MOSL: MUTHOOT FINANCE (Neutral)- Good operating performance; Ind-AS impact neutral
Muthoot Finance: Good operating performance; Ind-AS impact neutral
(MUTH IN, Mkt Cap USD2.4b, CMP INR437, TP INR490, 12% Upside, Neutral)
- Muthoot Finance's (MUTH) 1QFY19 PAT grew 43% YoY to INR4.9b, driven by a pick-up in loan growth, a reduction in GNPLs and a lower C/I ratio.
- Standalone AUM grew 6% QoQ/10% YoY to INR310b. This quarter marked the sharpest sequential loan growth since demonetization. Growth was driven by both volume (gold pledged with the company stood at 161 tonnes v/s 152 tonnes in the year-ago period) and value (average ticket size up 5% YoY to INR39k).
- With interest write-backs on account of declining GNPLs and lower cost of funds, NII increased 31% YoY. Note that next quarter onward, the base for cost of funds will become unfavorable and MUTH is likely to witness a sharp increase in cost of funds thereafter.
- MUTH raised INR30b worth of NCDs in a private placement during the quarter. As a result, the share of NCDs in the total borrowing mix increased from 27% to 35% in 4QFY18.
- Asset quality improved meaningfully after a few successive quarters of deterioration. GNPLs declined ~30% sequentially, resulting in a GNPL ratio of 4.6% (-240bp QoQ). ECL provisions stood at 1.9% of total loans, largely unchanged from prior quarters. The company has made more than adequate provisions against the expected credit losses.
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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