MAS Financial Services Ltd
NSE:MASFIN
MAS Financial Services Ltd
NSE:MASFIN
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Good afternoon, ladies and gentlemen, and a very warm welcome to the MAS Financial Services Limited Q1 FY '23 Post-Results Conference Call, hosted by Edelweiss Broking Limited. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. Jigar Jani from Edelweiss Wealth Research. Thank you, and over to you, sir.
Thank you, Rochelle, and good evening, everyone. On behalf of Edelweiss, I welcome you all to the Q1 FY '23 Earnings Conference Call of MAS Financial Services Limited.
To discuss the results, we have with us from the management team, Mr. Kamlesh Gandhi, Chairman and MD; Mrs. Darshana Pandya, Director and CEO; Mr. Ankit Jain, CFO; and other members of the senior management team. Without further delay, I would now hand over the call to the management for their opening comments, post which we can open the floor for Q&A session.
Thank you very much, and over to you, sir.
Thank you, Jigar. And good evening to all of you. Happy to connect to all of you once again. And as you know that we published our results yesterday, and I think all of you must have gone through the results.
At the outset, I would like to express satisfaction over what we have done in this last quarter. We are well in line of our connection as shared with all of you from time to time that we have very strong revenue to come back to a growth of anywhere between 30% to 35%. Having said that, the growth this quarter has been in excess of around 25% to 29% in AUM, corresponded by close to 26% in profitability.
So this confirms our understanding and that makes us more confident to be able to say that we have sufficient and [indiscernible] to continue with a growth of around 20% to 25%, what we have been doing since decades.
I give you the strategic heads up, and it will be followed by Darshana in taking you through the numbers in brief, followed by Ankit talking to you on capital and liabilities. So just to give a heads up, as I told you that we have held back on the track of very different growth what we have been all these decades [indiscernible] on every 3 to 4 years.
And secondly, starting from capital and liabilities, we are very highly capitalized at around 25%. And liability management has been very strong, that has been around [indiscernible] over all this year. We have sufficient liquidity, and we reduced the liquidity because of the strong -- the strong pipeline and the confidence in the economy coming back to normal. So on capital and liabilities, we remain very strong with a very strong capital adequacy.
In terms of the product distribution, we continue to focus on [indiscernible] where 90% of business comes from micro, small and medium enterprises. And across the category, we have registered a good Y-on-Y growth, followed by contribution of 2-wheelers and commercial vehicle. As I've always said that once we have a very normal continuous economic growth, we will see that also contributing more going forward.
In terms of distribution, we are, as I talked to you and close to 6,000 -- potentially, we can be found at close to 6,000 locations in the country spread star across over 6 states. And accompanied by the strong partnership with more than 150 NBFCs. And we share you from time to time, our direct distribution is increasing. So the share of that in our AUM is also increasing. Due to that share currently it's close to 55% as compared to 45% last year. And it's also going to increase. While we hold nothing against our NBFC distribution that has performed exceedingly well and due to translate into numbers of INR 17,000 crores of cumulative disbursement over a decade. And the loss driven [indiscernible] less than 1% special quality intermediation of all the partners we work with.
But however, we have begun to increase and penetrate more in the states we work and that will increase our direct distribution. In terms of asset quality -- the asset quality has been maintained. And as you know, how we work the other prioritized asset, profitability and the priority is asset profitability and growth. Having said that, we have demonstrated our capabilities to grow -- grow continuously despite of rather seeing profitability and asset our growth -- profitably and [indiscernible] of asset our growth, because growth has been very robust overall this 2.5 decade.
So asset quality remains strong with net NPAs at close to 1.63% of the Stage -- 3 assets at 1.63% of our total AUM. So that speaks about our understanding of the sector and the revenue expertise over all these years delegating through all this crisis. While the asset quality is strong, as a conservative approach, we still continue to carry close to 0.62% of provisioning buffer currently. And that can be used for a period of time gradually.
So that is on the asset quality. Coming to our housing finance that has also started showing very positive signs of growth at around 16% to 17% of AUM growth this year. And we are very confident that on a low grade, we will be in a position to register at 25% to 30% on a year-to-year basis. So overall, it has been a very strong quarter. Customer is back fundamentals of the way we are working over all these years. We had expressed this condition and confidence during all our interaction with -- during all our interactions with previous lenders and investors. And we are very happy to demonstrate our capabilities now. And we see no reason why we'll not be in a position to continue going forward.
So going forward, things look very positive for us. We're very strong and have strong capital adequacy. And once again, I would like to share this is capital adequacy mainly through internal accruals, it is little bit close to 5 years since we released our capital in IPO. So it has been in non-dilutive growth and mainly through internal accruals, which requires very high level of operational excellence, asset quality and profitability. That is what we have demonstrated over all these years.
So with this background, I would like to -- and with this conference I would like to hand it over to Darshana to take you through the basic numbers, which should be helpful to understand the working deck.
Thank you, sir. Good afternoon, everyone. I'm happy to connect once again with all of you. So I will briefly take you through the numbers. First, will get [indiscernible]. So we started this year at INR 6,246 crores. And as on June, our AUM stands at INR 6,684 crores and June '21 was at INR 5,162 crores, which is 29.49% growth in AUM. And the configuration of this AUM is around 89% is coming from microloan -- micro-enterprise loan and SME loans and 2-wheels is around 11%.
Now coming to the income numbers. Total income grew by around 33.56% from INR 148 crore 50 lakh to like 198 crore 33 lakh -- INR 198 crore. Profit before tax grew by 25.69% from INR 49 crores to INR 62 crore. Profit after tax in accordance to the PBT grew by 26.33%. That is from INR 36 crore -- INR 36 crore 83 lakh in Q1 '22 to INR 46 crore 52 lakh in Q1 '23.
Regarding the quality of the asset, as Kamlesh Sir mentioned, we maintained the quality as on June. Our gross stage 3 asset is 2.28% and net stage 3 asset is 1 point -- 2.27% and net stage 3 is 1.63% as compared to 2.28% and 1.7% as of March '22. And we continue to carry the provision by management overlay of around INR 34 crores, which is 0.62% of a total on book assess.
Now coming to our housing numbers. Asset under management of our housing portfolio is now INR 343 crores as compared to INR 294.70 crores like in June '21, which is 16.46% growth in AUM. Total PBT grew by 32.53% from INR 1 crore 6 lakh to INR 1 crore 41 lakhs. Profit after tax has increased by 29.86% from INR 82 lakhs to INR 1 crore 7 lakhs. Here also the quality of the asset is we could maintain that, that is gross stage 3 30.52% and net stage 3 is 30.38%. It was almost same in the last -- in March '22. Here, also, we continue to carry a management overlay of around INR 3 crores, which is 1.06% of our total on book assess. So this was regarding the performance of both [indiscernible] company. Now I'll request Ankit to take you through the capital and liability management during the quarter.
Thank you, ma'am. Good afternoon to all. To further allocate on capital and liability management, we'll be able to maintain an equity buffer of around INR 600 crores as [indiscernible] the basis and unutilized casting facility of around INR 400 crores. In addition, the company has sanction on hand to the tune of INR 1,500 crores in the form of [indiscernible] like term loans, DA and [indiscernible]. In the last quarter, we completed around INR 300 crores direct assignment transaction.
The company has further more than INR 1,000 crores sanction on hand, which we utilized during the current year. The company aims to maintain around 20% to 25% of AUM as off book to direct assignment transactions. In the last quarter, we did around INR 40 crores of co-lending transaction with bank. And we are in process of tying up with various banks for co-lending [indiscernible] which will be a win-win proposition for both entities. Company is available cash credit facility of INR 18.25 crores, out of which utilization level is around 65% to 70% and thus portion is kept on liquidity asset. We reached INR 616 crore term loan during the quarter. This has a average tenure of 3 to 5 years and help us to maintain the asset liability maturity pattern in a better way.
Further, we have around INR 400 crores sanction on hand, which we utilized during the year. We will assess our structural liquidity for the period and the total assessment there's no negative impact on liquidity and the cash flow in all cumulative bucket seeming positive.
As told, the capacity remains strong at 25.28%, with Tier 1 capital of 22.49% and a great [indiscernible] PAT capital going forward in order to have a healthy capital structure. The debt equity remains at 3.74x. The cost of borrowing for the quarter has been stable at 8.64%. In the current given increasing interest rate scenario, we initiated that cost of borrowing to remain stable at [indiscernible] trend of anything between 25% to 50%. Thank you.
So thank you, Ankit. And before we open for Q&A, I'd just like to add on the retention drive that we have taken at the company level. So what we are doing is that we are trying to digitize all our internal processes, which we can accord more efficiencies, especially in origination and also in the credit business in. So we have a strong team of 30 people plus in the department, we are constantly working to digitize all the processes we have across products besides our tie ups with various fintech. And we are tying up with fintech in a way whereby the of [indiscernible] where it is not diluted and across our products, which gives us a better origination reach to the places where we might be missing in case despite of our best efforts.
So I think we all know that we have to be more focused than absolutely aware of the technological advancement happening in the financial services space, and we are much aware of it and the company is constantly in the loop and we'll endeavor to set on how we can use the technology in the most optimal manner so as to improve efficiencies. That was on the digitization drive of the company and the fintech.
So with this, I would like to open the session for Q&A. We'll be happy to answer your queries. So the session may be open.
[Operator Instructions] Our first question is from the line of Jehan Bhadha from Nirmal Bang.
Congratulations for good number. Sir, I have one question on fee and commission expenditures, which is at INR 13 crores for the quarter. If I look at previous quarters, this number actually before COVID used to be negligible at around INR 1 crore or so. So can you explain what this is?
So fee and commission expenditure is a part of the operational expenditure as we increase our decrease expend. This is Pre-COVID we were at around 3,000, 3,500 of our distribution in terms of centers reach, which has increased to now close to 6,000. And secondly, as I said last quarter also that with the partner [indiscernible] for better control, we have changed our working model from retiring the complete profit from the customer and then sharing the IRR post visiting the complete amount in [indiscernible] and then that amount is shared with them.
So that has been parted as fees and commission to them. So these are a function of 2 things. the cans in business models are better controlled with our NBFC partners and also the increase in the operational expenditure because of the increased reach and included retail business.
Our next question is from the line of Amarnath Bhakat from Ministry of Finance, Oman.
Thanks for giving this comfort to investors that we continue to maintain your same path of consistent growth and maintaining the capital adequacy. Sir, my first question is relating to this maintaining the higher capital adequacy more than -- much more than what the regulatory requirement is, how much is your negative cost currently?
See, let me take you through how this capital adequacy fundamentally evolved over a period of time. While statutory requirement is 10% higher and over 15% and that is a bare minimum capital movement. As you know, this sector has passed through a lot of crisis and a very continued crisis last -- since 2018. So it is prudent to control the leverage and have more capital buffers. And with a view to payback the overall working of the company to make it more fundamentally strong, we have internal plans to maintain it anywhere around 20%. This 25% is a function of a slow growth for 2 years during COVID time, whereby we continue to make profit during that period. So there was a lot of -- there are internal accruals not backed up by sufficient growth for at least 2 years and that increased our capital base.
And if you see it in a perspective, this capital base will give us a sufficient [indiscernible] internal accruals only over a period of -- over a period of time. So this capital adequacy is a complex decision getting this capital adequacy is a conscious decision. Secondly, post this crisis, usually, the leverage for NBFC is at around 5% or 5.5% was well acceptable by the lenders, which has changed years to 3.5 to 4x. So taking all these things into account, I think we have our capital adequacy, which is sufficient to fuel our growth through internal accruals. And that is evidenced of the fact that even our return on capital employed is a healthy 15% plus. So it is not at the cost of the return on capital employed, but it is a cautious decision by the company to be well capitalized. And overall, as we come back to the normal trajectory of growth, we see it hovering around 20%.
Sir, well understood at this point. And that is the history of your company as well as to maintain a higher level of debt to the capital adequacy. The purpose I'm asking this question is if our growth rate of AUM is 20%-25%. The leverage is around 3.5%, 3.7%.
The return on assets is supposed to go a little higher. One side, our expenditure profile, all expenditure profile is keep on increasing. But -- and that is -- the income rate on the expenditure rate is not going line on line. Generally, it's supposed to be if it is 25%, 25% of the year. Around 20%, 25% should be on the bottom line as well. But if you see this bottom line increase because of whatever expenditure others, is not in line with the growth profile of this company.
And also the return on assets and return on duty both are more or less stagnant. Now we are almost 15 years to 20, 25 years old company, you already have a growth base here. So why -- I'm just trying to understand why we are not being a little at based on your experience and the debt you might have already been achieved in the market. And what we are seeing is the bottom line has really not been increasing in that way.
So to answer your question, I think on bottom line, if you see and if you don't just take a quarter or 2 or a year or 2, we already in our presentation that our over 25 years, we have grown our PAT at a rate of 40%. And that is that one corresponds with the AUM growth, if you see a history of 25 years long journey. So I think you will do attention to that fact. And secondly, the marketing expenditure and profitability absolutely like to line might not be practically possible when you are in an expansion stage, it might lag a few quarters. But even though we have endeavored and we have demonstrated our capabilities to be very close to that as I shared with you that 35% growth in AUM over all these years are completed by a corresponding raise in profitability over an extended period of 20, 25 years, which is demonstrated and a lot of headwinds [indiscernible] various cycles.
In terms of being aggressive in growth being the practitioner if I share with you, growth is not only the function of the capital under back. Beeping into informal funding, beeping into retail funding, I think operational excellence plays a very important role. And even though when you talk about a 20%, 25% growth, that is doubling your AUM every 3 years. And over the years, we have seen that the common denominator for failures across the period has been exponential growth. It's not about lack of opportunity or lack of capabilities to raise more debt or more capital. It is about a cautious understanding that how you can manage growth. The growth has to manage in such a manner that it adds value to all the stakeholders and generate a good ROA and ROE.
Coming to ROA, expansion of ROA, beyond a point is difficult if you want to create quality assets and if you really want to grow continuously at 20%, 25% because there are a lot of competitive sources. So expansion of ROA we have always seen that the value add what we do, 15% to 18% ROE is in the close to 3%, 3.25% of ROA in sync with the value add we do to all the stakeholders. And this is what we have understood, and we have zeroed down on the fundamental after the norm understanding of 25 years of working.
Just to follow up a little bit, sir, only the same point. Just to follow up, man. That guidance is 20%, 25% of the loan growth. So with the corresponding period of 5 years, what's your guidance on the ROA and ROE. This is my last one -- for the same period -- for the next 5 years.
While we cannot predict that the [indiscernible] is that it will keep our is anywhere in the range of 2.75% to 3.25%, translating into ROEs of anywhere between 15% to 18%.
[Operator Instructions] Our next question is from the line of Madhuchanda Dey from MC Pro.
Congratulations on a very good set of numbers. I have one housekeeping question to start with, which is what is the disbursement figure for the quarter?
I think INR 2,153 crores.
Okay. Sir, my next question is, we have seen 2 rounds of rate hike by the Central Bank in the last quarter. But we have seen that you have seen a tad reduction in the cost of funds and some improvement in margin also.
So if you could explain that and also give us some guidance on how you see your NIM behaving in a rising rate trajectory like now?
To start with the means, what we said intend to maintain and what we foresee is able to maintain in that range of 6.75% to 7.25% if [indiscernible] -- and in fact, the U.S. where it will be around 7%. In terms of what was the impact of the increase rate scenario like to take you through how we borrow. Our borrowing is MCLR based and this MCLR is usually around 6 months to 1 year's time. So as soon as the repo rate increases, our borrowing rate does not correspond immediately.
So that is the advantage what we get, but the various borrowing as well there is a [indiscernible] at various point of time. And presuming that these repo rates are going to be at a pre-COVID level, we at this stage, as Ankit told in his opening remarks that we [indiscernible] total rising interest rate by a little bit 0.25% to 0.4% on our borrowing.
And as said in the last con call that we have around 70% of our assets, whereby we have the possibility to increase the interest rate. So the passing on the interest rate in such scenarios where there is very -- there are a lot of subsequent rise is possible. So we have 70% of assets like that. So combination of our borrowing and our capabilities to pass on the rate to an extent should see us maintaining the lean, steady mix.
On the reduction in -- a slight reduction in the interest rate might be the function of the change in the borrowing patterns of the entities through which we were borrowing. So it's not so that we have started borrowing at a quite less a rate, it might be a request under fuel type of credit to the different type of credit. Just as an example. We have INR 2,000 crores of fulfillment which is around 60% of it is tied around WCDL and the WCDL is benchmarked to a 90-day MCLR. So if the usage during the quarter in that portion has, which reflects a lower rate of interest. But on a margin basis, a lean basis, we expect this to be over around 70% taking into account even the rate hikes.
Sir, if I may just ask one more question. If you could throw some light on what would be the rough breakup of your AUM between your own sourcing, the third-party NBFC sourcing, fintech and core lending?
I think our own sourcing is 55% versus all other combined at 45%.
I mean I'm really keen on understanding how the fintech partnerships and the core lending is picking up.
It is picking up gradually. Last year quarter, we had INR 200 crores of business spend through fintech utilization whereby, as I said in the opening remarks that based on the credit screen what we do and the area of operations we'll be comfortable with. So this is that we have entered the lease from the fintech players, and that has been close to INR 300 crores this quarter as compared to INR 200 crores last quarter. And this is a space where we all are trying to understand and learn that the nuances of the win in such a manner that in future, we can use this very effectively and efficiently to originate the business without compromising with the quality of the credit.
And sir, your colleague mentioned INR 40 crore was the core lending, right?
That is core learning from the liability side. That is on the liability side.
Okay. I'm sorry. What was the core lending on the asset side?
I think on core lending on the asset side, included in the 45%, and I think must be around close to INR 300 crores.
In the quarter gone by?
Yes.
Okay, sir. And if I -- if you permit me, I'll just ask my very last question, which is, sir, you mentioned about this, your aspirations of a steady growth of 20% to 25%. In this year, in the current fiscal, I mean what are the challenges to this growth number? I mean, what do you see in the horizon which can offset this growth number?
So any -- as I see right now, interest rate is well covered at the probabilities of headwinds that we see is the volatility in interest rate that is well covered. In terms of the economy picking up, I do see a very active movement among our borrowers for disbursement. We see this market picking up a company by our distribution increasing both through an [attic return ] through NBFC-rich and a very huge market.
So I think that 20%, 25% growth, we are very confident on that. And the only headwinds what we see right now, including the 3 premiums as benign on the health ground the way it is right now, I think it was the volatility in the interest rate and that is well covered. Besides that, I don't see much headwinds for a 20% to 25% growth.
Our next question is from the line of [ Ankit Gupta ] from Bamboo Capital.
More congratulations for a great set of numbers, I think the past 2 quarters, gross growth is picking up on this...
[Operator Instructions]
Is it better now?
Please go ahead.
Yes. First congratulations on a good set of numbers. I think last 2, 3 quarters, we have seen a pickup in disbursement. Rents are growing as well. So on our major segment, which is SME as well as on the microfinance side, in the last 5, 6 years, we have seen quite a bit of disruption starting from demonetization. GST 2019, '20 also was a bit challenging in terms of growth. And then you had last 2 years or 4, so almost 5, 6 years of disturbances we have had year after year, there have been tough points. Given our expertise in the segment and our lending into this segment, do you think that this segment will now bounce back and we can see a decent growth of 2, 3 years, barring some external disturbances or impact that can come? Apart from that, we hear it for at least 2, 3 years of normalized or a good growth in this segment now?
Definitely. When we talk about India growing at a healthy rate of 7% plus, these are the segments which are going to contribute predominantly. So we see a lot of scope and we are very bullish going through not only for 2, 3 years, but in more than that in the medium term.
And secondly, as you very rightly reminded, these sectors have gone through the most difficult times of their lives. It is to add color, that has been a very unprecedented time what we have seen over all these years. And the enterprises who survived all this are well geared up and are very enthusiastic to grow and take up the lost ground of last few years.
So all this combined should give us a good opportunity to be the partner in that group. And providing -- and their growth means they will need more working capital, there is no -- they need more capital for capital expenditure. And that is where financial services will play a very important role being confident in their growth. So we -- I would actually agree with you that this is the time the next few years, at least not agitating any other macro hiccups.
I think this factor is going to exhibit a very strong and a decent growth and high-quality growth. And we can -- as a very strong player in this segment, I think a very old player in this segment in and to benefit from this. And that is why the confidence stands out that to grow at the rate of around 20%, 25% even on an expanded base.
Okay. And sir, second question was on the liability side. Given our size and our rating has been largely being dependent on bank borrowings and tax rate and term loan contributing more than 60%, 65% of our [ postal ] borrowing. And our exposure to the capital market through NCD as well as CC has been lately less and we just started exploring those options now? Do you think with hopefully improvement in rating to AA category with our size of AUM increasing over a year or 2, we -- our exposure to capital market will increase, and this might help us reducing our cost of borrowing by a certain extent given yields in those segments are relatively lower compared to bank borrowing?
Definitely. So as you say that we already have made a very healthy entry into capital market borrowings with versus around INR 700 crores outstanding in terms of ancillaries through capital market borrowings. So that is approximately 10% of our total liability. And we believe in a diversified liability profile, be it banks, private banks and capital markets. And as the rating improves, as the size increases, definitely we get an advantage to tap the capital market at a more competitive rate.
Currently, restricting capital market exposure is only because that we want to be competitive on the rates also. The rates offered by other lenders are much more competitive than what we would go out to capital market from borrow. And at -- and as you have seen that given our track record, given our capital adequacies and all, the institutional lending pipeline has always been so strong. So to show by August 15 or by August 30, we will be having the path for the complete year, and then we'll be counting for better opportunities, lesser interest rate and so on and so forth. So as we know, capital market exposure will increase, but we'll have an eye on the cost factor too.
Our next question is from the line of Sarvesh Gupta from Maximal Capital.
Sir, I had 3 questions. One is, while talking about ROAs and ROEs, if we do have the sort of thinking about growing multifold from current levels over the medium term, so when you break up the ROA, are there any levers on: a, OpEx as we scale -- let's say we scale 4, 5x from here, do we see OpEx coming down?
The other is cost of borrowing, which will definitely happen, but do you intend to sort of keep a part of that benefit to you increasing your ROA? And third is, of course, the tech sort of efficiencies. So you spoke about some of the tech initiatives that you are taking. So do you see part of them sort of helping you increase the ROA? So any of these 3 levers do you envisage them working for you if you go at a very high scale? So that is question number one.
Sarvesh, economies of scale are net benefits. As we grow economies of scale along with the use of technology, they'll definitely benefit. But if you say right now because of our distribution model, our OpEx is absolutely at the optimum level or at a very high efficient levels. So once we start having more and more business towards adding distribution, the OpEx net increase, but it will not affect the ROA because the ROAs, the lead will increase at a faster pace than what we will spend as expenditure acquiring that business. So as we grow economies of scale, both in terms of operations using technology, increasing yields as we go along, and secondly, definitely, there is decreasing interest rates because of the increase in ratings. See, this is as you -- if I talk to take the fundamental lending is a business of arbitrage. So as and when we grow and our rating also increases, so what will happen is that it will be at the half data, and we will be in a position to explore that to the advantage of improving the ROA marginally.
But having said that, as we grow, we will also have to enter a few of the segments whereby those segments would be a little competitive as compared to what we are working. So over a period of time, we are talking about going 3, 4x, so we talk about a INR 20,000 crores, INR 25,000 crores AUM. What we appreciate that there is a lot of dynamic changes happening, and ultimately, we have seen and what we realize that ROE will see in a range for end of between 3% to 3.5%. And given the recent realities of real estate, the result could go anywhere between 16% to 18% ROE.
Okay. And what is missing on the 3 years also the fee income? So do you envisage that as you scale up, are there any potential thoughts on generating non-lending sort of an income to sort of help that ROE? Are you seeing that as you scale that, that can be a possibility?
Yes, yes. So we are in process of getting the insurance license as we already do interim business which is a natural target to our lenders given the length along with the open market operations. So this is one business which will align with our line of activities. And secondly, we have to explore other fee-based avenues whereby we can generate in that our own SME clients as we grow. How we can modulate capital for them or how we can be of other services to them, that will definitely be explored.
So currently, the idea will be first to build up scale and then once we build up scale, for into various activities, whereby we can generate fee-based income. So that for example, we have almost in -- almost due to that broking license within the next quarter or 2, and that should help us increase our fee-based income.
Understood. Now coming to the housing business, sir, it's been there for a while. We have already showcased a very low NPA numbers on that book. But you would also agree that the book is so small that the NPA numbers do not sort of hint or tell us how it will behave at a scale. And book being so small, it hasn't really contributed at all towards the overall growth also. So what is the thought process, sir?
I mean there is no sort of a meaningful contribution from that business to our business. It's been there at a very good profile, but then the scale is really low. So do we really want to do something there? And when will the -- because at that scale, 17%, 16% of growth is meaningless. It's such a small scale. So do you see that book growing at 50%, 100% or plus? Or do we have any different way of looking at that business to scale it up or it will continue to be in the shadows?
That will start contributing very meaningfully. And we see a 3-year horizon whereby it will start contributing at the interest rate of 30% to 35%.
And just on the housing side, I'm not a judgment of how the various players operate, but we are seeing this informal housing payments so closely. There are 2, 3 things where we differentiate. When we talk about housing is a majority to play housing and not a bulk of lap into it, number one. Number second, the quality definitely, you cannot extrapolate on a bigger number, but at least you can get the direction of the working of the company and the fundamentals of the company because the direction is not correct, even on a smaller base, it is on the contrary, difficult to maintain a high quality of assets because we don't get the denominator advantage.
So taking all these things into account, we are very confident that the fees are stabilized whereby the housing finance market has been differentiated into various interest rate cohorts, right, starting from 7% to 9% to 15% to 17%. We are pleased ourselves and we are between a 10% to 12% interest cohort where we see a lot of traction. It was a very cautious decision by the company to grow it cautiously over all these years. And now we believe 16%, 17% is the journey. Overall, it will start from this year, you see I'm very confident of overall 20% growth as compared to the last year. And once we -- with the next 2 years or 3, once we reach the INR 1,000-crore mark, and then also control continued growth of around 25% to 30%, which that's contributing very meaningfully. And medium term, our medium term view is that this is going to contribute not substantially, but it will contribute very meaningfully.
Our next question is from the line of Rahul Jain from Credence Wealth.
Sir, congratulations on a very good set of number. So sir, first question with regards to our micro enterprises loans. Typically, in last few quarters, our average ticket size used to be around INR 40,000 to INR 45,000. And gradually, it has come down in the last 3 quarters to around INR 24,000, somewhere in the average of INR 40,000, INR 45,000. And in this quarter itself, we are seeing a jump from about INR 25,000 to INR 45,000, INR 46,000 average ticket size has gone up. Anything to read into this? Or is this some reclassification being done? How do we view this?
I think the asset side we were lower in the previous quarters, mainly because we were during the COVID or coming out of COVID. So during that time, the fourth quarter saw very meaningful exposures we have exited. And once we saw the things coming back to the normal, where we have come back to the original exposures. And if I tell you the direction, anything less than 3 lakhs of process will be a micro enterprise loan. So there is a conscious effort by the company to increase the ticket size with reserving borrowers because we like to grow with the borrowers and now things will stabilized, will give us the confidence to increase the business size there also. So there, we understand that the ticket size will greatly increase. But once again, not at the cost of or compromising the quality of the asset.
Is there a change in the kind of borrowers where we are lending in terms of typically certain borrowers who were not -- or who are not lending. And now we have started the lending back or is it a different kind of borrower? Or is it more due to also higher disbursements happening to the fintech? Anything on those lines?
I think it's largely so more than 300 different categories of borrowers and more or less, we revolve around those category of borrowers only. So as I told you the [ GAAP ] side is a matter of the comfort that we draw from time to time. There is the macro conditions in the economy. So if we are comfortable and if things are going smooth and as you know that we have stabilized -- we are in the process of stabilizing from last Q3 onwards.
So now we are getting the possible to cater to the demand the way the borrowers would like to borrow from us. Normally, what it happens that he wants 1 lakh of rupees will contribute around INR 30,000, INR 40,000, INR 20,000, whatever the internal guidelines are from time to time. So the borrower agreement is the same and fintech or direct disbursement, our criteria for extending the loan does not change. That is if you do certain criteria, it is direct origination of origination to fintech. Typically the origination at fintech does not change.
Sir, with regards to our branches, one observation is to be endemic. We have done very well in terms of expanding our branches in the state of Uttar Pradesh from about 10 branches about a year ago, we are today at 31. In previous interactions, you have mentioned that Maharashtra, Rajasthan and MP, these are our 3 focus areas to take the branch network from about 125 to 250 next 3 years.
So NPE, we have increases from 10 to 31 whereas on Maharashtra, typically in the last 3, 4 quarters, it has remained in this time or it has just gone up from 21 to 26. So is it like there is some conscious effort going on in MP, where you feel we are much better off in terms of the resources or the branch network or the kind of reach you have gotten into? Just to understand and going at how do you see this?
See, opening of the branches depends upon our internal survey of those region and also getting the right sort of human resources. If you compare Maharashtra and MP, Maharashtra was slow deliberately because we all know that Maharashtra was higher state going over. So we are waiting for a while before we can really increase the number of branches there. So we're trying to factor areas where we are more comfortable from credit risk as per our assessment and also getting the resources what we need.
So that will be -- there will be a different numbers in different states from a quarter-to-quarter basis. It will depend upon the opportunity we get and how well we are executed in a particular state. So depending upon execution, the opportunity to be that, it will differ. But overall, as I shared earlier, we intend to have around 250 branches among our areas of operations. Maybe 1 state might be ahead than the other for a quarter or 2. But once we get the right opportunity, I think it will be as per the overall planning.
Our next question is from the line of Deepak Sonawane from Haitong Securities.
Sir, I have 2 questions. First is on fintech. Sir, we have seen a very strong growth in terms of -- through fintech channels. So what has been our average ticket size for the business through fintech?
I think we have around INR 300 crores of business in this quarter. And this is the average ticket size depending upon the product. If it is an annual loan, then the average ticket size will be around between INR 50,000 to INR 60,000. And it is an SME loan, the average ticket size will be in the range of around INR 2 lakh to INR 5 lakh.
All right. Okay. And sir, my second question is kind of a data keeping. So can you just give out a Phase 3 asset numbers for -- or in percentage for all the 4 main categories in MEL, SME, 2-wheelers and commercial vehicles?
So in terms of percentage?
Yes, yes. That will be good.
Just a minute. So in 2-wheelers, it is 2.58%; commercial is 2.35%; MEL is 1.53% and SME is 1.48%.
Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management team for closing comments.
So thank you, everybody. And for the ones that miss out on this Q&A session, I request them to contact [ Jigar Jani ] who represent from the IR, and we'll be happy to answer all your queries. So thank you so much. And once again, as I said in the opening remarks, we are very confident that we'll be in a position to accelerate the growth in overall this year and having very strong end of year. I wish you all the best. Thank you.
Ladies and gentlemen, on behalf of Edelweiss Broking Limited, that concludes this conference call. Thank you for joining us. You may now disconnect your lines.