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    Muthoot Capital Services Limited

    MUTHOOTCAP
    Financial Services·15 May 2025
    Management Summary

    Muthoot Capital Services Limited reported a strong Q4 FY25, achieving record disbursements of ₹2,642 crores for the full year and crossing ₹3,000 crores in AUM with a 52% YoY growth. Asset quality improved significantly with GNPA at 4.88% and NNPA at 2.30%, supported by a 60% PCR. The company outlined ambitious strategic objectives for 2028, targeting ₹10,000 crores AUM and >4% ROA, driven by product diversification and digital transformation, despite some short-term pressure on opex due to investments.

    Highlights

    5

    • AUM crossed ₹3,000 crores for the first time, reaching ₹3,057.76 crores, a 52% YoY jump.

    • GNPA significantly reduced by 52% YoY to 4.88%, and NNPA stood at 2.30%.

    • FY25 disbursements were ₹2,642 crores, an 84% YoY growth, marking an all-time high.

    • PCR is at a high of 60%, indicating robust provisioning.

    • Strategic expansion into used cars, used commercial vehicles, and electric 2-wheelers is driving new growth trajectories.

    Concerns

    3

    • NNPA slightly increased from 2.22% last quarter to 2.30% this quarter.

    • Stage 2 assets increased from 3.4% in Q3 to 4.2% in Q4, though management attributed this to higher Q3 denominator and seasoning.

    • Opex was noted as being on the higher side due to investments in new products and systems, impacting ROA in the short term.

    What Changed2

    vs Q2 FY26

    Guidance items14 → 18 (+4)Risks discussed5 → 3 (-2)
    Key financials

    Metrics

    16

    Periods

    3

    Headline

    12
    • AUM
      ₹3,057.76 Cr
      YoY+52%
    • GNPA
      4.9%
      YoY-52%QoQ+3.2%
    • NNPA
      2.3%
      YoY-32.4%QoQ+3.6%
    • PBT
      ₹60.4 Cr
    • PAT
      ₹46.31 Cr

    Q4

    1
    • Impairment Provisions
      ₹19.38 Cr

    FY25

    3
    • Disbursements
      ₹2,642 Cr
      YoY+84%
    • Net Interest Income
      ₹248.09 Cr
    • Opex
      ₹173.16 Cr

    Segment breakdown

    2-Wheeler AUM
    ₹2,806 Cr AUM56.0% Growth85% Share of Overall Book5.3% GNPA
    4-Wheeler AUM
    ₹86.84 Cr AUM2.3% Growth69% GNPA
    Commercial Vehicle AUM
    ₹61.25 Cr AUM31% GNPA
    Corporate Loans
    ₹53.51 Cr AUM-71% Growth0% GNPA
    EV Financing (evfin)
    ₹182.92 Cr Portfolio
    Manba Finance
    ₹122.86 Cr Portfolio
    Up Money Finance
    ₹12.63 Cr Portfolio
    List

    Guidance & targets

    18
    CategoryTargetPriority
    AUM
    AUM
    ₹10,000 crores
    		High
    AUM
    AUM
    ₹4,500-4,600 crores
    		High
    Profitability
    ROA
    >4%
    		High
    Profitability
    ROA (blended)
    2.5% to 2.75%
    		High
    Profitability
    ROA (blended)
    >3%
    		Medium
    Credit Rating
    Credit Rating
    AA+
    		High
    Market Share
    Pan-India Market Share
    3%
    		High
    Market Share
    Operational Locations Market Share
    >7.5%
    		High
    Product Mix
    Alternate Products Share of Book
    40%
    		High
    Group Synergy
    Group Companies Business Contribution
    30%
    		High
    Digitalization
    Digital Channel Disbursement Share
    5%
    		High
    Asset Quality
    GNPA
    <4.5%
    		High
    Credit Cost
    Impairment Provision
    1.65% to 1.80%
    		High
    Other Income
    Insurance Income
    ₹15-16 crores
    		High
    Net Interest Income
    Net Interest Income Growth
    50%
    		High
    Opex
    Opex to AUM Reduction
    100-200 bps
    		Medium
    Finance Cost
    Finance Cost Reduction
    ₹0.25-0.50
    		High
    Corporate Loan Book
    Corporate Loan Book Size
    ₹150-200 crores
    		High

    GNPA below 4.5%

    next quarter
    Current4.88%
    Target<4.5%

    Why it matters

    Achieving this target indicates continued improvement in asset quality and effective risk management.

    Next strategic objective is to strengthen asset quality by bringing down GNPA below 4.5%. Our guidance for last year was 6%, and we bettered it by bringing it down to 4.9%. Now we want to keep this constantly below the 4.5% mark.

    How to verify

    key_financials.metrics[label='GNPA']

    Risks & concerns

    3
    RiskSeverity

    Asset quality deterioration (Stage 2 & NNPA increase)

    NNPA slightly increased QoQ from 2.22% to 2.30%, and Stage 2 assets from 3.4% to 4.2%. Management attributed this to higher Q3 business volume (denominator effect) and seasoning of the portfolio, asserting new portfolio is behaving well. — Analyst downplayed

    medium

    High slippage ratio

    Analyst noted a high annualized slippage ratio. Management clarified that absolute slippages remained stable, leading to a decrease as a percentage of growing AUM (from 0.96% in Oct '23 to 0.6% in March), and new secured segments will further reduce it. — Analyst downplayed

    medium

    Higher Opex impacting ROA

    Opex was higher due to investments in new products, systems, and technology. Management acknowledged the short-term impact on ROA but expects benefits to accrue in the current year, leading to improved profitability. — Analyst acknowledged

    low

    Q&A highlights

    8

    “So therein, we are conservative enough to provide it, whereas so there are 2 factors to it. One, it is taking the P&L hit, which I already said it will be increased because we have a highest PCR of 60 percentage. Second, how the asset quality is actually behaving in the books.”

    Analyst questioned the increase in NNPA and significant Q4 provisions despite a PCR revision, suggesting underlying asset quality issues. Management clarified it was due to the impact of ARC transactions on collections and a conservative 60% PCR policy.

    asked by Digant Haria

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 FY25 Performance and Full-Year Highlights

    Muthoot Capital Services Limited reported an all-time high disbursement of ₹2,642 crores for FY25, marking an 84% year-on-year growth. The company's AUM surpassed ₹3,000 crores for the first time, closing at ₹3,057.76 crores, a 52% YoY increase. PBT for the full year stood at ₹60.40 crores, with PAT at ₹46.31 crores, and EPS at ₹27.81. The blended yield across all segments was 20.61%, contributing to a blended ROA of 1.88% and ROE of 7.30%.

    02

    Asset Quality and Provisioning Strategy

    The company demonstrated significant improvement in asset quality, with GNPA reducing by 52% YoY to 4.88% and NNPA at 2.30%. The Provision Coverage Ratio (PCR) is maintained at a high of 60%. Management clarified that Q4 provisions of ₹19.38 crores were due to the seasoning of the portfolio and a conservative provisioning policy. For FY26, the company expects impairment provisioning to be in the range of 1.65% to 1.80% of the AUM, reflecting a stable outlook.

    03

    Strategic Objectives for 2028

    Muthoot Capital has set ambitious strategic objectives for 2028, aiming for an AUM of ₹10,000 crores with an ROA greater than 4% and an AA+ credit rating. Key pillars include becoming digital-first, customer-centric, and data-driven, expanding Pan-India market share to 3% (from current 1.8%), and increasing contribution from alternate products to 40% of the book (from current 15%). The company also targets a 30% business contribution from group companies and 5% disbursement through digital channels.

    04

    Product Diversification and Segment Performance

    The company is strategically diversifying its product portfolio beyond 2-wheelers, which currently constitute 85% of the book. 4-wheeler AUM grew by 232% to ₹86.84 crores, and the new Commercial Vehicle SBU closed at ₹61.25 crores. New growth areas include used cars, used commercial vehicles, and electric 2-wheelers, with EV financing already at ₹182.92 crores. The corporate loan book was de-grown by 71% to ₹53.51 crores, as the focus remains on retail segments.

    05

    Funding and Capital Adequacy

    The company's balance sheet size reached ₹3,584 crores, with borrowings at ₹2,853 crores, resulting in a debt-to-equity ratio of 4.34x. The borrowing cost stood at 9.95%. Capital Adequacy Ratio (CRAR) remained healthy at 22.36%. In Q4, additional funding of ₹671.36 crores was secured, comprising ₹496.36 crores in long-term and ₹175 crores in short-term funds. Muthoot Capital has also invested ₹100 crores for EV impact funding through GuarantCo.

    06

    Opex Management and Profitability Outlook

    While opex for FY25 stood at ₹173.16 crores, management acknowledged it was higher due to significant investments in new products, technology, and business expansion. They anticipate these investments will yield benefits in the current year, leading to improved profitability. The company expects a blended ROA of 2.5% to 2.75% for FY26 and aims for over 3% ROA for the current year, supported by a projected 50% growth in Net Interest Income and a 100-200 bps reduction in opex to AUM.

    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.