Muthoot Microfin Limited (NSE: MUTHOOTMF, BSE: 544055), a leading non-banking financial company-micro finance institution (NBFC-MFI) in India, has unveiled its unaudited financial results for the first quarter of the financial year 2024-25. Renowned for its focus on providing micro-loans to women entrepreneurs in rural India, Muthoot Microfin has demonstrated notable growth across various financial and operational metrics.

Financial Performance Overview

In Q1 FY25, Muthoot Microfin Limited achieved a remarkable 33.5% year-on-year increase in total income, rising from ₹480 crore to ₹641 crore. This surge underscores the company’s robust operational performance amidst challenging macroeconomic conditions. Net interest income (NII) saw a significant boost of 36.6%, reaching ₹383 crore from ₹280 crore a year ago. The pre-provision operating profit (PPOP) experienced a striking 50.4% growth, climbing from ₹148 crore to ₹223 crore, reflecting strong operational efficiency and cost management.

The profit after tax (PAT) also saw an 18.3% increase, growing from ₹96 crore to ₹113 crore. This growth is indicative of Muthoot Microfin’s effective strategies in managing costs and driving revenue.

Asset Quality Improvement

Muthoot Microfin Limited’s asset quality improved notably during the quarter. The gross non-performing assets (GNPA) decreased by 65 basis points from 2.75% to 2.10%. This improvement is attributed to the company’s stringent risk management practices and effective recovery mechanisms. The net non-performing assets (NNPA) also saw a positive shift, decreasing from 1.09% to 0.71%. These metrics reflect the company’s strong focus on maintaining high asset quality and reducing credit risk.

Business Expansion and Strategic Initiatives

The company’s gross loan portfolio (GLP) expanded by 21.6% year-on-year, from ₹10,038 crore to ₹12,210 crore. Muthoot Microfin disbursed ₹2,204 crore during the quarter, highlighting its active engagement in providing financial support to underserved segments. The borrower base grew by 13.1%, increasing from 30 lakh to 34 lakh across 1,562 branches. This growth was facilitated by a 27% increase in branch count, with 54 new branches added during the quarter.

Muthoot Microfin’s expansion into Telangana and Andhra Pradesh is a strategic move aimed at tapping into the underserved markets in South India. These new regions are expected to drive further growth, leveraging the company’s established operational framework and expertise in microfinance.

Regulatory and Financial Developments

The company recently received a Corporate Agent license from the Insurance Regulatory and Development Authority of India (IRDAI). This license allows Muthoot Microfin to offer customized insurance plans, thereby diversifying its revenue sources and enhancing its value proposition for customers.

Muthoot Microfin entered into a co-lending agreement with State Bank of India (SBI) to support women entrepreneurs in rural and semi-urban areas. This collaboration is expected to boost financial inclusion and empower women by providing them with necessary financial resources.

In addition to these developments, Muthoot Microfin reduced its interest rates by 35 basis points in July, lowering the effective lending rate from 23.65% to 23.30%. This rate cut is part of the company’s strategy to enhance customer affordability and drive growth.

Financial Stability and Liquidity

Muthoot Microfin Limited’s liquidity position remains strong, with ₹1,070 crore in unencumbered cash and cash equivalents, representing 9% of total assets. The company also holds unutilized sanctions amounting to ₹3,159 crore, providing a solid financial cushion. The capital adequacy ratio (CRAR) is at a healthy 30.29%, ensuring robust capital reserves.

The company’s cost of borrowings has improved, with the cost of funds (CoF) decreasing by 15 basis points from 11.22% in Q1 FY24 to 11.07% in Q1 FY25. This reduction in borrowing costs contributes to the overall financial stability and efficiency of the company.

Expert Opinions

Thomas Muthoot, Managing Director of Muthoot Microfin, expressed confidence in the company’s performance despite the challenges of general elections and other external disruptions. He emphasised the company’s ability to maintain growth momentum and operational efficiency, which positions it well for future success.

Sadaf Sayeed, CEO of Muthoot Microfin, praised the company’s resilience and consistent performance in the face of external challenges. He highlighted the strong growth in assets under management (AUM) and the company’s strategic expansion into new markets. Sayeed reiterated the company’s commitment to maintaining stable net interest margins (NIMs) and delivering value to customers through competitive rates and innovative financial solutions.

Looking Ahead

Muthoot Microfin Limited’s performance in Q1 FY25 highlights its strong growth trajectory and effective management practices. With significant increases in income, asset quality improvements, and strategic expansions, the company is well-positioned to continue its growth throughout the fiscal year.

  Andhra Pradesh, Insurance Regulatory and Development Authority of India, Muthoot Microfin Limited, Sadaf Sayeed, State Bank of India, Telangana, Thomas Muthoot