Earnings Call Transcript - XNSE:MUTHOOTMF 2026-11-06

Operator

Ladies and gentlemen, good day and welcome to the Muthud Microfinance Q2F527 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference has been recorded. I now hand the conference over to Mr. Arun Anthony Nalkara. Thank you, and over to you, sir.

Arun Alkara

Thank you, Avrit. Good morning, everyone, and welcome to the Q2F527 earnings conference call for Mutut Microfin Ltd. So far, I would like to thank the management of Mutut Microfin for giving us this opportunity to host this call. From the management side today, we have Mr. Thomas Mutut, Chairman, Mr. Sadaf Syed, Chief Executive Officer. Mr. Praveen T., Chief Financial Officer, Mr. Uddish Ullas, Chief Operating Officer, and Mr. Rajat Gupta, Senior ABP in Mr. Relations. I would now like to hand over the call to Mr. Sadaf Said for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Sadhav Saeed, CEO

Thank you very much. Good morning, everyone. Thank you for joining the earning call of Matruth Microfin. We are discussing here Q2 results of FY27. I trust you have had the opportunity to review our financial results, investor presentation and press release, all of which are available in the stock exchange and our company's website. Before I get into the numbers, let me highlight a few key developments for the quarter. We recorded our highest ever quarterly dispersal of 2,900 crore. We kept our credit costs within the guidance range of 2.5% to 2.3%. We were at 2.6%. Brought our average cost of borrowing for the first time in the industry of the company in single digits. We are at below 10%, 9.93%. And reported a quarterly profit of more than 110.8 crores for the quarter standalone. These results reflect improvement we are seeing across our business. Our portfolio continues to grow. Collections have strengthened. Our lending mix is becoming more diversified, and our funding costs are easing. Importantly, we have been able to make this progress while maintaining discipline on asset quality. The measures we have taken over the past several quarters are now beginning to translate into better operating and financial performance. At the same time, we remain watchful of the macroeconomic environment, particularly this year's uneven monsoons. The Alignino conditions have led to a drought-like situation in Maharashtra and Karnataka, and we have mapped our exposure to these districts where the deficit rain has been there. If you can see our presentation, we have given a particular slide. The exposure for us is very limited. It's around 3.6% of our portfolio is in these two states, which is an on-book portfolio, about 550 crores. Thank you. There are 34 districts which are affected in these states combined, some severely, some a little bit moderately. With Karnataka, it amounts to just 0.49% of our on-book portfolio. 3.1, but It has a natural calamity cover, the NADCAD insurance that we are offering to our customer. And as I mentioned in our last call, less than 2% of our portfolio is directly dependent on agriculture or any rain-sensitive areas where they are located. So from that perspective, the portfolio is very well insulated. We have also given in our collection efficiency numbers, the numbers for October. We have seen in October collection efficiency, overall collection efficiency further improve. Our collection efficiency for the quarter is at 98.1%, but for October, it has reached to 99.2%. And I can also appraise you of the presentation, which we have for November. The ENAS presentation, the first is the date for that presentation. So yesterday was the date. And we have seen a 2% improvement in presentation clearance. So overall, the collection efficiency and the collection scenario remains to be positive. So far, we have not seen any adverse impact in our collection. Impact collection continues to improve. Our collections have remained steady. Our field teams are staying close to the market, and they can pick up early signals and add the… It helped us to limit the impact of Fengal Cyclone, which was in Tamil Nadu late 2024, and kept our portfolio largely unaffected through the floods and heavy rains and even the recent monsoon deficit and also the rains in certain areas which have been heavy. So even if the condition worsens, most of our customers in these areas have support to fall back on. With limited exposure, strong insurance cover and study collection, we do not expect a material impact on our business at this stage. Coming to our business performance, we dispersed 2,900 crores in Q2, a growth of 28% year-on-year and 10% over the previous quarter. Taking our first half disbursement to 5,545 crore with a seasonally stronger second half and festive season ahead, we expect this momentum to remain healthy. Our AUM grew by 22%. This is above our guidance of 18 to 20%. We closed the quarter with 15,323 crores of asset under management. Uh... We had revised our guidance to 20% last quarter, and we remained committed to it. We will definitely achieve the guidance and may go beyond. One of the areas that we have focused on is portfolio diversification. We have made very good progress in this. Right now, our portfolio, the breakup between JLG and non-JLG products remains 69-31. This was around 83-17 in the end of March. We targeted 70-30 mix for the year, but we have already surpassed it, and we continue to build a stronger portfolio there because we are seeing very good response in terms of take-up and also the asset quality. A large part of this growth has come from individual lending business, particularly the small and growing business. This portfolio has now reached... 1,164 crore, accounting to 27% of our total AEM, and performance has been very encouraging. Delinquency level remains very robust. We have given our presentation, 90 plus is just 0.02%, and it is almost like two years into this portfolio. So the performance is reasonably seasoned. Of course, it has to see a little bit more time, but so far, we don't see any early indication. The way we have built this portfolio is also very important. We have largely graduated our existing JLG customer who have demonstrated a strong repayment track record and have a credit score of 700 and above. So this is a portfolio which is graduating our customer, and we are carefully selecting our customer and graduating. Out of the 32 lakh customers, we have graduated so far 2.7 lakh customers, and these are all customers who are having. A long-standing relationship with us, a long-standing relationship, and a 700-plus. Co-lending partnership with our parent company, Mathuton Corp. We have dispersed around 453 crores of gold loans during the quarter. We are seeing very encouraging traction in secure lending. We have also started disbursement under Microlab, which will further expand. I can update you in the month of October. We have crossed 100 crores AUM. In Microlab portfolio as well, and this portfolio is also behaving very well. We have also around 18 months of seasoning on this portfolio. The delinquency is near zero in this as well. Overall, our active customer base stands at approximately 32.7 lakh. Of these, around 50% of our customers are unique to Matut Microfin, while another 31% are us plus one. So, almost 81% of the customers are having either us and one more relationally. And that has been our focus effort to retain our good customers and continue to increase our wallet share with our customers. Let me also talk about the work we have been doing to improve operating efficiency. We have taken several steps over the past year. And we are beginning to see the results. First, we introduced a branch profitability module under which every branch is assessed on its revenue, operating costs, and credit costs. This has helped us to identify branches that were not generating adequate return. We identified 80 such branches and have since taken steps to either merge, rationalize, or redeploy resources. Secondly, we have centred our underwriting capabilities through in-house credit scorecard developed by our own trustee. We have also made significant investment in technology to improve quality and speed of our credit assessment. For instance, through our generative AI initiative, discussion with the customers are recorded in local language, And there's a credit memo automatically prepared, whether the system can analyze all Photographs that have been clicked through the PD and give a recommendation in terms of the credit worthiness of the borrower. We are using account aggregator platform to get the banking information. We are using EKYZ, E-Sign, and very easily digitizing our repayment mandate also with the customer so that there is an E-NATCH collection. As a result, we have been able to also improve our digital collection. Now, digital collection amounts to 47% of our overall collection month-on-month basis, and the guidance of 75% that we were guiding for 2030, we are very confident that we would be able to achieve much earlier that 75% digital collection. The third and most important aspect is we have grown our new product. Without adding any new infrastructure. Thank you. The results are clearly visible. There is AUM growth per branch. We have reached around 9.1 crores outstanding per branch as compared to 7.3 crores a year. AUM per loan officer has also reached around 1.8 million, and OPEX. The GLP has come down from 7% same period last year to 6.1% this quarter, and most importantly, our cost-to-income ratio, which we were guiding that we would be below 50%, we are already at around 48.1% for standalone for the quarter, and definitely for the full financial year, we will be on our guidance, and we will bring in a lot more efficiency. Our aim for AUM per branch is to be around 12 to 13 crores, and OPEX to be brought to OPEX to AUM to be between 5.5 to 5.75. We are confident that we will be able to reach that number. And on digital collection, definitely we will reach around 75% digital collection pretty soon. On the network side, we have now 1,675 branches. We continue to deepen our presence in our core market, which is South India. While expanding our operations in carefully selected states, we have selected Assam, we have selected Andhra Pradesh. We have already, we are deepening up presence in Assam and Andhra Pradesh and Pilangana, and we will be also entering into Jammu and Kashmir very soon. And definitely these new areas where we are entering, that will allow us to acquire new customers and increase our overall client. Meanwhile, we continue to offer more products to our existing customers and cater to their needs. Most important improvement is in our operating performance accompanied by the improvement in asset quality. Our overall collection efficiency has reached to 98.1%, an improvement of 477 basis points if you look at year-on-year. Ex-bucket collection efficiency has reached 99.9%. Almost every rupee that is due is coming on time. On our GNPA, we have had an improvement of 32 basis points. It stands at around 3.38% as of now. Our net NPA is 1.05. And our provision cover continues to remain strong at 69.6%, almost 70%, with a credit cost of 2.6%, which is what we are guided for. All of this now reflects in our financial. In Q2, total income grew by 27%. We reported 733 crores of total income. And our net interest margin, which is a very important aspect, has improved from 12% to 12.5%, which is a very significant development that we are seeing. And it has both impact of our better collection, reduction of NPAs, so yielding portfolio has improved, and at the same time, reduction of our cost of funds. And our PPOV has any... And our ROA is at 3%, and ROE is 14.8%. For the first half, the total income grew by 23%, so 1,403 crores, and PTOP grew by 56%. This is in line with our guidance. Usually quarter three and quarter four are even stronger quarters. So we definitely feel that on the profitability guidance, we are on track and we should be able to achieve our profit guidance that we had given. Moving to the liability side. Last quarter, I said that with the benefit of our rating upgrade, which is Crescent AA-, our cost and fund will come down and reach a single digit by end of the financial aid. We have reached the end quarter to itself. Our average cost of borrowing has come down from 10.13% to 9.93%, and our incremental cost of borrowing has come down to 9.69%. During the quarter, we raised 3,213 crores, taking our first half fund raised to 5,946 crores. This includes 250 crores of N3D at a coupon rate of 9.25%. Both public sector and private sector banks continue to support us. More recently, we had a Care Edge global rating revised our outlook to positive. This builds on the Crystal upgrade and will help us access funds at a better rate. We have 4,328 crores of liquidity on the balance sheet and 4,328 crores of unawaited sanctions in our hand. So, liquidity is not a concern and we have good room to negotiate for better rates and going forward also, our guidance is that rates will remain stable and we will only be able to negotiate and bring them down further. Coming to the guidance, our FY22... We are confident of achieving it and on growth, we are on track of 20% AUM growth. On credit course, we expect to do better in guidance level. On net interest margin, we are confident of being on the upper end of our guidance. We will definitely do more than that. And on ROI, we expect to be also on the upper end and beat that guidance. 3.3% is the upper bracket for ROE, and 18% is the ROE. We definitely feel that we would be able to beat that guidance. And we remain fully committed to our long-term target of 30,000 crores by 2030. We have a strong capital adequacy ratio of 25.5%. And with the kind of profitability that we are seeing and the portfolio performance, we feel that our growth numbers can be achieved without raising any further capital at the moment. And we'll continue to grow with the same momentum and build our strong numbers and continue to pursue our strategy of diversification and ensuring that our customers get best products that are available in the market and best of service. We will continue to overachieve on our guidance as we have done. All the parameters that we have laid down on growth, as well as our asset quality, credit cost, our ROA, ROE, we are absolutely on track, and we continue to remain on track, and we are confident that we will achieve this guidance for the full analysis.

Ajay Dubey, Analyst — Individual Investor

I'll stop here.

Sadhav Saeed, CEO

I'll just give a context in terms of the industry. The industry has also come out of a difficult phase in FY25, and then there was FY26 recalibration, and now FY27, which is a phase where the industry and most of the leaders are seeing good momentum and good results. I feel that this momentum will continue. There is a renewed vigor, more calibrated approach, and there is no over-wellness. Here, people are following the same guidance principle that we had put in place as an industry, that nobody should have more than three lenders, and that even though the market has improved, we continue to follow those guidance. And be more vigilant about it and ensure that the customer gets better, but without getting over-leveraged. And in our presentation, you have seen that since FY24 till September, FY26, overall exposure among our customers has only grown from 62,000 crores to 64,000 crores. So there's not a huge increase in the exposure to the customer, but at the same time, Madhut Microfin exposure has grown from 12,000 crores to 15,000 crores. So we have been able to replace a lot of loans. And increase our wallet share among our customers without over-leveraging. And that is what our strategy is going forward also, to be the preferred lender, preferred service provider to our customers. Customers have already subscribed to their app. One of the new initiatives that we have started. It's a visa loan through the app where customers who are eligible for loans, we are already credit tested and we have checked their track records and given them the opportunity where they can transact directly through the app and borrow the loan. And this loan happens within 30 minutes, even faster, but right now it is within 30 minutes. And there is no physical interaction with the customer. In some cases, there is some assistance which is required that is provided, but most cases, there is no. Even on a weekend, on a Sunday, there are disbursements happening. I think that is the future of microfinance and also for Madood Microfin. We will be able to disburse loans, assess the customers over a flight, and we will be able to disburse these loans digitally. The improvements are coming very swiftly. We'll become a Where she doesn't have to come and subject herself to physical verification, she can do it online. At the same time, it's complete liberty to the borrower whenever they want to borrow, whatever they want to borrow, they can do it. And our credit assessment process is very, very strong, and we are able to assess the customer over a digital platform very quickly and make a decision on them. And this is a campaign-based product where already filtered customers are given this facility. And we feel that this will help us to maintain customer loyalty as well as bring in operational efficiency. I'll stop here, and happy to take any questions that are there.

Operator

Thank you very much.

Operator

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Varun Dube from Share India Securities. Please go ahead.

Varun Dubey, Analyst — Share India Securities

Good morning, sir, and congratulations on your strong set of numbers, sir. Sir, you have given in your presentation that around, you know, you have exposure to Maharashtra and Karnataka, about 3.6% of your portfolio and 82% is covered to NADCAT. What about the other states? I mean, what kind of exposure do you have? Because there are several states who have actually, you know, declared fraud. And would you go slow on disbursements in these states? What's your strategy going to be?

Sadhav Saeed, CEO

So, we are a well-diversified organization. We have coverage in 21 states. The affected states, which are majorly, are Karnataka and Maharashtra, for which we have given our number of 3.6 percent. In terms of other states, we have not seen any trend. For other factors like there were floods in Assam and Maharashtra in Bihar, we do not have any impact on those because we already have NATRAC protection. 85% of our portfolio is covered under natural climate insurance, so we don't see any challenge. And as far as disbursements are concerned, we are consistently disbursing our loans. So we have seen almost a 27% increase in disbursement actually. And we will continue to be on that track, but we are watchful of those districts where there is challenges. So definitely in those districts, we will adopt a calibrated approach and we will focus on more of secured loan product in those districts. And only customers who are paying as well, we will continue to give loan to them. If there is any disturbance, we will, of course, be mindful of that and we'll recalibrate what we want to do.

Varun Dubey, Analyst — Share India Securities

Okay, sir. So, you said about secured loans, but I mean, there are several companies who have been facing, you know, issues with gold financing as well, especially, you know, the smaller 10-year gold financing. So, have you faced any challenge in that? And what kind of, you know, asset quality has been there in gold financing? You can throw some light on that.

Sadhav Saeed, CEO

So we have not seen any challenge at all. One, we are conservative on our loan in LTV. Secondly, most of our assessment is based on income. So we already have a track record of the customer. We already have the income level of the customer. And based on their eligibility only, we are funding them. So, from that perspective, the goal lending that we are doing is very well balanced in terms of assessment of the capacity of the customer and tied up with the collateral value as well, and we are going conservative on the LTE. So over, we have not seen any challenge.

Varun Dubey, Analyst — Share India Securities

Thank you, sir.

Sadhav Saeed, CEO

Sorry, I didn't get the last question on this.

Varun Dubey, Analyst — Share India Securities

So the IRDAI glass regulation on insurance, what could be that?

Sadhav Saeed, CEO

Yeah, so I think... As far as the CGFMU credit guarantee is concerned, we have applied for it. There is budget allocation still awaited at the CGFMU level. Once that is there, definitely we are in the forefront of the queue. That would be available. Having said that, irrespective of whether we have a CGFMU or not, we already have a natural gravity insurance. 85% of our customers are already having that insurance. So, we don't see any challenge there. And related question with respect to IRDA, at the moment, it's a draft. We have also given our feedback on the draft. We don't see. This is an immediate challenge. I think once the final version is there, we would be able to comment on it, but at the moment, there is no impact on it. As such, the insurance revenue from our book is very limited. It is less than around 5% of our total revenue, so the impact would not be there so much. Even if the guidance, the guidelines come in the frame and form, which is there today. So on the overall earnings of our business, where it would not impact, we offer these products as a pass-through. So the customer, whatever premium they're paying, we pass it on to the insurance company, and they give the insurance cover to them. So that will remain for us the model. So you had one more question. Sorry, I missed that.

Varun Dubey, Analyst — Share India Securities

On the, you know, cost of funds, I mean, they have come below 10%, but now we are in a rising rate environment, so do you expect them to?

Sadhav Saeed, CEO

Definitely, we have seen the rate height of qualified BIPs, which has recently happened, and the pass-on of that. The situation is that there would be further rate hikes, but at the moment, we have been able to negotiate better. We have 1,700 crores of liquidity on the balance sheet and over another 4,000 crores of sanction in hand. So we have enough in our city for us to be able to sufficiently negotiate. So, one of the benefits that has happened with the individual loans and other products, which are a slightly longer tenor product, We have had a conscious... We have an effort of diversifying our source of capital. We have used the NCD. We have done a 250 crore NCD at 9.25%. We will further do more NCDs also, and as the global macroeconomic environment changes and there is a stability in the hedging cost, we will also use our ECB route. We already have a couple of sanctions in our hand where ECB is available to us. We will definitely draw them down. Maybe the first one would be this quarter itself, and that will help us to continue to maintain our interest rate. We are confident. Biggest reason why we are able to bring this cost of fund down is the PTCs that we are doing are at a very fine rate. There's a huge demand of priority sector portfolio among the private banks and foreign banks, and they are doing on an average at around 8% the PTC transaction. So we are able to get better rates there. That really is helping us to bring the cost of fund down, and we feel that the comorbidative tension will remain, and we will be able to negotiate better and continue to maintain our rates.

Ashleesh Sonjay, Analyst — Kotak Securities

Do you want to add something?

Operator

Thank you. Before we take the next question, we would like to remind participants that you may press star and 1 to ask a question. The next question is from the line of Ashlesh Sonjay from Kodak Securities. Please go ahead. Hi, Tim. Good morning.

Ashleesh Sonjay, Analyst — Kotak Securities

So, the first question is on the MSI portfolio in Maharashtra. If I can talk about the X market collection efficiency trend in the state in the month of September, October, and if you can also give us some color on what are the borrowers saying about the repayment ability.

Sadhav Saeed, CEO

I think the connection efficiency has remained strong. If you look at overall and especially to the states, it has remained stable. It has not deteriorated even in the peak. You would have to keep in mind that this was a month, especially September, where there were a lot of festivities also were there. And a lot of holidays were there, but despite that, the collection efficiency has remained stable. On X bucket, Karnataka remains 100%, and on Maharashtra, which was already at around 98%, it remained at 98%. So, from that perspective, there is no impact on, like, collection efficiency from the current situation, as we see. Even in October, where there were even more festivals and holidays, the collection efficiency has remained strong. And we don't see any impact in coming in near terms also. Carnada has pretty much stabilized. And there is no challenge there. Challenge overall collection efficiency for our company. The representation for November, as I said, has improved by 2% in terms of first presentation. The applications are quite positive for collection efficiency.

Ashleesh Sonjay, Analyst — Kotak Securities

Sorry, sir, just a clarification, the Maharashtra X-Bucket collections is trending at 98% of it.

Sadhav Saeed, CEO

Yeah, correct.

Ashleesh Sonjay, Analyst — Kotak Securities

Okay, but just qualitatively, what are the borrowers saying, sir? Is it an income problem over there?

Sadhav Saeed, CEO

No, so we, whatever are the customers who are falling behind on their payments for the first time, we are calling them, and more than 60% of the customers have told that they will continue to pay. The balance customers are also saying that they have been told by their leaders not to pay right now, but they are willing to pay. So, the approach is to have a kind of independent connection with those customers and to convince them to pay. And I think... In other scenarios also, they come back and pay.

Ashleesh Sonjay, Analyst — Kotak Securities

And any collective action which is happening from the SRO side or RBI side to address the issues here?

Sadhav Saeed, CEO

From the SRO side, collectively, we have decided to be more vigilant and responsible. So biggest challenge in this scenario is miscommunication. A lot of the time, the communication goes like that coercive collection practices are being used and stuff like that. So, there is a standing guidance from both the SROs that be more empathetic and more careful in collection. There should not be too much of a harsh collection, which is any way microfinance industry does not follow. Secondly, to avoid any sort of miscommunication, the SROs have already... What is the function of NFIs and what is... Unregulated lenders are also confused with MFI. So, they make that distinction that not to confuse those customers with MFIs, those lenders with MFIs. Sorry.

Ashleesh Sonjay, Analyst — Kotak Securities

Understood, sir. Perfect, sir. Thank you very much. Thank you.

Operator

Thank you. The next question is from the line of Neeraj Khandelwal from NMTT Family Office. Please go ahead.

Sadhav Saeed, CEO

Sir, my question was on this purchase of loan assets from Muthuth Finance. What is it? This is the first time that we are seeing such type of transaction where the loan assignment has been purchased from Muthuth FinCorp of 200 crores.

Varun Dubey, Analyst — Share India Securities

If you can give more background on this.

Sadhav Saeed, CEO

Yeah, so these are loans that we are originating on the referral program. So we have two models under which we are offering gold loans. One is a referral where we only get a fee, upfront fee for the loan that we have originated. Second one is where we do a co-lending with FinCorp where we have 60% share, FinCorp has 40% share. Initially, when we were originating, most of the business was booked under the referral program. To get that portfolio back into our books, we have purchased that portfolio. So, this is the same gold-owned portfolio. These are largely our customers. Some bit will be mixed also. But that is the transaction. And going forward also, like as we originate portfolio under the referral scheme, we will continue to have those portfolios because these are the customers owned by Matuk Microfin will continue to be on our books.

Ashleesh Sonjay, Analyst — Kotak Securities

Okay, and what is the average yield on this particular portfolio?

Sadhav Saeed, CEO

So, see, effectively, when we originate, we get 1.5% upfront fee, and then on the margin, we are getting around 9.8% yield on this portfolio. So, effectively, upfront and generally, these are the three to six months kind of a tenor weighted average, if you can say it's around five months kind of a tenor. On that, effective yields is in the range of around 12% to 12.5%.

Operator

That's it for my thanks. Thank you.

Operator

Thank you.

Operator

Participants who wish to ask questions may press star in 1 at this time. Ladies and gentlemen, in order to ask a question, you may press star and 1 at this time.

Operator

The next question is from the line of Ajay Dubey, an individual investor. Please go ahead.

Ajay Dubey, Analyst — Individual Investor

Yeah, I hope I know.

Sadhav Saeed, CEO

Yes, yes, Ajay.

Ajay Dubey, Analyst — Individual Investor

Yes, perfect, perfect. Thanks for the opportunity and congratulations on a good set of numbers. The first question I had was related to, you know, the... Any new situation that we're seeing around the country. So I understand that our exposure to Maharashtra and Karnataka is, you know, not very high. But what's the situation with exposure to, you know, Aslam and Bihar, for example? That's the first question. And related to that is, do we have any kind of NACAT insurance on the portfolio in these situations?

Sadhav Saeed, CEO

Yeah, Ajay, see, first of all, like, Assam is one of the areas that we have newly entered. So, our portfolio exposure there is limited. We are just about less than 100 crore portfolio there in Assam. And all of those customers have a national calamity insurance. 100% there. And in Bihar, we are close to around 1,000 crores of portfolio in Bihar. And as of now, we have not seen any challenge from that draw situation. But during the monsoon, there was some part which was affected due to floods. There, we had availed the benefit of NADCAT insurance. Around 85% of our portfolio continues to have cover of NADCAD insurance, and there is no challenge there that we have faced. In terms of post-flood as well, a drought situation has not had an impact on the hard collection efficiency. It's improving every month, and every quarter it is improving.

Ajay Dubey, Analyst — Individual Investor

Perfect. And the second question I had was about the ECL release this quarter. So if I understand correctly, there was roughly around 540 million of ECL release. So I wanted to understand the approach behind it because your competitors, if I understand, are starting to build buffers during the stage of the cycle. So I wanted to understand what drove the release and what is the nominal credit cost if, you know, the release stops.

Sadhav Saeed, CEO

The credit cost, I think the credit cost remains stable around 2.6%. The ECL basically is based on the portfolio experience, and also there are factors such as microeconomic GDP guidance and inflation guidance, which has an impact on that overall ECL calculation. So, as the portfolio continues to improve, the ECL model will show a lesser requirement. We continue to maintain a healthy cover of around 70% on our portfolio. And we will maintain that. And that is what has resulted in a little bit of a release of ECL. We continue to have a buffer of around 24 crores, which is not really a management overlay, but there is a buffer for contingencies like these dot-like situations we have in our overall ECL model. So we will continue to build on that 24 crores. And definitely, if there is a requirement, that would be utilized to cover for any sort of an impact on the portfolio. Maybe, Praveen, if you want to elaborate a little bit.

Praveen T, CFO

Yeah, I think you have covered, but I think one more point here is that some of these provisions will lead to use it to the right off and clear it off. But otherwise, the coverage remains stable at around 69.9, close to 70%. So that has been remained. And one more point here is to note is that as we grow, the secured portion of the portfolio is also growing in the balancing size. Currently, it is around 4.5 percent. If you look at six months back, which was less than one percent. So that also will play a role in terms of the overall provisioning coverage will depend upon the composition of that as well. But to summarize, one thing is that there is other provision overlay, which is around 24 crores carrying in the balance sheet, plus the overall coverage remains stable.

Ajay Dubey, Analyst — Individual Investor

Perfect. Now, that answers my question. Thank you, and all the best for Q3.

Operator

Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ask a question, you may press Start and 1 now.

Operator

Participants who wish to ask questions may press star and 1 at this time. Ladies and gentlemen, in order to ask a question, you may press start and 1 now.

Operator

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

Sadhav Saeed, CEO

So, once again, thank you very much for joining the call. As we mentioned in our opening remarks, we remain committed to our guidance. We will continue to build a robust, strong portfolio with diversified asset base. On all the parameters, the fundamentals, on the growth. We are doing very well. On availability of funds, liquidity is sufficient for us. We have own balance sheet as well as pensions in hand. On the cost of fund, it continues to trend down, and we'll continue to negotiate better and make sure that our cost of fund continues to be stable or coming down, even though we are entering into a rising interest rate scenario. Thirdly, the asset quality is improving very well. We are seeing better collections from our existing portfolio, and the new portfolio that we are originating is very, very prime quality, and there is absolutely no delinquency in the individual loan. There is very, very minor, 90 plus is 0.02. Similar is for LAP, and gold loan remains robust. So that will help us to improve our asset quality. And consequently, our credit cost is also trending down. We are stable at around 2.6%, which is on the lower spectrum of our guidance. We are confident that in coming quarter, as we build more portfolio of higher quality, This credit cost will come down. We will keep in mind that we maintain some provision. For our portfolio, at the same time, the guidance... We definitely are very confident that we will be able to achieve those numbers and we will be able to give the kind of ROE that we have committed. In the economic environment also, we have sufficient insulations in terms of our national climate insurance, the collection practice, the diversification, the underwriting practice. We will calibrate our disbursement in the areas which are affected. Irrespective of that, because of our diversification, we will continue to have our disbursement targets. So, we're looking forward to the remaining part of the year, and we anticipate a strong growth and a very strong performance, and anticipate that we will be achieving all of our guidance numbers. I wish you a very, very happy Diwali on behalf of Matut Microfin, and thank you for continuing to support us, and we look forward to interacting with you on the regular basis. Thank you very much.

Operator

Thank you. On behalf of GM Financial, that concludes this conference. Thank you for joining us, and you may now disconnect the lines.