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    Muthoot Capital Services Limited

    MUTHOOTCAP
    Financial Services·22 Jan 2026
    Management Summary

    Muthoot Capital Services reported a strong Q3 FY26, driven by a strategic shift towards self-sourced business and product diversification, leading to a 19.9% YoY AUM growth to INR3,399 crores. The company significantly improved its asset quality with slippages reducing to 0.65% and lowered its cost of funds to 8.82%. However, overall disbursements were impacted by a conscious reduction in co-lending, and increased impairment expenses affected profitability, drawing analyst scrutiny regarding past guidance and underwriting quality.

    Highlights

    5
    • Q3 was a 'fantastic quarter' for the auto sector, benefiting the company.

    • Muthoot Capital's self-sourced business grew 20-25%, with a strategic shift away from co-lending.

    • New products (construction equipment finance, used 2-wheeler) launched or in UAT, expanding product portfolio.

    • Implementation of AI/ML-based collection strategy and Agentic AI-based telecalling significantly improved collection efficiency and reduced costs.

    • CRISIL upgraded rating to A+ with a positive outlook.

    Concerns

    4
    • Overall disbursement numbers saw a slight drop due to a conscious reduction in co-lending share (70% degrowth YoY).

    • Impairment expense for 9M FY26 increased significantly to INR54.59 crores from INR2.82 crores in 9M FY25, impacting profitability.

    • Analyst concern regarding underwriting quality and rising NPAs, despite management's efforts.

    • Previous guidance for FY26 AUM (INR4,500 crores) and PAT (INR60 crores for H2) were not met, leading to analyst skepticism.

    Key financials

    Metrics

    16

    Periods

    3

    Headline

    11
    • AUM
      ₹3,399 Cr
      YoY+19.9%
    • Balance Sheet Size
      ₹3,944 Cr
    • Borrowing
      ₹3,198 Cr
    • Debt to Equity
      4.81 x
    • CRAR
      22.5%

    Q3

    3
    • Disbursement
      ₹626 Cr
      YoY-25.9%
    • Cost of Funds
      8.8%
    • Slippage Rate
      65%

    9M FY26

    2
    • Revenue
      ₹463.85 Cr
      YoY+37.9%
    • Impairment Expense
      ₹54.59 Cr
      YoY+18.4%

    Segment breakdown

    • 2-wheeler₹2,308 Cr86.1%
    • Used 4-wheeler₹136 Cr5.1%
    • CV₹186 Cr6.9%
    • Loyalty Loan₹50 Cr1.9%
    Donut· Share of AUM

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Gross ₹3,198 crores

    Cost 8.8%

    Liquidity

    Liquidity disclosed

    LCR is hovering around 115-125%, well above RBI's 100% requirement.

    Guidance & targets

    11
    CategoryTargetPriority
    AUM
    Total AUM
    INR10,000 crores
    High
    Retail FD Book
    Retail FD Book
    cross INR100 crores
    High
    Disbursement
    Total Disbursement
    closer to INR2,500 crores
    High
    Disbursement
    Additional Incremental Disbursement
    INR4,000 crores
    High
    Disbursement
    Q4 FY26 Disbursement
    INR600 crores
    High
    Disbursement
    Q1 FY27 Disbursement
    INR750-800 crores
    Medium
    Disbursement
    4-wheeler and CV Disbursement
    INR1,000 crores
    High
    Profitability
    ROA
    good ROA
    Low
    Asset Quality
    Slippages
    0.65% or lower
    Medium
    Asset Quality
    PCR
    50%
    High
    Cost of Funds
    Cost of Funds
    go down
    Medium

    What to watch in Q4 FY26

    5

    Retail FD Book Growth

    by March end (FY26)
    CurrentINR67.28 crores
    Targetcross INR100 crores

    Why it matters

    Achievement of this target indicates success in diversifying funding sources and retail liability strategy.

    And our aim is to cross INR100 crores by the end of March, and that is where we will be reaching.

    Risks & concerns

    3
    RiskSeverity

    Asset quality and rising NPAs

    Analyst highlighted rising NPAs and questioned underwriting quality, despite management's efforts to improve collection and underwriting.Analyst acknowledged

    high

    Credibility of past guidance and unmet targets

    Analyst pointed out that previous AUM and PAT guidance were not met, leading to skepticism about future projections.Analyst acknowledged

    medium

    Slippages in the North region

    Management admitted that expansion in the North led to higher attrition and slippages, impacting overall asset quality.Management acknowledged

    medium

    Q&A highlights

    7

    “So, the earlier guidance that we had given as a part of our strategic objective is to become a INR10,000 crore AUM company by 2028. We are not revising our guidance. So according to that, we will calibrate our so next month, when we go into our budget session, we will build our budgets around that number so that we don't miss that 2028 mark of INR10,000 crores.”

    Analyst pushed for specific ROA targets and future loan book growth, which management addressed with AUM targets but remained qualitative on ROA for the upcoming year.

    asked by Amit Mehendale

    3 min read7 chapters

    Detailed Narrative

    01

    Q3 FY26 Performance Overview

    Muthoot Capital Services reported a total AUM of INR3,399 crores in Q3 FY26, marking a 19.9% year-on-year growth from INR2,832 crores in Q3 FY25. The company's balance sheet size reached INR3,944 crores, with borrowings at INR3,198 crores and a debt-to-equity ratio of 4.81x. CRAR stood at 22.49%, while GNPA and NNPA were reported at 5.93% and 3% respectively. Disbursements for the quarter were INR626 crores, a decrease from INR845 crores in Q3 FY25, primarily due to a strategic shift away from co-lending.

    02

    Strategic Shift to Self-Sourcing and Reduced Co-lending

    The company has drastically shifted its focus towards self-sourcing, with Muthoot Capital Services' owned business growing by 20-25%. This strategic move aims to improve capital effectiveness and yield. Consequently, the co-lending portfolio saw a significant degrowth of 70% year-on-year, reducing its share from INR939 crores to INR685 crores. This reduction, while impacting overall disbursement numbers, is a conscious decision to prioritize higher-yield, self-sourced business and manage capital more effectively.

    03

    Technology and Collection Initiatives

    Muthoot Capital has made significant tech investments in its collection process. A new collection app, MCollect, has been adopted and issued to the sales team for the first 6-month collections. An AI/ML-based strategy builder has been implemented to predict optimal customer contact methods, leading to improved collection efficiency and reduced slippages from 0.91% in Q1 to 0.65% in Q3. Agentic AI-based telecalling has also been introduced, reducing physical telecaller strength, cutting costs, and drastically improving call volumes.

    04

    Product Diversification and Retail FD Growth

    The company is expanding its product portfolio beyond 2-wheelers, launching construction equipment finance and preparing to go live with used 2-wheeler products. The 4-wheeler and CV segments have shown remarkable year-on-year growth of 84% and 476% respectively. The retail FD book grew by INR26 crores in the quarter, with a target to cross INR100 crores by March end, indicating success in diversifying funding sources.

    05

    Asset Quality Management and Provisioning Strategy

    Slippages (flow forward to standard AUM) have consistently decreased from 0.91% in Q1 to 0.65% in Q3. The company took a conscious decision to reduce its Provision Coverage Ratio (PCR) from 60% to 50% based on a revised ECL model and improved LGD assessment, which was done with the help of a 'Big 4' consultant. This resulted in a release of overlay provisions in the quarter. However, impairment expenses for 9M FY26 increased significantly to INR54.59 crores from INR2.82 crores in 9M FY25.

    06

    Funding and Liquidity Position

    Muthoot Capital successfully closed a green bond transaction, securing INR150 crores from Axis Bank as part of a larger INR300 crores fund. The company also raised INR437.44 crores in additional facilities, comprising INR55 crores short-term and INR382 crores long-term. The cost of funds improved to 8.82% in Q3 from 9.66% in Q2. The Liquidity Coverage Ratio (LCR) is maintained at 115-125%, well above the RBI's 100% requirement, indicating a strong liquidity position.

    07

    Future Outlook and Growth Targets

    The company reiterated its strategic objective to achieve INR10,000 crores AUM by 2028. For FY26, the revised disbursement target is closer to INR2,500 crores (down from an initial INR4,500 crores due to policy corrections). For FY27 onwards, the company aims for an additional incremental disbursement of INR4,000 crores. Specifically, INR600 crores is targeted for Q4 FY26, and INR750-800 crores for Q1 FY27. The 4-wheeler and CV segments are expected to contribute INR1,000 crores in disbursement in FY27.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.