Muthoot Capital Services Limited (MUTHOOTCAP) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Mutut Capital Service Limited Q4 FY26 earning conference call hosted by Ilara Securities. As a reminder, all participant lines will be the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchstone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Manitki Mawad from Hilara Securities. Thank you, Anu, to you, sir. Thank you. Good morning, all.

On behalf of Hilara Securities, we welcome you all to the Q4FY26 earnings conference call of Mutual Capital Services Limited. From the management today, we have with us Mr. Matthews Marcos, CEO. I now hand over the call to management for opening remarks. Thank you, and over to you, sir.

Good morning, everyone. Manish, am I audible?

Yes, sir, you are.

Okay, so good morning, everyone, and thank you for joining us today. So on behalf of the management team, I welcome all our investors, analysts, lenders, and stakeholders to the earnings call for Q4 2526. So, if I talk about the year that went by, we had a calibrated growth amidst challenging and evolving macroeconomic environment. The first half of the year, you all know, we saw, you know, the stress in MFI still over to the retail lending piece. In the last quarter, as we all know, we saw global uncertainties arising out of the geopolitical tensions, the war in West Asia, which, you know, saw elevated crude oil prices, tightening of liquidity conditions, and continued impact on consumption patterns. And also, you know, it saw a significant rise in OPEX across sectors. But despite all these headwinds, I believe the Indian economy demonstrated resilience, and it was supported by domestic demand, the GST rationalization that government had done, and also the gradual recovery in rural consumption. So all of these were actual tailwinds for the Indian economy. At MCSL, against all this backdrop, we remain focused on strengthening the fundamentals of our business and executing our long-term strategy objectives. During FY2526, your company achieved an AUM of 3500 rows, including the managed book, reflecting steady expansion across core and emerging product segments. We continue to diversify our portfolio with very encouraging traction in commercial vehicles, used car, loyalty loans, and also business from the group companies, while we maintained our strong presence in the two-wheeler financing ecosystem. Our strategy emphasis during the year was not merely on growth but also building a more sustainable, you know, technology-driven and customer-centric franchise. So, at this moment, I would also like to add that, you know, today, based on our technology platforms, we are, you know, benchmark in some of the areas, at least, even compared to large organizations. We made significant progress in our digital transformation initiatives through automated collection, digitization, account aggregator, workflow modernization, and strengthening of governance and compliance framework. More importantly, we've begun laying the foundation for becoming a truly digital and AI-driven organization during the year. We initiated multiple AI-led interventions across the enterprise, including AI-based ticket segregation for compliance and revenge management, speech and voice analytics for customer interaction, smart debt collection initiatives. AI-assisted collection monitoring, enhanced data-driven underwriting, and risk assessment capabilities. Today, 100% of our pre-delinquency calls are done by AI agents. And gradually, I believe by the end of Q1, entire X bucket calling will be done by AI agents only. There will be no human interaction in these two buckets. Completely, it will be AI driven. We are also progressively integrating technology and analytics into our audit and compliance tracking, operational workflow, broad monitoring, and customer servicing functions to improve efficiency and responsiveness. And this is a decision that we are doing across the organization. Because, you know, at MPG Group, we clearly understand that the future of financial services will be shaped by institutions that can combine scale with intelligence, automation, and customer-centric digital capabilities. So our investments, we have made a lot of investments in Data Lake, business rule engine, workflow automation, and AI-led process enhancement. And these are not isolated projects, but these are actually part of a larger strategic shift towards building a future-ready organization. Doing while doing all of these, you know, we have remained conscious of the stress emerging in the retail credit environment, asset quality pressure across the industry, especially in the unsecured and semi-urban borrower segments. has been at elevated levels. And this warranted a more measured and prudent approach. So we have focused on balancing growth with risk discipline, strengthening collection infrastructure, improving digital repayment penetration, and enhancing underwriting quality. Today, we collect more than 80% through digital route. And only less than 20% is through cash collection mode. And as we look ahead, we remain optimistic about the long-term opportunity in India's mobility financing ecosystem, because all the structural drivers are intact, improving affordability with GST rationalization, recovery in rural demand. All of these fundamentals remain very, very strong. Also in the CV space, replacement demand. It's growing. You know, growing adoption of digital finance continues to provide a strong foundation for a company like ours, which is truly into the digital space. For the coming year, we have outlined, you know, a focused roadmap. We are targeting close to 3,000 crores of disbursement, and we aim to get deeper penetration into, you know, the markets that we are currently in, and we wish to expand through our digital sourcing channels and continue to improve on our operational efficiency and sustained investments in technology, governance, and AI capabilities. And our long-term aspiration remains clear, which is to build a scalable, diversified institution and fully digital, which will create value for shareholders. So I think with that opening commentary, I would request Ramandeep to take over and take you through the detailed operational and financial performance of the last year and last quarter. Thank you. Ramandeep, over to you.

Thank you, Matthew, sir.

Am I audible, sir? Just confirm. Manit, if you can confirm. Yes, Raman, we are audible.

Morning, all. So, this time, we have divided our call into four parts now for you all. First, like we always spoke about the AUM, then the asset quality of the company, then we'll speak on the GNPA, and then we'll speak on the PACT. Talking about the AEM of the company, including Managed Book, which I'll just explain right now, we have closed our AEM at 3,441 crore. Managed Book, when we say the company has been able to do a DA transaction first time in the last three to four financial years. So this we have concluded with a pool of approximately 100 crore with Hinduja in the month of March. On the AUM front, the sole portfolio of MCSL, which was 2,118 crores, now has been closed at 2,758 crores. Whereas, the co-lending portfolio, which was 940 crores at the start of the year, we closed at 595 crores. So, there is a significant degrowth in the co-lending portfolio, which we have said in each and every earning call. The retail portion of our business. Which, which was around 559 percentage from the MCSL side. If we see Q4, in Q4, we were at 89.51 percentage from the MCSL side. So, we earlier used to be like 60-40, 60 through co-lending and then 40 percentage, sorry, 40 percentage through co-lending and 60 through MCSL. That ratio has been significantly changed over the year, and in Q4, we were at 89.51% only through MCSL, and remaining has been contributed by the co-lending front. So, when we say on the AUM front of the company, products which have contributed to this 3,500 CR, namely a two-wheeler, wherein we have seen growth. Obviously, you know, the managed book was there, wherein DA we have done. Four-wheeler, when we say used car book, which was initially at 86 crore at the start of this financial year, we closed at 155 crore. And when we talk about CV, which was 61.25 crore at the start of the year, we closed at approximately 240 crore at the end of this year, which is a significant jump. So this is broadly on the AUM of the company. Now talking about the asset quality of the company, which has contributed towards. So in the last learning call, I remember that the company, when I said the percentage of flow forward towards the AUM. So, from the opening, Standard AUM, when we were at 0.80% was my flow forward at the start of the year. Now, when we see Q4, it is only 0.43%. So, we might see that GNP of the company, which I have also shared, it is coming at 6.41% and 6.96% with interest accrual. I will just explain all the entire thing, but first we will speak on the retail assets of the company. So, when we say 0.43% was my flow forward, and we can see that 0.80% has been dropped down to 0.73%, then 0.65%, then 0.55%, and finally, we have closed at 0.43%, which is a significant achievement in terms of my NPA analysis for the month, for the year. The second thing which has contributed is my slippages, which was around 18 crores a month. Starting at the start of this financial year, now that has gone down to 8-9 CR a month, which means we have been able to control the slippages from stage 2 to stage 3 asset by almost 50%, which is again a very significant jump. And when we talk about the asset quality, the contribution that has been made through my retail segment. So, retail segment, when we say that, we have also relied on, okay, there was a co-lending portfolio, there is an MCSL portfolio. So, what we have been able to achieve through MCSL portfolio, the overall yield, which was around 18, 18.5% at the start of the year, That has gone up to 21.02% because of the share that has been increased from the MCSL portfolio. With that, my two-wheeler standalone as an incremental business from the two-wheeler, that gave me 22.02% of the yield. My four-wheeler is contributing 18.45% of the yield, while CV has contributed 7.31% and loyalty loan has contributed 24.92%. So that has allowed the company to increase the yield while focusing on the MCSL portfolio as a loan. This was more or less on the AUM, the asset quality of the company. We'll now speak on the GNPA portion. We reported 6.96% with the interest accrual and 6.41% with the principal outstanding. On ManageBook, when we computed GNPA 90+, it is 5.58%. The sole reason which has contributed to the increase in the GNPA while the flow forward has been brought down significantly, as I said, I'm repeating it, it's 0.43%. The sole reason was we have recognized one of our corporate loan, which was up money. So we have recognized the entire 15.51 CR as an NTA in March. And then, you know, though we know that, you know, and whatever that has to be provided for that NPA, that we have done in March. Now, while saying that, one more thing, the entire loan, we knew that that was in stress since September, October of the financial year, wherein we have been able to take the recoveries out of it. But as far as the DPD timer is concerned, it has to be recognized as an NPA, so we did. Now, we know that the provisioning and all we have provided, on the other hand, we are also happy about this effect that we have been able to secure this loan. And then, you know, whatever we have classified as an NPA in this financial year, I hope in the next financial year, in this financial year, we have been able to realize that security and we'll be able to bring down that NPA portion. This is one. So that corporate loan has significantly contributed towards the NPA, my total NPA as we close this financial year, 194 crore. And then when we added this, then around 15, 15 and a half crore, it's a big chunk of that NPA. So, this is how the NPM movement for the company. Now, four important factors wherein, you know, we, I want to say that first. The company has taken a call on the portfolio, which was sourced pre-COVID, and that was lying in the doubtful two and doubtful three category. So around 12 crore of the portfolio has been taken out from the books, wherein we have taken for the entire portfolio, we have taken the P&L hit as well. How did we classify this portfolio? We have classified this portfolio wherein no recovery has happened for the company on this portfolio since June 2023. Number one. Number two, no change in the PCR. It remains at 50% and NNP has to be below 6%. That's the policy of the company and we are sticking on to it. We have also provided for 43,15,000 fraud loan accounts, which are almost eight instances that has been reported to us and for that 100% provision has been provided in the books. For up money, we have already spoken, and then there is another impact of one-time hit that the company has taken, apart from the write-off account, apart from the up money, and there was one more hit that the company has taken, which was providing the impact on the new wage code. So, based on the financial impact that the company has taken, which I have also explained in the Note 5, it was coming as 1.68 CR that has been taken for the valuation of gratitude and believe in cashment. And then I have also explained at the start, we have also done one DA deal, which I have said in the Q3. But, you know, because of the fact that my Q1 performance, because of my impairment was very high, and Q2, it has been brought down. Q3, we have seen some improvement. That is the reason we have been able to, that we were sure that, okay, this portfolio has been classified for DA. And based on our recent efficiency numbers, that has given us enough confidence, you know, to make sure that we can close a DA deal as well. So that DA deal, we have taken in the market of 100 crores, and that has been successfully closed. And then, you know, these are the kind of things which we wanted to do at the start of this financial year. But we know that how the impairment was impacting and what was the kind of impact. But we have left behind everything till Q3 and Q4. We have been able to do that DA for the first time and will be able to continue also. At the same time, the AUM also needs to grow, which we have seen a growth in our MCSL portfolio, as I have already said. Last year, our CEO has said that we will close around 600 crore of business, and then we close around 562 crore of business, which is a very close number of what we have said. And another income which has significantly increased over quarter one to quarter four, and then we are also planning that this income is going to further increase in this financial year, is an insurance income that through corporate agency, we have taken a 7.52 CR that has been classified as another income in my P&L. So that also we have taken, and we know that these kind of incomes, since we are a corporate agent, so while doing the cross-selling and all, these kind of incomes are going to increase. Second thing, on my ECL versus IRAC, the company is still carrying a 51.57 CR of the exit provision over the IRAC, which you also must have seen in the PPT, which I have shared. We did, since we said that we have taken a call on the pre-COVID portfolio, we have taken same call on the ARC as well, while we did ARC, because at that time, the portfolio which has been sold to the ARC was the portfolio wherein we are able to recover something out of the portfolio. So that is the reason, if you see my, both my ARCs are doing extremely well. The SR at the start of the financial, sorry, at the start of the ARC was 103 crores. Now that has been brought down to 26 CCR with the Phoenix ARC. And then similarly, another ARC that we did, which was at the start of this financial year, which was around 41 crores. So 23 crores was the closing outstanding from those SRs. The best part about the entire financial year, wherein we have been able to bring down our cost of funds by 60 paisa, the warrants from the bank till the last financial year, which was only 435 crore a year, that has significantly jumped up and multiplied with 2x. Now it is 865 CR of the total bank sanction we received during the entire financial year. There was no change in the entire shareholding pattern. Promoters still hold 63.33% and remaining has been contributed by the retail and the corporates. Then, taking another update, the total borrowings which the company has done. Every quarter, as I said, in totality, we have been able to bring down the cost by 60 paisa. In the same format, we want to continue in this financial year as well. Only one increase that has happened in the entire cost of fund, that was when we did the co-lending PTC, wherein we know that the partner which we have chosen, obviously, it was a smaller partner, so that's the reason. The entire cost has been jumped up, but that has jumped up with a small percentage only. Other than that, the overall cost of fund has been brought down by 60 paisa. The fixed deposit book, which was at the start of this financial year, which was hovering around 40-45 crores from the years now. Now, this year, we have closed at 80.83 crores, which is again a significant achievement, and that too at a cost of 8.83 percentage. So, this is what we want to continue, and for our structural liquidity and the ALM which we have filed, we have not seen a cumulative mismatch in any single stage, whereas the LCR of the company was always 100 throughout the financial year, and at March, we closed at 129% as an LCR. For the investment front, the company has invested in SLR, PTC, SLR deposit, collateral deposit. We had with the banks from which we took the term loan and fixed deposit with the banks. We have earned an overall yield of 6.98%. At total, the borrowing cost for the Q4 versus Q3, at Q4, I was at 10.09%. Whereas in Q3, whereas in Q4, we closed our total cost of fund at 9.48%. With a significant jump in one quarter itself, the cost of funds have been brought down. So another update, which we have said last quarter, we said that we are in talks with the equity investments. We are in talks with the equity investors. So they wanted us to close our financial year so that they can see the results and all. And we have kept them updated throughout the entire GFM. And we do have a call with them on the Friday itself immediately after the results. So what we will do as a next step is we will just wait for the term sheets first. And then we will try to close something out of it specifically within the next two to three months from now onwards. That's it from my side.

Over to you, Manit.

Manit, now we can continue with the Q&A session.

Sure. Thank you. We'll now begin the question and answer session. Anyone who wishes to ask question may press star and 1 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 handset while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Vinay Jadhwani, an individual investor. Please go ahead.

Yeah, can you hear me? Yes, sir.

Yes, Mr. Vinay.

Yeah. Yeah, I've been an investor in Muthud Capital for the last 8 to 10 years. In earlier times, there was a management with Madhu and Vinod. Then there was management change. And currently, as we know, Ramandeep and Matriz has joined. So we were expecting good times since last 2 to 3 years. And We are still waiting for that to fructify. As you know, debt holders, you issue debt, securities, and you take in all that kind of debt, they get interest. But we as an equity investor, we are getting nothing for last 8 to 10 years. For the policy, once I was asking that we should be getting dividends, other finance companies also do profits and they are also doing finance like Mahindra, Mahindra Finance and other companies, they also give dividends to the shareholders. We are not even getting dividends. We are not getting any capital appreciation. In all the last phone calls, we have been told that things will get better. What kind of patience are you expecting from the investor, actually? I don't understand. Usually, either you are not getting the future quite right or what's happening, I'm not able to understand. But what we are getting is that only assurance that now things will improve, now things will improve. If you will clarify, that will be very helpful since we are waiting very patiently for the last many years. How much patience would you expect from us? That's my question.

Okay, so thanks, Vinay, for the question. First of all, you know, when we took over the company, the company was stagnant on 2,000 crores for seven consecutive years, right, from 2019 till 2020. Three and 24 when we took over. In the last two years, the AUM of the company has grown from 2,000 growth to 3,500 growth. So, there is definitely, and this year we will, so within three years, it will be more than 100% growth for the AUM. So, that is very, very clear that, you know, your patience is paying fruits. That is number one. Number two, on the profitability, our impact has gone up because of the fact that we have added many verticals. For 30 years, we were only a two-wheeler loan company. Today, we are a multi-product company, and that is the way I would expect the company to grow. We have now a fully grown CV vertical, a used car vertical, and then we have a renewed focus on fixed deposits. So we are a multi-product company today. We are starting online FD sourcing now. So on all the friends of business, we are growing, but because of the proportionate expense in cost related to adding up new verticals and also the amount of spend we have done on the IT and digital infrastructure, Today, we are a fully digital organization. So, our profits have been slightly subdued to that extent compared to our growth. But you need to appreciate the fact that AUM by this year and would have doubled over the last three years. Okay. And that's a significant move in terms of what has happened over the past so many years. Okay. So, that is one. On the division side, Raman, will you just take that question, please?

Yeah. One thing, sir, I want to add, when we took over this company, the GNP of the company was around 24.5 percentage, right? So, it's not easy, you know, when we need to start the entire process, the entire recoveries, you know, starting from the soft bucket, it used to be outsourced, which has significantly increased my cost of recoveries as a whole. So, we need to set up, that's the sole reason that, you know, the companies enter into web answers like Cocoa Lending, wherein, you know, we can increase our business at the same time, you know, relying on the partner's, you know, underwriting skills, and we can see that, okay, different geographies we can enter, but our GNPA should remain at a static level, at least for the incremental portfolio. At the same time, we took call on the GNPAs on the previous portfolio, which I explained as what we have done with the ARCs and how those ARCs portfolio are doing well. I hope that since those ARCs portfolio are doing well now itself after six, seven years, and then we have allowed them to become as a GNPA at the start, which is something which is not in our control when we have joined. On the dividend front, yes, since you know that the profitability was extremely lower, and I completely agree with you that being an investor for, say, seven, eight years, I am also an investor in so many companies and all. I completely understand this pain. But the only thing is, you know, whatever was the form of the company, whatever was the thing, we have found out a way now that, okay, even if I just wanted to take it further, even if the business here, you know, sorry, even if the business plan, That the company has framed for this financial year. It has framed keeping in mind that whatever new product which we have added and whatever was the existing one, which was in the form of two-wheeler, we made sure that company as a whole has defined an ROA first, and then based on that, everything has been said, okay, if this is the kind of growth we want to achieve, this should be a number wherein we should contain our impairment, we should contain our GNTA. So, this is where, so that, you know, we should have something, we should have something very good in the front of the shareholder. And this is not something I am saying that we have to speak it about after the end of this financial year. Quarter on quarter, we want to see, we want to show the shareholders that what kind of growth, because we have found some formula, okay, this is the kind of, you know, adjustment which we want to make. And even if you see in Q4, multiple hits we have taken. Otherwise, the profitability for the standalone Q4 would have been extremely good. So we have found a way. Obviously, you know, some calls need to be taken, which we have taken. That is the reason the profitability for the year as a whole was extremely lower. And Q1 was also a loss. That was the sole reason the dividend was not there, but yes, we will make sure that this kind of situation and all should not occur in future. That is something which I really wanted to say.

What happens, sir, whenever the results come out, first of all, there is a fear kind of a thing. Is this quarter going to be okay? My first point is that it's still an impairment. And again, I see, oh, again an impairment increase 20. No, no, no, no, Vinay, Vinay, Vinay.

I just wanted to say something here. The impairment which you have seen here now, that is also taking our impact of the right of account which we have done. Okay, around 7 crores, 7 crores. Of impact that we have taken in the impairment for this. And all these accounts pertains to pre-COVID era itself that also have explained while I was speaking. Okay, overall impairment, then that's the reason I stressed on the fact that flow forward was only 0.43% and then the overall stage 3 is going down, down, down. That is the reason I am explaining this again and again, Vinay, sir. So what kind of profitability for

this year we can expect finally so that we can think that now we'll again have a, I can again wish and expect and wait for one more year. So what kind of profitability we can expect for this year? I am asking just for profitability, because I am an equity holder, and I just want to, like, debt holder look for interest, you look for profitability. Yeah, simple.

So, I understand your question. That is the reason if you see at the start of this call, instead of, you know, saying that what is the kind of business that we have done, I just took my call into the four factors, which is very important for equity holder. What is my AEM? Where is my asset quality? Where it is going? What is the GNPA now? And what is the part of the company? That is the reason I stressed on that. Now, since I am again saying there is a formula wherein we have started working, okay. Now, I will not say like that, by the end of this financial year, you will be having this and that. This is something, you know, which is again planning something for, you know, next 12 months or so. Quarter on quarter, we wanted a shareholder to see the results now, because as a first one thing, which has, even if you see for the whole financial year, which we have said it, you know, that the impairment expense, that has, you know, gone substantially. For the whole year, I have booked 76 crore of impairment expense, right, sir? Whereas last financial year, it was only 1880, 18.5 crore itself. That is where the entire profitability juice has been taken into. So, we should appreciate that in Q3, it has gone substantially down, and in Q4, it has gone against substantially down. Now, these calls, at the end of the year, we have to take that, okay, one corporate loan account. Otherwise, I have to take all these calls in Q1, Q2, because once we know that, okay, this financial year, we have been able to manage till Q4, sorry, till Q3. So there are a few calls we can take in Q4 so that everything should remain in control and we can have a fresh journey with the new portfolio, whatever we have sourced, while the new management has taken over. So with that, you know, we should start providing the result from quarter on quarter. So this is something, and then one more thing which I have just said, and I just want to reiterate it. The entire profitability of the company which we have made in this financial year, entire business plan, has just kept in mind, okay, there has to be some good-looking ROA of the company. You know, pre-tech ROA of the company should be 2.5%. This is what we have taken into our account, and these are the results which we wanted to show from quarter one itself. Okay, the business plan which we have targeted for April, May, June, and the impairment. Now, this is getting reviewed every month with each and every income side and each and every expense side. Is there any slippages as of now? When we are saying that, it is no. So, which means that, okay, we are going in something good that we are going to do. So, this is the limited answer from my side, Vanessa. Just keep that. I'll request one more thing. Please have some faith, you know, wherein we want to develop this.

I'm having faith and I'm having patience.

Yeah, yeah, yeah. Vina Matthews here. I, you know, invite you to have a, at any time, as per your convenience, have a personal one-on-one discussion with me and Raman, which we will take you through all the changes that we have made in the company, all the initiatives that we have taken, all the AI things we have implemented, all the digital things that we have implemented. We have completely revamped the institution, okay? You have to see it to believe it. I am okay. We can meet somewhere where you are stationed in Bombay or somewhere, or we can have a call and we can show you the entire thing, okay? We are confident about what we are doing, very, very confident.

Sure. Thank you.

Thank you. The next question is from the line of Tejas Kandelwal from Prudent Equities. Please go ahead.

Hi, sir. Thank you for the opportunity. As you have said that we have grown our AUM, which I agree, but, sir, the growth is meaningless because our profit is not growing at all. And our net NPS and gross NPS continue to deteriorate, and our net NPS are now above 4%. And at the time of such bad NPS, our provisioning coverage ratio still remains around 50%. Now, this again raises the concern that profitability is being protected at the cost of balance sheet. And, sir, even in the last quarter, provision reversal had materially supported our pad. And now, sir, we have now seen almost five to six consecutive quarters of weak performance, and our disbursement has also not grown enough. So, sir, my question is, now, even if you have replaced the new head of collection, But sir, after all this, if the present management is unable to deliver a visible turnaround after such an extended period, then would the board consider bringing in the different leadership team with the strong execution track record or something?

No, I think we'll have to get some numbers right. First of all, you admitted that there is an AUM growth. Number two, you need to look at the split of the AUM. Okay, when the new management came in, we did not have a sales team to do business. So the immediate step was to stop the AUM from further degrowing. What we did was immediately build a few co-lending partners, and in the first year and almost through the second year, about 60%, 65% of the growth was coming from co-lending. Okay. But by that time, we built our own team and we built capability for doing our own business. And with the fact that we saw some stress in co-lending partners with our partners, as Raman has already said that one account has gone NPA, we took a conscious decision to stop the co-lending business as a whole. Okay. At some stage, our co-lending business was 900 plus crores, which was one third of our business. And that was a zero NPA portfolio because that was the arrangement with the call lenders where they would give only the best cases to us. So, there was a pool which is now degrowing, which did not have an NPA, and our pool is growing, which will have naturally some amount of NPA, and that is why it is apparently showing us a higher NPA. But it is not that our portfolio quality has deteriorated. It is the fact that the denominator, which was zero NPA, is flowing out faster. The 900 crores last year has come down to 500 crores, which will almost be zero by this year end. So, whatever we are doing is our own business, and we are confident about what we are doing. The board is fully confident about what we are doing. We are praising them on every initiative that we take. Our AEMs are growing. We are moving the way our strategy objectives, which have been defined by the company, is growing to be on a fully digital organization and AI-driven organization and diversify the portfolio. So all these years, 30 years, we were only a two-wheeler loan company, which is not a very good thing to do because two-wheeler typically happens to be a higher delinquency product. Okay, so we've gone through all the cycles. We've seen that the organization is resilient. We've seen how we can turn around from different situations. And therefore, the board and the promoters are confident about the management and will continue to grow. On terms of our profit being subdued, as I again said, we have made a lot of investment. We have put two whole new verticals of CV and CE, and there is a India team now. Those two businesses are only being supported by the two-wheeler business. They are not breaking even now. So, the entire cost of two verticals has been borne by one vertical, which is a two-wheeler loan business, which also went through its own challenges because of not just our own issues, but macroeconomic conditions, like we are a very closely related business to the MFI segment. And MFI saw huge stress. You saw the MFI stress spill over to unsecured lending, unsecured lending. But despite all of that, we've been able to, while make small, though it is smaller, but we've been able to make profits across the quarters. Now, two things you have to keep in mind. We are, the two-wheeler business is supporting that stress. Two-wheeler business is supporting outflow of a non-NTA pool of co-lending. The two-wheeler business is supporting two whole new verticals which have come up. The two-wheeler business is supporting a whole new initiative of digitization AI. All of this involves a lot of cost. Okay. After having done all of that, we've been able to come quarter on quarter and show you some results. Of course, I know this is not to the satisfaction of the investors. It's not to the entire satisfaction of us also in terms of the results. But we are fully convinced about our actions and what we are doing, and we'll continue to do what is right for the company. That's my answer.

Sir, one thing I want to add, a few numbers, sir, I think, because sir has said that, you know, in Q3, we have done some PCR change and all. I'll tell you, sir, my NPA is, you know, since you must be having this PPT, you can also do the same number with me. We have reported an NPA of 209 CR. Okay. While in Q3, we have reported 211 crores. You can just see PPTs with you. Okay, 211 crores we have reported. Now that 211 CR was the entire retail NPA. Out of that 209, just subtract 15 crore from the up money, which was the corporate loan. It would be 194 crore, 194 crore on a book of 3,441 crore. It comes as a GNP as a percentage of 5.64 percentage as compared to 6.45 percentage in Q3. So you tell me, sir, why that you tell me, sir, that whether the NPA has gone down or increased. If you compare Apple to Apple, you compare our PCR, and then you say, because the statement which you have made the NNPA has increased. NNPA in my Q3 with the PCR of 50%, that was a conscious call we have taken, because we know that our retail portfolio is performing extremely well, was 3.64%. Without, and just comparing Apple to Apple with retail portfolio, my NNPA would have been 2.82%. So, this is the kind of change which the company has made. Yes, Mr. Taylor, over to you. You can ask now.

Yes, so, as far as I can see, sir, our NPS have bottomed around Q2, Q3, F25. After that, they are raising and NPS will cross now 7%. So, which is, I think, concerning. And the second thing is, you have talked about the growth in AUM. But, sir, our disbursement has not shown any growth, both quarter-on-quarter and both year-on-year. So, I don't know when, at the time, when the entire auto sector is booming in India. I think you are missing the golden cycle.

Yeah, sorry to interrupt. First, I want to take this question on the NPA first. You said around 7% in general. I want to know this calculation, how you are doing it. Apple to Apple, you do that. Retail to retail. Corporate loan, up money was an excluding sector, which we already told on that. We already have a security with it. Just exclude corporate loan, then you inform us that where we are on our NPA. Because at the start of the call, I myself has said that we were at 0.85% as a flow forward towards the standard AUM. That has gone down up to by Q4 as 0.43%. That I have accepted that at the start of the year it was like this. But now it has been halved. It's only 0.43%. So I wanted to know what make you say that it was 7% and all. I just want to know the statement, sir.

I mean, in presentation, you have given the 6.96% of GNPF. Yes, sir. It's around 7%, right?

Yes, very correct, very correct. So 6.99, that is the reason I'm explaining. While answering your question, I said 6.96%.

That's what I said, that gross impact is running towards 7%. That was what I said, and then second was on the growth, which you have said that you're growing, but your disruptions are not growing. And the entire auto sector is booming, so I think you are missing the golden cycle. So that was what I said. I don't know what you're talking about. Okay.

So, sir, this is what it is. So when I, again, I'll repeat that, or this 6.45 percentage, 6.89 percentage, whatever it is, or the NPA, when at the start of the, your question, the question was that we have changed the PCI, this, that, and I wanted you to have a comparison on the retail to retail. That is the reason when I was explaining my call, I said that the company has taken up money as a corporate loan, as a hit of 15 crore, as a one-time hit. That has led to an increase. If you reduce that component, you compared Apple to Apple, your NPA would be 6.45 percentage in Q3. Now it is 5.64 percentage. So it is below 6. That is how my retail portfolio is getting executed now, sir.

On the question of the growth, again, I clarified in my response. Earlier, we were growing MCSL plus co-lending. Today, we are growing only MCSL and we are at the same level. Okay. So, if I add co-lending, I can grow another by 50%, which we don't want to do. That's why we are not doing. It's a conscious call. We are very clear of what we are doing.

Okay, sir, what growth should we look at in FI 27 on the AUM side and on the profitability side also?

Tejas, sir, one more thing. Sir, I want to take this question. Tejas, sir, on this slide 7, which we have shared, if you can open, if you have that in front of it, in front of you. The growth, which I wanted to say that NCSL portfolio was 2118 crore. That has grown up to 2758 crore, 29% of the growth which we have recorded. Sir, I believe that is in line with the industry. The only answer to say that there was some degrowth, which was around coal ending growth, which has been degrown by 40%. 940 crore has become 595 crore. Okay, sir. So, we wanted to grow the MCSL portfolio in the same lines in this financial year as well, sir.

Okay, okay. And on the profitability front? What kind of ROA have you decided internally?

So, while doing the business plan for the company, the cumulative ROA which we have taken, because we know that two-wheeler is an existing one, while four-wheeler and CV are the new ones, wherein they need to perform extremely well and which they are doing it as well. So, we are expecting that either of two will get a break-even in this financial year, okay, but we have not taken while computing the overall ROA. Pre-tax ROA, we have computed as a whole for MCSL would be around 2.5% to 2%. This is what we wanted to say. Okay.

Thank you so much.

Thank you. Thank you. The next question is from the line of Vinod Prishna from Evin Deswell. Please go ahead.

Sir, I have an audible? Yes, Mr. Vinod. Sir, how far is our 10,000 crore ohm and 3% ROI or 4% ROI target? And are you now confident about the business model that you have said because you are talking, you have invested in digital AI and collections and, sorry, in sourcing from only our portfolio? So, and also North, because we have done, for us, North is new. So, how confident are you that your business model is set in north and about the growth and what do you say, how far is that 10,000 tour? So, if I can, how confident are you from the way you are set up the new, once the new team has come?

So, we are very confident about the 10,000 crores. That's why we put up that number on board. And we also, this year, before budgeting, we again went through all our strategic objectives. We have retained all of them. We are looking at 10,000 crores by 2829, somewhere thereabout. And the path this year is we have definitely crossed 4,000 crore AEM. Somewhere close to 4,500 crore is what we are looking at. But we will look at the evolving situation because of the, you know, ongoing crisis and all that. We don't know how it's going to impact India. You already heard TM say a few things yesterday as advisory. So we will look at the evolving situation. We want to go quarter on quarter. But we are very, very confident about our business model. We are confident about our team. We are confident about the locations that we have opened up in the north. All the locations are doing well, and we will continue to scale there. We will go in a calibrated manner in north. We will not expand to all the markets. The markets where we are present currently, we are comfortable, will continue to grow. Other than that, we are expanding in newer markets where we did not have much deeper presence like Maharashtra and Tamil Nadu. Both of these are very, very good markets, but our presence was less where we are going deeper into that. And we are very confident about our business model and the team and the initiatives that we are taking. Thank you, sir. Thank you.

Thank you. The next question is from the line of Ankur from GenCapital. Please go ahead.

Yep, thanks. Matthews, him and congrats. I think you guys have been navigating a very, very tough environment. Matthews, I think you complete three rounds, so congrats on that. First question, if you can give us more color on the team build-out that you referred to, how is the collection and BD team shaping up?

So, collector and the second, what was the theme, you said?

Business development team.

Business, okay. So today we have, you know, completely divided the company into various, you know, SBUs, okay, strategic business units. So we have a business head for two-wheeler business. We have a business head for car, UCL. We have a business head for commercial vehicles, and we have a business head for the group relationship business. So, which is all the group companies. So, we have been only getting business from Mutut FinCorp for a long time, and that used to contribute almost, you know, 85-90% of the group relationship business. This year onwards, we are going with Mutut Microfin, and Mutut Microfin has already signed up with us, and also CHIT and Mutut Housing Finance in a small manner, while the volume will not be large, but the objective at a group level is that when we do scrub on individual company base, we see that a lot of customers go outside of Mutut's ecosystem to take loans, which is already available in the Mutut ecosystem. So, that is something at a group level we are trying to keep in-house. So, all group companies carry, you know, one is to four targets, which is one customer should have four products within the group and all that. So, those kind of initiatives are happening. Swincor will continue to be the largest one. So those are the four business verticals. We have a head of collection who takes care of all the four collections, but he is supported by zonal heads in the north, east, and south. That's our portfolio is not that big. So as of now, we don't have a zonal head there. But as and when the portfolio grows, we'll have people there also. Other than that, we have today a full-blown, you know, what do you call, audit function, compliance function, risk function, credit head and credit team. Most of our two-wheeler credit has been automated through scorecards. So, largely the team is for car and CV which still is manual in terms of while the flow is digital, but the underwriting happens with the manual interventions. We have a full-blown now legal team. So, all verticals, so some 17 HODs report into the CEO, all of them are full-fledged departments. So, all of these are investments, and we've invested a lot in compliance and governance, which is reflected in our upgrade, in our recently conducted RDA audit and all that. So, all of these are resulting in, you know, very good software aspects of the business, and, of course, we know that the investment on the business side is going into developing all of these. So, we are building our organization from the very foundation. Okay, and the results are there to be seen, the promoters are happy, the board is happy, and we will build it, we are confident about it.

So, given the current cost base, what kind of cost to income ratios we should look at, let's say, F27 and F28? Is the cost, most of the cost, or is it more cost coming in?

Sir, as I said earlier, you know, we do have two new products in line, which is used car and CV, right? So, therein also the business is increasing extremely well, and either of two will get a break-even in this financial area itself. Therefore, when we talk about MC as a whole cost to income, yes, it is very high as of now. We target slowly to bring it down, and obviously, the good target is to remain at around 60-40, which is not now as of now, but yes, for this financial year, we want it. Right now, it is 85% wherein we are standing as of now. But, you know, when we know that the overall cost, when we say that for two things which is really helping us out now. One cost which has helped us out throughout the entire financial year was the cost of funds that has gone down by 60 paisa, and then on the new incremental funds which we are going to raise, which would be around 3,000 crore, on that 60 paisa would be having a huge impact, number one. Number two, which I will say that, you know, the cost of impairment, wherein we are seeing some good results starting QQ3 itself, and Q3 and Q4, we are seeing, we are hoping that if trend gets continued in Q1 and Q2 itself, we will be having a good margin for our cost to incomes as well. So, I hope that Q1 would be good, and based on that, for the entire financial aid, we can still project that, okay, we will not achieve as per what we wanted as 60% to 40%, but yes, we will be somewhere around 70-75%.

Raman, two follow-ups. One, how much equity are you planning to raise and will it come from promoters? Second, you mentioned 3,000 crores. Is that the debt that you will take over what, one, two, three years?

Yeah, understood, sir. So two, answering both, sir. Number one, as I said at the start of the call as well, we got two investors during the last year itself, but you know that, you know, Q1 was not that good, and Q2 we improved, then Q3 and Q4. Q4 we have been able to show some, you know, good. That is the reason I'm focusing on my portfolio as a whole. One surprise in the corporate loan has come, other than that, the results, as per me as a CFO, was extremely good, and the performance in terms of the asset quality has been significantly improved. Okay, so we, so this, this, these results have been, so we have shared this with our new investors as well. Not confirmed though, but yes, you know, they want to do us some due diligence on the final results and all, which they will start now and immediately after the AGM, they will take the entire balance sheet to review and to reflect. So we are targeting around 400 crore, you know, wherein we, the promoter also wanted to contribute. This round would be more in the form of CCPS. You know, why? Because this would be more of a milestone based. The valuation of the company is not that great, which you already know in the market. So, that is the reason milestone will play a very significant role here again. So, we wanted to target a 400 CR itself, wherein 200 would be upfront and 200 based on some milestone which we want to do. And then, yes, promoter wanted to, they always wanted to take a substantial share. Right now, they are at 63.63 percentage. Obviously, they want to maintain somewhere around more than 51 percentage throughout. So, this is one. Second thing on the 3,000 crore I said, this would be my total borrowing which I am planning. On that, you know, the cost of funds, as I said, because when we talk about the RO as a whole, it doesn't, sir, it doesn't come only from the impairment and from all. While saving the, you know, small cost and now it has become so big, that 3,000 crore percentage of 60 paisa, that will contribute a lot in this financial year on the overall RO of the company, sir.

Okay. I want to add something where Raman has left. So, earlier I had mentioned in reply to Vinay saying that I invite all of you for a more detailed, you know, demo where we can take you through individually or collectively through the processes that we have put in, all the improvements that we have made, which will actually give you more confidence in what we are doing. So, that offer remains, and I'm happy to invite as many of you are joining that thing. But in the current moment, I want to add a few initiatives that, you know, on the cost saving. So, our entire two-wheeler today underwriting, and we have also got AUA, KUA license from, you know, UDI. So, our KYC is going fully digital from this month onwards. Till now, we were looking at various options. Some was manual, OCR, and all that. Now, we are enabled on safe authentication and biometric authentication. Our entire KYC is automated. Our risk underwriting is automated through scorecards. So the last leg was, so once the credit underwriting becomes automated, we had about 30 odd people doing two-wheeler credit. Okay, that team will now get reduced to three or four because they just need to monitor the BREs. So that entire cost, we move to the car and CV where we need people to do the underwriting even now. So while we are building these two businesses, we will not be adding that much incremental cost because of the saving that we are doing here. On the second leg, the last leg of the disbursement process of two-wheeler, which was operations, used to be manual. Thereafter, the KYC is done, then the underwriting is done. A few people, again, some 40, 45 people were sitting and looking at files, looking at the invoices, insurance, margin money, etc., etc., and disbursing the files. That leg, we have developed an AI tool and made that automated. Today, we are getting about 65% application level FTP on that. So that over a period of time, the next two, three months, because it's a machine learning model which learns and improves, we expect to take it to 90%. In which case, instead of this 45 people, I need only five people to do that entire life. As of now, all these costs remain with me. The credit costs, the operations costs remain with me because I can't send everybody home. But these are rationalizations that we are making, which will, in the time to come, improve, because even with increased volume, I will not be adding more people, because all of these are automations that we are doing. It will not reflect in any balance sheet, any P&L account. These are all things which I can show you to have a chance to speak to you individually and demo. There was a huge amount of cost that I was incurring in terms of, you know, name match, face match, address match, geo-distance monitoring in each application. So there were geo-distance restrictions. If a customer says beyond 40, 50 kilometers, we will not do that loan, et cetera, et cetera. So all of these used to be API calls to external vendors, which now we have built in-house, and from the month of May, it is in-house. So that used to be a 3-4 crore bill for me in a year, which will not be there from this month. So these are all, you know, none of these come in any of the published figures. These are all initiatives that will gradually improve efficiency as well as reduce cost for the organization. And these are the things that we are implementing, and implementing with full support from the board and promoters and everyone. So we are very confident that we are in the right track.

Yeah, since we had the chance to meet Microfin Management in Mumbai last week, so a lot of initiatives that you are talking about, I think they've already done, so you have a good... Good learning ground there. Just one question, if you guys can hold one in West today, either in Kochi or Bombay. We can. That's a good suggestion.

We will do that.

Is it fine if we drop a mail to Deepa to coordinate that?

Yeah, please do that. Please do that. We will be more than happy to come in with all our initiatives.

Yeah. So, fine enough. I will pick it up with Deepa and comment and all the rest of us.

Thank you.

Thank you. The next question is from the line of Shiti Shvarma from Rest Azure Group. Please go ahead.

Hello, Gouda from MI, Audible.

Yes, sir.

Yes, sir. Yeah, my query was, as you're aware, in the upcoming year, we have certain, you know, events against us. For example, they are saying there's an El Nino problem, there's a heat wave problem, there's a war, supply chain crisis. Are we worried about the ARC security receipts? We may have to take a write-down there also because of it being in the legacy book.

As of now, we see no challenge. I think these are peripheral issues. It still needs to be because India is still reliant on domestic consumption. The direct impact to any of these countries is very, very less. Yes, we still need to see how the crude oil prices are going to impact broad consumption, but we don't see, as of now, we have not seen any other thing. We had a detailed report coming to us from Crystal. Even Crystal has not, you know, while they have flagged off, they have put red flags in terms of overall slight slowdown and all that, But they are predicting good credit growth, not much impact on repayments and all that. As of now, we are not very concerned on any of these things. And if you look at the ARC, in the first ARC, we have only about 25% or 26% remaining, and the second ARC is a little over 40%. So the dangerous part is already behind us now.

Okay, sir. And so certain banks, the major banks have taken some countercyclical provisions. We are not keen to go towards that. You are confident that because the segments we lend to are susceptible sometimes to macro shocks more, but we are confident that our underwriting will sail through it, right, on the new book or the last one year book, which we have built.

Yes, the last one-year book has been behaving extremely good. So we have recently taken a, you know, last quarter we took the. We have a Credit Insights dashboard from one of the credit bureaus where it gives comparison between you and the peer group. So, we can set the peer group. Obviously, they will not give you one-on-one, but they allow us to set a peer group. So, we have set a couple of peer groups and we do a comparison. We are way below the NPA levels in the incremental portfolio when we compare ourselves with the peer groups. So we are confident. And, yeah, I think if there is any drastic shock coming out of all these developments, we can't predict. But as of now, the way it looks like, I think we are pretty much confident. And that's why I said that we are looking at a calibrated growth. I don't want to go very, very aggressive. While even today, I think the industry is still steady state. On a steady state basis, it's not shown any dip. So, I would still like to tread with caution in terms of new onboarding, and therefore we are not entering into any new geographies this year. We are only going deeper in the places where we are already present. So, those are the checks and balances that we are keeping in mind.

Okay. Thank you, sir. That's all from my time.

Thank you. Thank you. Ladies and gentlemen, we take this as a last question. I now hand the conference over to the management for closing comments.

Thank you so much. You know, it was nice interacting with all of you. Once again, as I mentioned, I would, you know, we would like to organize a smaller group meeting with all of you and take you through all the improvements that we have made in terms of our business, our investments. And we want to highlight our, you know, thought process for the years to come. We would really love your participation in that so that you also get confidence. I know some of these questions come out of your own, you know, frustrations and may not be able to see the results that you are expecting. But, you know, as they give the bamboo analogy, we are building the roots, and we are building a real strong root, so that you will see that 10 grow very fast in the time to come. So we are very confident about what we are doing as a management. Our board is fully in support of us, promoters are fully in support of us, and we will deliver the results. We are confident about that. Thank you so much. And keep, stay invested in us. That's the challenge we can give you. Thank you.

Thank you. On behalf of Ilara Securities, that concludes this conference. Thank you for joining us. You may now disconnect your lines.

Thanks, Manit. Thank you.