Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Muthoot Capital Services Ltd (BOM:511766, Financial) achieved a significant asset sourcing of INR498 crores in Q1 FY '25.
- The company successfully reduced its Gross Non-Performing Assets (GNPA) by 55.4% year-on-year, bringing it down to 9.84%.
- Net Non-Performing Assets (NNPA) also saw a reduction of 28.1%, now standing at 3.41%.
- Total Assets Under Management (AUM) increased by 25.43% year-on-year, reaching INR2,182 crores.
- The company has diversified its portfolio by adding new product lines such as electric vehicles (EVs), loyalty loans, and used cars.
Negative Points
- Despite the positive financial performance, the company faced an increase in NPAs from the pre-COVID portfolio, impacting profitability.
- The cost of borrowing has increased slightly, despite efforts to reduce it.
- The company had to take additional hits in profit due to provisioning and employee appraisals, impacting overall profitability.
- There is a significant concentration of the portfolio in the southern region of India, which could pose a risk.
- The company has not made any new corporate loan transactions in the quarter, indicating a potential slowdown in this segment.
Q & A Highlights
Q: What is the breakup of our borrowing? And what's the incremental cost of borrowing for us?
A: The borrowing is divided into five parts: NCD and MLD (29%), working capital demand loan and term loan from banks (46%), CP (11%), PTC and DA (8.5%), and FDs and sub-debt (8%). The incremental cost of funds for Q1 stood at 9.65%, down from 9.9% in Q4. The total cost of funding is 9.84% on a book level. - Ramandeep Gill, CFO
Q: Do you have a similar budgeted vs. actual figure to share for FY '25?
A: Yes, we can share the figures. Please provide your email ID, and we will send it to you. - Ramandeep Gill, CFO
Q: Do you have an internal target set for reducing NPA levels by the end of the financial year?
A: Yes, the target is to bring the overall GNPA below 6% by Q2 and around 4% to 5.5% by the end of the financial year. - Ramandeep Gill, CFO
Q: Are you confident about achieving INR600 crores disbursement in Q2?
A: Yes, we already crossed INR200 crores in July and will easily surpass INR600 crores for Q2. - Mathews Markose, CEO
Q: Will the ARC transaction be done in Q3?
A: We will take a call on the ARC transaction in Q2. Our guidance is to bring GNPA down to 6% by March. - Mathews Markose, CEO and Ramandeep Gill, CFO
Q: Is the company considering any buybacks for wealth creation for shareholders?
A: We will discuss this in an individual investor meeting soon, and any decisions will be posted on the BSE site. - Ramandeep Gill, CFO
Q: Will the profit impact from management outlay and compensation be added back from Q2 onwards?
A: Yes, the hits taken in Q1 were one-time. We expect more profit from Q2 onwards. - Ramandeep Gill, CFO
Q: What's the business growth target in terms of AUM and disbursements for this financial year?
A: The target is an AUM of INR2,800 crores to INR3,000 crores and disbursements closer to INR2,000 crores. - Mathews Markose, CEO
Q: Will there be elevated OpEx for a long period due to focus on collection and legacy asset cleanup?
A: No, the OpEx on collection has come down significantly, and we don't see any challenges in OpEx as we speak. - Mathews Markose, CEO
Q: Any change in co-lending partnership tie-ups due to increased delinquencies in small ticket retail loans?
A: No, we are going strong with all our partners and will continue to do so. - Mathews Markose, CEO
Q: Could you share the yields for each business line?
A: Two-wheeler portfolio operates at 21%-23%, used car and LCV at 18%-18.5%, loyalty loans at 22%-23%, and co-lending at 12.80%. - Ramandeep Gill, CFO
Q: How do you see NIM growth or NOI growth going ahead?
A: We expect the yield to go up and the cost of funds to go down, contributing to increased NIM. By the end of the year, you will see significant growth in NII. - Ramandeep Gill, CFO
Q: What will be your credit cost guidance for FY '25 and FY '26?
A: The policy is to maintain a PCR of 75%. We expect the credit cost to go down, with a revision likely in Q4 of this financial year. - Ramandeep Gill, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
