Muthoot Microfin , a leading microfinance institution, has reported a profit of INR 8.00 crores (including Other Comprehensive Income) for the quarter ended June 30, marking a turnaround after a challenging previous fiscal year. The company's performance shows signs of improvement in the microfinance operating environment, driven by favorable macroeconomic trends and robust disbursements.

Key Financial Highlights

• Assets Under Management (AUM) stood at INR 12,252.00 crores
• Disbursements of INR 1,775.00 crores covering 311,026 loans
• Net Interest Margin improved to 11.50% from 10.90% in the previous quarter
• Cost of funds decreased to 10.79% from 11.02%
• Gross NPA remained stable at 4.50%
• Net NPA increased by 24 basis points to 1.58%

New Product Lines

Muthoot Microfin has launched three new product lines to diversify its portfolio:

1. Micro LAP (Loan Against Property): Loans between INR 1.00-10.00 lakh
2. Gold Loans: Through co-lending with parent company
3. Individual Loans: For micro MSME financing

Operational Performance

Future Outlook

The management expects to increase monthly disbursements to INR 800.00-850.00 crores by the end of Q2 and over INR 1,000.00 crores in H2. The company is focusing on a calibrated approach towards product diversification and improving its asset quality.

Management Commentary

Sadaf Sayeed, CEO of Muthoot Microfin, stated, "We are now better placed and more confident of building a robust, sustainable, and well-diversified business, a business which is built on strong foundation of data analytics, use of technology, focusing on customer centricity and robust underwriting practice."

The company's credit rating has been reaffirmed by CRISIL at A+/Stable for long-term debt, with MFI Grading at M1 and Code of Conduct Assessment Rating at C1.

Collection Efficiency and Recovery

• Overall collection efficiency is improving, reaching 99.20% - 99.30% for ex-bucket collections
• Recovery from overdue loans has significantly increased to INR 38.00 crores in Q1, compared to INR 6.00-7.00 crores per month previously

Funding and Liquidity

Muthoot Microfin raised INR 1,450.00 crores during the quarter, with a focus on using Pass-Through Certificates (PTCs) as a source of capital. The company has over INR 2,000.00 crores of liquidity available in various forms, ensuring adequate funds for growth.

As Muthoot Microfin continues to implement its diversification strategy and focus on improving asset quality, the company appears well-positioned to capitalize on the improving microfinance environment in the coming quarters.

Muthoot Microfin , a leading microfinance institution, reported a decline in Q1 loan disbursements but is optimistic about Q2 recovery as it expands its product portfolio. The company is making strategic moves to diversify its offerings and expand its reach in the financial services sector.

Q1 Performance and Industry Trends

Muthoot Microfin CEO Sadaf Sayeed reported Q1 loan disbursements of 175.00 crores to 311,000 borrowers, representing a 9.40% decline from Q4. The company attributes this decrease to seasonal factors and new industry guardrails implemented by Mfin. These guardrails have had a positive impact:

• Reduced overleveraged customers (exposure above 2.00 lakh rupees) to 1.00%
• Decreased customers with more than four loans to 4.70% from 10.80%

Collection efficiency improved to 93.00% company-wide, with 99.30% on-time repayment for new portfolios. Notably, Karnataka's collection efficiency recovered to 87.00% from a low of 73.00% during the crisis.

Financial Management

The company utilized 132.00 crores from previous provisions to write off bad loans and maintains 97.00 crores in provisions, demonstrating prudent financial management.

New Product Verticals

Muthoot Microfin is broadening its offerings with the introduction of three new product verticals:

1. Micro-LAP (Loan Against Property) - 1-7 lakh rupees
2. Individual loans up to 5.00 lakh rupees
3. Gold loans

These new initiatives mark a significant shift in the company's strategy, moving beyond its traditional microfinance focus.

Leveraging Existing Network and Customer Base

Muthoot Microfin plans to capitalize on its extensive customer base, targeting 440,000 existing customers with credit scores above 730 for cross-selling these new products.

Q2 Outlook

The company expects significant Q2 improvement based on July disbursement trends. This optimism is fueled by the launch of new products and the recovery in collection efficiency.

Regulatory Environment Supporting Diversification

The company's diversification strategy aligns with recent regulatory changes. The Reserve Bank of India (RBI) has lowered the minimum qualifying asset criteria for NBFC-MFIs to 60.00%, allowing these institutions to expand their secured loan offerings.

As Muthoot Microfin navigates this expansion into new product verticals, it aims to strengthen its position in the financial services sector while addressing the diverse credit needs of its customer base. The success of these initiatives will be crucial in determining the company's future growth trajectory and profitability.