Moneyboxx Fin. — Q4 FY26 earnings call

So last year what has happened, because we saw after the MFI crisis, we realized that bottom of the pyramid customer is really suffering very hard. So, we had to think over it. We placed a lot of effort on the collection side, going legal, which has really improved. At the same time, we had to ensure that what we lend further, because what we're realizing that it was not impacting just the unsecured lending in MFI sector, but something like even a INR3 lakh to INR4 lakh kind of loan, which those same clientele was going, they were suffering. So, we had to change our strategy to move upwards. And that's what we did.

Analyst questioned the moderate AUM growth despite improved asset quality, leading management to explain the strategic shift towards higher-ticket secured loans and team changes as reasons for slower growth during transition.

Asked by Rushbh Dugal

Rushbh I don't disagree with you. Our cost is high. So one of the biggest reasons is that our AUM is low. So people who have joined us as a state head, I can tell you my state heads who are managing about INR100 crores here have been managing almost INR2,000 crores from where they have come in. So I don't disagree that opex is high on the employee cost side, because we have taken to build this book, we have taken the best of profiles from the best of the companies who have like 15 to 20 years kind of experience in building this kind of book. So yes, as AUM grows, the cost will keep coming down.

Analyst highlighted high employee costs, and management attributed it to lower AUM and the strategy of hiring experienced, high-caliber professionals, expecting costs to normalize as AUM grows.

Asked by Rushbh Dugal

So I think that remains the most crucial factor. I don't disagree that yield will decrease because of the secured lending or even on the partnership business side. But what we are trying to do here is that we have to reduce our opex. So, as I said that there is a planning where we are trying to do 20%, 25% of the monthly business through direct partnership, which does not involve sales team. And then to protect on the credit cost, because there also we suffered in last 2 years, we are going for the FLDG kind of programs. This will ensure that over a period of time, our opex in terms of deal sourcing, collection efforts, and credit cost reduces. So, although you're getting a lower yield a bit, but on the cost side and on the credit cost side, we save money.

Analyst questioned the trade-off between secured lending and lower yields. Management explained their strategy to offset this by reducing operating expenses through direct partnerships and mitigating credit costs via FLDG programs.

Asked by Rushbh Dugal

So I think, Rushbh this is what we have done already. So, we have introduced one product, which is solar, where there is a lot of focus by the government, by foundations. So it's a replacement of diesel engines, so in solar atta chakki, oil expellers, jaggery units, telecom towers. There's a lot of business there, which we are - I think this business will be about 10% of AUM this year. So that's one new product which we have opened. And there are a few in the pipeline as well. So, we plan to do something in digital lending as well starting next month. So we will give an update in later times, but yes.

Analyst inquired about new products and geographies. Management detailed the launch of renewable energy loans (solar) and plans for digital lending, while confirming no new states would be added and branch network would consolidate.

Asked by Rushbh Dugal

I would say that it's not that appetite is not there or the demand is not there. But I think from the lenders' perspective, and it's not just about Moneyboxx, from the lenders' perspective, everyone has tightened the norms of lending now because there has been stress. If I talk about in our last 7 years of operation, first 5.5 years and that is why I'm saying, including COVID, there has never been a collection stress. I mean, it's not that really hard work was required on the collection side. So in the last 1.5 years, collection has become a task. So, every lender is trying to move up the chain, MFI moving up to secured, or maybe lending for players like us who are doing like INR3 lakh, INR5 lakhs, 6 lakhs are also moving to the more, I mean, better houses, better collateral, better customers. So that choice obviously impacts some kind of demand. And overall, somehow you have to be careful.

Analyst asked about a potential slowdown in customer demand. Management acknowledged that lenders have tightened norms due to past stress, impacting demand, and emphasized a cautious approach.

Asked by Deep Hemani

So cross-selling may or may not come. Right now, it is to acquire customers for this solar thing. But obviously, they can be the future customer in our secured space. Yield is around 22.5%. It will be around 24-ish if you include all fees and everything, yes. But one good part is that we are not incurring sales cost here. So these are direct leads which are coming through partners.

Analyst sought details on the yield and potential cross-selling opportunities for the new renewable energy loan segment. Management confirmed a yield of 22.5% (24% including fees) and noted that these are direct leads, reducing sales costs.

Asked by Deep Hemani

So sectors, as I said, things have not been great earlier, and not just MFI, which I explained that the lower end of the segment where our pool was earlier, I mean, more like INR3 lakh to INR4 lakh kind of secured loans. So those clientele have suffered and that led to NPA. Now what we are doing is one, we are going with Section 138 for check bouncing in these cases. And by doing ARC, we are going for SARFAESI. So from May onwards, we have started taking SARFAESI action in these cases also. So that's the plan. Going forward, the amount of NPA every month will keep on reducing.

Analyst asked about the increase in Gross NPA. Management attributed it to stress in lower-end secured loan segments and outlined aggressive recovery measures like Section 138 and SARFAESI actions to reduce future NPAs.

Asked by Sagar Singh

Tenure is around 4 years there. Most of the players are like operators. They have agri land, they could have some other business as well, but one major business they will have is, say, atta chakki, oil expeller, all combined generally they have, these kind of machines. And there could be other businesses also like running RO water plant, sheet metal fabrication, but atta chakki, oil expeller is one key area we are funding. ATS is about 4 lakhs, 4 years is the tenure. And as we said that interest rate is around 22%, and overall yield becomes 23%, 24%. This will be counted as secured loan because there is a hypothecation of solar assets against these loans. So one, this will be counted as solar assets. And second is there is a second loss fees guarantee as well against these. So after a 3% loss, there is a second loss fees guarantee. So the delinquencies, these loans will be really controlled.

Analyst requested granular details on the new solar loan product. Management provided comprehensive information on target customers, average ticket size (INR4 lakhs), tenure (4 years), interest rate (22%), and confirmed its secured nature due to asset hypothecation and a second loss guarantee.

Asked by Sagar Singh