This Small Cap Lender Is Dropping As 27% Profit Growth Fails To Impress Investors

Shares of Muthoot Microfin’s were falling on Tuesday despite the small lender posting growth in net profit during the fourth quarter.

What Happened: Muthoot Microfin’s financial performance for the quarter ended March 31 showcased remarkable growth, with net profit reaching ₹120 crore, marking a 27% increase compared to the previous year. This surge was underpinned by a notable 47% rise in net interest income, which amounted to ₹400 crore.

As a non-banking financial company-microfinance institution (NBFC-MFI) under the Muthoot Pappachan group based in Kerala, Muthoot Microfin witnessed substantial expansion in its gross loan portfolio, which grew by 32.4% year-on-year to ₹12,194 crore. Moreover, the company achieved its highest-ever disbursement of ₹10,661.59 crore during this period.

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Better Margins: The quarter’s net interest margin stood at 13.52%, reflecting a 65 basis point increase from the same period last year. Total income surged by 46% to ₹653 crore, with operating profit witnessing a substantial 63% growth, reaching ₹244 crore compared to the corresponding quarter of the previous year.

Muthoot Microfin attributed its success to a notable reduction in credit costs, which dropped to 1.7% in FY24 from 3% in the last fiscal year. This improvement is credited to the company’s robust asset quality and enhanced collection efficiency.

CEO Sadaf Sayeed underscored the company’s commitment to maintaining a healthy loan portfolio, highlighting the significant improvement in non-performing assets (NPA) figures, with net NPA standing at an impressive 0.35%. These achievements underscore Muthoot Microfin’s dedication to financial stability and growth.

Price Action: Muthoot Microfin’s share price was down 1.14% at ₹241.90 near the start of trade on Tuesday.

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