Muthoot Microfin reported a 22.0% year-on-year (YoY) increase in Assets Under Management (AUM) to ₹15,323 crore for the quarter ended September 30, 2026. The NBFC also saw its cost of funds decline to 9.93%, marking its entry into single-digit territory for the first time.

Disbursements for Q2FY27 stood at ₹2,900 crore, registering a 28% YoY growth and a 10% quarter-on-quarter (QoQ) increase compared to Q1FY27. The company’s portfolio diversification efforts yielded results, with the mix between Joint Liability Group (JLG) and Non-JLG loans improving to 69:31 from 83:17 as of March 31, 2026.

Asset quality and collection efficiency

The company maintained robust asset quality metrics during the reporting period. Collection Efficiency (CE) improved by 477 basis points (bps) YoY to reach 98.11% in Q2FY27. Furthermore, the X-Bucket CE, excluding advances, stood at 99.9%, indicating sustained collection discipline and resilience within the loan book.

The Small and Micro Enterprise Individual Loan (IL) portfolio grew to ₹4,164 crore, maintaining near-zero delinquency rates. Additionally, Muthoot Microfin disbursed ₹453 crore in gold loans through a referral and co-lending model with its parent company, Muthoot Fincorp Limited, further strengthening its secured lending segment.

Funding profile and liquidity

Muthoot Microfin strengthened its funding position by raising a total of ₹3,213 crore during Q2FY27, bringing the overall borrowing for the half-year to ₹5,946 crore. As of September 30, 2026, the company held a robust liquidity position of ₹1,701 crore and had unavailed sanctioned credit lines amounting to ₹4,328 crore.

The overall cost of funds declined by 20 bps from 10.13% in the previous quarter. The incremental cost of funds also improved by 11 bps QoQ to 9.69%.

Network expansion and digital adoption

As of September 30, 2026, the company operated 1,675 branches and served 32 lakh active customers. It continued to strengthen its presence in markets including Telangana, Andhra Pradesh, and Assam.

Digital initiatives gained significant traction, with cumulative downloads of the Mahila Mitra app reaching 22 lakh. Digital collections increased to 47% in Q2FY27, up from 25% in Q2FY26 and 40% in Q1FY26, reflecting enhanced customer engagement and adoption of digital payment channels.

What the numbers show

The simultaneous improvement in portfolio diversification and cost efficiency highlights a strategic shift toward higher-margin, lower-risk segments. While JLG loans remain the core, the shift to a 69:31 JLG-to-Non-JLG mix suggests a deliberate move to reduce concentration risk. This is supported by the near-zero delinquency in the Individual Loan portfolio, which now constitutes a significant portion of the book. The drop in cost of funds to single digits, combined with rising digital collections, indicates operational leverage is beginning to materialize as scale increases.

Muthoot Microfin has allotted ₹250 crore worth of secured, listed non-convertible debentures (NCDs) through a private placement. The instruments carry an annual coupon rate of 9.25% and mature in September 2028.

Allotment details

The Debenture Issue and Allotment Committee approved the allotment on September 8, 2026, following Board approval dated June 30, 2026. The issuance consists of 250,000 debentures with a face value of ₹10,000 each.

The following table summarises the key terms of the issuance:

The NCDs are secured by a first-ranking and exclusive charge of 1.0x over the company’s present and future receivables, which are free from encumbrances. Interest is payable monthly. The securities have been listed on the BSE Limited.

This private placement route allows financial institutions to raise debt capital from select institutional and qualified investors outside the public issuance process. The allotment was made within the limits approved by the Board of Directors.

Strategic context

This fund raise forms part of Muthoot Microfin's strategy to strengthen its funding profile, diversify its liability mix, and optimise its overall cost of borrowing. Mr Sadaf Sayeed, CEO of Muthoot Microfin Limited, noted that the company's cost of funds declined by 75 bps in FY26. He added that a recent upgrade in the company's credit rating to CRISIL AA-/Stable strengthens its ability to access funding at competitive rates.

As on June 30, 2026, the company served 3.25 million active customers through 1,671 branches across 21 states, with a Gross Loan Portfolio (GLP) of ₹14,457.2 crore.

Source: https://lodr-files.dhan.co/lodr-inputs/Company/INE046W01019/429a7eff-018b-4e7e-a3f1-4ff1bbe19bc9.pdf