Muthoot Finance on Saturday reported a 36 per cent rise in consolidated net profit at Rs 3,278 crore for the September quarter, powered by a 42 per cent expansion in its loan book, while gross bad loans in the standalone business climbed to 3.87 per cent of advances from 2.28 per cent three months earlier.
The Kochi-based lender disclosed the result in two sets. Consolidated profit rose from Rs 2,412 crore a year earlier, while standalone profit, which strips out subsidiaries and overseas units, grew 27 per cent to Rs 2,977 crore from Rs 2,345 crore. Standalone total income rose to Rs 8,842 crore from Rs 6,442 crore in the year-ago quarter.
Read more on newzshort:
IGL Q2 Profit Falls 94 Percent On Costlier Gas
The Gold Loan Book Outgrew The Profit
Assets under management on a consolidated basis stood at Rs 2.09 lakh crore at the end of September. Gold loans accounted for Rs 1.93 lakh crore of that, up 46 per cent year on year. On a standalone basis the book was Rs 1.88 lakh crore, of which gold loans were Rs 1.79 lakh crore, or 95 per cent.
Growth in the book ran ahead of profit. AUM expanded 42 per cent while consolidated profit rose 36 per cent, a gap that points to thinner spreads on loans written in the quarter. Interest income of Rs 8,730 crore made up almost all of standalone total income, leaving Rs 112 crore from fees.
Read more on newzshort:
Reliance Q2 Profit Hits Record Rs 29,550 Crore
The Number That Slipped Past The Headline
The detail that matters most sits in the asset quality table. Standalone gross non-performing assets rose to 3.87 per cent at the end of September from 2.28 per cent at the end of June, a 70 per cent jump in one quarter. On a Rs 1.88 lakh crore book that is roughly Rs 7,270 crore of gross bad loans.
Gold explains why the number matters. MCX gold set a record of Rs 1,93,096 per 10 grams on 29 January and has since given up about 28 per cent, closing at Rs 1,39,291 on Friday, with international prices below $4,000 an ounce. A falling bullion price erodes the collateral behind every gold loan, forcing top-ups, part payments or auctions.
Belstar Turns A Corner
The microfinance arm was the bright spot in an otherwise mixed set of numbers. Belstar Microfinance earned a net profit of Rs 78 crore in the quarter against Rs 66 crore in the preceding three months, and its gross bad loan ratio eased to 3.26 per cent from 4.58 per cent a year earlier. First half profit of Rs 144 crore compared with a loss of Rs 160 crore.
New Management, An RBI Penalty
Alexander George took charge as managing director on 1 October, with George Alexander Muthoot moving up to executive vice chairman and K.R. Bijimon elevated to chief executive. The September quarter is the last full set of accounts filed under the earlier arrangement. In July the Reserve Bank of India imposed a Rs 5.80 lakh penalty on the company for lapses in customer verification and transaction monitoring.
The franchise behind those numbers is unusually deep for an NBFC. Muthoot Finance began as a Kerala gold financing business in 1939, was incorporated in 1997 and listed in 2011. It runs more than 7,500 branches, according to its Muthoot Finance profile, and lends in the UK, the United States and the UAE. It bought Belstar in 2016 and Muthoot Money in 2018.
Guidance Says 25 Percent, Not 46
George Alexander Muthoot pointed to demand for secured credit and the formalisation of borrowing as the base for growth, and said merging Muthoot Money, now a pure gold loan business, into the parent would cut operating costs and improve efficiency. The Financial Express reported that the company raised its gold loan AUM growth guidance to 25 per cent, well short of the 46 per cent just delivered.
What To Watch
The December quarter will be the first to absorb October’s slide in gold prices, and it will show whether the September bad loan spike was a one-off or the start of a trend. Watch the auction and recovery line, the pace of fresh gold loans against repayments, and whether Belstar holds on to its improved asset quality.
Our read: this is a growth quarter on paper and a risk quarter underneath. The book grew 42 per cent, profit grew 36 per cent and bad loans grew faster than either. When 92 per cent of the balance sheet is a single commodity, the price of that commodity sets the next two quarters, and a 25 per cent guidance is the tell.
