MUTHOOTFIN - MUTHOOT FINANCE LIMITED Share Price

Management Outlook and Major Points:

1. Growth Trajectory: Management highlighted strong YoY growth in consolidated loan assets (34%) and profit (19%), driven by a 37% YoY surge in the core gold loan portfolio. Expect continued growth in Q4, though no specific figures were committed. FY26 guidance remains at 15%, subject to review.

2. Gold Loan Resilience: Robust demand for gold loans, particularly during festivals, underscores customer trust and economic momentum. The portfolio (stand-alone) grew 29% in 9 months, with no significant impact from regulatory observations on processes.

3. Subsidiaries & Microfinance: Housing finance disbursements rose to Rs.880Cr (9M), but microfinance challenges led to tempered disbursements. Focus remains on collections and loan quality, with issues expected to resolve in the next few quarters. Karnataka microfinance exposure is minimal (Rs.900Cr), with no immediate collection risks.

4. Digital Expansion: Partnerships with GPay/PhonePe aim to enhance lead generation for gold loans, personal loans, and LAP. Digital adoption is rising, with transactions increasingly facilitated through these platforms.

5. Asset Quality & NPA Strategy: Gold loan GNPA (4.22%) is manageable, with auctions as a last resort. Non-gold NPA (Rs.300Cr) is considered a peak, fully provisioned. Emphasis on customer flexibility to avoid auctions, preserving long-term relationships.

6. Operational Efficiency: Employee costs rose due to incentives and festival bonuses, aligning with growth. Branch network expansion, particularly in subsidiary Muthoot Money (now gold-loan focused), supports outreach, with ~950 branches added.

7. Regulatory Compliance: No changes required post-RBI observations; processes remain compliant. LTV adherence (75% at disbursement) and no immediate EMI product shifts reiterated.

8. Economic Context: Acknowledged broader economic stress but noted gold loans' resilience as customers prioritize liquidity. Non-gold products (personal loans, LAP) show stable underwriting, leveraging existing customer relationships.

Summary: Management remains optimistic on gold loan growth, digital integration, and branch expansion, with prudent risk management in microfinance. Asset quality and regulatory alignment are priorities, sustaining a 15% growth outlook for FY26.

Question 1:
Rajiv Mehta (Yes Securities):
"Sir, my first question is on the employee expenses were higher Q-on-Q and Y-on-Y by a significant extent but when I look at the employee base, it's flat. [...] Can you please elaborate on how this growth in employee costs have come about?"

Answer:
Employee costs rose due to festival-related bonuses (e.g., Diwali, Onam) paid in Q3 and performance-linked incentives tied to business growth. This aligns with seasonal trends and operational norms.

Question 2:
Rajiv Mehta (Yes Securities):
"And can you also comment on the growth outlook now [...] do you remain very confident about delivering very similar performance in the coming quarters?"

Answer:
While Q3 saw 29% YoY loan growth, management expects continued growth in Q4 but refrained from quantifying it. Confidence stems from sustained demand and festive momentum, though competition remains a factor.

Question 3:
Rajiv Mehta (Yes Securities):
"Post [regulatory] feedback, were there any conclusive feedback from the regulator, which we had to implement on the ground?"

Answer:
No operational changes were required post-regulatory feedback. Processes were already compliant with RBI's "hygiene checks," and growth remains unaffected.

Question 4:
Shreya Shivani (CLSA):
"Can you give [...] the cost of fund rate movement [...] and how much is 6-monthly MCLR or 1-year linked? [...] economics of [GPay/PhonePe] partnerships?"

Answer:
Borrowing costs average ~9%, mostly via term loans (56% bank loans, 26% NCDs, 13% ECBs). GPay/PhonePe partnerships focus on lead generation for gold loans/personal loans, with fees paid for leads.

Question 5:
Vaibhav Badjatya (Honesty and Integrity Investment):
"Why do you think [MFI's branch-based repayment] approach is better? [...] How this approach is better?"

Answer:
The SHG-linked model requires customers to visit branches for repayments, fostering discipline and reducing delinquency. It mimics a "bank-like" environment, enhancing trust and collections.

Question 6:
Mona Khetan (Dolat Capital):
"Sir, [...] how much is from the non-gold segment versus the gold? [...] Could we expect this [NPA] to be the peak?"

Answer:
Non-gold NPAs (personal loans, LAP) rose to INR 300 crores (4% of standalone NPAs). Management expects this to stabilize as the portfolio matures, with 100% provisioning for non-gold NPAs.

Question 7:
Shweta (Elara):
"How do you see the gold loan NPA picture [...] anomalies in banks' lending practices?"

Answer:
Muthoot's GNPA (4.2-4.3%) reflects customer accommodation (delaying auctions) to avoid defaults. Unlike banks, Muthoot prioritizes client retention over immediate recovery, ensuring minimal losses.

Question 8:
Kamal Mulchandani (Investec):
"What is the policy on loan rollover? [...] Are we facing issues in Karnataka's microfinance portfolio?"

Answer:
Rollovers require re-assessment at current LTV (75%). Karnataka's microfinance portfolio (~INR 900 crore) faces no immediate stress, with collections stable despite regulatory discussions.

Question 9:
Abhijit Tibrewal (Motilal Oswal):
"Has RBI asked for LTV to remain 75% throughout the loan tenure [...] or provisions for rollovers?"

Answer:
No new regulatory mandates; Muthoot adheres to existing norms (75% LTV at disbursement). Auctioning remains a last resort, with GNPA likely to stay ~4.2-4.3%.

Question 10:
Kushan Parikh (Morgan Stanley):
"Guidance for FY26 loan growth [...] credit cost outlook [...] loan book split by ticket size?"

Answer:
FY26 guidance: 15% growth. Credit costs (1% for ECL) depend on NPA trends. Gold loan split: 30% <INR 1L, 32% INR 1-3L, 38% >INR 3L. Non-gold growth to align with gold loans.