Manappuram Finance Q1 2013 Earnings Call 2 Aug’12 Call/131213_20120802.pdf · Manappuram Finance...

Manappuram Finance Q1 2013 Earnings Call 2 Aug’12

Operator Ladies and gentlemen good day and welcome to the Manappuram Finance Limited Q1 FY13 Earnings Conference Call hosted by ICICI Securities Limited. As a reminder for the duration of this conference, all participant lines will be in the listen‐only mode and there will be an opportunity for you to ask questions at the end of today's presentation. Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. Abhishek Murarka. Thank you and over to you sir.

Abhishek Murarka Yeah. Thanks Myron. good evening and welcome to the conference call, we have Mr. Unnikrishnan the Deputy CEO and the Executive Director of Mannappuram Finance with us. I think it's been a critical quarter for the gold loan companies in terms of business realignment.

However, Manappuram has outperformed the street estimates and manage quiet well in tough times. So I think without much ado I would invite Mr. Unnikrishnan to share his openings remarks and the quarter highlights following which we can have a Q&A session. Over to you sir

I. Unnikrishnan, Managing Director & Chief Financial Officer Thank you Abhishek. Good evening ladies and gentlemen. Thanks for joining the call. Welcome to conference call to discuss the financial results of Manappuram Finance Limited for the quarter ended 30th June 2012.

The results of the company are already with you by now. The company registered a total income of 725.5 crore in Q1 of FY13 as against 493.5 crore in Q1 of FY12. Net interest interest income registered a growth of 33% year‐on‐year to Rs. 416.9 crores in Q1 FY13 as against Rs. 314.5 crores in Q1 of FY12, while the operating profit was up 43% year‐on‐year to Rs. 234 crore in Q1 of FY13 as against Rs. 160 crore in Q1 of FY12.

Profit after tax registered a growth of 46% year‐on‐year to Rs. 158 crores in Q1 FY13 as against a Rs. 108 crores in Q1 FY12. The company following conservative accounting norms has changed its estimates on depreciation with regards to certain assets and has provided an additional accelerated depreciation of 9.15 crore during the quarter. So adjusting for this, profit after tax would have been higher by roughly 6 crores for tax and would have touched 164 crores actually.

The company entered first quarter 30th June 2012 with the AUM of 10,850 crores, registering a healthy growth of 20% compared to 30th June 2011.

Before I open the floor for question, I'd like to give a little bit color on the trends that we see for the economy in general and the goal on industry in particular, as the global economic environment continues to remain uncertain posing several challenges going forward.

Global economy continues to lose traction, the wake of deepening Eurozone crisis. While the concerns of sovereign default and the possibility of Greece exiting the Eurozone have abated, the possibility of a prolonged economic recession remains with the data indicating that even the core economies are slowing down.

We believe this all goes well for gold as an asset class and it will remain safe having protecting investors from deep depreciation of currencies. Leading global banks have predicted that gold prices to touch higher from current levels in the days ahead which is positive for all gold loan companies.

During our last six months or so, we have been passing through certain regulated turbulence as well. Strong growth in assets under management of gold loan companies got‐‐from the Reserve Bank of India thereby bringing in new regulatory changes for the industry with a 60% cap on the loan‐to‐value. And also the regulator has tighten the KYC norms and has put a cap 7.5% cap on the banks' capital funds while lending to gold loan companies.

RBI's concern is that the rapid growth of gold loan companies along with dependence on public funds causes a systemic risk. Further, there were concerns about concentration risks in gold‐loan NBFCs, rising from there into product focus. While the market have interpreted RBI stand has been negative to the gold loan sector as insiders in the industry we hold a different view.

We believe RBI has acted out of it as a responsibility to prevent critical risk from materializing. We continue to believe that gold loans can be a transformation force in India for finance sector particularly in promoting finance inclusion and in monetizing India's vast stock of private gold. Therefore, it is imperative that we do not lose sight of a significant upside potential that gold loans hold.

Gold loan financing is a window to provide finance to people at the lower end of pyramid for their immediate personal and business needs. By restricting the loan‐to‐value to 60% and making it applicable only to non‐banking financial companies, there is real risk of bringing new life into the unorganized sector which as pawnbrokers and money lenders, the loan shops.

We expect the Reserve Bank to continue to keep a close watch on the evolving situation and recalibrate the policy, responses adequate. We 're hopeful of the favorable outcome from Reserve Bank constitutional working group, under the leadership of Mr. K.U.B Rao to study the business gold loans and examine current attractiveness gold loan NBFCs.

See we have had interactions with Reserve Bank off late as well. And on the basis of our interaction with RBI, we understand that largely the concerns on the business, the gold loan business have been on high growth, increasing number of customer complaints and perceived lack of transparency in the auctions. The ‐of the concerns around the same, the Reserve Bank of India has described the reduced selling limits on bank exposure to gold loan companies at 7.5% of the capital fund. And has also reduced to the loan‐to‐value to 60% of the jewellery value. And has also put in place a fast track court making the boards of non‐banking financial companies responsible for its implementation.

At Manappuram, we have proactively improved our KYC process, have put in place a transparent auction policy and practice and have introduced an intrude and automated customer complaint‐‐redress mechanism.

Apart from the above, we have also been hit by the new securitizers norms which have made a securitizers of gold loan very difficult going forward. Further, going forward we expect certain market practices of NBFCs relating to raising, non‐convertible debentures, certain practices are likely to be modified by removing any of any other complaints to public...

We believe that while doing this due regard will be given by other banks to keep NCD as one of the most important sources of funding.

We are happy to see that we are complined with all the new RBI guidance and continue to respect the decisions of the regulator. These changes not only tightened the news for all existing companies, but also make it difficult for new entrants to easily enter the industry.

In February 2012, as you may be knowing, the Reserve Bank has issued a public notice that‐‐the company for continuing to exit the deficits from the public after becoming a non‐deficit, taking non‐banking financial company in March 2011. While we clarified that the company of accepting retail subscriptions to its secured NCDs, non‐convertible debentures, which is permitted, a related issue had also come up regarding deficit fact subject by a proprietary concern Manappuram Agro.

In the light of the concern expressed by RBI the promoters have since transferred the enter amount of his deposits into‐account with a local nationalized bank and bulk of the deposits have now been repaid.

Arising from these developments, the top management of the company initiated a series measures to review and improve governance standard and benchmark it through the best practices. The leading law firm Amarchand Mangaldas was taken on board to assist then new review exercise and we're now in the process of implementing their recommendations.

We continued to re‐trade current year. Current year will be a year of consolidation for gold loan NBFCs. After the years of high growth, we believe the company will continue to strive to maintain high quality growth and continue to enhance shareholder value.

The management has taken several measures to ensure the company is able to maintain reasonable growth with acceptable margins. FY13 is a year of consolidation for the company, before it returns to a healthy growth path in FY14.

We at Manappuram are constantly assessing new environment post the regulatory changes and still think it is too early to comment on the changes and provide you with accurate guidance for FY13.

Having said that, I'd like to mention, we will continue to maintain healthy NIMs and normalized ROAs closer to above 4% and very healthy ROEs in the band of 20% to 25%. We believe these normalized return ratios are very good, considering that our business model has a much even stronger and the risk profile of our business has reduced considerably with the lower LTV and gold if it collapses.

Lastly, we thank all the shareholders, the distinguished shareholders, employees, our lending banks and finance institution, our foreign and domestic investors, regulatory bodies and the government, further valuable contributions in our success. Also worth specially mention Reserve Bank of India it devoted considerable time and resources to ensure the security of the finance sector and the long‐term survival of the gold loan sector.

As I said, Manappuram Finance is in a phase of consolidation. By definition, consolidation is not half as exciting as rapid growth, nevertheless or the long haul, it is vital for the health of the organization. We seek you whole heart support so that the company is able to achieve its true potential in the years to come. Management will take all the steps necessary to enlarge even stronger

as a company that creates consistent value for its shareholder.

Before I conclude, let me quote the Reserve Bank Governor, Dr. Subbarao, " We cannot ban or restrict loans against gold beyond a certain point because there is indeed a life line for millions of households who keep gold as a hedge for difficult times. "

Manappuram believes that the expected policy of framework, some policy framework is going to be based around the above statement of the Governor. With 18,000 metric tonnes of household used jewellery waiting to be monetized, we believe gold loan business is going to have a great future in this country.

With these opening remarks, I hand over the phone to Abhishek.

Abhishek Murarka Myron are you there. Can we continue with the Q&A?

Operator Yeah.

Questions And Answers

Operator Participants we will begin the question‐and‐answer session. [Operator Instructions]. We have the first question from the line of Ajitesh Nair from UBS Securities. Please go ahead.

Ajitesh Nair Thank you. Good evening, sir.

I. Unnikrishnan, Managing Director & Chief Financial Officer Hi. Good evening.

Ajitesh Nair Sir, just two questions. The first one, can you help us with the gross NPA number for this quarter?

I. Unnikrishnan, Managing Director & Chief Financial Officer Gross NPA is around 112 crores.

Abhishek Murarka As compared to 64 crores last quarter?

I. Unnikrishnan, Managing Director & Chief Financial Officer That's right.

Ajitesh Nair Right. Sir, what explains the jump? Have you gone slow in the auctioning?

I. Unnikrishnan, Managing Director & Chief Financial Officer Last quarter ‐‐ I think you have the gold loan number, 64 crores. Last quarter, it was 73 crores, gold loan was 63 crores, this time goal loan is 97 croress. Yeah.

Ajitesh Nair 97 crores.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah.

Ajitesh Nair And 100 crores overall, okay.


Ajitesh Nair So why are we going slow in auctioning, sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer Because as I said the Reserve Bank has put in place a new auction policy as part of the fair fact of this quote, it prescribes an independent auctioneer to conduct auctions publication in local newspaper et cetera.

Ajitesh Nair Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer What has happened earlier, we were conducting the auctions on our own. So if you look at these changes that are made towards the end of last quarter.

Ajitesh Nair Right.

I. Unnikrishnan, Managing Director & Chief Financial Officer Around March, last week of March, so what happened is it took time for us to appoint all these auctioneers and all that. Now, we have just started auctioning. And one more thing the loan book, the overdue position has slightly gone going up, the technique NPA has slightly gone up, we call it technical NPA. But the above 90% LTV loans have actually become zero, whereas it was 3% in Q4 of last year. So actually the quality of it has not been affected. So only the overdue have gone up.

Ajitesh Nair Understood. And do you expect next quarter onwards this numbers to remain here or come off?

I. Unnikrishnan, Managing Director & Chief Financial Officer It may actually ‐‐ the process will fully streamlined for the next four, five months. Maybe largely this will be addressed in Q2 or there could be some overlap into Q3 as well.

Ajitesh Nair Understood sir.

I. Unnikrishnan, Managing Director & Chief Financial Officer But by Q4 things would be normal.

Ajitesh Nair Okay.


Ajitesh Nair Sir secondly I wanted to check your headcount is down by close to 2,200 people on a Q‐on‐Q basis. So, why is that?

I. Unnikrishnan, Managing Director & Chief Financial Officer See, the number you're having is the end of the period number, okay. So, we are on course to implement some cost reduction plans et cetera. As part of that, we have rationalized the staff number. So, what you're seeing is the end of the June number. It is not average number, okay. So, salary was paid on the average number. That's the reason.

Ajitesh Nair Okay. One last one. Today in the AGM has any decision been taken on the special rights for the new investors?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. We conducted the Annual General Meeting with more than 160 shareholders participating. And that is a smooth ‐‐ there were no major questions or anything, passed it with something majority.

Ajitesh Nair Okay. Thank you, sir. Thank you, sir. All the best.

I. Unnikrishnan, Managing Director & Chief Financial Officer Thank you.

Operator Thank you. The next question is from the line of Ashish Sharma from Enam Asset Management. Please go ahead.

Ashish Sharma

Yeah. Good evening, sir and congratulations on good set of numbers.


Ashish Sharma I just wanted to get a sense on the cost of borrowing. What was the cost of borrowing for Q1 and would you expect it to trend down in the coming quarters sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer See the cost of borrowing this quarter was around 13.41% whereas it was 13.73% last quarter.

Ashish Sharma Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer So there is marginal dip in the cost of borrowing. One thing to understand is I think the policy rates maybe either remaining the same or may even come down going forward. So our cost funds will reflect that. If it remains flat, our cost of funds will remain the same or if it goes down that will move inline with that.

Ashish Sharma Okay. And in terms of probability, we reported sort of a 158 crore number. Do you expect this numbers to trend upwards, I mean this is sort of a worst quarter based on realizing the business model with the new rules?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. I think better answer from my side will be sort to talk about the loan book, then we will get a sense on the profit numbers, because generally we do not give any guidance on the profit number.

See if you look at the de‐growth in the loan, we have de‐grown in the last quarter and we have de‐grown in Q1 of this year itself. So we have already seen two quarters of de‐growth. And in Q2, we do not expect de‐growth, this quarter will be flat. And starting Q3, we should be growing at around 10% or even 15% over the next six months in Q2 and Q3. So, net‐net our loan book growth for this should be either flat or maybe a nominal increase over the beginning of the year number.

Ashish Sharma Okay. And one more question was on the depreciation charge. There would be a one‐time hit in Q1, after that I think the normalized run rate would continue for depreciation. What was the one‐time hit sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. This is a one‐time hit, this is a catch up of accumulated depreciation. Going forward on these assets we'll be providing a depreciation as per the new norm which is a three year life.

Ashish Sharma Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer But that will not be material that's what I'm saying.

Ashish Sharma Okay. That won't be material. And where do you expect cost to income ratio to trend going forward overall sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. I mean cost income is not a number, I do not, I mean I do not ‐‐ I'm not a great admirer of that ratio for Manappuram, not for other companies. And I do not closely, I mean watch that number, honestly.

Ashish Sharma No, in case, I think look into cost to asset ratio. So where do you expect that ratio to trend sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer That should be around. It should come down by the end of the year, it should come down to 5%.

Ashish Sharma 5%. Okay. And just one last question, we had ‐‐ about the gold loan business with NBFCs and banks, where do you exactly send, I mean I think with the NBFCs, it is around 50,000 crores. Where do ‐ send in that number, sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer See what the understand is that see the market is organized market is at least two times that of the NBFC markets. So the total market size organized market size should be around 1.5 lakh. And I understand that this year I mean NBFCs may not be growing their loan books substantially maybe small NBFC maybe growing. And banks must be showing some good numbers this year also. That's my sense on the total loan book.

Ashish Sharma And also as you mentioned in the opening remarks, does the current norms ensure that there are entry barriers for the new player, I mean new players would find it difficult to sustain at these lower ROEs?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, the new player I'm talking about the NBFCs. They will find it difficult to capture the markets number one because they'll have to face competition both from money lenders and banks. So that, it will be very difficult for new NBFC and also that restrict norms introduced by ‐ with respect to the fair practices, the multiple language communication then this is will increase the cost for them. And also all the practices they have actually streamlined their process, so it is going to be even more difficult for smaller companies to idea to the new norms.

Ashish Sharma And this gives a sort of a big advantage to the established players like Manappuram?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, yeah.

Ashish Sharma Fine sir. Thanks a lot. I will come up with a follow‐up question. Thank you.


Operator Thank you. The next question is from the line of Gaurav Nevatia from Arrow Capital. Please go ahead.

Gaurav Nevatia Sir, good evening.


Gaurav Nevatia Sir, has there been any change in the methodology of your valuing the collateral before and after RBI introduced the cap of 60% on loan‐to‐value?

I. Unnikrishnan, Managing Director & Chief Financial Officer See if you look at RBI, earlier we had our own norms. Each company had their own norms. We had our own norms on valuing the jewelery. Then starting March RBI prescribed some new norms.

Gaurav Nevatia Yes.

I. Unnikrishnan, Managing Director & Chief Financial Officer Saying that the loan to value on each loan which are non‐banking financial company is discussing, should not exit 60% of the jewelery value, the collateral value, of course.

Gaurav Nevatia Right.

I. Unnikrishnan, Managing Director & Chief Financial Officer What that circular has not spelt out it is how to calculate the collateral value, it has not laid down any hard and fast rule on that.

Gaurav Nevatia Sir, that is exact reason of my question, because earlier probably you would take the scrap value, which is essentially the whole value minusing the after all the stones and I mean not taking into account any making or mark up of the jeweler.

I. Unnikrishnan, Managing Director & Chief Financial Officer

Yeah.

Gaurav Nevatia But, now since they have elected open, sir. I mean that's why the question.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. Now what you have done is all the large NBFCs which are into gold loan have formed an association. That association has prescribed certain norms and we are following that.

Gaurav Nevatia So, sir as per the norms, do we actually have a reduction in the loan‐to‐value effectively or not?

I. Unnikrishnan, Managing Director & Chief Financial Officer We are well below 60% now. As per our LTV is well below 60% now.

Analyst Yes, sir. I'm sure that we are complying with the RBI what I'm asking is has that effectively been a material change?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah it is around ‐‐ compared to Manappuram's practice it's around 10% lower valuation.

Analyst It is 10% lower compared to before?


Analyst Okay, sir. And sir one more question is when is the Rao Committee report expected I know the last date it was supposed to be July end. So do we have any sense how far away the report can be?

I. Unnikrishnan, Managing Director & Chief Financial Officer So when the constitute they have banned till the 13th of July.

Analyst Right.

I. Unnikrishnan, Managing Director & Chief Financial Officer I mean that was the time we all were expecting to Board. What I understand is that this report may come out maybe any time now, maybe one week, two weeks, by the end of August, we should be seeing the report.

Analyst Right, sir. Thank you very much. And sir, also one more thing strikes me. You mentioned that we are expecting a ROE of 20% to 24% whereas in the earlier concall, the expectation was around 18% to 20%. So can I say that things are looking a little better than what they were in May when we last spoke?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. Definitely.

Analyst Right, sir. Thank you very much.


Operator Thank you. The next question in from the line of Veekesh Gandhi from Bank of America. Please go ahead.

Veekesh Gandhi Hello, sir. How are you.

I. Unnikrishnan, Managing Director & Chief Financial Officer Hi, Veekesh.

Veekesh Gandhi Sir, just couple of questions, one is I just wanted to get your perspective on disbursements.


Veekesh Gandhi Probably I think at a all time low 4,000 crores.


Veekesh Gandhi So where do you see that moving up? I mean last year I believe you something around 32,000 crores. Environment was obviously different, regulations were different. So, just to get your perspective on that?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. See, number one, the message from RBI was to ensure that the growth comes down just like ‐‐. So, we made some conscious

effort to see that no, we do not grow. So, what is it is we stopped offering all low yielding products. And started focusing only on the high‐yielding products. That is the reason why our yields if you look at it has slightly gone up. At the same time, the percentage of low yielding product and the overall buy have gone down from something like 25% to 12%. I'm talking about products with the yield of less than 18%.

So, what has happened is optically the yield has gone up. Actually to the customer yield is not, his cost of borrowing has not gone up. Yeah, I'll tell you from 27 it has gone down less than 18% product has gone down from 27% to 15%.

Veekesh Gandhi Okay. So that's the primary reason?


Veekesh Gandhi So where do you see the disbursement number to end at probably, I mean without like 4,000 crore this year should we assume something around like 25,000 30,000?

I. Unnikrishnan, Managing Director & Chief Financial Officer I mean we should see around between 25,000 to 30,000 crores of disbursement, we should see.

Veekesh Gandhi For the full year?


Veekesh Gandhi Okay, and sir secondly can you help me with the data point related to your ‐‐ I have your cost of borrowings. Just wanted to get your NIMs and your yields for this quarter, last quarter and first quarter of last year.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, as I said the yield has slightly gone up to 27%

Veekesh Gandhi Sorry?

I. Unnikrishnan, Managing Director & Chief Financial Officer 27% at this quarter.

Veekesh Gandhi 27%?


Veekesh Gandhi Okay. Last quarter was 27.5 right?

I. Unnikrishnan, Managing Director & Chief Financial Officer No, no last quarter, it was slightly less. It was 26.25.

Veekesh Gandhi Okay. And first quarter of last year.


Veekesh Gandhi Okay. So the yield has been moving up.

I. Unnikrishnan, Managing Director & Chief Financial Officer And that is because of the proportion of low yielding products have gone down from...

Veekesh Gandhi 27 to 15

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah to 15%.

Veekesh Gandhi Okay. So are you seeing any ‐‐ related to that are you seeing any resistance in terms of your higher push on higher yields affecting your disbursements?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, what we've done is as per the new loan policy we've kept our interest rate at 24%. So for historical portfolio which was above 24%, that also has come down. So what is happening is the all the rates are hovering around this 25%, that is what is happening. So yield ultimately may settle around 25%. It can, in the medium term over the next one year, can be even between around 24%.

Veekesh Gandhi Okay and sir, just can you help me with the NIMS and the ‐‐ margin?


Cost of borrowing is around the 13.47.

Veekesh Gandhi Okay, fine so, yeah I'll do it myself. So the yield is 27 right for the quarter.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, yeah.

Veekesh Gandhi Okay, thank you sir.

Operator Thank you. The next question is from the line of Prashant Premkumar from EastBridge Capital. Please go ahead.

Analyst Mr Unnikrishnan, thanks for taking the question and congratulation on a good quarter. I had a question on the customers that you lost this quarter, I think it's around 200,000. Can you give us some color on what kind of customers, were they above 1 lakh customers or what percent of them, sort of are above 1 lakh or above 5 lakh?

I. Unnikrishnan, Managing Director & Chief Financial Officer See, actually we have added customers at the 11%, 25% category and we have lost some customers at more than 2 lakh category. This is what has happened. So largely what has happened, we have, in fact the small value customers have gone up actually.

Analyst And so you're losing these customers to banks, is that right on the....

I. Unnikrishnan, Managing Director & Chief Financial Officer Our sense is we've lost customers to banks and money lenders.

Analyst Understood. Thanks for that. I had another question on sort of just access to the bond market. When it comes to sort of just raising, just commercial paper when do you think you can sort of raise sort of material resources at competitive rates?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, see we are in a position to tap the market anytime. Now if you look at last quarter, I mean in Q4 we had company specific issues as well as market specific issues. The market was not having any liquidity. And we had also undergoing some issues with the regulator as well. So we were playing it very cautiously. Going forward we should be able to raise money from the debt market as well.

Our rating has been...

Analyst Yeah, and then the last question on ad expense which have come off materially again this quarter. When will you feel ‐now where will that numbers stabilize and when will you feel comfortable sort of moving forward with advertising again?

I. Unnikrishnan, Managing Director & Chief Financial Officer This year we may end with some spending on 30 crore to 35 crores. And going forward, I don't think ‐‐ see gone are the days of high growth 50% growth, 60% growth and all that. But when we introduce some low yielding products our volume is likely to go up. And ‐‐ we should be able grow say 15% to 20% depending upon which year we are already talking about. If we are talking about say FY'14, we should be able to grow 20%. For that kind of growth we will not be required to spend 100 crores or 70, 80 crores. But in between number may be instead of 30 crores, 35 crores when we spending 50 crores.

Analyst I understood.


Analyst Thanks and congrats again on very good number.


Operator Thank you. The next question is from the line of Jigar Valia from OHM Group. Please go ahead.

Jigar Valia Thanks for the opportunity sir. Sir, would like to know what would be the lowest yield product, yield for the lowest ‐‐.

I. Unnikrishnan, Managing Director & Chief Financial Officer As of now, we're not offering any products that are less than 18%.

Jigar Valia Okay. So minimum is 18%.

I. Unnikrishnan, Managing Director & Chief Financial Officer As of now, but we'll be changing that at anytime now, and we'll be targeting some growth going forward. So, when we start focusing on growth, that's what I said in our low yield will likely go down.

Jigar Valia So, it would go down to from 18, you will start focusing on say 15% to 18% category. Also probably try to catch that particular market which we...

I. Unnikrishnan, Managing Director & Chief Financial Officer Basically 15 to 18 category and 18 to 21 category. Currently most of the products starts 21 to 24 category.

Jigar Valia Mostly it is in 21 to 24 category.

I. Unnikrishnan, Managing Director & Chief Financial Officer Currently yeah.

Jigar Valia Okay and should this happen you would expect some that 10%, 15% growth actually you like...

I. Unnikrishnan, Managing Director & Chief Financial Officer That's right. Yeah.

Jigar Valia Sir if you can also guide in terms of what are your expectations from RBI in terms of relaxing the norms, what specific areas, it's more with the LTV gap or it's more operational aspects of it?

I. Unnikrishnan, Managing Director & Chief Financial Officer See my sense is that may revisit the LTV now. Barring that, I don't have any sense as to what they are thinking. This own interaction with the regulator. They have understood that no more specific norms should be laid down. But subscribing how to I mean maybe now they will come out some guidelines as to how to value jewelery could be there if recommendation may be for a higher LTV. So it will be uniform across all ‐‐ and I don't know whether banks as of now I don't think they but they can't rule out.

Jigar Valia Okay. Sir what percentage of our branches would not be profitable?

I. Unnikrishnan, Managing Director & Chief Financial Officer The branches were opened last year, which is around 900 branches. They have not started making money.

Jigar Valia Okay.


Jigar Valia Okay and if you can also tell me the total current number of branches.

I. Unnikrishnan, Managing Director & Chief Financial Officer We have added 63 branches this quarter. So the total is around 2,970 something.

Jigar Valia

2917 okay. Okay, so for the 18% yield 18% if you can which is the minimum currently, what is the amount of loan per gram?

I. Unnikrishnan, Managing Director & Chief Financial Officer Amount of loan per gram?

Jigar Valia Yeah.

I. Unnikrishnan, Managing Director & Chief Financial Officer Okay. I have that number just a moment. Loan amount per gram, see I'll...

Jigar Valia Approximate, approximation.

I. Unnikrishnan, Managing Director & Chief Financial Officer This is around some ‐‐ see the per customer ‐‐ I'll give you the per customer grammage, 37.45,

Jigar Valia Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer 37.45 and ticket size is 37,000 sorry per customer expose is 66,421. So you can divide it, you will it, 66,421 is the per customer exposure, divided by 37.45.

Jigar Valia Divide by 37.45.


Jigar Valia Okay, okay, sir thanks.


Operator Thank you. The next question is from the line of Jyothi Kumar from Spark Capital.

Ganeshram Jayaraman

Hello sir, Ganeshram here.

I. Unnikrishnan, Managing Director & Chief Financial Officer Hi, Ganeshram.

Ganeshram Jayaraman Hi, sir. Sir, two questions, one is out of the total NCDs of 1,300 crores, how much will be retail, sir?

I. Unnikrishnan, Managing Director & Chief Financial Officer Retail in the sense, we had made a public issue also, that is 440 crores that also is retail, mostly retail?

Ganeshram Jayaraman Okay, apart from that?

I. Unnikrishnan, Managing Director & Chief Financial Officer Apart from that the remaining portion is around, a similar amount around 450 crore.

Ganeshram Jayaraman Okay and the balance will be placed privately with say, mutual funds.


Ganeshram Jayaraman Okay. Secondly out of the 10,700 crores of loan book, what proportion would have got re‐priced say at lower LTVs and paper? And how much is left to be done at the new LTV restrictions?

I. Unnikrishnan, Managing Director & Chief Financial Officer One, I mean, I don't have a readymade answer for that. But when I observe, we do not have any loan which is having an LTV of more than 90% as of today with us.

Ganeshram Jayaraman Fine. But what I'm trying to just understand is post restriction started, the entire loan book will not have got the re‐priced at the new regulation.

I. Unnikrishnan, Managing Director & Chief Financial Officer I understand that, yeah.

Ganeshram Jayaraman So what proportion you have got done and what is left to be done, just a ball park estimate?

I. Unnikrishnan, Managing Director & Chief Financial Officer I'll tell you, around 60% of the loan book today is ‐‐ 60% or 70%, just a moment, I'll have the number, yeah, around 70% of the loan book today is less than 60% LTV.

Ganeshram Jayaraman Okay, okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer That will give some color.

Ganeshram Jayaraman Yeah. That gives a sense, okay. And lastly, I mean have you thought of any game plan if there is cash restriction on loans in excess of 50,000 rupees, if there is such a cash restriction what is your fall back option, are ‐‐, bearer checks an option or ‐‐ kind of, what kind of thought process you have in mind?

I. Unnikrishnan, Managing Director & Chief Financial Officer There are some, if you look at ‐‐ I read out a recent quote of the Governor of Reserve Bank of India which was emphasizing on the need for this loan. So that statement emphasizes on one thing that this industry needs to grow. So if the policy framework is going to be built around that, I am sure Reserve Bank will be coming out with a framework which enables this business, that's the sense I got from that statement.

So my sense is and also they have recognized in some of the interactions we could also understand that they recognized the unplanned needs of this loan, because people go for these borrowings, whenever there is an exigency. So this is not a pre planned loan. So none of your requirement is pre‐planned, so long as this is predominantly a rural and semi‐urban product or even in the metros this is a peripheral product. This is not a core city product, this is not core city product, this is product of the labor class, that kind of product.

Ganeshram Jayaraman No, I agree. I got the point. I mean I'm clearly agreeing to what you are saying, but my only point is do we have a plan in case this restriction indeed comes in? What else ‐‐ what is the second plan of action?

I. Unnikrishnan, Managing Director & Chief Financial Officer I mean my sense is, let us, we don't want to be unnecessarily concerned about that, because this business essentially has to be carried out in the way this is being done with appropriate measures for avoiding any large value loans getting diverted for undesirable purpose. So as I used to tell we, out of our 16.42 lakh customers, the customers who have borrowed more than 5 lacs is not even 25,000, it's not even 25,000. And also an average customer is borrowing against 37 grams, 38 grams of gold. I mean must be remembering my earlier statement that this is a 40 gram business all along. Last five years 10 years you take, it is a 40 gram business.

Analyst Lastly sir. The brand ambassadors, are you going to continue with them or have you discontinued your relationship with any of them?

I. Unnikrishnan, Managing Director & Chief Financial Officer Expect one or two we're continuing with them on a muted form. The decibel level will be down but we will be continuing with them.

Analyst Okay. That's it from me. Thank you.

Operator Thank you. The next question is from the line of Hiren Dasani from Goldman Sachs Asset Management. Please go ahead.

Hiren Dasani Thank you. One question on the other operating expense which is approximately 71 crore off. This has gone up quarter‐on‐quarter compared to the March quarter. So any one‐off there 73 crores yesterday.

I. Unnikrishnan, Managing Director & Chief Financial Officer That 61 crore no?

Hiren Dasani Yeah compared to 62 crore it has gone up to about 73 crores.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah as we said there is a 9 crore which holds depreciation.

Hiren Dasani No no that is a separate line.

I. Unnikrishnan, Managing Director & Chief Financial Officer Okay there is a 10 crore that is in Q4, there was no bad debts actually because whatever bad debts we had, we had provided in the first three quarters.

Hiren Dasani I am even adjusting for that. So 61 crore is gone up to 84 crore and of 84 crore about 10.5 crore is bad debt related. So even if you adjust.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah this is around to 6 crore is on account of rents payments in certain branches where we had executed the agreement. And we which do not proposed to open. So we had to pay some rental on that. That is around 64. Then there are some tax related payments of around 4 crores. So that is 10 crores.

Hiren Dasani Okay. So this two would be largely one‐off?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, that's right.

Hiren Dasani And rent is also like you entered into agreement but you are not proposing to open but you had to...

I. Unnikrishnan, Managing Director & Chief Financial Officer So we had to cancel that. So we had to provide for the all the rental and all that it on.

Hiren Dasani So roughly 10 crores is one‐off in that sense.


Hiren Dasani Okay. Thirdly I mean we are talking not of opening of any branches. We have opened some branches so going forward also we should expect some branch openings this year as well?

I. Unnikrishnan, Managing Director & Chief Financial Officer No see, what we had indicated in the begin of the year also. Then no, actually we will be opening some 200 odd branches and roughly 250 branches.

Hiren Dasani Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer And simultaneously we will be closing down some branches. So net‐net there won't increase in that number of branches by the end of the year.

Hiren Dasani Okay, okay. It just so happened in the first quarter the closures don't seem to be...

I. Unnikrishnan, Managing Director & Chief Financial Officer Exactly yeah. Because it happens as the lag effect. These were branches which were kept ready for opening but we could not open the Q4 of last year.

Hiren Dasani Sure, sure. And I mean what's the value of the gold auction during the quarter?

I. Unnikrishnan, Managing Director & Chief Financial Officer It's only 15 crore.

Hiren Dasani

Compared to Q4?

I. Unnikrishnan, Managing Director & Chief Financial Officer Q4 was 144 crore. 140 odd crores.

Hiren Dasani 140 odd crores.


Hiren Dasani Sir can you just repeat the gross NPA numbers which you said in the beginning for gold loans as well as for the total?

I. Unnikrishnan, Managing Director & Chief Financial Officer Gold is 96 crores.

Hiren Dasani Yeah.

I. Unnikrishnan, Managing Director & Chief Financial Officer 97 crores. The overall is 112 crores.

Hiren Dasani 112 crores.


Hiren Dasani And what was the number as of March.

I. Unnikrishnan, Managing Director & Chief Financial Officer 63 and 73.

Hiren Dasani 63 and 73.


Hiren Dasani Sir, question is this, I mean see if you exclude gold loans you have about 16 crore of gross NPA. And the book itself of non‐gold and outstanding is about 113 crore.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. See even out of that, see there is around what is that amount around 6 crore again is a special type of gold loan, which we are disclosing it separately, because that product we are not pushing now, under the new guide lines we cannot be able to push it. That's the reason.

Hiren Dasani Okay. So 6 crore NPA is related to that.

I. Unnikrishnan, Managing Director & Chief Financial Officer That is only technical line, these are not ‐‐ I mean any ‐‐ these are all technical NPAs that's an installment loan, then six installments this becomes NPL.

Hiren Dasani Okay. You don't expect losses in...

I. Unnikrishnan, Managing Director & Chief Financial Officer No, no, no that wont be any loss in that.

Hiren Dasani Okay, okay. Okay sir. Thank you very much.


Operator Thank you. The next question form the Pankaj Agrawal from Ambit Capital. Please go ahead.

Pankaj Agarwal ‐‐ your number of employees have gone down sequentially where as your number of branches have gone up. So where have done this reduction in employees?

I. Unnikrishnan, Managing Director & Chief Financial Officer We started some rationalization of the staff ‐ as part of our overall cost rationalization. So they haven't redeployed in other branches and we are not, on its own, we are not tired we have not cut down the employees. It's a normal process.

Pankaj Agarwal No but the absolute number has gone down I mean, if you ‐‐

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. And also bunker what has been happening when you're growing 50 branches per month. We were keeping some additional work force to be deployed in the new branches.

Pankaj Agarwal Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer So suddenly we stop operating branches so that excess pool was not declared. That is one reason.

Pankaj Agarwal Okay. But still it's around 3,000 employees.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. At least 1,000 employees we were keeping it in excess.

Pankaj Agarwal Yeah. But the reduction is around 3,000 employees...

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. And other one is we've as per the new norm, the number of employees will be less.

Pankaj Agarwal Yeah. But I mean has this reduction being in any other operations or core operations audit and risk management or it's only...

I. Unnikrishnan, Managing Director & Chief Financial Officer No, no this is at the branch level actually.

Pankaj Agarwal Actually my concern was that whether to reduce your employee expenses. I mean are you cutting down on your...

I. Unnikrishnan, Managing Director & Chief Financial Officer No, no this is not on audit, this is not on risk, this is not on inspection. This is purely on the operating people at the branch level.

Pankaj Agarwal Okay. And your credit lines from banks and mutual funds it is again down on sequential basis. It was around 10,000 crores at the end of last quarter, it has come down to 9,000 crore. So it seems that during the quarter you have not got any additional credit lines from the bank. So do you...

I. Unnikrishnan, Managing Director & Chief Financial Officer Not exactly like that. We have sufficient funding arrangements of more than 1,000 crores kept in readiness. The only thing is

because we are not growing. So we see draw down the limits, and also we were not looking for new facility as well.

Pankaj Agarwal Okay. So I mean to put it another way, your decline in loan growth sequentially it was more due to constraints on the liability side or the asset side?

I. Unnikrishnan, Managing Director & Chief Financial Officer Not aspects, this is largely on account of asset side I am saying. Liability front the constraint was because that was at different issue because as I said, the securitization path we have to replace it with that other funding.

Pankaj Agarwal Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer That has nothing to do with other funding availability of other funding or anything that was purely technical.

Pankaj Agarwal Yeah but are banks ready to swap this assignment through normal credit lines or?

I. Unnikrishnan, Managing Director & Chief Financial Officer Largely yes. There are some banks where we are still having discussions. Some banks have already done that. I mean that will happen I mean they may not be 100%, but part of it will get converted a normal facilities.

Pankaj Agarwal So tomorrow, let's say, you have an opportunity to grow 20%, 25% year‐on‐year. You believe that liabilities won't be an issue.

I. Unnikrishnan, Managing Director & Chief Financial Officer This year anyway, for this kind of growth we are adequately funded. We don't expect any challenge. So next year for growing 20% I don't think we'll have be having any challenge. 20%, 24%, I don't think we will be having any challenge.

Pankaj Agarwal Okay, sir. Thank you very much.

I. Unnikrishnan, Managing Director & Chief Financial Officer Thank you Pankaj.

Operator Thank you. The next question is from the line of Mithun Soni from GeeCee Investments. Please go ahead.

Mithun Soni

Yeah, hello. Am I audible, sir?


Mithun Soni Sir, just some book‐keeping questions. Could you tell me like what is the total gold stock as of now, as of the quarter end?

I. Unnikrishnan, Managing Director & Chief Financial Officer Quarter end gold stock is around 60 tons, just...


Mithun Soni And what will be the securitized book as of now?

I. Unnikrishnan, Managing Director & Chief Financial Officer Around 1,300 crores.

Mithun Soni 1,300 crores, which is and it should run down by the end of the next quarter or do you expect it to...?

I. Unnikrishnan, Managing Director & Chief Financial Officer Largely, it should ‐‐ the next two quarters run it down.

Mithun Soni Okay. And our total debt excluding the securitization would be in the range of about 8,900 crores‐9,000 crores?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. 8,000 odd crores.

Mithun Soni Around 8,000 crores?


Mithun Soni

Okay, okay. All right. Thank you sir.


Operator Thank you. The next question is from the line of Amit Ganatra from Religare Asset Management. Please go ahead.

Amit Ganatra Yeah. Good evening sir.


Amit Ganatra Sir, one question basically the rate at which your disbursements have fallen on a year‐on‐year basis and even on a quarter‐on‐quarter basis. So even has actually not fallen. So I means that your rate at which the assets are running down that has basically gone down, they're not, the assets are churning at the rate at which they used to churn earlier? Why is it happening, I mean any specific reason?

I. Unnikrishnan, Managing Director & Chief Financial Officer See one reason is as I said since we have adequate coverage and essentially are not in a growth mode, our focus is on retaining whatever loans possible. So one thing is we are not aggressively pushing for collections. The other is when we brought down the LTV from 85% to 60%, I'm talking about the highest LTV. There were some say around 15% of the customers who used to roll over these loans, they stopped doing that. So these are one‐time impact.

Amit Ganatra Okay. So rollover basically going down and also...

I. Unnikrishnan, Managing Director & Chief Financial Officer With respect to this set of customers?

Amit Ganatra So now basically going ahead, what can we expect in terms of run down rate because how of much of the disbursement will ultimately translate into new loan growth in future?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, we should be seeing a total disbursement of around 35,000 to 30,000 crores this year.

Amit Ganatra But will the run down rate continue to remain the way it is or it will once again go up? See whatever you disburse, not everything translates into a new loan growth right because your assets also tend to run down. In fact if I look at the last 13 offer data, in the

earlier periods the run downrate was pretty high. That has been coming down and now it has come down very drastically.

I. Unnikrishnan, Managing Director & Chief Financial Officer Now going forward the run down will come down because as I said we will also be ensuring that why can't we retain a customer five months or six months instead of four months? Our focus is on that.

Amit Ganatra And also does it partly explain that the tough economic conditions that customers, they, may be in the past they use to be able to repay very fast and now basically since the tenure anyways is one year and the conditions are tough so may be they are not able to repay as fast as the they were able to repair earlier, is that also one of the reason one can attribute?

I. Unnikrishnan, Managing Director & Chief Financial Officer May be I'll be able to give a color on that, when we go back to the normal disbursement mode. See during last two quarters our focus was actually on de‐growing the business.

Amit Ganatra Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, thank you.

Operator Thank you. The next question is from the line of Gaurav Nevatia from Arrow Capital. Please go ahead.

Gaurav Nevatia Sir I have some follow‐up questions please.


Gaurav Nevatia Sir, did I miss something you mentioned that the yield is 27%. Is that correct?


Gaurav Nevatia Sir, but when we're lending at an average of 18 to 21 to 24, why is the yield at 27%, sir.


This is the simple annualized yield. When a lending institution is lending at 24% monthly compounded that itself will...

Gaurav Nevatia Okay. Right. Okay my question is answered. And sir the second follow‐up question is what are the reasons, sir for upping your guidance of ROE from 18 to 20 to now 20 to 24 because I mean as I see things on the ground I don't see many changes from May to now. So I mean there have been no regulatory changes as well. So sir what are ‐‐ can you enumerate reasons for upping your guidance?

I. Unnikrishnan, Managing Director & Chief Financial Officer In Q1 and Q2 we were not sure about the stance of the regulator on this product itself.

Gaurav Nevatia Alright. Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer So as I read out, now there is a statement, at least from the Governor himself saying that, this is a product of a million.

Analyst Okay.

I. Unnikrishnan, Managing Director & Chief Financial Officer So that gives me the necessary confidence to tell you that this is going to be the scenario. So that basically closed case for our business. So the regulatory stand I believe then always will be built around that statement. This is affecting the millions of households. That it is not referring a millions of people, millions of households, a substantial number, millions of households means substantial number.

Analyst Great. And sir how did the monsoons affect our business?

I. Unnikrishnan, Managing Director & Chief Financial Officer As I said we will have some colors normally poor monsoon are good monsoon, both helps out business when we talk about the rural part of the business. Because in that monsoon what happens people who will look for money for a different reason. In a good monsoon people will look for money for expanding their small business or something like that. So this will be neutral as well as we're concerned.

Analyst Thank you sir. Thank you very much.


Operator Thank you. The next question is from the line of Umang Shah from Motilal Oswal. Please go ahead.

Umang Shah Yeah. Good evening sir. First of all, thank you for taking my question. Sir firstly in terms of LTV calculation method, have you received any communication from the RBI whether approving or disapproving the new methodology for LTV calculation?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. See we have some consolation based on our understanding I mean discussions. They did not approve or disapprove that particular rate, method of calculation. At least they don't have any adverse remarks on that.

Umang Shah Okay, okay. And incrementally as we all know, that we can not lend beyond 60% as we stand today, what would be our overall portfolio of LTV?

I. Unnikrishnan, Managing Director & Chief Financial Officer It's less than 60%

Umang Shah Overall portfolio LTV 2 is less than 60%?

I. Unnikrishnan, Managing Director & Chief Financial Officer It must be around 54, 55 kind of numbers.

Umang Shah So is it that we are for the whole portfolio we are calculating based on the new method, is it?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, based on that otherwise it is around 64%.

Umang Shah Okay, okay. 64% as per the old method?

I. Unnikrishnan, Managing Director & Chief Financial Officer That's right, yeah.

Umang Shah Okay, okay. And sir second thing is just with reference to Amit's question as you said that the focus on retaining the loan for a longer period on the book. Is it that ‐‐ do we have any products wherein we are lending for a period longer than 12 months or we are ‐‐ I mean in terms of ‐ product...

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, exactly. We can come out with some products like that. We have done it in the past also where we can actually struck to the life of the loan.

Umang Shah Okay, but are we doing it right now?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, Yeah that's what I said, our focus will be on the actually increasing the tenure of the loan. That way also we can also grow faster no by reducing the run down.

Umang Shah So I mean let's say if we were to may be increase a tenure of an existing customer. So in that case what are the implications in terms of rates or may be asset quality, I mean how does that work?

I. Unnikrishnan, Managing Director & Chief Financial Officer Asset quality, as I said, asset quality shouldn't arise, then you are lending say 60% then there is a question of asset quality getting affected. That normally we'll give up more confidence to stretch the tenure of the loan, no? Yeah.

Umang Shah Okay, okay. So basically it would actually be more related in terms of how the roll‐overs are actually panning out.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, we can treat the product in a way stretching the life of the loan.

Umang Shah Okay got it. And sir in terms of yields you mentioned the lowest yield that we currently have on any product is 18 and maximum is around 24. Between 18 and 24 whats the difference in terms of LTV assuming 24 is the maximum LTV of 60.

I. Unnikrishnan, Managing Director & Chief Financial Officer In the last two quarters, what I said is we have been focusing more on the 24% yield product, that's the peak yield product.

Umang Shah I understand.

I. Unnikrishnan, Managing Director & Chief Financial Officer Because we were not on a growth mode. So we were just losing the 18% customers or 15% customer. Okay. But going forward we will be introducing those products again. So we will be on a gross mode again. But to that extent our yield also will come down.

Umang Shah I completely agree with you. But the only thing that I am trying to understand is that with different products having different yields what's the difference in the LTVs. So I mean ‐‐ so what's the difference in the LTV, so I mean if 24% product has a maximum...?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, within that let me just read on ‐‐ we will do ‐‐ we will come out with some tailor made products for the customers.

Umang Shah Okay, okay, got it. Okay and just to understand this probably the other way. Apart from the LTV what would be the other factors, that would determine the yield for any particular customer?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah see the other one is ‐‐ your penal rate of interest, your processing fee your frequency of interest payment, all this thing can be brought into the picture.

Umang Shah Okay, okay. Fair enough. And sir, just one last question. As you said that probably we should be able to close the year with maybe a 10%, 15% kind of even growth. So in that 10% to 15% what kind of value increase and volume increase are we factoring in right now? Or is it that we....

I. Unnikrishnan, Managing Director & Chief Financial Officer This is at constant price.

Umang Shah Okay. So one can fairly assume that all 10%, 15% would be volume driven growth?

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah. In terms of number of customers, in terms of tonnage, in terms of loan book.

Umang Shah Okay, okay. Great. Thank you so much, sir and wish you all the best.


Operator Thank you. We'll take a final question from the line of Kunal Shah from Edelweiss. Please go ahead.

Kunal Shah Yeah, sir. Two sets of questions. So firstly as you mentioned that we have been losing the customers on say the, higher ticket size and say adding the customers on say less than 25,000 category. So what will be the proportion of the customers now more than 1 lakh, would that have come off as compared to that of last quarter?

I. Unnikrishnan, Managing Director & Chief Financial Officer I'll say right now I don't have the exact number. So what I told you was a general pattern.

Kunal Shah Okay.


Kunal Shah Okay. And sir the other thing, just wanted to understand on this auction part as well. Normally see this quarter we had done auction of 15 crores, last Q4 we had done auction of 150 crores. And I think for last full year we had done almost like 375 to 380 crore.

I. Unnikrishnan, Managing Director & Chief Financial Officer 380 odd crores.

Kunal Shah Yeah, 380 odd crore. Sir so what I presume was like suppose if the gap in the auction is so much, then I think the slippages or say the gross NPLs would also have gone up in the similar proportion. But we had seen like almost 30 crores of increase in gross NPL, despite in terms of auction say from 150 crores, it is coming down to 15 crores. So is it like the gap like it has not completed 180 days NPL recognition and it is moving like 15, 16 in a month and may be like in the next quarter we would see much had NPL number? If we doesn't proceed with auction in the normal course.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, we will be able to catch up with the auction schedule by the end of this quarter. We should be to do that. And there could be some overlap to next quarter, the first month of Q3 as well. But largely we will be done with that by the end of this quarter itself. When I say this quarter, the second quarter itself, okay. That is number one. And from asset quality perspective that's what I said, actually it has improved, that's what I am saying. We had above 90%, 3% of the loan book was above 90% as of March 2012. Now it is zero.

Likewise between 80 and 90 it was 22% now it is 10%. So in my own interest I mean I can't say my own interest because after 15 months normally we have to auction. So there is nothing to worry about, that's what I am saying, actually the quality of the asset has gone up.

Kunal Shah Okay. No, I was just saying because definitely I am not doubting in terms of quality and I think the loss given default would also be lower since we have gold as a collateral with us, okay but say if like the auction is not ‐‐ but so can we see because in...

I. Unnikrishnan, Managing Director & Chief Financial Officer This is temporary phase, Kunal because we have to put in place the proper mechanism for conducting the auctions and we have to recruit ‐‐ empanel, not recruit, empanel these auctioneers throughout the country by inviting applications, than scrutinizing that ensuring whether this person is the right person, like that. So it took time in negotiating their fee and all that, it took time for us to put in place a proper mechanism. Now it's okay working, it will start working.

Kunal Shah Okay. Sir, in terms on this provisioning, I think the gold loan AUM is also declining plus the provisioning on this 30 crore of increase in gross NPL we are have done almost like 10 odd crores. So now this should get reversed going forward.

I. Unnikrishnan, Managing Director & Chief Financial Officer That I can't say. Normally I mean credit loss will always be there, some credit loss will always be there, 0.25‐0.3 credit loss will always be there, annualized.

Kunal Shah

Yeah, okay, okay. And sir if I look at it in terms of AUM per gram today we spended almost like 1,775. So, now incrementally we would be leading somewhere around 1,950 to 2,000 gram.

I. Unnikrishnan, Managing Director & Chief Financial Officer That's right, yeah.

Kunal Shah Yeah, so say if like this is the book which really dint through the end of this fiscal, then even in terms of like AUM gram even you are not trading any stock of gold, then also we would see almost like 10, 15% kind of increase in AUMs.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, that's a good observation, yeah.

Kunal Shah Yeah, and so if we keep on adding just on the previous question when someone asked like 10% to 15% growth may be that is coming from where did your volume, I think even in the value term directly there will be 15% growth and whatever we add on to the...

I. Unnikrishnan, Managing Director & Chief Financial Officer I will tell you Kunal, there will be some run 80%, 90% category as well category as well.

Kunal Shah Okay. So then AUM per gram, you don't expect to move to 2,000 or so. Then it should be somewhere near like 1,775. So not to the current incremental rate.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, I mean 10%, 15% growth. I don't foresee any problem.

Kunal Shah Okay. And I say if you look at it like if we are assuming like 30,000, 25,000 to 30,000 crores of disbursements, okay and we are expecting the tenure also getting extended, okay. Then I think 15,000 is something which the number could be easily for FY'13.

I. Unnikrishnan, Managing Director & Chief Financial Officer Yeah, if I have got 15,000 crores loan book

Kunal Shah Yeah because anyways the tenure if I look at it this

I. Unnikrishnan, Managing Director & Chief Financial Officer No, no we will be around 11,500 crores to 12,000 crores loan book.

Kunal Shah

Yeah sir, then tenure would continue to be like four months? Then tenure is not getting exactly extended.

I. Unnikrishnan, Managing Director & Chief Financial Officer Kunal we are raising 3000 crores in a matter of six months. I mean ‐‐. You have to look at the other side also no.

Kunal Shah Okay sir. Thanks a lot sir.

Operator Thank you. I would now like to hand the floor over to Mr. Abhishek Murarka for closing comments.

Abhishek Murarka Yeah thanks Madan. Actually I would like to thank you Mr. Unnikrishnnan for taking out time to do this call and for coming out with a pretty elaborate and informative opening remark. So thanks a lot and thanks for the participants for being on the call. Thanks everyone and have a good evening.

I. Unnikrishnan, Managing Director & Chief Financial Officer Thank you everybody for joining the call. Thanks Abhishek for arranging the call. Thank you all. Thanks for the joining the call. Thank you, bye bye.

Operator Thank you sir. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us you may now disconnect your lines.

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