Muthoot Finance Limited (MUTHOOTFIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Muthoot Finance Q1 FY '27 Earnings Conference Call. [Operator Instructions]. Please note that this conference is being recorded. I now hand the conference over to Mr. [indiscernible] Capital. Thank you, and over to you, sir.

Yes, a very good afternoon to all of you. We are here to discuss the Muthoot Finance Q1 results. For that, we have the [indiscernible] started with me [indiscernible] is an expert. And then we have for wholesale Directors, we [indiscernible], who is an Executive Director, [indiscernible] with an executive base and Mr. [indiscernible]. Without further ado, I'll hand the call over to the [indiscernible] for his opening remarks, we'll follow that up with question and answers. Over to you, sir.

Thank you, [ Saket ]. Good afternoon, ladies and gentlemen. A very warm welcome to all of you. Joining us today for Muthoot Finance Limited earnings call to discuss our financial performance for the first quarter ended 30th June 2026. I hope all of you and their families are doing well. Joining me on the call today are members of our senior management team, our Chairman is there. Directors are also there. Joint Managing Directors also there, COO, Mr. Bijimon, is also there; and the CFO, Mr. [indiscernible] also there and the [indiscernible]. Before I delve into the quarter's operational and financial highlights, I want to express my gratitude to our customers' employees and stakeholders for their continued trust. We are honored that Muthoot Finance continues to be recognized as India's #1 most trusted financial service brand for the tenth consecutive year, along with being certified as a Great Place to work for 5 consecutive years. These allocates demonstrate the strength of our legacy and our commitment to sustainable long-term stakeholder value. I'm delighted to report that financial '27 has started on a strong note, continuing the robust momentum seen in the previous quarters. Our consolidated loan [indiscernible] has expanded by 43% year-on-year, reaching [ INR 1,91,000 ] crores as of June 30 compared to [ INR 1,33,000 ] crores in June 2025. On a sequential basis, consolidated AUM grew by 5%. The consolidated profit after tax for Q1 financial year '27 delivered a 43% year-on-year growth coming in at INR 2,825 crores. Stand-alone AUM, our loan AUM registered a 43% year-on-year growth, raising INR 17,000 crores. And the standalone profit after tax reached INR 2,550 crores, recording a growth of 25% year-on-year. The stand-alone income grew by 33% year-on-year to INR 7,613. Our return metrics remain best in class with a stand-alone return on average assets of 6.09 and return on average equity of 26.6% during the quarter. CapEx adequacy remains comfortably well above the regulatory requirement of requirement at 20.3%. Our core gold loan business continues to demonstrate exceptional market demand and operating leverage. As I said, the consolidated gold loan AUM rose to [ 1,75, 000 ] crores in stand-alone coal loan AUM to [ INR 1,66,000 ] crores, representing a 44% year-on-year increase. Regarding new customer acquisition during financial year '27, we disposed INR 8,937 crores in gold loans to over 4,18, 000 new customers. This reinforces our strong customer retention and expanding reach. The active customer base expanded to 65.77 lakhs in June adding over 1 lakhs 63 active customers during the quarter, up from 64 lakh in March '26. The branch productivity efficiency per branch improved significantly with average gold loan AUM per branch increasing by 40% year-on-year to INR 32.47 crores per branch. The asset quality remains stellar. Credit losses on gross loans stood at an absolute minimum of 0.05%. We expanded our fiscal process during the quarter were adding 86 new branches across the group, taking our group branch debt up to INR 7,654. Our subsidiaries are also performing smoothly and accelerating our vision of building a diversified nonbanking financial services. Muthoot Money Limited witnessed exponential growth. Loan AUM grew by 111% year-on-year to INR 10,550 crores, driven primarily by the strong growth of its gold loan portfolio. The total revenue surged once 137% year-on-year to INR 51 crores and profit after tax increased 366% to INR 172 crores. Asset quality improved further with Stage 3 assets declining to 0.67%. [ Belstar ] Micro Finance showed strong recurring profitability delivering a profit after tax of INR 66 crores for this quarter compared to a net loss in the corresponding quarter last year. Loan AUM stood at INR 7,842 crores as industry was stress moderated disbursement growth. Following the regulatory enabling for MFI to expand non-microfinance portfolio, [ Vesta ] opened 45 new gold loan branches in Q1 to diversify its product base. [indiscernible] AUM grew by 13% year-on-year to INR 3,496 crores and profit after tax stood at INR 4 crores, marking a 114% year-on-year increase. Asia Asset Finance or [ Sri Lanka ] subsidiary posted impressive performance with AM expanding 51% year-on-year to INR 5,270 crores and profit after tax surging 113% year-on-year to INR [indiscernible] crores. [indiscernible] insurance focus improved the premium collection of INR 70 crores and last profit after taxes has been [indiscernible]. [indiscernible], we believe the regulatory changes implemented from [indiscernible] in the gold on industry are structural positive. The strengthened transparency and drive formalization, which favors established trusted players like Muthoot Finance. While our primary gold loan business continues to perform solidly, our non-gold loan portfolios, spanning micro finance housing and business loans are contributing generally to our total assets. Coupled with our omnichannel digital framework, we are well positioned to capitalize on India's structural growth opportunities in financial inclusion. Thank you once again for joining us today. I now open the floor for your questions and look forward to an engaging discussion. Thank you.

[Operator Instructions] The first question is from the line of Digant Haria from [ GreenEdge ].

So my question is that we've seen a very sharp drop in the yield this quarter, almost something like 300 bps and -- a lot of other players, which have reported have not really seen yield drop at all. So just wanted to know like is this something based on the new strategy that we are targeting to compete with banks? Or what is it? Because the 300 bps seems a little high. And not that suddenly competition had gone up in the last 3 months. So there's some comments here, sir.

Yes. Thank you. Yes. The yield in the quarter 4 was 50.76. And this year -- this quarter, it is 17.93. I agree there is a drop in the yield due to a variety of reasons like probably we have also reduced our interest rates in this quarter or the yield because of -- we are giving lower rates also. Higher rates are also there. Lower rates are also there. So probably this quarter, some of the lower rate loans would have taken more precisions. Number two, last year, third quarter and fourth quarter, where we saw 20%, et cetera, yield, was actually a very good year where our recoveries were really good. There were a lot of [indiscernible] which got renewed also. So renewal and rolled over last year. Till about last year, there were a lot of renewals and the interest collections, et cetera, were very good, and that is also factoring to follow the reasons for that. And probably as a steady state, 18 -- plus/minus maybe 18% to 18.5% should be the normal yield, which we should be looking at going forward also. So what we have now is 18%, 17.93%, probably going forward this year also, it should be 18% et cetera. So I think that's a decent yield what we got last year should we consider say windfall wind for [ 15]. So anyway, you were able to cash in on that, we have got the benefit of that. Going forward with the new strategies, et cetera, to strategies to grow the gold loan book, et cetera, probably there can be -- there was a [indiscernible] a determined effort to bring down the yield also. So we have not done the yield, but as we'll keep pricing we have after.

Okay, sir. That was a very detailed explanation. Sir, second question is that for this year also now there you see this gold loan -- gold prices, which are volatile. Second is that we have these new guidelines, which have started, the 75%, 80%, 85% LTV across life of the loan. Just wanted 2 questions here. One is your opening guidance for FY '27, you generally grew 15%. What would you like to give on behaviors [indiscernible]? And then second is that this gold on product has generally been a product where customers don't like to pay monthly interest. It's more being a [ bullet ] product for as long as the 15, 16 years, I have tracked this. So as the branches are we able to drive any change? Do we get to drive any change or -- and because the stage 1, stage 2 loan actually increase because of this regulation, nothing related to business, but there's thoughts on these 2 things, sir.

Yes. I think you are right in saying that, yes, the regulatory changes. So actually, in the first 2 months, April and towards latter half of May, we were actually bringing in the new product. We were training our staff also for the new product -- new rates, new schemes, the 75%, 80% -- 85% [ schemes ], et cetera. And as you rightly said, we need to maybe retrain our staff and the customers to think of paying at least constant quarter -- it's not monthly, or in a quarter. I think after some time, we will -- we are seeing good response from the customers there, not that everybody is paying monthly. But it's not monthly, 2 months for 3 months. So that is what we are trying to implement. And I'm sure that will do well. And after May, we have seen very good traction in the AUM growth and I don't want to give any guidance to that, but we will revise the guidance in the next quarter. While we are reviewing the next quarter, we will revise the guidance. So AUM should keep growing. As I said, the yield also should be in the range of 18%, what I think in the coming quarters.

The next question is from the line of Piran Engineer from CLSA.

Firstly, just on this yield drop thing, I wanted to understand there are no interest recoveries or any one-offs in this interest income number, right? Like last couple of quarters, we were out of top line.

Lots of old loans, which were there, we were able to recover a lot of interest, that's happened in the last 2, 3 quarters. So I think those are behind us now.

Okay. So this is a clear interest income number. And we are looking to increase this slightly, as you said, to 18%, 18.5%.

Yes, I didn't say that we are going to increase, but I think it should settle at that level. It just sits at that level 18, 18 points.

And just overall, in terms of disbursement TV now that the new norms are out, how has our average disbursement LTV changed with these due norms? Like for the entire disbursements done this quarter?

Certain percentage of the customers are interested in the -- at 85%, which is below 2.5 lakhs. But majority of them still continue to take 75%. That range is what is still the disbursal rate. Not that everybody is taking 85%, et cetera. There are some people. So -- but then the advantage is that we can offer a [indiscernible] of products and make of choice to the customer. Somebody wants to pay monthly interest, somebody wants to pay yearly interest, yearly interest also, the scheme is there. But of course, the LTV will get produced because we have to factor in the next interest payment interest dues also for the next 12 months. So many combinations are there. People have got more choice, and that is why I said it took April and May for us to bring out good schemes, et cetera. I'm sure now the schemes have taken place, and we see good traction. So yes, I think to answer your question, the origination LTV has really not gone up. That was your question, I suppose.

Okay. Let me give an example. If somebody wants a 12-month loan, INR 2, at what LTV will you give? Will it be the same in Q1 if you want the bullet loan versus their EMI?

No, that is different. So in case of [ bullet ] payment, if it is 12 months, you had to reduce the interest accrual. So if it is less than INR 2.5 lakhs, [indiscernible] minus interest accrual win and 5 lakh, it will be --

Maybe we will get about 75% -- 77% of the --

You will get the [indiscernible] and 35.

But given that most of our customers don't -- they pay interest off and on, they don't pay it regularly. So do we just assume that all the loans are bullet loans and then do that 85 million minus interest accrual --

We have all the schemes present now. And that's what [indiscernible] saying that it will take some time for the employees to [indiscernible] customers also to [indiscernible] vertical thing. Mostly, we are seeing that customers are taking somewhere around 35% [indiscernible].

So we have -- you can pay monthly interest, you can say once in 3 months, 1 in 9 months, 1 in 12 months. So we have different schemes. But then LTV will be different in many of these things. If you actually deducting -- if somebody is a prepared to pay the month 3 interest. Then if it is a loan is 20 or flat, we can get all the 85%.

Understood. And sir, what would the difference in the interest rate be between a monthly interest loan and a bullet loan as of today?

No, it is not linked to [indiscernible]. It is not at all linked, just because these agree to pay monthly or is paying only once in 12 months, there is no in different [indiscernible]. Skills have different interest. It is not based on the repayment promise of 1 month and 3 months and 12 months.

Okay. Understood. And just lastly, sir, this quarter, we've again turned around in terms of customer growth. Last 2 quarters, it was declining. What factors do you think led to this pickup in customer count or tonnage growth this quarter?

Customer call definitely newer customers upcoming. But tonnage growth is actively what is always saying, the gold price. When the gold price falls, the [indiscernible] goes up because he has to bring more gold today. If the price is high, he brings in lesser gold, of course. That's what I have been trying to tell last 4 quarters, but I think people now will start understanding. The gold price [indiscernible] will keep on increasing because somebody wants 1 lakh earlier needs to go 10 crores. That is a good all [indiscernible]. Simple as that.

The next question is from the line of [ Shekar Doshi ] from [ Equiris ].

My question was on the product side. So are we still continuing with the [ Vanila ] gold loan product or we have also launched new products on the income-generating segment front?

Yes, I think we -- I think CEOs say, saying that we have different products, monthly interest product, income-generating product, there iknd. Actually today, a book of products out there and too many people have pointed out choice today.

The income-generating loans, just to take advantage of LTV, we have not launched. Yes. I think that one may not be the correct way unless we are able to assess the repayment capacity as well as the end use of the product, that may lead to a problem. Many companies have started. I believe it the correct way, we will be starting and so on.

So not just because somebody says is income-generating load, we can't give an income delta repayment capacity, except aim. If you bypass that, we will follow the [indiscernible].

Right, right. Got it, sir. So basically, we plan to launch the and wherein we can look at end use as well as evaluate income. [indiscernible], would we also comfortably give higher LTV? Or would you want to prudently manage it below 85%?

We also do have a no problem. So we assess them as the 85% LTV and less than 200 [indiscernible]. We take that because we see maybe 2%, 3%, 5% of our portfolio will be there. That is massive.

Right, right. Got it, sir. Got it. Sir, the second question was on the tenure front. So why you highlighted about -- to the previous participant on the calculation side. But have we brought down the tenure to, let's say, 3 months, 6 months for our [indiscernible] product?

I think I told you, we have a green product. We have a monthly interest product. We have a 6-month product, 9 months and 12 months. People can close and take, but we need to assist a longer-term outrepayment, the LTV has to be recalculated to a lower level. That's it.

So then in that case, sir, are we seeing more interest because more interest for sorter tenure, and that is why the increase in [ GSI ] as well because it's all interlinked from that recognition standpoint.

Our [indiscernible] calculations are not based -- not based on that. I think that is not something -- because of [indiscernible] -- it is based on many other factors, which have not discussed here.

Got it. I'll take it offline.

The next question is from the line of [ Carsten].

Sir, I wanted to check if a rating of trade is in the offering, are there any discussions with the rating agencies regarding an upgrade?

First of all, thank you for attending the call on a Saturday. We work, but I'm happy that -- and people are also working. So I think CFO will answer the [indiscernible].

Glad that you asked, I hope analysts from [ Crisil ] and [ Ikar ] also there on the call. They are listening to it answer. We always have our hopes at our expectations. But again, we said it is with the -- and with the [indiscernible] rating agency, probably you should see good things happening now.

And -- so no discussions. Okay. So no discussions that have happened and it's entirely the management we have had with the agencies regarding this? Or -- can you take us some time on the --

Every 6 months, we engage with them, we pour our hears to them. We hope everything is go, but it takes time for them to also get comfortable and do this.

The next question is from the line of [ Sivakumar ] from [indiscernible].

Sir, my question is with regards to the increasing competition in the segment. We are seeing -- of course, we have seen the competition from the banks. We have done that -- we have dealt with that in the past. But now increasingly, most of the major NBFCs are also increasingly focused on the gold loan segment. So will be -- will there be any change in strategy in-house in terms of interest rates or the way you branch out the network in terms of how you will deal with the increasing competition from other NBFCs?

Compensation from total NBFC business today is only INR 4 lakh crores. Total bag gold on stream lakes were INR 16 lakh crores, [indiscernible]. Anyway, from NBFC, et cetera, we [indiscernible] strategy for any NBFCs. But with all the competition, whether this bag or NBFC, we have the same good customer service, quick service, and customers generally feel that [indiscernible] the right place to come for a core level. That is what has been our brand strength. [indiscernible] has always been the forefront of marketing or marketing the concept of gold. So people definitely refer to that field that the [indiscernible]. So combination will come. There is a special strategy for competition. We'll do our best customer service. It will be the best. We will do all that is necessary. But probably, as I was saying in the beginning also, probably that we may see some yield compression, et cetera, but we what we have earlier maybe 20% excess at said, it will be around 18% plus. So that's still a decent yield for us because we have the legacy book and the city portfolio. The new prices or coming will have to -- we'll have to content with low interest rate schemes to compete with banks. They have also to compete with back to compete with other also. But we having a legacy portfolio with the SEC customers we have some advantages there. So these are some things which are any -- as the quarters go, we will see the fittest will survive and the non-focused people will go -- that is what we are already in earlier also. People are not fully focused or fully into this, have just started a gold loan business just for starting a whole room business, I don't think they will be able to sustain. But somebody who is keen fully with the board on like Muthoot probably we have an opportunity there. And it just wait for the next few quarters to see what is [indiscernible] to happen.

Got it, sir. Sir, and in terms of geographical focus, South East still 49% of our total AUM. So going forward, how much cope of growth do you see from the other more recent areas like, say, the Eastern India and Northern India. Do you still see scope for growth there? Or do you think this is what we can do, the pace of growth in those geographies?

The gold oil business is growing everywhere. South -- it's just that South it started much earlier, maybe a few decades earlier started in South. So people sold are more [indiscernible] to odor comfortable with the [indiscernible]. That comfort is really catching up in other states also, not [indiscernible]. Our geographical location of starting his own, we have [indiscernible] everywhere. There's no place [indiscernible]. If you step whether we want to add more branches in the place, maybe like you want to add more branches, we will add more busier therefore only or later, et cetera. So we have [indiscernible] there. We have [indiscernible] offices there. So wherever we see a business we have and year to the growth in all these places because we have marketing and sales people and also our [indiscernible] working. So they know where the potential is and then we open branches there. There is no geography we have left out. But as you said, South is also [indiscernible], it's more because the business also is more itself. If you look at the statistics of [indiscernible], 17% of the gold loan business is from South. Even for bank, [indiscernible]. So South has started on what his [indiscernible] or still cases, but there is -- there's potential in both places. So answering the question, we will be opening branches. Wherever there is a potential or wherever we see there is scope for getting more new business.

And one last question, if I can chip in. What is your plan for [indiscernible], because even after so many years, we are still -- I think we are undergoing in terms of the potential there, we adjusted INR 7,800 crores. And now that we are seeing that microfinance segment has stabilized across the country, will you start getting aggressive in terms of loan growth order.

Answer first to your question, you don't be aggressive in [indiscernible] microfinance. That's the first question first answer. The second is we would like to have a very calibrated less risky portfolio. And we have actually trained our own instructions to the [ Vesta ] team to do macro only with selected good quality customers, not just for the sake of [indiscernible]. See, microfinance, 1 quarter you will see doing well. Next quarter, you will see something is happening. After 3 quarters, you will see something else. So -- it is like that. It is a cyclical business, et cetera. But we have tried to take advantage or trying to use the facility of the other loans by doing gold loans or so there. Today, we have 100 plus branches opened only another 50 in the next 3 months to do exclusively gold, and they have started their doing well. So we'll have a mix of second and unsecured. Secured lending as a policy, we would like -- it's unsecured in the [indiscernible], we would like to give only to better good quality customers, not for the sake of [indiscernible] because we don't want to show anybody that we need to do a lot of mix of [indiscernible]. If you [indiscernible].

The next question is from the line of [ Naga Garg ] from Ambit Capital.

I have 2 questions. One, I was going through your last quarter transcript with the other quarter -- am I audible now?

Yes, better.

Okay. Sir, I was going through the last quarter transcript as of 14th May. And at that time, you had indicated that you did not see the need to lower your yields from the 20%. So for your yields to drop 300 basis points quarter-on-quarter, the yields from late May to June would have to be lower than 18%. So is that understanding correct? And if yes, then can you tell me what is the average yield for the month of June or maybe July? That's my first question.

So [indiscernible], no, there are a couple of things as in this [indiscernible]. Last year, I know it was an extraordinary where we saw gold prices increasing top up happening. So where we are able to do most of the recurring connections, but needing to give any discussed for customers or auctioning of no amounts of gold under recovery, et cetera. So that is one thing. Then there was NPA accounts, we have -- we could collect most of the full income. Third, the ARP investment presence we are directly because their principal recovery has happened, the remaining amount was coming into the [indiscernible] specifically, the fourth quarter -- third and fourth quarter we saw a large amount of renewals happening, especially because the new regulatory regime was kicking in from first of April. So we encourage also these customers to do rollover top-ups, et cetera. So most of the loans, as you know that we follow a remain structure. So a lot of these loans because of the rate rollover outstanding at a lower restructure currently. Probably they will increase to migrate to higher levels. So that is an important factor which have also resulted easily. Then as has said, some reductions we have done in the first quarter. [indiscernible]

Lastly, how much would the reduction --

Increased gold prices in the fourth quarter. Those incomes are not there in the first quarter. Yes, go ahead. Please.

So no, I was just saying that how much have the reductions been? And another related question is that if you can give the use for June considering that all of April and half of May was at 20% yield, so if you can help us with the yield in the June -- in the month of June. That will be very helpful.

So we don't have any bifurcation as for June and you need to understand what led to this. So these are reasons why -- thanks to -- we don't have an exact breakup because of this or what happened in June, et cetera, what is the interest income.

Sure. And the second question is on your cost of borrowings. How much more do you think it can increase from here? Or will it settle here? It's up about 7 bp quarter-on-quarter.

No. So I'm not expecting any reductions in the cost of borrowing. It will mostly remain at these levels. on [indiscernible], which might -- it can go up. It all depends on how RB is going to look at revising the benchmark rates.

Understood. Maybe another 5, 7 [indiscernible] this? Any ballpark number, whatever.

Part of much in a business where you're generating a 5% plus ROE.

[Operator Instructions] The next question is from the line of Rajiv Mehta from Yes Securities.

Just on the -- you said that there is no interest difference between a customer paying quarterly or things semiannually or paying any. And you said that the pricing will vary across teams. So what do you mean the scheme? And what is the pricing range difference across schemes? I mean on a per month basis on an annual basis, what are the different lending rates or structures that we are offering and what is the price range right now through the branches here?

Many of these things which you asked is there in our website. But I don't want to go into the granular details of how we correct [indiscernible] public for [indiscernible]. So I think that is --

What -- just to -- sir, where is the customer will pay you quarterly, semiannual or maybe annually also intense, but the principal payment comes at the end of the term of the loan, right? And some of the loans remains at 12 months.

We have 12 months load. We have 9 months loan. We are 3 months ago. Monthly interest loan also.

Were these recently introduced or they were always there?

All these things were entrance from first of April.

Would be -- Okay. Yes, yes. And just lastly, just to focus back on volume growth because maybe the gold are stable and maybe I can see that there is a good pickup in customer acquisition, old customer reactivation. What will -- what is driving -- I mean, how are you driving your branches to acquire more customers, retain old customers? Because I'm sure there will be a lot of pressure on competitors also to take over your customer. So how are we driving our branches to ensure that we get good volume growth in a year when the gold prices could be largely stable?

Most of these are internal strategies. We have strategies to retain our customers, their strategies to get customers, et cetera. Again, again, we like to only demonstrate that on our performance. And I'm sure going forward also, see, you saw the gold price coming down and still the AM going up. So it is not the function of the gold price that the business is good. The business is growing because there is need for funding. So that is something which I have been telling for the last several quarters, but people sometimes refuse to understand that, refuse to understand that. So it is not just because I have a high gold price, I'm going to borrow big money. [indiscernible] I feel that I can repay, otherwise, is [indiscernible]. Sort of selling it is borrowing is wanting to be paid. So we have our strategies for all these things, all these competition, et cetera. And I'm sure in the next quarters, you will see good growth in [indiscernible].

[Operator Instructions] The next question is from the line of Nidhesh Jain from Investec.

The first question is on LTV. What is our LTV as of June, including accrued interest?

So it will be around 65% or 66%. [indiscernible]