Muthoot Finance falls 7% post Q4 results

NBFCs, Poor, Women, Banks
Shares of Muthoot Finance have fallen 7% to Rs 389 per share on the BSE in early morning trade after the company reported 8% year on year (YoY) decline its standalone revenue from financing segment at Rs 15.73 billion in March quarter (Q4FY18). It had revenue from financing segment of Rs 17.10 billion in year ago quarter.

Total revenue including other income fell 6% to Rs 16.08 million from Rs 17.13 billion in the corresponding quarter of previous fiscal.

Despite single digit growth in its gold loan portfolio, Muthoot Finance reported 40% YoY growth in net profit at Rs 4.5 billion, largely on the back of financial leverage.

Net NPA increased from 4.93% in Q3FY18 to 6.16% in Q4FY18. Generally NPA will not result into bad debts as collateral can be auctioned, Muthoot Finance said in a press release.

Gross non-performing assets (GNPAs) increased from 5.62% in December 2017 quarter to 6.98% in March 2018, largely on account of migration to 90dpd & shifting to borrower wise NPA classification, analysts at Antique Stock Broking said in result review.

FY18 could best be captioned as a year where macro environment was tough but company level improvements were many. As an illustration, management's decision to provide extra time for customers resulted in higher NPAs and higher interest income (our estimate is to the tune of Rs 2 billion). A part of this excess income was used to shore up prudential provisions, which now stand at 2% of loans. Also, dividend pay-out was increased by 60% this year, signifying confidence in earnings trajectory, the brokerage firm said in a note.

In our view, the company's strong brand, branch network and long track record in dealing borrowers in India's informal economy provide a huge option value. Maintain BUY with price target of Rs 566 per share (gold business at 10x earnings and Rs 89 for the subsidiaries), it added.

At 11:26 am; the stock was trading 4% lower at Rs 402 on the BSE, as compared to 0.26% decline in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 2.19 million shares changed hands on the BSE and NSE so far.

In past one year, Muthoot Finance underperformed the market by gaining 2% against 15% rise in the benchmark index.