MOSL: MUTHOOT FINANCE (Neutral)-Gold loan business steady-Subsidiaries continue to gain share
Muthoot Finance: Gold loan business steady; Subsidiaries continue to gain share
(muth IN, Mkt Cap USD2.7b, CMP INR484, TP INR500, 3% Upside, Neutral)
- Muthoot Finance’s (MUTH) PAT grew 1% YoY to INR4.9b (3% miss) driven by muted growth in the topline and one-off taxes to the tune of INR224m (as adjustment for the prior year). Adjusted for one-off taxes, PAT was in line.
- Standalone AUM was flat QoQ (up 15% YoY) at INR325b. However, its subsidiaries had a strong quarter with their combined loan book growing 11% QoQ/ 65% YoY to INR40b. Tepid performance in gold loans was due to (a) lower volumes – gold stock outstanding declined from 168 tons to 166 ton QoQ, and (b) the company adopting a conservative liquidity stance.
- Borrowings grew 4% QoQ despite no sequential loan book growth. Bulk of the incremental borrowings was in the form of CPs, the share of which now stands at 16% v/s 12% in 2QFY19. Cost of funds increased 50bp QoQ to 9.5%; the company passed on most of this increase to its borrowers. Hence, spread was sequentially and largely unchanged at 11.7%.
- Asset quality was stable on a sequential basis with Gross Stage 3 loans at 1.96% and ECL provisions at 1.8%. Credit costs remain modest at INR19m for the quarter (similar trend in the past few quarters).The total stock of outstanding provisions remained constant at INR8.1b (1.3x of GNPLs).
Muthoot Finance Limited is a gold financing company. The Company is a non-banking financial company (NBFC), which is engaged in providing loan (financing) against collateral of gold jewelry. The Company operates through two segments: Financing and Power Generation. The Company provides personal and business loans (secured by gold jewelry) primarily to individuals having no access to formal credit for a reasonable tenure to meet their short-term working capital requirements. The Company offers gold loans, foreign inward money transfer services, foreign exchange services, insurance broking, home loans, personal loans, collection services, microfinance, wind mill power generation, white label automated teller machine, instant money transfer services and domestic money transfer services. The Company has a network of approximately 4,294 branches all over India. In Sri Lanka, the Company offers corporate loans, mortgage loans, factoring, business loan and short term loans, among others.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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