Muthoot Capital Services Limited — Q1 FY27 earnings call

Call held 17 Jul 2026

Management summary

Muthoot Capital Services Limited delivered a strong Q1 FY27, marked by a CRISIL rating upgrade and significant asset quality improvement with GNPA at 3.94%. The company's retail portfolio grew to INR2,851 crores, driven by a strategic shift towards own sourcing and diversification into higher-quality segments. Despite moderate overall growth due to cautious underwriting, management reiterated its long-term AUM target of INR10,000 crores by FY28-29, supported by leveraging its group's extensive network and digital initiatives.

Highlights

  • CRISIL rating upgraded to AA minus stable, enhancing access to diversified capital sources.

  • Public deposit franchise crossed INR100 crores, providing a stable and granular funding base.

  • GNPA reduced to 3.94%, a decline of 182 basis points year-on-year, reflecting improved asset quality.

  • Retail portfolio grew significantly to INR2,851 crores, up INR500 crores YoY, with a focus on high-quality assets.

  • Cost of funding reduced by INR0.80 YoY and INR0.43 QoQ, with further reductions expected post-rating upgrade.

Concerns

  • Overall Q1 growth of 6% was moderate compared to the 14% industry growth, due to cautious credit acceptance ratios (35-40%).

  • Co-lending portfolio significantly reduced from INR1,000 crores a year back to INR499 crores, with zero incremental business.

  • Macroeconomic conditions (war, etc.) pose a potential risk to the Indian economy, which the company is closely monitoring.

Key financials

2 periods

Headline

  • GNPA
    3.9%
    YoY -1.8%
  • NNPA
    1.9%
  • Retail Portfolio
    ₹2,851 Cr
    YoY +23.9%
  • PAT
    ₹8 Cr
  • CRAR
    22.1%

Q1

  • Standalone Disbursements
    ₹535 Cr
    QoQ +5.3%

What they filed

Q1 FY27: revenue up 7.1%, net profit up 273.9% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue109 126 137 145 154 +41%155 +23%166 +21%156 +7%
Net profit16 13 6 -5 3 −82%8 −39%5 −16%8 +274%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Gross ₹3,318 Cr
    • Rate reset Cost of funding reduced by INR0.80 YoY and INR0.43 QoQ, with incremental borrowing cost in Q1 at 9%.
    And now the overall cost of funding, which we have already shared, we have seen INR0.80 down as compared to the last financial year. That is that change has come only in my term loan, which we have taken from the bank loan. Overall change in the borrowing, we can see from the last quarter Q1 to now this Q1, we can see INR0.43 down. ... The company has closed the borrowings at INR3,318 crores at a borrowing cost incremental borrowing cost in the Q1 at 9%. This will go down in this quarter as well.
  • Liquidity Liquidity disclosed Public deposit franchise crossed INR100 crores. Liquidity position stable with fund balance 125-130% of RBI LCR requirement. Investments in high-quality liquid assets and fixed deposits with banks.
    Second, our public deposit franchise crossed INR100 crores. ... The liquidity position of the company remains stable, wherein the company is always having a balances over and above the LCR balance, which is required to be maintained from the RBI. ... Whereas the over and above 100% has been invested in the fixed deposits with the bank itself.

Guidance & targets

AUM

  • AUM projection for current FY AUM · this year · High confidence INR4,000-4,200 crores
    This year, the AUM projections that we had given was around INR4,000 crores to INR4,200 crores, and we will reach those numbers this year.

    — Mathews Markose

  • Long-term AUM target AUM · FY28-29 · High confidence INR10,000 crores
    So on the AUM growth, as I had mentioned earlier, we are so in the Q1 of this year, our credit acceptance rates were far below the industry numbers. So where industry gives about 75% to 80% approval rates, we were only at about 35%, 40% approval rate. So that was being cautious. ... Yes. Manish-ji, I'll take that question. So yes, we are our objective is INR10,000 crores. That '28-'29 will, of course, you also know about the overall macroeconomic conditions, war, etcetera. We don't know how the entire impact will hit our Indian economy and all that has to be seen. But yes, that INR10,000 crores guidance is still intact. '28-'29, we will be there.

    — Mathews Markose

Profitability

  • Pretax ROA Profitability · this financial year · High confidence 2.5%
    Yes. So as of now so in this year, as I said in the last call also, we have taken a pretax ROA of around 2.5% for this financial year. And we are going to work on that. As of now, we have reached a stage of 1%, but there are now from the next quarter itself, wherein we are expecting the business to grow.

    — Ramandeep Gill

  • Used Car ROA Profitability · this financial year · Medium confidence 1-1.5%
    So therefore, we are expecting an ROA tree of around 1%, 1.5%. But at the same time, used car is going to have a breakeven in this financial year.

    — Ramandeep Gill

Asset Quality

  • Retail GNPA Asset Quality · throughout the financial year · High confidence sub-4%
    From the retail portfolio, the GNPA is 3.49%. We are expecting if the business is continuing to grow in the same fashion, so we are expecting the GNPA to be sub-4% only throughout the financial year for the retail segment.

    — Ramandeep Gill

  • NNPA Asset Quality · throughout the financial year · High confidence sub-2%
    And there is no change in the ECL policy of the company so as the PCR, so NNPA would be sub-2%.

    — Ramandeep Gill

Sourcing

  • Incremental sourcing from group entities Sourcing · Medium confidence 40%

    Previously 15-20% → 40%

    15% to 20% of our incremental sourcing every month comes from group entities today. And the objective is to take it to 40% of the incremental sourcing.

    — Mathews Markose

Portfolio Mix

  • 2-wheeler book share Portfolio Mix · in 3-4 years · Medium confidence ~30%
    So disbursement may be 50%-50% or 60%-40% in favor of 2-wheeler, but the retention of the book will be faster on the other 2. So that is where we see that AUM growing faster than 2-wheeler AUM. But yes, over a next 3-, 4-year horizon, the objective is to bring down the 2-wheeler book to around 30% of the overall book and 70% being contributed by car, CV, CE and maybe we will get into tractors.

    — Mathews Markose

What to watch in Q2 FY27

AUM growth for FY27

this year
Current INR3,300 crores (excluding sold portfolio)
Target INR4,000-4,200 crores

Why it matters

To assess if the company is on track to meet its annual AUM target despite cautious Q1 growth.

This year, the AUM projections that we had given was around INR4,000 crores to INR4,200 crores, and we will reach those numbers this year.

Risks & concerns

  • Macroeconomic conditions

    medium

    Global macroeconomic conditions (war, etc.) could impact the Indian economy, which the company is closely monitoring.

    That '28-'29 will, of course, you also know about the overall macroeconomic conditions, war, etcetera. We don't know how the entire impact will hit our Indian economy and all that has to be seen.

    Management acknowledged

  • Moderate growth due to cautious underwriting

    low

    Q1 growth of 6% was moderate compared to 14% industry growth due to credit acceptance ratios being kept at 35-40% to maintain asset quality.

    At Muthoot Capital, we delivered a 6% growth, which may be slightly moderate compared to the industry growth. But all our internal analysis indicates that the gap was not driven by market demand, but primarily due to the fact that our credit acceptance ratios were kept moderate. We were approving about only 35%, 40% of the cases that were getting logged in, and that was as a measure of continuing to focus on our quality.

    Management acknowledged

Q&A highlights

7 direct
Structural repositioning of 2-wheeler and retail lending portfolio Direct
So first of all, our portfolio, you would see that quarter-on-quarter, we are diversifying our portfolio. So the 2-wheeler used to be our warhorse for a long. It was actually the single product for us for a long time. Now we have diversified and our other 2 -- other 3 businesses, which is construction equipment, commercial vehicles and car is steadily growing against that.

Analyst questioned strategy to defend margins and compete with Fintechs; management detailed diversification, rating upgrade benefits, liability franchise building, and risk-based pricing.

Asked by Sucrit D Patil

Frameworks for provisioning discipline and capital adequacy Direct
So therein, we are seeing a reduction. But at the same time, macroeconomic factors has also been taken. So we have -- last year also, we engaged EY and this year also, we have engaged EY. Therefore, if you see the Note number 5, which we have placed, we have additionally taken INR2.5 crores on the impairment because we know that in Q2.

Analyst inquired about managing credit costs and capital; management explained stopping co-lending, own sourcing benefits, and proactive impairment provisioning.

Asked by Sucrit D Patil

AUM and ROA aspirations Direct
This year, the AUM projections that we had given was around INR4,000 crores to INR4,200 crores, and we will reach those numbers this year. That's the projection, yes. And Raman, can you take on the ROA part, please? ... Yes. So as of now so in this year, as I said in the last call also, we have taken a pretax ROA of around 2.5% for this financial year. And we are going to work on that. As of now, we have reached a stage of 1%, but there are now from the next quarter itself, wherein we are expecting the business to grow.

Analyst sought clarity on long-term AUM targets and current year ROA, which management provided with specific numbers and timelines.

Asked by Amit Mehendale

ROA for used car book Direct
So therefore, we are expecting an ROA tree of around 1%, 1.5%. But at the same time, used car is going to have a breakeven in this financial year.

Analyst questioned the profitability of the used car segment given its lower yield; management outlined the ROA target and breakeven plan.

Asked by Amit Mehendale

ARC transaction details and accounting impact Direct
So in totality, INR203 crores have been sold in the ARC 3 at a valuation of around 45.61%, which I have already shared in the note. So there -- after this -- during this valuation exercise, what we have done, we have taken a blended valuation. unlike the first 2 deals wherein the valuations were coming at 50%, 55% with the same ARCs.

Analyst sought detailed information on the ARC deals, including financial impact and recovery expectations, which management explained comprehensively.

Asked by Hitansh

Guidance for GNPA and NNPA for FY27 and beyond Direct
From the retail portfolio, the GNPA is 3.49%. We are expecting if the business is continuing to grow in the same fashion, so we are expecting the GNPA to be sub-4% only throughout the financial year for the retail segment. And there is no change in the ECL policy of the company so as the PCR, so NNPA would be sub-2%.

Analyst asked for forward-looking asset quality targets, which management provided with specific sub-4% and sub-2% figures.

Asked by Hitansh

Equity raising update Partial
So right now, if you see debt to equity of the company is 4.88x. We are quite comfortable till 6 level, okay? But at the same time, last time, what I have told, I want to continue with that only. We are speaking to investors. There are 2, 3 investors who are already sharing, data sharing has also been happened with them. So as and when the valuation will click, so wherein we are expecting some meetings to happen in Q2 only. So then we can think about it and we can close the deal.

Analyst asked for an update on equity raising; management indicated ongoing discussions with investors and potential closure in Q2.

Asked by Vinay Jadwani

Impact of group collaboration on sourcing and ROA Direct
15% to 20% of our incremental sourcing every month comes from group entities today. And the objective is to take it to 40%. ... So wherever as I mentioned, the opex and the cost of acquisition from that channel is lower. So obviously, it has a slightly higher ROA compared to the dealer channel.

Analyst questioned the benefits and efficiency of leveraging group entities; management quantified current contribution and target, confirming lower costs and higher ROA.

Asked by Ankur Gulati

2 min read 5 chapters

Detailed narrative

Strategic Shift Towards Retail and Diversification

Muthoot Capital Services Limited is strategically repositioning its portfolio by reducing its reliance on the 2-wheeler segment and co-lending. The retail portfolio has grown significantly to INR2,851 crores from INR2,300 crores a year ago, while the co-lending book has shrunk from INR1,000 crores to INR499 crores. The company is actively diversifying into construction equipment, commercial vehicles, and cars, which currently exhibit lower GNPA levels (sub 0.5%) and contribute to a more stable asset base. This shift is supported by internal data analytics for scorecards and a multi-product, multi-bureau strategy.

Improved Asset Quality and Proactive Risk Management

The company demonstrated strong asset quality improvement, with GNPA reducing by 182 basis points year-on-year to 3.94%, and retail GNPA at 3.49%. The NNPA stands at 1.94% with a PCR of 50%. Muthoot Capital undertook a one-time cleanup through an ARC deal, selling INR203 crores of non-contributing assets at a 45.61% valuation, including a write-off pool of INR83.18 crores. This proactive measure aims to ensure a clean portfolio for future growth, with INR14 crores expected as recovery from this deal in the current year.

Enhanced Funding Profile and Cost Efficiency

A significant achievement in Q1 FY27 was the CRISIL rating upgrade to AA minus stable, which is expected to further reduce borrowing costs by INR0.40-0.50 in upcoming deals. The cost of funding has already decreased by INR0.80 year-on-year and INR0.43 quarter-on-quarter. The public deposit franchise crossed INR100 crores, providing a stable and granular funding base. The company maintains robust liquidity, with its fund balance at 125-130% of the RBI LCR requirement, and invests excess liquidity in high-quality liquid assets and fixed deposits.

Leveraging Technology and Group Synergies

Muthoot Capital is heavily investing in AI-driven technology, with AI bots achieving a 55% resolution rate for X bucket collections. AI is also being used for welcome calling, audit/compliance, and customer complaint segregation. The company is leveraging the extensive Muthoot Pappachan group network, with 15-20% of incremental sourcing currently coming from group entities, targeting 40%. This collaboration, along with digital initiatives like QR codes for on-spot approvals at dealerships, aims to drive efficient customer acquisition and reduce acquisition costs.

AUM and Profitability Outlook

Management reiterated its long-term AUM target of INR10,000 crores by FY28-29, with a current year projection of INR4,000-4,200 crores. The pretax ROA target for the current financial year is 2.5%, up from the current 1%. The used car segment, despite its lower yield (18.6%), is expected to breakeven this financial year and achieve an ROA of 1-1.5%. The company anticipates retail GNPA to remain sub-4% and NNPA sub-2% throughout the financial year, supported by disciplined execution and improved portfolio quality.

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