely understand that a lot of work is going on from our end there. But 2 observations. One, so is Stage 3 now peaking out at around 8-odd percent that we have seen for this particular quarter?

Also, why the OpEx to AUM had to increase over 400 bps sequentially when the fact that the book has degrown on MFI side, also the loan officer count is down. And I mean, I'm sure collection efforts would have sort of I mean, would have stacked up more now, but that has also not reflected in the asset quality. So what is leading to continued spike and this meaningful spike now in Q4?

[A. Bindu, executive]

We can say that the Q4 is the worst quarter, and we are seeing some improvement. And if you see the net NPA is INR 177 crores. So the coming quarters in absolute number, this will be less. Your question on OpEx, what we did is we had the season assist order and we were recovering from that. We want our employees to focus more on collection. Otherwise, our INR 8,000 crore money is with the borrowers.

We need a lot of people for collection. And we want to maintain the employee strength. And that is the reason to compensate them for the drop in disbursement incentive. We increased the collection incentive that helped us at least to maintain the collection efficiency at this level.

So the reason for OpEx is a slightly higher incentive to retain employees to improve the collection. I agree that OpEx has gone up. And all these ratios are a function of AUM. As the AUM drops these percentages, the GNPA or the OpEx to AUM has gone up. But in absolute number, it is not very high compared to previous net NPA of INR 224 crores, this is INR 177 crores. So the provision coverage also increased.

[Shweta Daptardar, analyst]

Fair point, ma'am. And just a request to the whole team, we would greatly appreciate if there is a reasonable interval between announcement of results and conference call, which will allow us some time to review the financials. and all the best for your future endeavors.

[A. Bindu, executive]

Yes. Sorry for that. We faced some technical issues in the last minute. Otherwise, we used to upload in our back. So sorry for that.

[Operator]

The next question is from the line of Shreepal Doshi from Equirus...

[Shreepal Doshi, analyst]

My question was you made a comment in your early commentary that we have submitted some representation to the RBI. So could you please give some more detail as to what sort of representations have been made by us?

[Vazhappully Nandakumar, executive]

The representations are made through our association primarily level playing field with the banks 75% shall include the interest component of maturity. So the major is that to maintain the LTV at the present level.

[Shreepal Doshi, analyst]

Got it. And sir, like in our current book, what percent of our customers would be taking bullet repayment as an option in our gold book?

[Vazhappully Nandakumar, executive]

In our case, 100% of the customers are taking bullet.

[Shreepal Doshi, analyst]

All right. All right. So I mean -- and so during the quarter, the LTV has gone down for the gold business. So what explains that? Have we started -- while it was just a draft circular, but have we started taking some proactive actions or something like that and therefore, the reduction or what explains the reduction?

[Vazhappully Nandakumar, executive]

It is not because of that. See, when the gold price goes up, the customer takes the money what he wants only. So just because the gold price has gone up, he will not avail more money. Why? Because people when they pledge have a clear visibility about the cash flow the average life of the loan still remains around 4 to 5 months and many customers redeem within 1 or 2 months' time. So they have the visibility. And unless they have the visibility, they will not borrow. So this is their family jewelry, which is so close to their heart.

So that's why even when the gold price goes up, they borrow within their capacity. They feel like when the gold price goes up, if they borrow more, they will not be able to meet their commitment. Because one thing what should be understood here is if he wants more -- enjoy that and he has no intention to repay, better he can sell in the market and get more money. Why should we come -- so that's the reason why when the gold price goes up, there is a phenomenon, it comes down. And when the gold price goes down, it goes up, LTV goes up.

[Shreepal Doshi, analyst]

Right, right. Sir, just one more question here, like in link with the draft circular. So if it gets implemented in the current form, then what would be the disbursement LTV that we will have to maintain or we will have to sort of start with because you highlighted that 100% of our portfolio is bullet payment. So in that case, what would be the LTV at the time of disbursement that we'll have to maintain?

[Vazhappully Nandakumar, executive]

The interest component, whatever it is till the maturity date that also will have to be factored while computing our LTV and the cap is still maintain that [indiscernible]

[Shreepal Doshi, analyst]

Given that our gold I think closer to 2% if we do back calculation, we be closer to 60% sort of an LTV?

[Vazhappully Nandakumar, executive]

Right -- we will design schemes, which is convenient to the borrowers. And we don't expect disruption with the introduction of this. And we believe that it will make the industry more robust, et cetera. And there will be a level playing field for the NBFCs. And banks also will be more in line with this because most of the loans even in the case of banks are availed as loans.

[Shreepal Doshi, analyst]

Got it. Sir, just one more question on the microfinance side. So in that we do have decent exposure in states like Karnataka and Tamil Nadu, where we have seen in the recent time, the state government have taken some actions from the angle -- so how are we seeing at ground level the collections being impacted in these 2 states, especially in Tamil Nadu, which is very, very recent.

[Vazhappully Nandakumar, executive]

So in both the cases, the ordinance made it fly clear that these are applicable to unregulated institutions. As we are regulated institutions, initially, there are some hiccups. Other than that, we are getting support even the police as we are -- once they understand we are a regulated entity working within the guidelines of RBI. So it's -- there are initially some challenges. But gradually, the market understands this -- our target audience understands that and they cooperate with that...

[Operator]

The next question is from the line of Kushan Parikh from Morgan Stanley.

[Kushan Parikh, analyst]

So I have mainly 2 questions. So the first question is around the loan growth. Basically, this quarter, we have seen loan growth sequentially decline for most of the non-gold sectors. MFI is understandable given the ongoing stress over there. But if you could just help us understand the sequential slowdown in the -- in the vehicle segment or the on lending segment or even the slowdown in growth in the HFCs.

So some color around the slowdown and what the future outlook for these segments will look like and what direction the overall loan mix will take in the near to medium term as we transition to the Bain capital management?

And the second question is around the Ashirvad credit cost. If you could just help add some color to the credit cost in this quarter? I mean, how much of it was pertaining to write-off? And also, if you could give some direction around incremental stress recognition that is left in the Ashirvad loan book and also any additional provisioning requirements. So I mean, what direction should we think about credit costs going forward? So those are my 2 questions. And a third data keeping question, if you could just give the number for gold auctions in this quarter.

[Vazhappully Nandakumar, executive]

So loan growth in gold loan is good. is going strong. The other sectors like vehicle finance, some of the areas like tractors and equipment, we slowed down that. And we thought of tightening our loans, et cetera. So consciously, we took a call to slow down during the last quarter. And this quarter, everything is reinstated with new underwriting norms. HFC also, it is like that.

So these segments will grow going forward. It will be -- the growth should be more healthy. That's why we took a pause, but those will be compensated with the gold with the growth in gold loan. That is what you see. Ash credit cost, you can share that. Yes.

[A. Bindu, executive]

So when the guardrails implemented from August onwards, we have seen a higher delinquency and those cases slipped to NPA in Q4. So these are the flows happened during Q3 and slipped to Q4 as NPA. But now we have seen stability in the flows, and we expect these numbers to come down in the coming quarters. The write-off number for the quarter… INR 565 crores. And the auction during the quarter, INR 108 crores...

[Kushan Parikh, analyst]

That was helpful. If you could just give some guidance around the credit cost at Ashirvad going forward as well. I mean should we expect that -- I mean the 4Q credit costs are sufficient and incrementally, we should see significantly lower credit cost or there is still some specification left that would come into -- spill over into Q1 as well?

[A. Bindu, executive]

The credit cost number as the disbursement is very slow, the credit cost number will be -- the percentage will be high. But in absolute number, this will be much less.

[Operator]

The next question is from the line of Rajiv Mehta from Yes Securities.

[Rajiv Mehta, analyst]

Sir, when was this pricing moderation done in gold loans, which was done selectively in certain locations, which month? And post that, have you experienced any increase in growth in terms of AUM? Because when I look at the customer base in Q4, your customer base is actually negative -- I mean, flat to negative growth. So if you can tell us when was it done? And whether -- is there any improvement in terms of new customer addition?

If not, because you're chasing high-value customers, so maybe not exactly in the customer count, but actually in terms of disbursement number on a monthly basis, is that picking up? And how much it is picking up? And are you also further thinking of taking it further ahead in terms of reduction of portfolio yield or lending rates to spur the growth?

[Vazhappully Nandakumar, executive]

So we are targeting slightly higher tickets also with interest rate reduction in that segment, definitely, that segment is growing. So this leads to a growth in AUM, and we expect good growth in gold AUM in the coming months.

[A. Bindu, executive]

We started the pilot in Q3, very few branches. seeing the result from those branches, we extended mainly in February. So the high ticket customers we are able to acquire. That is the reason the number of customers we couldn't, but the average ticket size has gone up.

[Vazhappully Nandakumar, executive]

5 lakh from 14% level went up to 16% in Q1...

[A. Bindu, executive]

Above INR 5 lakh increased to 16% from the earlier level of 14%...

[Rajiv Mehta, analyst]

Okay. And so when you're talking about expecting growth in gold loan portfolio you are obviously factoring in whatever impact has to come from the implementation of draft guideline. And so what is the -- I mean, any range in the growth number, if you put any range for the growth number for the current year?

And if you can also comment simultaneously on the competition intensity from banks and your peers? Because I think 1 year back, I mean, you were calling out that the competition from the banks is now kind of stabilizing or receding. But what is it now? And if you could quantify the growth number for the gold portfolio?

[Vazhappully Nandakumar, executive]

We expect a growth of over 20% during the current year.

[Rajiv Mehta, analyst]

Okay. And sir, any comment on competitive intensity?

[Vazhappully Nandakumar, executive]

Yes. See, the competition is always there. But still, we expect a good growth of over 20% during the current financial year...

[Rajiv Mehta, analyst]

Okay. Okay. And just one last thing I want to check. I mean, sir, if the draft guidelines were to get implemented and you said that it will not have any significant impact on on-the-ground practices and maybe even on growth. But you talked about certain things which the industry was not doing in the past in terms of LTV monitoring on a more concurrent basis, which may kind of mean that you will have to collect interest from the borrower more regularly so that the LTV is not breached.

And hence, it also would mean that you will have to change your product structure in that case, maybe charge a lesser yield since the accrued interest portion will be lesser now. So why do you say that the guideline is implemented in the current form and shape will not be significantly disruptive when there are a lot of things which may need to change on the ground?

[Vazhappully Nandakumar, executive]

See, many of the things are already implemented just particularly by major players, this LTV monitoring on a continual basis and this policy around how to do that is already framed by the Board, and this is already in practice now. So gold loan industry is also growing as you've seen from the growth in gold loan from the banking industry. So it is growing very fast. And we hope we will also enjoy the benefit of that growth of gold loan portfolio as a whole. So there is a lot of migration taking place from the unorganized sector, and we are seeing that.

[Operator]

The next question is from the line of Pradeep Agarwal from B&K Securities.

[Unknown Analyst]

My question pertains to the drug guidelines. So while the industry and you have been offering around 12-month tenure products. And if that is implemented in the current form, I believe the impact on the LTV is the highest. So are we evaluating to reduce the tenure for newer products so that the impact on the LTV remains less? And if we do so -- if we do not do so, do you see that the industry might do that and can impact business for us?

[Vazhappully Nandakumar, executive]

We had short tenure schemes in the past. We have successfully implemented that. So we are waiting for the guidelines to come. Accordingly, we will action will not have much problem in offering loans of different tenures.

[Unknown Analyst]

So in the past, if you can share the experience when we reduce the tenure, is that gave some challenge to customers in terms of convenience, what it has versus 12-month product? Or is it indifferent?

[Vazhappully Nandakumar, executive]

So those who want that 1 year, we will offer 1 year at a lower LTV. So from 2013 onwards till 2023, we were offering loans of tenure of 3 months.

[Unknown Analyst]

So will that have an impact on our yields?

[Vazhappully Nandakumar, executive]

I don't expect.

[Operator]

The next question is from the line of Bhaskar Basu from Jefferies.

[Bhaskar Basu, analyst]

I just have a couple of questions. I think a few of them were answered. So firstly, on the gold loan yields, while you're seeing some dip this quarter, what is the outlook in terms of how much further do you expect next year? And given that in the context of additional growth, how should we think about the NII growth with a lower margin and better growth? That's my question number one.

[Vazhappully Nandakumar, executive]

So we expect the yield to come down because more and more competition yield to come down. We expect the borrowing cost also will go down gradually the yield along with the yield. And by targeting growth to cover whatever is the loss in the yield, we expect to maintain the ROE...

[Bhaskar Basu, analyst]

Yield comes down, your margin comes down, your ROE gets impacted, right?

[Vazhappully Nandakumar, executive]

We'll leverage our capital. We leverage our capital to maintain ROE.

[Bhaskar Basu, analyst]

Okay. Secondly, on your -- on the new draft circular and I think there was some discussion around it. So are you looking at products which kind of have more interest payment upfront, more regular interest payment versus the bullet payments? Secondly, and also from an operational standpoint, some of the things like end-use monitoring, customer verification, are these things already being implemented? Or are you waiting for the guideline to come in? And how do you see that impacting costs?

[Vazhappully Nandakumar, executive]

So these are already in place. monitoring are already in place. The policy...

[Bhaskar Basu, analyst]

Monitoring as well.

[Vazhappully Nandakumar, executive]

Policy around that. I don't think it will affect the business. So the customer is pledging for a purpose only. That is the end. We will see this is -- we are offering mainly consumption loans.

So then regarding the products, the guidelines come in to ensure the we have the steady business we will offer the products to customers accordingly to meet their requirements.

[Bhaskar Basu, analyst]

And on the liability side, how should we think about cost of fund going forward? What is the pace of repricing? How much of it is linked to MCLR? And I mean, if you assume the 50 bps rate cut, when can we start to see some benefit?

[A. Bindu, executive]

See the cost of borrowing, one is the mix of borrowing. So in our case, with the bond and the large amount of term loans, the profile -- the tenure has gone up. That is what happened during this year. And the other thing with the reduction, slowly banks started reducing the MCLR. So we are seeing some benefit coming in the beginning of the '25,'26 year.

So April, we have seen some benefit coming in. CPs also started getting. So we are seeing a reduction in cost of borrowing. So the Q1 FY '26, we will see some benefit.

[Bhaskar Basu, analyst]

Possible to quantify in the context of correction we've seen so far or any broad guidance around it?

[A. Bindu, executive]

I will not be able to quantify.

[Vazhappully Nandakumar, executive]

Current there is some fluidity with regard to the environment in the country now. So any prediction at this moment may not be right.

[Bhaskar Basu, analyst]

Understood. And my last question is on the vehicle finance book, we're seeing a meaningful increase in NPLs. So what's really happening there? And what is the thought process going forward?

[Vazhappully Nandakumar, executive]

So we have taken some strategic steps in this regard. So which segment we should go, which segment we should not be there, et cetera. And also, we have strengthened our underwriting machinery as well as our collection machinery. So with this, we hope the situation will be -- will improve very fast.

[Bhaskar Basu, analyst]

Just to understand where is the stress, which segment is there any specific product where...

[Vazhappully Nandakumar, executive]

One is tractors and farm equipment. Then some of the we have seen a higher delinquency level, which we now...

[Operator]

The next question is from the line of Hale from Pi Square Investment.

[Unknown Analyst]

I just wanted to understand the status on the open offer that Bain Capital has and certain regulations or certain set of new regulations that we need to comply with and its effect on our current ongoing business, gold and non-gold both.

[Vazhappully Nandakumar, executive]

See that process is underway. regulators from [indiscernible] regulators here. That process is fully on. Our lawyers and bankers are taking care of. And we don't expect any with regard to that other than the natural time it takes time it takes. So we expect that to close everything before the end of this year, well before that.

[Unknown Analyst]

Sorry, what is the time line expected?

[Vazhappully Nandakumar, executive]

Yes, that well before the end of this year.

[Operator]

The next question is from the line of Pi Chawla from IDBI.

[Bunty Chawla, analyst]

Most of my questions have been answered. One thing, now how one should see the MFI portfolio going forward and the overall pie? And as you said, AUM growth for the gold loan portfolio for FY '26 will be 20% growth. So on an overall AUM growth on a consolidated basis, how one should see that number?

[Vazhappully Nandakumar, executive]

So I expect the MFI portfolio to go down to somewhere around 10% towards the end of this year on the consolidated book.

[Bunty Chawla, analyst]

Okay. And overall AUM growth on a consol basis...

[Vazhappully Nandakumar, executive]

I expect to be around 20%...

[Bunty Chawla, analyst]

Okay. And lastly, how one should see the ROA on a consol basis as we have -- so this quarter will be a one-off in terms of losses. But on FY '26 basis, ROA number for the full year on a consol basis?

[Vazhappully Nandakumar, executive]

So more than ROA, we are focusing on ROE. it has slightly gone down because of microfinance portfolio. The share of that is coming down. And for new lending, we are using the guards. -- disburs.et to reach around 18% and we hope in a few quarters from now, we will reach the level of 18% ROE.

[Operator]

[Operator Instructions] The next question is from the line of Shubham from IC.

[Shubham Agarwal, analyst]

I have mainly two questions. First is on Bain's capital infusion. So it is going to be in gold loan business or it's also going to be allocated to other subsidies business also. So that is my first question. And second one is regarding Ashirvad. So this year, this quarter's losses are mainly because of the high provisioning. So this is all factored in, in this quarter or going forward also, there is going to be provisioning also happening in this Ashirwad.

[Vazhappully Nandakumar, executive]

So, the main capital infusion into the parent company, Manappuram. It is not specifically for gold loan, but our target is to grow gold loan and secured loans, particularly gold loan and secured MSME including affordable housing. This is our priority, and we don't ignore vehicle finance. The idea is we want to run the company in the longer term with almost 90% in secured lending. That's the idea. So regarding the provisioning in Ashirwad, we hope the indication is this will coming down in the coming quarters.

[Shubham Agarwal, analyst]

So capital is mostly for the secured business, right?

[Vazhappully Nandakumar, executive]

That is a joint decision. that is focused more on secured business.

[Operator]

The next question is from the line of Vivek Gautam from GS Investment.

[Unknown Analyst]

Yes. Am I audible? Yes, sir, you're audible. So this quarter is the worst over for our microfinance and gold loan business? Was it sort of a kitchen sink quarter and future would improve from here should also improve from here.

[Vazhappully Nandakumar, executive]

Yes. So microfinance, what signals is this time is over. Gold loan business is seeing a robust growth. Last quarter also, we have grown and this quarter also, we expect a robust growth. And we hope that to continue to have a robust growth throughout this year.

[Unknown Analyst]

The same stands true for other loan businesses also vehicle housing and other also.

[Vazhappully Nandakumar, executive]

Housing also, all the secured business, we expect a reasonable growth.

[Unknown Analyst]

Sir, second thing was about this bank capital experience in managing the nonbanking finance companies, loan companies in India and abroad. If you can highlight their specialization and how would they add value to our business...

[Vazhappully Nandakumar, executive]

They were the investors in Axis Bank in the past, then L&T Finance. Now they run Tiger Finance, formerly Adi Finance, then cetera, they manage. They have the experience both in India as well as global. So with that experience and our knowledge about gold loans, so these are blended, we expect that to be good for the company.

[Unknown Analyst]

And sir, I saw a machine in China, ATM machine wherein gold loan, they were disbursing on the basis of jewelry also and everything in one go. So some sort of risk of the technological disruption to our gold loan business, sir? -- that manual intervention is required or something?

[Vazhappully Nandakumar, executive]

Yes. I don't expect that in the immediate future. I don't know in 5 years or 10 years' time, what will come because these involve multiple technologies like metallurgy, many other technologies to be blended here. Many have tried in the past. See, in a jewelry, this can be done because whatever -- whenever they purchase something, they have the time to verify each piece, et cetera, et cetera. And whatever is available even in the jewelry that the testing will be -- can be only very super. So on, it is very difficult. It has to be actually broken for verification testing, et cetera.

In a loan industry, loan industry, this cannot be broken open. So I don't think in the present situation, anybody has that. So it is very difficult. And that is as NBFCs are concerned. They have the people across all the branches who have the capability to assess the purity to a higher degree of accuracy by the mere feel and touch. That is our strength. And I believe that, that will continue to be our strength.

[Unknown Analyst]

Last query is on the gold loan prices. So the gold loan prices are expected to remain high only as most of the countries like China, Russia have started investing in gold loan -- gold only instead of the treasuries of U.S. government and Western government post Ukraine war and because of that, because of the Ukraine and Western government sees those treasury bond made investment made by Russia. So as such, the prices of gold are expected to remain high only.

[Vazhappully Nandakumar, executive]

I don't take a call lending. So there is a prescribed LV fixing model. Even the regulation has mandated that we go by that. We don't take any prospective view about gold prices. But personally, I believe that the chances of the gold price are -- is only going up. That's my personal sir.

[Operator]

The next question is from the line of Mona Khetan from Dolat Capital.

[Mona Khetan, analyst]

Firstly, on growth. So you mentioned that you're looking for consol AUM growth of about 20%. So do we expect vehicle SME housing portfolio to pick up materially and given the underwriting changes we have undergone or there could be some more consolidation in these books before growth picks up?

[Vazhappully Nandakumar, executive]

So that consolidation phase is already achieved. Now we are targeting growth. We are expecting growth for the other segments also, we expect that to grow around 20%.

[Mona Khetan, analyst]

Sure. And could I know the Stage 3 ECR in vehicle and MSME book in your case?

[A. Bindu, executive]

Provision coverage for the secured book is around 10. For the unsecured, we are writing off beyond 90...

[Mona Khetan, analyst]

So 10% is for the entire stand-alone book, if I'm correct, right?

[A. Bindu, executive]

No, no. See, gold loan, the provision will be very less because we are following the LGD, the historical data shows a low LGD for gold loan. That is around only for gold loan business. For the MSME and vehicle finance also based on the historical data, we are creating...

[Mona Khetan, analyst]

Okay. And we have not really increased the coverage during this quarter to that extent. It remains in the same line as last quarter or so. In MSME vehicle, et cetera?

[A. Bindu, executive]

March '25 numbers recalculated the LGD model, we will compute annually. So March '24 numbers and March '25 numbers, there is some change. But in vehicle finance, as soon as the -- like the vehicle is reprocessed and sold, actual loss will be written off. On the NPAs we are creating the process, but all write-off also factored in the LGD computation.

[Mona Khetan, analyst]

Sure. So if you could just share the Stage 3 PCR for vehicle and MSMEs with handy at your end?

[A. Bindu, executive]

So it's around 20 percentage for finance I will come back to it.

[Mona Khetan, analyst]

Sure. And just finally, on the Ashirwad book, 1 plus TPD, where does it stand?

[A. Bindu, executive]

It is given in the presentation, 1 plus. Yes, that's 30 plus I think...

[Vazhappully Nandakumar, executive]

Plus... 30 plus is 7.2%... Plus... Plus... 1 plus is 20%...

[Mona Khetan, analyst]

If you could just share the PRE...

[Operator]

The last question is from the line of Dakar, an individual investor.

[Unknown Analyst]

My question from the impairment. Can you give some about the age bracket of persons or demography where the impairment has been done?

[Vazhappully Nandakumar, executive]

You're asking about...

[Unknown Analyst]

Impairment part.

[Vazhappully Nandakumar, executive]

Which segment, the MFI or vehicle or which portfolio?

[Unknown Analyst]

Customer, customer, mainly the average ticket size, average ticket size, average age bracket and the demography?

[Vazhappully Nandakumar, executive]

[indiscernible]

[A. Bindu, executive]

[indiscernible]

[Vazhappully Nandakumar, executive]

[indiscernible]

[Operator]

As there are no further questions from the participants, I now hand the conference over to management for closing comments.

[Vazhappully Nandakumar, executive]

So thank you, and we look forward for your support.

[A. Bindu, executive]

Thank you.

[Operator]

On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.