Ladies and gentlemen, good day, and welcome to the Q3 FY22 earnings conference call of Muthoot Finance Limited, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in 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 touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ansuman Deb from ICICI Securities. Thank you, and over to you, sir. Good afternoon, ladies and gentlemen. It's an honor and privilege to host the Q3 FY 2022 results conference call of Muthoot Finance Limited. From the company, we have Mr. George Alexander Muthoot, Managing Director, Mr. Alexander George Muthoot, Whole Time Director, Mr. George Alexander Muthoot, Whole Time Director, Mr. George M. George, Whole Time Director, Mr. George Jacob Muthoot, Whole Time Director, Mr. Eapen Alexander Muthoot, Executive Director, and Mr. Oommen K. Mammen, Chief Financial Officer. I will now request the management for some brief opening remarks, post which we will open the floor for Q&A. Over to you, sir. Thank you, and good afternoon to all. I will straightaway get into the business aspects of it. The consolidated assets under management increased to INR 60,886 crores, showing a 9.9% year-on-year growth for the nine months. The profit after tax increased to INR 3,025 crores, up by 8%. Stand-alone assets under management increased to INR 54,688, which shows a growth of 9%, and the stand-alone profit after tax increased to INR 2,994. We had a tough quarter in the sense that the corona impact on the third wave impacted us in this quarter. Therefore, although the advances were up, but the releases or their closures and the auctions were also there. We had a flat growth in the gold loan business, almost a flat growth in this quarter. Hopefully this quarter things are starting to look up, and we should show a growth in the AUM this quarter. The other subsidiary companies have also, some of them have not done well because of the economic scenario. The overall business in the subsidiary has come down except for the microfinance. The others, we are having a cautious attitude to the amount in the home finance, the vehicle finance company. The subsidiary which is doing the insurance broking business has done really well. That is what we have. All the other things I think are there in the presentation, which is there. I think that we will open up now. We will open up for Q&A. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Ankush Agrawal from Surge Capital. Please go ahead. Hi, sir. Thank you for taking my question. Mostly in the last seven, eight years, our yields have been constant at around 20%, 1% or 2% here and there. While our cost of funds have fallen from 12% to 8%, which has allowed us to increase our spread from low 9% to 13%, 14% odd. Like, so now if the interest rate environment is such that the interest rate starts inching higher, so how do you see it affects Muthoot? Like, do we are going to charge higher yields to our customers and maintain our spread? Okay. Thank you. I think we have been able to maintain our spread and our yield in spite of having to reduce some of our yields. Going forward, I don't see a very great surge in the borrowing cost. Probably in the last two years, the borrowing cost has come down by about 200 basis points. In the next six months, I expect the borrowing cost to go up by probably 50 basis points only. We will see that we will tweak our products and offer different types of products to customers to see that we are able to maintain our spread level. Right. In a hypothetical environment where interest rates does jump and our cost of borrowings also increase quite a lot. Is there a room to increase our yields spread? Yeah. If overall the interest rates are going up, then our borrowers also are not are in the same plane. They will understand that everywhere rates are going up. We always have room for that because our customers, especially the smaller customers, smaller loan ticket customers, are not that interest sensitive. If everywhere the interest rates are going up, so we can easily increase our interest rates also. Okay. Great. Secondly, sir, on the growth of a gold loan business, right? Given the nature of the business wherein the repayments are quite fast, it is difficult to build a loan book. Now at a INR 55,000 crore loan book, probably we will be doing about INR 1.2 lakh crore kind of business every year. I just wanted to know, like, what gives you the confidence that you will be able to grow this book, like, from this level? Like, what are the key factors that will drive up growth? Will it be branch expansion or the overall uptick in economy, if you can add something? Yeah, I think the overall uptick in the economy is what we should be looking at. Because now we are seeing the business also getting opened up. Our mainstay customers, the MSME customers, as well as the small shopkeepers, small businessmen, they are restarting business. I'm sure this should increase the business only. Probably we will again restart or do little bit more advertisement also. We should be able to maintain a reasonable growth rate going forward also. I understand the base is going up, which was earlier much lower. It has gone up to INR 55,000 crore, so it's not easy. Probably we should be able to do more branch business and maintain the growth momentum. You know, if branch expansion has a direct impact on the growth, like if you increase the branches quite a lot, will that have a direct impact on the growth? Not much so because we are reasonably well-placed with the branches even now. I think you would have noticed that our core branch business has been steadily going up from INR 7 crores-INR 8 crore. Now it is almost touching INR 9 crore plus. Any branch can handle much more business. We only need to increase the number of employees in the branch. With that we can do much more business. Also their per ticket size also is going up. It was about INR 20,000 three years back. It's now about INR 60,000. We feel that this existing branch which is spread all over the place can easily handle more business. Right. Like, in terms of diversification into other lending products like microfinance, home finance and all that, how aggressive you think you would be in the medium to long term? You would continue to maintain 90-10 split between the gold and other business? Yeah. The microfinance sector is now I think reasonably well-placed and things are getting under control. It is showing growth. Our microfinance company in particular we have received an approval for equity infusion also in that company. That is the microfinance which should we feel be going well. The affordable home finance and the vehicle finance we are going a little cautious and also the personal loan business. We are going a little cautious because we will be calibrated growth only till we are sure of or more confident about the economic growth because almost all of those are almost unsecured. Even vehicle loans are you can say it is not that secure as a gold loan. Those will take little more time for the economic activity also to pick up and the economy to stabilize. Once that stabilizes, we will be able to grow. If you ask in the short term, we are not planning on aggressive growth in the non-gold loan business. Yeah. My question was that is there some kind of internal target in terms of diversifying away from the gold loans? No, no. We would definitely like to do more gold loan business also because earlier two years back, we had thought of having 10%, 15%, then 20% non-gold loan portfolio. Unfortunately after the COVID, et cetera, things are not looking bright, as far as we are concerned, for the non-gold loan. We are going slow on that. Probably after three or four quarters or five, six quarters, things should improve. We are ready. We have all the backend, everything is ready for doing more business when the opportunity is there. Right. That was very helpful, sir. Thank you. Thank you. The next question is from the line of Deepak Gupta from Reliance Nippon Life. Please go ahead. Hi. Good afternoon. Thank you for taking my question. Sir, firstly, if you could share some perspective on the rise in Stage 3 loans. Is it, how much of that was on account of RBI circular? Stage 3 loan asset increase is not because of RBI circular. It's because of a larger disbursement happened in Q2 of last year. Some of its customers because of their cash flow challenges, you know, they could not meet their repayment commitment. Large part of the defaults, we have auctioned it off. Some are still there because those customers asked for some more time. That is the reason why, you know, there is an increase in the Stage 3 asset. As you know, it is all collateralized by gold and jewelry. We don't expect any losses. I think now the Stage 3 assets will get stabilized by end of the fourth quarter. Sir, what was the quantum of auction that you've done for the quarter, and how is it versus last year and last quarter? For this quarter we have done INR 2,800 crore. Last year was much lesser. Negligible. Okay. Sir, any specific reasons for doing auction given the fact that, you know, you always maintain the stance that you all avoid auction as much as possible because you lose the customer if you auction the gold. Why did you think there was a need to do an auction this time around? Yeah, because it is those customers who had taken loans in the Q2 of last year. See, many of these customers or some of these customers, they were not able to get the repayment which they expected. They. When a customer is pledging a gold loan, he has that in his mind, he has a calculation that, "Yes, some I am expecting some money from somewhere in the next two months, three months, four months and six months." That is why he is pledging the gold and taking only 75% instead of selling it and taking all the 100. But some of these people, their calculations, their calculation for getting back their money from the business or whatever has not been forthcoming. Probably they would have abandoned that, and the next option for us is to auction. As Oommen K. Mammen was saying earlier, we try to give little more time to the customer and hold some of it in the book as Stage 3 asset, in spite of it being a Stage 3, because it is fully secured. We try to accommodate the customer as far as possible, and then if it's not possible, then there is no other way other than to auction it. We- Sure. Sir, would you want to call out is there any particular geography where these loans were auctioned and then, from where these loans originated? All over the place. Not particular geography. Like normal. Everywhere. Sure. How many customers it could be possibly? The average ticket size should be about INR 60,000 or INR 70,000. INR 2,000, about 400,000 customers. Got it, sir. Sir, you know, I'm noting that the LTV has come down sharply this quarter. Is it only because of the rise in gold prices by 5% quarter-on-quarter, which is why LTVs had reduced meaningfully from Q2 to Q3? LTV or AUM? I'm talking about loan-to-value, sir, expressed loan. The loan-to-value is based on the today's gold price, sir. If the gold price is soft, LTV will be lower. The average LTV as on December is 69%. Right. Last quarter it was at 73%. Yeah. Last quarter it was at. Function of the price, sir. Okay. Largely because of the price. Yes. Right. Sir, just last question. You know, you have guided for 12%-15% kind of a loan growth before year-end. You think you'll be able to meet that guidance for FY 2022? We will try our best, but things are not fully in our hands also. The business environment also needs to change a bit. We lost first quarter also. We lost a lot of. We had a lot of releases or repayments in quarter three. That is quarter three. Quarter four should do some plus, but probably we may not be sure of big rate there. Definitely there will be growth in fourth quarter. Sure. I hear you. Thank you so much, sir. All the best. Thank you. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead. Sir, good afternoon. This is a follow-up to the previous question. In some customers, you have given forbearance on repaying the loans, and in others, you have auctioned off the loan. When you give a gold loan, do you do any cash flow analysis on the customer's business profile or his personal finances? Because is collateral the main value that you see and the lending is against that. If there are delays, how do you take care of it? No. See, the loan has to be given in quick time, maybe five minutes, 10 minutes, 15 minutes. Even if we ask the customer for his repayment or his place from where he's going to repay, et cetera, we will not get a forthcoming and a correct answer. As you said, it is mainly security based. Probably he has some calculation in his mind, but of course, we don't do any checking of that or verification of his cash flow sources. When some customers come and request us in the branch, the branch manager is the person who recommends that, okay, he feels that he is going to get some money in the next two, three months. What maximum we give is two, three months only, that's it. If he's not coming by the next three months, we just auction it in the next quarter. What NPAs you saw, 1.85% in Q2, has been fully released by Q3. The 3.8% you see in Q3 is a new one. We give them two, three months time more. Try to accommodate them as far as possible, because we are sure that we will not have a loss on that account. Okay. Thanks, sir. That was clear. Sir, also if you could explain the movement in the Stage 2 loans of Muthoot Finance, provide some clarification, and there's been a sharp fall. The Stage 2 which became Stage. You know, September Q2 Stage 2 was 6,153. You know, that became Stage 3 in Q3, which we, you know, either recovered or auctioned off or some are remaining as Stage 3 asset. Q3 Stage 2 has fallen, you know. The fall is because, you know, the increase first of all happened in Q2 because of problems where we had a sudden surge in disbursements post the first lockdown. Now it's from Q3 of last year, I think it's more or less the normalized disbursement. That you can see it from our disbursement and collection chart in the presentation. Mm-hmm. I think it's on Page 29. Yeah. Okay, sir. Thank you very much, and wish you luck. Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead. Yeah. Hi, good afternoon. Thanks for the clear questions. I just wanted to understand what would be the LTV of Stage 2 loans. I mean, if I capitalize the interest that is on the Stage 2 loans we take, what would be the LTV typically for majority of the loans? Well, we don't have the exact numbers, but, you know, it should be, you know, somewhere around 90%-95% including, you know, the interest portion. Okay. Understood. That's helpful. Any sort of internal targets for March year-end and where do you want to bring the Stage 2 and Stage 3 assets down to, either with auctions or repayments? Any trend that you're looking at? Nothing like that. We should have something 2%-3%, that's it. Stage 3, I thought. 2%-3% of Stage 2 assets? Stage 3. Stage 3 assets. Stage 2 is in the making only, so it is time for us to give more time to the customers. If we give more time to the customers, they'll be happy, they'll be comfortable, and if we can accommodate people in the Stage 2 in our books, so be it. Right. Understood. From a, you know, provisioning standpoint, if I look at, you know, you are carrying INR 3 billion additional provision, COVID-related buffer that you had made. Do you expect to utilize this in case of any sort of elevated credit cost in Q4, or you believe that you can end the year with nominal credit costs without utilizing this buffer? Just wanted some thoughts on credit costs. It's up to the board to take that decision. This excess portion, you know, came up during the transition process from our IRAC accounts to the NPLs. This is not any excess, you know, core provisions. Okay. Sure. I mean, the board will decide that. Okay. Yeah. Sure. Just lastly, your cost of funds has come down sharply in this quarter. What is your marginal cost of funds for this quarter? We are raising somewhere between, you know, 7%-7.5% on, you know, maybe 7.25% or 7.3% on the bank funding, depending on the tenor. On the securities market it is even lower on the NCDs. On a blended basis, is it fair to say it's around 7%? See, I think we should see the cost of funds coming down significantly maybe in the next six months. With the falling cost of funds and despite, you know, lower share of CP's, so CP has come down quarter-on-quarter. Is it on a, maybe quarter-end basis is it down or during the quarter also CP was lower for this last quarter. Yeah. You know, because we are carrying excess liquidity, we thought, you know, you know, reducing our finance cost a little bit. We repaid some of the CPs for the interim. Currently we have only a small amount outstanding. Then when we require funds, we'll start borrowing again through CPs. Okay. Just to get this, I mean, little more granularly. You expect another cost of funds to decline in the next six months, but what would trigger that? Are you raising money at lower cost versus- You know, assuming a stable interest rate regime, I think, you know, we will retire our older borrowings taken at a higher cost. Now, suppose if the general rate of interest there is an increase, to that extent, you know, that decline will be offset. In the current environment, I think we should see a reduction of our borrowi ng costs. Okay. Any say quantum? Be it 15, 20 basis points or higher? Yeah. Certainly, yeah. Maybe 15-20 basis points. Okay. Wonderful. That's, yeah. That's all from my side. Thank you so much, and all the very best. Thank you. The next question is from the line of Kartik Sahni from Mirae Asset Management. Please go ahead. Hi, sir. My first question is around your number of active customers. Sequentially there has been a decline of about 2%. I just want to understand your strategy and what's your target growth for this? See, the decline is because as we said, there were more releases this year, this quarter than new advances. That is why the active number of active customers have really come down. That is one point. New customer additions have been steady and we have done 2.5 lakh in one term. No? INR 3.5 lakh new customers have got added, as we also saw some customers due to auctions and releases et cetera, aggressive repayments, they also went away from the book. We have been able to add new customers. I think that is the strong point here. We've been able to add 3 lakh 50,000 customers this quarter also, new customers. Okay, sir. Thank you. My second question is around your NIM. If we see the last four quarters, I think it's around 4.2 for Q3. I just want to understand, given that it's an increasing rate environment, where do you see your steady state NIM? No, I think we answered that earlier. You know, assuming a stable interest rate scenario, I think we should see a decline in our borrowing costs in the six months. Now, if there is a rate increase which, you know, happens, then to that extent that decline will be offset because of that increase. You know, we are expecting about, you know, maybe 50-20 basis points decline in the next six months in the borrowing cost. Okay. Thank you. Got it. All the best. Thank you. Thank you. The next question is from the line of Aswin Kumar Balasubramanian from HSBC AMC. Please go ahead. Yeah, hi. Just want to understand the higher auction which you mentioned. Is it because the last year, you know, September, December quarter you would have, you know, disbursed some of these loans at a, you know, a higher gold price and, as a result, those would have sort of now become, you know, NPA the customers who not have rolled over again, and that also explains why the LTV has come down because the higher LTV loans have available. See, we disbursed about INR 50,000 crores during that quarter, you know. Out of that only INR 2,800 crores got auctioned off, which is a very minuscule number compared to the disbursed ones. You know, which also explains the reason why, you know, some of these accounts are being auctioned. Customer might be facing some challenge in terms of the cash flows. We gave them time, you know, further time, but, you know, unfortunately he's not able to generate. We can't wait any longer. In spite of that, you know, we have kept some of these loan assets as, you know, Stage 3 asset, you know, which we will liquidate, in this current quarter. The priority- I'm just trying to understand, is it also linked to the gold price? Because that was the quarter when we saw sharp fall from then on and since on a year-on-year basis, the gold price is now lower. In Q2, there was actually a lot of demand for funds. People are opening up their business, et cetera, and they wanted funds, and we were there to give them funds quite easily. The higher gold price at that time also helped, definitely helped. They borrowed. If they wanted to liquidate it, they would have sold it and got 100%. They had expected some cash flow in the coming three, six months, but which didn't materialize for them. The final auction was auctioned. Right. In that case, these auctions will continue going forward also? Yeah, yeah. It is part of any gold loan business. If the economy is not doing well, then these people are not getting the cash flow which they are expecting, which they are mentally expecting. Unlike a salaried person who is getting a regular cash flow, remember 99% of these people are not salaried people. They are all small business traders, and a lot of things are uncertain and probably if they don't get the cash flow they expect, finally they abandon the gold and that is what we auction. We try to give them as much time and accommodate them in our books as maybe Stage 2 and Stage 3, et cetera. We try to accommodate as far as possible. When that is not possible, then we just auction it. Right. Is the actual auction also related to the gold price? I mean, I'm trying to understand or No, auction is not related to gold price, et cetera. If suppose the gold price goes up very high, then customers may those who thought of abandoning the gold will think of, "Why, you know, why should I abandon the gold? I will try to release it and somehow rent it or take it back." That's the only thing. Other than that, it is not related. Okay. Thank you. Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead. Yeah. Hi, sir. Just one accounting question. Do we reverse the accrued interest after 90 days past due or immediately on one day past due? No, after 90 days past due. We'll reverse the full 15 months accrued interest, is it, from an accounting perspective? Yes. Yes. Just three months? No, 15 months. Okay, got it. Sir, secondly, just regarding balance sheet liquidity now, you know, for a while we've been maintaining very high levels of balance sheet liquidity. 20% of our balance sheet is kept in liquid assets. This was not the case earlier, about two years back. Do we see a case of trimming liquidity from the balance sheet? I think we have done this exercise this quarter. I think you would have seen that our absolute cash flows has come down a little bit. That is partly because of some kind of a treasury management which we have done. Liquidity, as we have always mentioned, you know, we have to keep it at a higher level because of the LCR requirements. As well as, you know, the challenging times which, you know, which is there. Also because being an NBFC, we need to have high liquidity. It also helps in giving more comfort to the rating agencies. You know, that we should see it as a part of our business model. The high level is here to stay, simply put. Not the very high level. A reasonable good liquidity we should expect now. We should be keeping now. If taken two years back, we had all the IL&FS issue, so many NBFC issues and everything. Every time liquidity for an NBFC, where we don't get any funding or support from the Reserve Bank, we need to have our own liquidity. Keeping liquidity even at the cost of some interest loss, it's not a bad idea. It's what the board is always thinking. We will keep good liquidity, but not certainly the very high liquidity. Got it. Okay. That's all from my end. Thank you, and all the best. Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yes. Thanks for taking my question. Sir, just wanted to understand, gold prices have recovered in the months of November and December and remained totally flat in January. I mean, if I am doing my math right, I understand that there were forward flows of about INR 1,000 crore in the third quarter in your Stage 2 and Stage 3. Basically, even if I net off these, I mean, auctions that you did about INR 2,800 crore, there were forward flows of about INR 1,000 crore in Stage 2 and Stage 3. What are the forward flows that you're expecting now? And to that extent, what is the quantum of auctions that it could lead to? That's my first question. The second related question, I mean, you and even the other gold financiers always talk about that extra LTV, which is the making charges, which kind of acts as a margin of safety for you. But does that really play out in the real world, given that I mean, I was seeing if I look at the monthly average gold price of August, when gold prices were at its peak, August 2020, to maybe the monthly average gold price in January 2022, it's roughly around 92% of what the peak gold prices would have been. I'm talking about the monthly averages. Despite that, customers still want to abandon their gold. How should we look at this? First of all, can you just tell me what is meant by forward close? I didn't understand this. Forward close. Sir, what I meant is, I mean, if I look at your Stage 2 plus Stage 3, which is your 30+ B2B, add on Q2 and add on Q3, and kind of take that difference of the 30+ B2B and then net off this INR 2,800 crores of auctions that you did, there's still another INR 1,000 crores which would have probably flown from Stage 1 into Stage 2 or Stage 3. Okay. What I'm asking, sir, looking at the gold prices today, I mean, what is the quantum of forward flows that you expect in fourth quarter and what is the quantum of auctions that it could lead to? You know, we have given the breakup of Stage 2 assets and Stage 3 assets. Stage 2 assets logically should move to Stage 3 assets if it is not liquidated. Stage 3 assets, you know, it's already there as a Stage 3, or it has to either liquidate or it will remain in Stage 3. We can't quantify in terms of auctions because a lot of these customers come and close the loan by paying the amount. As I said earlier, in Q2 of last year, we disposed INR 50,000 crore. Out of that, you know, we had to auction only around INR 2,800 crore and probably another INR 2,000 crore. Which means that out of 50,000 crore, only INR 4,800 crore went as overdue. It's a minuscule amount. The reason why, you know, we have to auction it, you know, you are also mentioning about the making charges. See why, you know, we have lent this INR 50,000 at the peak of the gold price. We need to draw comfort from the fact that INR 45,000 crore got repaid. You know. That could be either because, you know, there is adequate customer interest in the jewelry. That could be because of also the sentimental attachment. That could also be because of this higher equity in the ornament through making charges, et cetera. All these factors play a role. Now the reason why, you know, it goes for an auction is customer doesn't have the cash flow. What he can do. Even if he gives diamond, you know, if he doesn't have the money, what he can do. You know, it will finally go for an auction. That is the reason why the auctions are happening, because we can't wait any longer for him to generate cash flows and repay this. You know, ideally, you know, we would like these customers to come and to take back the ornaments, but we can't wait beyond that period. Got it. This is useful. I have just one more question. Sir, given, I mean, I understand that you've always kind of said that, I mean, the competition doesn't really affect you a lot and kind of visible in the yields and the spreads that you report. Sir, I mean, I just wanted to get some comfort that looking at the competitive landscape today and at whatever rates the peers and the competitors are lending, do you have, I mean, that comfort that you will be able to maintain your spreads going forward? Sir, last question that I also had is you talked about interest income reversals when a loan becomes an NPA. To that extent, when a loan becomes an NPA, there was too kind of like this quarter increase your ECL provisions. Now, I mean, let's say next quarter when you do those auctions and the NPAs come off, would you see a reversal of the reversal of the interest income that you took during the third quarter? There will not be a reversal, but the interest income will be higher and the new loans on which interest are accrued will be higher. There's no need of any reversal. New things will come. Got it. Your earlier question was, what was your earlier question? Sir, your competitive landscape and your comfort on the spread? Competition is always there. We have to survive in competition also. We have to devise new products. We will be giving new products. We will come up with something to see that we are able to maintain our yields reasonably well, you know, our net interest margins or the spreads reasonably well. We will try our best to do it. That's it. That's our. We will with our what should I say Our leadership advantage, given the gold loan business advantage. Sure. Any customer should be coming to us. Some go away because of the lower rates offered by some people, but a good part of them should come back to us. We should be able to reasonably maintain our interest spread. Great, sir. Thank you so much, and I wish you everything, the very best, sir. Thank you so much. Thank you. The next question is from the line of Digant Haria from GreenEdge Wealth. Please go ahead. Yes. My questions are, you know, mostly at the industry level. For any gold loan business, which happens at the branches, how important are the employees for, you know, relationship management with the clients and, you know, if I have to just, you know, rate the need of an employee for maintaining relationships with the client or, you know, doing the operations, which is evaluating the gold and, you know, doing the other things which a loan disbursement process would need, where would you rate this relationship? Like, you know, how important is it in the gold loan business generally and for us also? Okay. That's a very, very nice deduction and things which you have done. I think relationship is important. Probably some competitors feel that relationship is so important that they're trying to take away our staff, thinking that the relationship will bring all the business. It is not only the relationship, it is also the goodwill and other things of Muthoot which also brings customers. Relationship to some extent helps, but it is not the all in all about it. Just because an ex moves away from Muthoot to somewhere else, not that all the customers will move with him. Probably that would be there for some wealth management companies. Somebody who is managing the wealth of somebody, if he moves from my own company to X company to Y company, they are trying to move. I don't think gold loan people are like that because most of the people come to Muthoot because of Muthoot's name and Muthoot's standard, et cetera. A very small percentage of things is there with the relationship, your process, et cetera. The process and its turnaround time is also very important. Because of Muthoot, we have been in this field for quite some time, we have been able to iron out so many other things so that we can give a good turnaround time. Those are all factors which help. To answer your question, the branch manager or the relationship executive in the branch is not the whole deciding factor for customers to come to us or not come to. You have already answered my second question, which I was going to ask that, you know, if the employee attrition is high because I generally hear that, you know, even a Kotak Bank or an Axis Bank, everybody wants to build a gold loan team and, you know, because we have such trained employees and, you know, long-standing employees, like, you know, are they asking you for raises or, you know, is employee cost going to meaningfully rise because of the market scenario, or you think we can, you know, really manage this whole intense scale? We wouldn't like to lose good employees. Definitely we wouldn't like to. The people just don't go away merely because of some salary, et cetera. We have good incentive scheme so that they are also happy, incentives, rewards, recognitions, et cetera, which keep them attached to us. In spite of that, actually what we are seeing is in the recent past, it's not that people are going away from us. We have seen that some people are actually now not interested in work. They are thinking that I'll go home and stay across. I'll go to my village, especially in cities, et cetera. We have seen that people have gone home for COVID, don't want to come back to the city. We have, it's on the lighter side, I'm saying. There are a lot of people who have just not come back. Anyway, competition to some extent, there is some churn happens, and some churn also needs to happen always. You can't have somebody sitting there all the while. Right. Sir, thank you for these answers. Sir, if I can ask one more question that, you know, one startup is claiming that, you know, they are taking photograph of the gold ornament and they are doing some machine learning and artificial intelligence to detect if the gold is pure or not. Just that, I think, you know, a lot of people can claim whatever they want, but, you know, you as the largest player, as a leader, as the innovator, are you seeing any such spots in the market which, you know, somebody has cracked well and, you know, which probably we need to learn and adapt or we are good with the developments which are there? We are not at all bad with the developments. We are there. We are also thinking. We also have some R&D departments, et cetera, which constantly evaluate the things and our chief general manager, Biju, who was recently promoted to Executive Director. He says that one day we will see that he wants somebody to put some gold in the vending machine and the cash should come out from the other side. Right. That's good to hear that. All the best and yeah. The gold should come out from the other side. We are also every day thinking of it, but I, some people sometimes come with some things, but what we have been not able to crack is how to test the gold ornaments without defacing it or without actually just cutting it, et cetera. That is the challenge we have. Probably after some time something may happen and if there's something that will happen, we will be the first to do it. Right. That's great, congratulations and thank you so much for answering the questions. Thank you. Next question is from the line of Nidhesh Jain from Investec. Please go ahead. Firstly, when the auction is Mr. Jain, sorry to interrupt. Your voice is not clear, sir. If you can speak closer to the handset, please. Hello. Is it better now? Yes, sir. Yeah. When the auction of the loan is before, is any loss to be booked on principal interest? You know, how we are beginning to recover entire interest on it. No, we don't have any principal loss. Probably some small interest reduction may be there, that's all. Nothing substantial. There will certainly be some interest loss, but nothing substantial. Sure. Okay. I mean, obviously with a lot of companies marketing only on basis points per month. Yes. I think in this thing you are also marketing that. So, how do we differentiate between customers with, to whom we will be able to give low interest rates or charge high interest? I think it is the branch manager or the people there who decide. Yeah, probably we have some schemes also, where big loans are there. Big loans are there. Regular customer is there, who's been with us for long time, who also has some other loans. That is where we give interest concession. That is the new interest scheme. We have some specific schemes for that. If they borrow that scheme, we give it. Okay. What is the lowest interest rate you're offering to the customers? Today it is 6.9%. 6.9. Around. Largely the number of new customer acquisition has been declining quarter on quarter. What are the steps to increase the new customer acquisition? We have been through process of existing customer. We are able to activate our customers. The new customer acquisition numbers has been declining quarter on quarter basis. This quarter also our new customers acquisition has actually gone up. It is INR 3.5 lakh this quarter. It's a new customer. Unfortunately many customers in the old loans, etc., they had to be auctioned and so many customers also. We request all the participants to please stay connected while we reconnect the management. Ladies and gentlemen, we have the line for the management reconnected. Over to you, sir. Please continue. Your line broke in between. Yeah. I was asking about new customer acquisition. That number has actually declined in Q1, Q2. Why was this quarter the number is more in this quarter? See, overall the outstanding customers would have declined, but then new customer addition had been the very high in this quarter. INR 3.5 lakh is the new customer addition. Unfortunately, many customers closed their account also. The larger number of customers closed their accounts and we had to do auctions also. Because of that, the net increase in customers were not there. That is what. What we see is what the redeeming factor is that new customer acquisitions are high. Got you, sir. The entire existing customers, are we going to acquire interest from the entire portfolio? I mean the channel of customer acquisition. We have different channels. Online we have lead generation. We have online channels. We have lead generations coming through other channels also. Our repeat customers are there. Our customers who have earlier been there and not coming now, we win back customers. All those things are there. The customer has to come to the branch. Understood. Thank you so much. Thank you. The next question is from the line of Manan Tijoriwala from ICICI Prudential AMC. Please go ahead. Hi, sir. Just wanted to understand what would be the quantum of assets that would be above INR 3 lakh ticket size in our portfolio right now? About INR 20,000 is ticket size. Okay. Basically just to understand a bit more from the angle that, what would be the competitive intensity from the banking sector and other NBFCs who could borrow from secondary market? Yeah. Just because it is a higher loan, it doesn't mean that the competitive intensity is high. We also have lower interest schemes for high customers, etc. We have different schemes. Competition intensity will be there, but that is just probably our job to see that we retain our customers. Okay. Fair enough. What would be the quantum of assets priced below 10% rate of interest available? This is a pre-emptive that we have launched for, I mean, everyone has launched in the last quarter. I think that is, again, moving, it's a moving number. What is there this month may not be there next month. We haven't done some math on that. Okay. If you could provide a range or something. No, Manan. That information is not available. Sure. No issue. Then what will be the LTV on the Stage 3 assets that we hold? It will be at the time of the report at that time when we give the note. Stage 3 can be maybe 3,005. INR 3,005. Just INR 100 above today then. INR 100 a bove today's rate. That is correct. That is matching. It will be over INR 100 on safety, I think. More than what it is today. Right. No, what Industries was saying is that, you know, at that time, 12 months back, we had given probably at around INR 3,500. You know, 12 months interest should got added to it. It will be somewhere close to, you know, 90%-95% each. Okay. It's still LTV below 100%, it will be on safety aspect only. No, just because these assets are staged, it doesn't mean that customer has not paid interest. There are so many loan accounts where customer has paid up-to-date interest. Because these loans have crossed 15 months, you know, it is classified as an NPA. Those cases also will be there. Fair enough. That's also answered. Thank you. Thank you. The next question is from the line of Sunesh Khanna from IIFL AMC. Please go ahead. Yeah, hi, sir. Given that we have had a flattish quarter, this quarter. Are we maintaining a 15% growth target for the year which we think looks difficult? In that way, any other target or color you would like to give, will we maintain or we will end the year somewhere around 9% that we have delivered, or it could be slightly higher? It should be slightly higher than 9%, but anyway, you yourself said that we may not be able to do the 15%. Yeah, it will be little higher than 9%. Yeah. I don't want to do any number now. Definitely higher. Okay. For next year onward, are we maintaining our guidance or- Yeah. I think we should be able to do that 15% next year. Yeah. We should. Okay. That's it for me. Thank you. Thank you. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead. Yeah. Thank you, sir. Thank you for giving me the opportunity. My questions have almost been answered. The one question on the subsidiary part. If I see the Muthoot Money, which is an NBFC, it has reported a huge loss of INR 9 crore. If I see there has been an increase in the branches, there has been an increase in the employees. Stage 3 assets has gone down, but there has been a reporting of the profitability loss of INR 9 crore. Any change in that strategy in that NBFC you can share that? No. I think what is happening is all the loans which are good, especially the commercial vehicles, used commercial vehicles, etc., have become Stage 3. As a prudent measure, we have just written off many of these things. We expect more recovery to come even from the written-off account. We just wanted to show a better position with regard to the assets which we have on book. That's why. Aggressive write-off we did. That is as simple as that. Aggressive write-off when we felt that it is beyond Stage 3. That's it. That is why we have taken a loss. Okay, sir. Thank you. Thank you very much. That's all. That's it. Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead. Thank you, sir, for the opportunity. Couple of questions. One being, if I look at your auctions realization, if I go back and look at the history, FY 2021 has been slightly lower than past two, three years. Is it that the pandemic has been also impacting on the realization front? How would the picture pan out going ahead? Is it now that we have slightly higher numbers? Can you repeat the question? Auction realizations, if I look at your FY 2021 annual report, that number has been lower than your last two to three years run rate. Now that we have slightly higher number on the auction front, how will the realization pan out going forward? How will the? Realizations. Recoveries. Realizations through auctions. How will they pan out going forward? See, realization on auctions depends upon the price at that point of time. Now on to the first question. Past years, the auctions were lower because the collections were better. Earlier in the call, we had explained the reasons why the auction numbers have went up because of the larger disbursement we have done in Q2 and Q3 of last year. As I said, out of INR 50,000 crores of disbursement in Q2, the auctions done is only around INR 2,800 crores, which is a very small number. We could have given some more time, but market expects certain level of certain limits in terms of the Stage 3 assets. You know, we didn't have a choice but to auction these accounts. Okay. Secondly, in terms of your gold loan growth, you were mentioning last quarter that we have also moved out of home turf looking at newer geographies like North. How is it like doing business in North on the gold loan side different from what you are doing currently in the existing geographies? And will that be a new trigger to your gold loan traction on it? Well, I don't know what there is nothing like a new strategy for North. The only difference in North and South is North, East and West, our branches are in the bigger cities. In South, we are there in smaller towns also. That's the only difference. Otherwise, the same strategy, same growth is what we see in North and South. Okay. My last question in terms of provisioning run rate on P&L. This quarter, last quarter, the provisions have been around in the range of INR 700-INR 800 million. How do you see this number, a ballpark guidance going forward? You also mentioned that your GNPs of Stage 3 should come down to 2%-3%. How will it reflect on the provision on your P&L? See, there is actually practically, if you ask me, there is no need of a provision for a gold loan company, because the gold loan is fully secured. We have the full security with us. Technically we have to provide provision. The provisions may be whatever you see, provisions are actually reserved because we have never had enough a need to dip into the provisions till now. We don't need it actually. The provisions goes up because standard provisioning also goes up because the asset goes up, standard provisioning goes up. For the NPA, whatever provisions we had earlier also, we have never tried to reverse it. We had provisions earlier, we just left it there. I think we have around INR 900 crore to INR 1,000 crore of provisions in the balance sheet, which actually, I think, if you ask me, it is actually a profit of the company or the surplus of company only. Because none of these loans you see as NPA will result in a loan loss and we have to write off the provision or dip into the provision. Probably next year also, if the Stage 3 is higher, we need to do provision more. The Stage 3 is lower, the provision will be lesser. Okay, sir. I got the clear idea. Thank you. Thank you. Ladies and gentlemen, due to time constraint, we take that as the last question. I now hand the conference over to the management for their closing comments. From my side, Managing Director here, our CFO, Mr. Oommen, our new ED, Mr. K.R. Bijimon, and the other new directors who also joined the call. On all their behalf, I thank ICICI and the team who have arranged this. I also definitely thank all the participants for their participation and also thank them for their support. We hope and we are sure you'll continue to support the company. From our side, we will do our best to run the company well. For both investors and other stakeholders, we'll try our best to give you good returns or good expectations or we will try to realize your expectations with the company from our side. Thank you and good day. Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.