Summary
Muthoot Capital Services Limited - Q3 FY 2026 Earnings Call Summary Thursday, January 22, 2026, 11:00 AM
Event Participants
Executives Mathews Markose (CEO), Ramandeep Gill (CFO), Tina Muthoot (Whole-Time Director)
Analysts Amit Mehendale (RoboCapital), Rohan Mandora (Equirus), Tejas Khandelwal (Prudent Equity), Vinod Krishna (Avendus Wealth)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Total AUM | ₹3,399 crores | +20% YoY; strategic shift toward self-sourcing vs. co-lending |
| Disbursements | ₹626 crores | -26% YoY; decline driven by conscious reduction in co-lending (-70%) |
| GNPA | 5.93% | Reported on cost basis; Stage 3 assets at 6.45% including interest |
| NNPA | 3.00% | Driven by higher slippages in North India and aging of old buckets |
| PCR | 50.00% | -1000 bps QoQ; revised downward from 60% based on updated ECL/LGD model |
| Net Interest Income | ₹74 crores | Supported by incremental yields on new 2W business (22.25%) |
| Cost of Funds | 8.82% | -84 bps QoQ; benefit from increased PSU bank funding and retail FDs |
| CRAR | 22.49% | Maintains healthy capital cushion above regulatory requirements |
Geographic & Segment Commentary
- 2-Wheeler: Remian the core product with ₹2,308 crore AUM and 15% YoY growth; management implemented a location-based risk scorecard to curb slippages in high-risk northern territories.
- Used Cars & CV: Rapidly scaling segments with 84% and 476% YoY growth respectively; average ticket sizes are significantly higher (₹5-8 lakhs) than 2-wheelers, aiding AUM expansion.
- Loyalty Loans: Top-up loans for existing 2W customers saw 149% YoY growth to reach ₹50 crore AUM; operates at a high blended yield of 24.92%.
- Construction Equipment (CE): Launched in Q3 FY26 as a new vertical; average ticket size of ₹15 lakhs with a focus on high-quality underwriting and lower delinquency profiles.
Company-Specific & Strategic Commentary
- Strategy Shift: Moving away from low-yield co-lending/BC models to focus on group-sourced and MCSL-owned business to maximize capital effectiveness and yields (+2% on new book).
- Tech-Driven Collections: Implemented “MCollect” app and AI/ML-based strategy builders to predict optimal customer contact channels; Agentic AI telecalling has reduced physical headcount costs.
- Liability Diversification: Retail FD book grew 243% QoQ to ₹67.28 crores; targeting ₹100 crores by March 2026 to reduce reliance on market borrowings.
- Asset Quality Cleanup: Conducted a technical write-off of ₹14.09 crores in DPD 450+ day buckets where recoveries had stagnated.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM | ₹10,000 crores by FY28 | Long-term target maintained; requires scaling higher ticket size segments (CV/CE) |
| Disbursements | ₹4,000 crores in FY27 | Expected step-up from FY26 (~₹2,500cr) as new product verticals stabilize |
| ROA | ~2% Target | Management anticipates 200 bps yield improvement and lower credit costs to drive ROA recovery |
| Direct Assignment | Targeted in Q4 FY26 | Intend to close one major DA transaction to optimize capital and boost year-end profitability |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality & Slippages | GNPA remains elevated despite tech interventions; specific stress noted in North Indian geographies due to people/attrition issues. |
| Underwriting Integrity | Analysts expressed concern over “profitless growth” and the 10% PCR reduction which masked underlying operational performance in Q3. |
| Leverage & Capital | With debt-to-equity at 4.81x, the company has limited room for high-growth without capital conservation or DA transactions. |
Q&A Highlights
Asset Quality & PCR
- Question: Why was PCR reduced by 10% during a period of asset quality pressure? (Rohan Mandora)
- Answer: A Big 4 consultant redo of the ECL model showed historical LGD at only 34%; management felt 60% PCR was excessive and settled at 50% (Mathews Markose).
Growth vs. Profitability
- Question: How can the company claim it is on track when results are disappointing without provision releases? (Tejas Khandelwal)
- Answer: Growth was intentionally curtailed in Q2/Q3 to fix credit policies; the “superstructure” of new products (CV/CE) is now ready to build upon a fixed foundation (Mathews Markose).
Yield Expansion
- Question: What is driving the confidence in a 2% ROA? (Amit Mehendale)
- Answer: New 2W disbursements are at 22%+ yields; insurance cross-sell and lower borrowing costs (-50-60 bps on NCDs/CPs) provide a 200 bps margin tailwind (Ramandeep Gill).
Key Takeaway
Muthoot Capital Services Limited reported a transitional Q3 FY26, characterized by a deliberate slowdown in disbursements (₹626 crores) to prioritize high-yield self-sourced business over co-lending. While AUM grew 20% YoY to ₹3,399 crores, the bottom line was heavily supported by a ₹20 crore provision release following a reduction in PCR to 50%. Management successfully diversified the portfolio into Used Cars, CVs, and Construction Equipment, which now carry lower delinquency profiles than the 2W core. Strategic focus remains on AI-driven collections and liability diversification through retail FDs. Despite analyst skepticism regarding asset quality consistency in North India, the company maintains its ₹10,000 crore FY28 AUM target, betting on ticket-size expansion and a 200 bps yield improvement. The company expects a stronger FY27 as new underwriting scorecards and the tech-led collection framework stabilize.
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