Muthoot Finance’s profit before tax (PBT) grew 38 per cent at Rs 1,080 crore on YoY basis in Q3FY20. Net interest income (NII) grew 43 per cent, majorly on the back of strong assets under management (AUM) growth of 19 per cent. AUM growth has been driven mainly by the gold loan portfolio.
“Over the past 12-18 months, Muthoot Finance
has benefited from increasing gold prices and stronger demand. The short loan tenure has also ensured positive asset-liability management (ALM),” analysts at Motilal Oswal Securities said in results update.
“Over the past two quarters, net interest income (NII) has exceeded our estimates handsomely, partly due to interest rate hikes taken in June 2019 and partly due to higher penal interest from overdue collections. We expect spreads to moderate from Q3FY20 levels of around 16 per cent to a run-rate of around 13 per cent in FY21,” the brokerage firm said with ‘neutral’ rating on the stock.
“We remain optimistic about the stock as the liquidity crisis has resulted in increased preference for gold loan financing and even though the cost of funds is trending at a higher range but management has been able to pass on the hike in cost thus maintaining margin,” analysts at Narnolia Financial Advisors said in result update.
“Margins are expected to improve as the hike in the interest rate taken in July is resetting into the portfolio. Growth was mainly driven by a strong collection efficiency which has resulted in an improvement in the asset quality. The operating expense is expected to remain inflated going forward as the management has planned to expand branches by 100-200 every year,” the brokerage firm said.