Earnings Outlook
Rise in gold prices to lift Muthoot Fin PAT 20% YoY
This story was originally published at 10:43 IST on 2 August 2024
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By Kabir Sharma
MUMBAI – A surge in prices of gold is expected to lift Muthoot Finance Ltd's net profit by 20.2% on year to 11.72 bln rupees, according to estimates from six brokerage firms. Sequentially, the bottomline is seen rising 11%.
The estimates for net profit were in the range of 11.4 bln rupees to 12.2 bln rupees. "We expect loan book growth to remain strong at 10% on quarter (2-7% on quarter in the previous four quarters), reflecting 7% rise in gold prices and market share gains," Kotak Institutional Equities said in a note. The brokerage said the company is expected to report better disbursements than its peers. The company is yet to announce a date for its earnings announcement.
The lender's gold loan assets under management rose 18% on year to 728.79 bln rupees in Jan-Mar, while total loan AUM was up 20% on year at 758.27 bln rupees. The lender held 188 tn of gold as security as of March-end compared with 180 tn a year ago.
Net interest margin is likely to compress around 35 basis points on year due to moderation in yields and rising cost of funds, brokerages said. The interest spread, or the difference between interest income on average loan assets and interest expense on average borrowings, rose to 9.76% in Jan-Mar from 9.24% in Oct-Dec.
Muthoot's net interest income is seen rising 19.5% on year to 22.62 bln rupees. Net interest income of the gold financier rose 20.2% on year to 33.58 bln rupees in Jan-Mar.
The company will also benefit from the run-down of loan book by rival IIFL Finance, whose gold loan book fell 30?tween March and June, Kotak Institutional Equities said. In March, the Reserve Bank of India had barred IIFL Finance from sanctioning and disbursing gold loans as the non-banking finance company had disbursal and collection of loan amounts in cash far in excess of the statutory limit.
As per brokerages, the asset quality of the company is expected to remain stable. The lender's stage-III loan assets fell to 24.85 bln rupees as on Mar 31 from 25.77 bln rupees a quarter ago. The tier-1 capital adequacy ratio of the lender was 29.61% as of Mar 31.
Analysts look forward to the lender's guidance on margin and gold loan growth when it announces its earnings. At 0922 IST, shares of the company traded 0.9% lower at 1,846.50 rupees on the National Stock Exchange.
Following are the Apr-Jun earnings estimates for Muthoot Finance from six brokerages:
| Brokerage firm | Net interest income (in mln rupees) | Net profit (in mln rupees) |
| Elara Securities (India) Pvt Ltd | 23,033 | 11,708 |
| IDBI Capital Market Services Ltd | 22,409 | 11,468 |
| Kotak Institutional Equities | 22,313 | 11,866 |
| Motilal Oswal Financial Services Ltd | 23,032 | 11,749 |
| Nirmal Bang Equities Pvt Ltd | 22,960 | 12,150 |
| YES Securities (India) Ltd | 22,000 | 11,400 |
| Average | 22,624.50 | 11,723.50 |
End
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Namrata Rao
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