MUTHOOTFIN - MUTHOOT FINANCE LIMITED Share Price

Management provided an optimistic outlook, highlighting significant achievements for the fiscal year 2025. The company reported a record consolidated loan AUM of Rs.1,22,000 crores, representing a 37% year-on-year growth with an increase of Rs.33,000 crores. Consolidated profit after tax reached Rs.5,352 crores, up by 20%, while standalone AUM stood at Rs.1,08,000 crores, reflecting a growth of 43%.

Key forward-looking points included:

1. The management set a conservative growth guidance of 15% for the upcoming fiscal year, similar to prior guidance, despite achieving an impressive growth rate of 41% over the past year.
2. The gold loan AUM achieved Rs.1,02,956 crores with a year-on-year growth of 41%, a historic milestone since surpassing the Rs.1,00,000 crore mark.
3. The management highlighted plans to open 115 additional branches, indicating continued expansion.
4. The company announced a dividend of 260%, amounting to Rs.26 per equity share.
5. Upgrades in credit ratings from S&P (BB to BB+) and Moody's (BA2 to BA1) reflect strong financial stability.
6. The introduction of new gold lending guidelines by the RBI may pose challenges; however, management remains committed to the gold loan sector as its core business, indicating no immediate plans to shift towards non-gold lending.

Overall, Muthoot Finance's performance and future strategies underline a focus on steady growth and regulatory compliance, with a clear emphasis on maintaining customer trust and a robust operational framework.

Major Questions and Answers from the Earnings Call:

1. Question: How would you look at gold loan growth for this year and the next year? Is there enough for everyone in the competitive landscape?

Answer: We continue to provide a conservative growth guidance of 15% year-on-year, despite last year's 41% growth. The market is expanding as more people are monetizing their gold, bringing in more players, including banks and NBFCs. This growing pie means there's room for everyone; we're all seeing growth.

2. Question: With the draft gold lending guidelines proposing an LTV of 75% throughout the loan tenure, how will it affect disbursement?

Answer: We submitted our feedback on the draft guidelines, which focus on industry harmonization. While we currently operate below an average 62% LTV, we're concerned that stricter LTV rules might push customers back into unregulated sectors. We advocate for regulations that protect both customers and the sector's growth.

3. Question: Regarding Stage-III assets, can you break down the figures for gold vs. non-gold portfolios?

Answer: Our Stage-III on gold loans stands at approximately Rs.3,400 crores, while the non-gold loans are about Rs.300 crores. As we grow our gold loans significantly, this remains manageable, but we are keeping a close eye on credit quality.

4. Question: Can you share your thoughts on the increasing provisions and what it means for managing future gold price corrections?

Answer: Our provisions are based on IND AS 109, reflecting historical losses. While the current provisions might seem higher, we believe they are adequate to handle future fluctuations in gold prices. We've seen increased provisions primarily due to growth in our loan book.

5. Question: How do you see yields evolving in the face of increased competition and potentially lower interest rates next year?

Answer: We aim to maintain our interest spreads of 9-10%. If borrowing costs decline, we'll likely reduce yields, ensuring we continue to provide value to our customers while maintaining our profitability. The yield for Q4 remained consistent at 18.5%.

6. Question: What are the impacts of the new bill in Tamil Nadu on your collections for Belstar?

Answer: Initially, there are slight hiccups in collections due to perceptions around the new regulations. However, Belstar, being exempt from the stringent provisions of this act, should stabilize over time.

7. Question: What is your strategy regarding customer acquisition and the associated marketing costs given recent competition?

Answer: Our customer acquisition remains strong, and we've implemented continuous marketing campaigns. While we're committed to increasing our customer base, costs may fluctuate, but we won't cut back on essential marketing to drive growth.

8. Question: Are there any changes in your operational practices that will arise from upcoming regulatory demands?

Answer: Compliance costs will inevitably increase as regulations firm up. We will adapt our operations accordingly, ensuring we meet any new requirements while continuing to focus on our core gold loan business.

These summaries encompass essential inquiries alongside their respective responses, providing insight into the company's operational outlook, competitive landscape adjustments, and regulatory impacts.