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Informist, Wednesday, Aug. 13, 2025

 

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--Muthoot Finance: Accelerating efforts for digital gold loan offerings 
--CONTEXT: Comments from Muthoot Fin's mgmt in post earnings conference call 
--Muthoot Finance: New RBI gold norms to streamline lending 
--Muthoot Finance: New RBI gold loan norms to streamline lending 
--Muthoot Finance: New RBI gold loan guidelines quite business friendly 
--Muthoot Finance: New RBI gold loan norms gives more pdt choice to customer 
--Muthoot Finance: Not thought of changing mix of ticket size 
--Muthoot Fin: Will aim to maintain 9.5% interest spread amid rate cut cycle 
--Muthoot Fin:Operating costs to remain stable; will only rise with inflation 
--Muthoot Finance: Most loans linked to MCLR, see rates falling in 3-6 mos 
--Muthoot Finance: Prefer to keep non-gold loan business 15-20% 
--Muthoot Finance: Happy with current customer acquisition rate 
--Muthoot Finance: Comfortable on capital front, even after dividend 

 

By Aaryan Khanna and Gowri Lakshmi

 

NEW DELHI – The sharp expansion in Muthoot Finance's net interest margin in the June quarter came due to interest incomes being recovered through writebacks on non-performing assets and resolutions, the management said in a conference call with analysts Wednesday. The higher interest income was the key reason why the lender's yield on advances rose sharply both sequentially and on year.

 

The company got around INR 3.00 billion of interest from the writebacks and INR 1.00 billion of interest from the resolution of an account through an asset reconstruction company. In the June quarter, the yield rose 99 basis points sequentially and 130 bps on year to 19.56%. By keeping its interest expenses in check, Muthoot Finance was able to expand its net interest margin to 12.15% in the June quarter, from 11.27% in the trailing quarter and 11.51% a year ago.

 

Without the recoveries, however, the yield would have been similar to prior quarters, the management said. It expects another INR 1 billion to INR 1.5 billion of extra interest income through the asset reconstruction company in the coming quarters. "Yes. It would have been the same as what we were continuing in the last quarters," the management said, when asked where yield would be discounting the impact of the extra interest.

 

The gold financier posted a net profit of INR 20.46 billion in the reporting quarter, nearly doubling on year, helped by strong business growth and the expanded margin. The growth in both the bottom line and top line was the quickest since at least the December 2015 quarter. Impairment on financial instruments fell sharply to INR 433 million from INR 2.24 billion a year ago in the June quarter. 

 

The lender plans to pass on the impact of the Reserve Bank of India's rate cuts to customers, which will slowly percolate to reducing its cost of borrowing in the next three to six months, the management said. The non-banking financial company will aim to maintain its interest spread at 9.5%, which it had done both in the year-ago and quarter-ago periods. Most of its own borrowing is at the marginal-cost-of-funds-based lending rate from banks, though it had also succeeded in bringing down its cost of borrowing through issuing securities, the management said.

 

"So most of our loans are linked to the MCLR. And when the MCLR comes down of the banks, it will come down," the management said. "And we are expecting that to happen in the next three to six months." None of the lender's borrowing is linked to external benchmark, while its loan book is largely fixed rate.

 

RBI GOLD LOAN NORMS

The management was all praises for the RBI's new norms on gold loans, describing them as business friendly. In addition, they gave both lenders flexibility and allowed them to offer customers a wider breadth of products, Muthoot Finance said.

 

The RBI released final directions for lending against gold on Jun. 6 and relaxed norms for small-ticket loans. Under the new norms, the central bank increased the loan-to-value ratio for gold loans worth up to INR 250,000 to 85% from 75%. For gold loans above INR 250,000 but below INR 500,000, the maximum loan-to-value ratio was changed to 80% from 75%. It also smoothened out topping-up loans, among other changes that will apply from Apr. 1.

 

S&P Global Ratings had said in June that gold financiers will have to make some business-model adjustments to maximise the norms. However, the management said it had not given a thought to changing its ticket size mix or anything along similar lines.

 

In terms of its gold loan book, which swelled 40% on year to INR 1.13 trillion as of Jun. 30, around 40% comes from ticket sizes above INR 300,000, the management said. Loans of less than INR 100,000 make up 26% of the assets under management, while ticket sizes of INR 100,000-INR 300,000 add up to 34% of the book. 

 

"No, we have not thought about it because we feel that we cater to all the type of customers, the small customer, the big customer, everybody. Because through our branches and through our...legacy of operations, we have all these customers," the management said.

 

OTHERS

The management also said it was reasonably happy with its run-rate of customer acquisition and the growth rate in customers. Total active customers grew a little over 1% through the June quarter to 6.46 million, after rising 2% sequentially in the each of the last two quarters. In addition, the management expressed confidence that its knowledge and experience in the gold loan business would prevent it from losing market share to new entrants. Diversified NBFC Cholamandalam Investment and Finance Co. Ltd. is among the latest entrants into the segment, having disbursed loans worth INR 1 billion in the June quarter. 

 

Muthoot Finance was also accelerating its efforts for digital gold loan offerings, in order to make processes more convenient for customers. It would also lead to quicker disbursal times, the management said. As for the non-gold loan segment, that should expand slightly to 15-20% from the current 13%, they said.

 

The lender had enough capital to push for growth even after declaring dividends, the management said. Muthoot Finance's Capital Adequacy Ratio stood at 21.96% as of Jun. 30, from 23.71% a quarter ago. The management also guided for operating expenses to remain in check. Operating expenses to average loan asset ratio declined to 2.91% in the June quarter from 3.75% a quarter ago and 4.24% a year ago. At INR 85.53 billion in absolute terms, it also declined on a quarterly and annual basis.

 

"So if this time the opex (operating expense) has come down, it is because we had a 10,000 crore (INR 100 billion) growth in the AUM (assets under management)," the executives said. "The opex here, it will be almost stable...in absolute terms, it will go up only by the rate of inflation."

 

The earnings and analyst call came after market hours. On Wednesday, shares of Muthoot Finance closed 0.9% lower at INR 2,509.90 on the National Stock Exchange.  End

 

Edited by Akul Nishant Akhoury

 

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