Muthoot Microfin Plans Rs 6,000 Crore H2 Disbursement Amid Recovery
Muthoot Microfin’s CEO Sadaf Sayeed has announced plans to disburse Rs 6,000 crore in the second half of the fiscal year, signaling a strong growth push as the microfinance sector shows signs of recovery. The company’s quarterly profit surged fivefold sequentially to Rs 31 crore, with credit costs falling below guided levels.
Key Takeaways
- Rs 6,000 crore disbursement planned for H2 FY25
- Quarterly profit jumped 5x to Rs 31 crore sequentially
- Credit cost reduced to 3.6%, below 4-6% guidance
- GNPA declined to 4.6% from 4.8% quarter-on-quarter
- Targeting 70:30 microfinance to non-microfinance asset mix long-term
Sector Stress Peaking, Recovery Underway
According to CEO Sadaf Sayeed, the stress in the microfinance segment has peaked and the sector is now on a recovery path. “In our case, we have been seeing improvement since the last quarter,” Sayeed stated in an interview with Narayanan V.
The company’s dramatic turnaround is evident in its financial metrics. While net profit fell over 50% year-on-year due to cautious lending, sequential performance showed strong improvement with total income rising to Rs 577 crore from Rs 559 crore.
Credit cost, which reached 9.4% in the previous financial year, dropped to 4.3% in Q1 and further to 3.6% in Q2 – below the company’s guided range of 4-6%.
Disbursement Growth and Diversification
Muthoot Microfin’s disbursements grew 28% quarter-on-quarter to Rs 2,274 crore, contrasting with the industry’s 25% decline from Rs 4.4 lakh crore to Rs 3.32 lakh crore.
The company has maintained its Assets Under Management (AUM) with gross loan portfolio growing 2.5% sequentially to Rs 12,558 crore. Product diversification has been key, with non-Joint Liability Group (JLG) products now constituting 10% of quarterly disbursements.
“Alongside JLG loans, we now offer individual loans, loans against property (LAP), and gold finance,” Sayeed explained.
Asset Quality Improvement and Future Targets
The company’s gross NPA has started declining from 4.8% to 4.6% quarter-on-quarter, with provision coverage improving to 70%. Sayeed expects GNPA to fall below 4.5% next quarter and below 4% by fiscal year-end.
Regulatory changes have enabled greater diversification, with NBFC-MFIs now requiring only 60% qualifying microfinance assets instead of 75%. The company targets 10-15% of assets in non-JLG products by FY25-end and a long-term 70:30 mix between microfinance and non-microfinance assets.
Funding Strategy for Growth
To support the Rs 6,000 crore H2 disbursement plan, Muthoot Microfin has Rs 3,500 crore in sanctioned limits and plans to raise Rs 3,000 crore or more through multiple channels including external commercial borrowings (ECBs), non-convertible debentures (NCDs), term loans, pass-through certificates (PTCs), and direct assignments (DA).
With Rs 4,000 crore already disbursed in H1, the company follows its typical pattern where 40% of annual disbursements occur in the first half and 60% in the second half.
