Muthoot Microfin Q2 FY26 Earnings Call Transcript Highlights Strong Performance & Diversification
Muthoot Microfin reported strong Q2 FY26 results with improved disbursements, asset quality, and profitability. Credit cost reduced to 3.6%, AUM grew 10% QoQ. Strategic diversification into Individual, LAP, and Gold Loans is progressing well.
The announcement highlights substantial improvements in profitability, asset quality, and operational efficiency, alongside strategic diversification into new product lines. These factors are critical drivers for future growth and investor confidence, indicating a high impact on the company's long-term performance.
The company reported significant improvements across all key financial and operational metrics, including disbursements, asset quality (GNPA, Net NPA), provision coverage, and credit cost. Strategic diversification into new loan products, reduced cost of funds, and a positive outlook from CRISIL contribute to a strong positive sentiment.
* Muthoot Microfin Limited has released the transcript of its investor conference call held on November 6, 2025, to discuss the unaudited financial results for the quarter ended September 30, 2025.
* Key Highlights from the Q2 FY26 Earnings Call: * The company witnessed a shift in business trajectory, with operational challenges subsiding and activity returning to normalcy, supported by improved customer cash flow and strong demand. * CRISIL upgraded the company's outlook from 'stable' to 'positive', reflecting material improvement across all metrics. * Disbursements grew significantly by 28.1% during the quarter. * Cost of funds declined to 10.6%, with the marginal cost of funds at 9.8%. * Overdue collections improved substantially, with ₹57 crores collected from overdue accounts in Q2 FY26, averaging ₹19 crores per month. * Asset quality improved, with Gross NPA (GNPA) reducing from 4.85% to 4.61% and Net NPA improving from 1.58% to 1.41%. * Provision coverage increased from 68% to 70.4%. * Credit cost reduced significantly to 3.6% in Q2 FY26, down from 9.4% in FY25 and 4.3% in Q1 FY26. The company expects to be at the lower end or below its guidance of 4-6%. * Strategic portfolio diversification is underway with the introduction of Individual Loan, Micro LAP, and Gold Loan products. The non-JLG portfolio stands at approximately ₹475 crores, with Individual Loans at ₹468 crores, showing no delinquency and a 95% cheque clearance rate. * Gold Loan portfolio reached ₹7 crores through a referral scheme with Muthoot FinCorp, and the Micro LAP portfolio reached ₹9 crores. * Net Interest Margins (NIM) improved to 11.9% from 11.5% in the previous quarter. * Asset Under Management (AUM) grew to ₹12,558 crores, representing a 10% quarter-on-quarter growth. * Pre-Provision Operating Profit (PPOP) increased by 7.6% quarter-on-quarter. * The company disbursed ₹4,049 crores in the first half, with 0+ delinquency for this portfolio at 3.8% and 30+ at 6.5%. * Muthoot Microfin is targeting around 10% to 12% of its portfolio to be non-JLG in the current financial year. * Management expressed confidence in achieving its guidance for growth, NIMs (targeting 12.7% maximum), and ROA/ROE, while exceeding expectations on credit cost. * Prudent risk management practices, including natural calamity insurance and a newly developed in-house scorecard, are helping to build a better-quality portfolio and save costs (₹2 crores to ₹2.5 crores annually). * Overall cost reduction initiatives are expected to save ₹20 crores annually. * Branch rationalization, including the merger or closure of 84 identified branches, is expected to save around ₹50 crores in the next financial year. * The company is receiving strong support from both private and public sector banks, having completed a ₹500 crores PTC with State Bank of India. * The average ticket size for Individual Loans is around ₹1.3 lakhs, LAP at ₹3 lakhs, Gold Loans at ₹90,000, and IGL at ₹60,000. Only 0.8% of customers are overleveraged (outstanding >₹2 lakh). * The yield on Individual Loans is around 23%, with lower operating expenses due to existing customer base and digital collection methods.
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