Summary
Muthoot Microfin Limited - Q3 FY2026 Earnings Call Summary Tuesday, February 10, 2026, 11:00 AM IST
Event Participants
Executives 4 Praveen T. (CFO), Rajat Gupta (AVP, Investor Relations), Sadaf Sayeed (CEO), Udeesh Ullas (COO)
Analysts 7 Anil Tulsiram (Bestpals Research Advisory), Ashlesh Sonje (Kotak Securities), Himanshu (MB Investments), Mann (GrowthSphere Ventures), Mayank Mistry (Antique Stock Broking), Pratik Matkar (JM Financial), Prithviraj Patil (Investec)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Asset Under Management (AUM) | ₹13,078 crores | +5.4% YoY, +4.1% QoQ; driven by recovery in disbursements to ₹850 cr/month. |
| Disbursements | ₹2,492 crores | Q3 average of ₹850 cr/month; Management expects ₹1,000 cr/month in Q4. |
| Gross NPA (GNPA) | 4.40% | +137 bps YoY, -21 bps QoQ; significant improvement from previous peak stress. |
| Net NPA (NNPA) | Not explicitly stated | Improved by 7 bps QoQ. |
| Collection Efficiency | 94.80% | +150 bps QoQ; On-time (X-bucket) efficiency reached 99.8%. |
| Credit Cost | 3.30% | Lower than 9M FY26 average of 3.7%; guided range was 4.0%-6.0%. |
| Profit After Tax (PAT) | ₹62 crores | Healthy recovery compared to stress periods; 9M FY26 PAT stands at ₹99 crores. |
| Net Interest Margin (NIM) | 12.00% | Improved toward target range of 12.4%-12.7% as new pricing takes effect. |
| Cost of Funds | 10.43% | -64 bps YoY; incremental cost of funds significantly lower at 9.8%. |
| Cost to Income Ratio | 54.80% | Improved from previous year; targeting 43% long-term through cost optimization. |
| Capital Adequacy (CRAR) | 26.40% | Robust capital position; Net Worth stands at ₹2,768 crores. |
Geographic & Segment Commentary
- Core States (Tamil Nadu & Kerala): These states continue to lead performance with 100%+ collection efficiency. Tamil Nadu GNPA is 100 bps lower than the company average, while Kerala is 250 bps lower; digital collection adoption is highest here at 32-36%.
- Muthoot Small & Growing Business (MSGB): This individual loan segment reached ₹1,097 crores (8.4% of AUM) with near-zero delinquency. The portfolio is 100% digital collection via eNACH/UPI with a low bounce rate of 9%.
- Newer Geographies & Products: Recently entered Assam, Andhra, and Telangana are seeing steady penetration. Micro LAP has reached ₹22 crores AUM with zero delinquency, while the Gold Loan referral business reached ₹74 crores.
Company-Specific & Strategic Commentary
- Portfolio Diversification: The JLG to Non-JLG mix shifted from 97:3 in March to 88:12 in Q3, targeting a 65:35 ratio long-term to reduce event risk.
- Cost Optimization: Management merged or rationalized 66 out of 82 identified underperforming branches, contributing to opex reducing from 7% to 6.5%.
- Technology-Led Underwriting: Use of AI for “Personal Discussion” recording, automated credit appraisal memos, and account aggregator (Finarkein) integration to assess bank statements.
- Borrowing Strategy: Focus on shift toward PTC structures and non-bank sources (ECB, NCDs) to reach a 50:50 bank to non-bank borrowing mix.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| AUM Growth | ~₹14,000 crores by FY26 end | Represents ~14% annual growth, outperforming initial conservative guidance. |
| FY2027 Growth | 20% YoY | Management expects FY27 to be a “clean year” with higher disbursement momentum. |
| Return on Assets (ROA) | 3.0%+ for FY2027 | Expected 2% for FY26, rising to 3.5% long-term as credit costs stabilize at 2-2.5%. |
| Portfolio Mix | 70:30 (JLG:Non-JLG) | Target for end of FY2027 to further de-risk the balance sheet. |
Risks & Constraints
| Risk | Context |
|---|---|
| Asset Quality (Historical) | Previous legislative interventions in Karnataka caused high slippages; however, PAR 1-90 improved from 7.19% to 5.9% this quarter. |
| Unsecured Lending | While diversifying into “individual loans,” these remain unsecured; mitigation includes lending only to 4-5 year vintage customers with 700+ scores. |
| Leverage & Capital | Debt-to-equity is low at 3.3x; while internal accruals support current 20% growth, a capital raise may be required in late FY27 to maintain pace. |
Q&A Highlights
Asset Quality & Collection
- Question: What is the trend in PAR 1-90 buckets? (Ashlesh Sonje)
- Answer: PAR 1-30 improved to 2.23% (from 2.58%), 30-60 to 1.32%, and 60-90 to 2.43%. Total 1-90 PAR saw a 120 bps reduction QoQ (Sadaf Sayeed).
Financial Performance
- Question: Why was interest income lower QoQ despite AUM growth? (Prithviraj Patil)
- Answer: It was impacted by an interest reversal of approximately ₹25 crores related to write-offs; however, overall revenue including EIS showed improvement (Praveen T.).
Strategy & Turnaround
- Question: Can management assure that the “worst is behind” after last year’s heavy provisioning? (Nitin)
- Answer: All macro-linked covenant breaches have been cured. Management overlay of ₹230 crores has been subsumed, and FY27 is expected to be a clean year with 3.5% ROA (Sadaf Sayeed).
Funding & Costs
- Question: How is the borrowing mix impacting the cost of funds? (Mayank Mistry)
- Answer: Strategic shift to PTCs and NCDs is helping. Incremental cost of funds has dropped to 9.8%, and total cost is expected to hit 9.7% in 12-18 months (Sadaf Sayeed).
Key Takeaway
Muthoot Microfin demonstrated a clear turnaround in Q3 FY26, with AUM reaching ₹13,078 crores and GNPA improving to 4.40%. The company successfully executed its diversification strategy, shifting its JLG:Non-JLG mix to 88:12, bolstered by the ₹1,097 crore MSGB individual loan portfolio which features zero delinquency and 100% digital collections. Efficiency gains were evident as opex fell to 6.5% following branch rationalization. Management raised ₹2,700 crores in the quarter at competitive rates, with incremental costs of funds dropping to 9.8%. Looking ahead, the company guided for a 20% AUM growth in FY27 and a target ROA of 3.5% long-term, asserting that the legacy asset quality issues from Karnataka are now fully subsumed. The focus remains on retaining high-quality vintage customers through digital-first products and scientific underwriting.
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