MOSL: MUTHOOT FINANCE (Neutral)-Tepid quarter on growth, but outlook better
MUTHOOT FINANCE: Tepid quarter on growth, but outlook betterMUTHOOT FINANCE: Tepid quarter on growth, but outlook better(MUTH IN, Mkt Cap USD3.6b, CMP INR650, TP INR715, 10% Upside, Neutral)
** 2QFY20 PBT increased 41% YoY to INR10.5b, driven by one-off strong GNPL recoveries, which led to income of INR2b. Excluding this one-time income, PBT grew 14% YoY to INR8.5b. PAT for the quarter was INR8.6b, driven by 18% tax rate.
** Company took a cautious stance on growth due to tightness in liquidity. As a result, AUM was broadly flat QoQ (up 11% YoY) at INR357b. However, MUTH has raised USD450m senior notes from the international market as well as INR4.6b from retail NCDs in Oct'19 - hence, loan growth has resumed in 3QFY20.
** Excluding the INR2b income mentioned above, yields have improved 50bp QoQ to 21.7% v/s 20bp increase in CoF to 9.5%. While cost of funds may further increase due to the external borrowings, we expect the company to largely maintain spreads at 12%.
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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