MUTHOOTMF - Muthoot Microfin Limited Share Price

Muthoot Microfin Limited's management outlook for FY '26 indicates a strong recovery and optimistic growth trajectory. The company has achieved an asset under management (AUM) of INR 13,078 crores, reflecting a year-on-year growth of approximately 5.4% and a quarter-on-quarter growth of 4.1%. For disbursements, the monthly average has significantly improved to around INR 850 crores, with a projection to reach INR 1,000 crores in the upcoming quarter. Management emphasizes a strategic balance between group lending (JLG) and non-JLG products, targeting a future mix of 65% to 35%.

Key forward-looking points include:

• Aiming for a 20% growth in AUM for FY '27, with a target close to INR 17,000 crores.
• The net interest margin is projected to rise from the current 12% to between 12.4% and 12.7%, driven by improved yield from new disbursements.
• A cost-to-income ratio expected to improve from 54.8% to a target of 43% within 9 to 12 months, benefitting from branch rationalization and scaling of operations.
• Credit costs have been reduced to 3.3% for the quarter, with expectations to remain below the guided range, indicating increased efficiency and recovery rates.
• The GNPAs current position stands at 4.4%, showcasing a quarter-on-quarter reduction, and management anticipates the continuation of this positive trend.

Overall, management is confident in sustaining profitability through responsible lending practices, technology utilization, and targeted portfolio diversification, assuring stakeholders of a robust performance in the forthcoming quarters.

Major Questions and Answers from Muthoot Microfin Limited's Q3 FY '26 Earnings Call

Question 1: Mayank Mistry: "There is a substantial increase in your net gain on fair value changes. What led to this rise?"
Answer: "The increase is attributed to regular direct assignment income from transactions we've completed this quarter. We witnessed improved collections from overdue accounts, recovering INR62 crores compared to INR57 crores last quarter, which also contributes to this income rise."

Question 2: Mayank Mistry: "How should we see the impact of the borrowing mix changes on our cost of funds?"
Answer: "Our cost of funds has decreased, from approximately 11% last year to 10.43% now. This trend will continue as we shift our borrowing mix, focusing more on PTC structures, which allow for quicker rate transmission and will lower our cost further, aiming for about 9.7% in the next 12 to 18 months."

Question 3: Varun Dubey: "What are the segmental yields in the portfolio, and how will the overall net interest margin grow?"
Answer: "Currently, group loans yield around 24.85%, individual loans at 23%, and LAPs at 20%. As new disbursements continue at these rates, and as NPAs decrease, we anticipate reaching a net interest margin of 12.7% within the next 2-3 quarters."

Question 4: Anil Tulsiram: "What has changed structurally to make credit costs predictable over the next 5 years?"
Answer: "We've enhanced our underwriting processes, improved our scorecard, and strengthened customer evaluation through a combination of technology and personal assessments. We project credit costs to stabilize between 2-2.5% as our diversified portfolio mitigates risks."

Question 5: Mann: "How will the collection efficiency trends impact our NPA numbers?"
Answer: "We're seeing significant improvements across all overdue buckets, with expectations of recovering up to 40% from 90-plus day loans in the near future, positively impacting NPAs and credit costs going forward."

Question 6: Pratik Matkar: "Has pure-play microfinance growth become structurally constrained?"
Answer: "There is a recalibration occurring within the industry towards a diversified approach, which retains focus on existing customers while introducing new products. This strategy ensures ongoing growth and captures customer needs."

Question 7: Anil Tulsiram: "What's your strategy regarding the CGFMU guarantee?"
Answer: "We have applied for the CGFMU guarantee. This is tactical, aimed at higher-risk states, and we expect approval in the coming quarters to enhance our risk management."

These summarized questions and answers reflect the strategic objectives, financial performance and outlook of Muthoot Microfin Limited during the Q3 FY '26 earnings call.