Muthoot Finance Limited Q3 FY23 Earnings Conference Call Insights

Key highlights from Muthoot Finance Limited (MUTHOOTFIN) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:08:33] Sagar Shah from PhillipCapital asked if MUTHOOTFIN will return to the era of double-digit AUM growth that it experienced before. George Muthoot MD said it is difficult for people to enter the gold loan business and understand it as an operationally challenging business. The company hopes to return to double-digit growth after 3-4 quarters.

• [00:09:47] Sagar Shah from PhillipCapital enquired if the demand from the customers would be on the higher or lower ticket range. George Muthoot MD replied that demand for consumer credit is present in both Tier 2 and Tier 3 cities and big cities. The avg. ticket size for consumer credit is around INR70,000.

• [00:11:00] Sagar Shah from PhillipCapital asked about non-gold finance business, if the company intends to grow that business. George Muthoot MD said the aim is for the non-gold loan portfolio to reach 15-20% in the next 3-4 years, while the gold loan business should see a growth of 10% by the end of the next year.

• [00:13:57] Umang Shah from Kotak Mutual Fund asked about number of loan accounts outstanding being lower and how it’s expected to change over the next 1-2 years. George Muthoot MD said the company is not focusing on the number of customers, but instead looking at AUM. AUM has been steady and slightly improving.

• [00:15:58] Umang Shah from Kotak Mutual Fund enquired about the gold loan growth from FY23 perspective. George Muthoot MD replied that next two quarters the company should see better gold loan growth. MUTHOOTFIN expects to end the year with about 4-5% growth and therefore FY24 should reach at 10% growth.

• [00:19:44] Shubhranshu Mishra of PhillipCapital enquired why the company is not increasing more branches in East India when they are more productive than branches in West India. George Muthoot MD replied that it will open more branches in regions with high business potential and take security and safety factors into consideration.

• [00:26:34] Shubhranshu Mishra of PhillipCapital asked about the ticket size by AUM split. Oommen K. Mammen CFO said that less than INR1 lakh will be about 41%, between INR1 lakh and INR3 lakh, 35% and above INR3 lakhs, 24%.

• [00:31:47] Shreepal Doshi with Equirus enquired why the NPA number has sequentially increased. George Muthoot MD said that NPA for gold loans doesn’t affect the P&L because it gets back both interest and principal, so it allow customers to take more time if they request it. This helps customers avoid having to option the gold which is difficult.

• [00:34:49] Pradeep Agarwal with Systematix Shares asked about reason for employee base declining while branches increasing. George Muthoot MD said it could be due to branch additions and normal exits that could be seasonal.

• [00:38:54] Pradeep Agarwal with Systematix Shares asked about the auction number during 3Q23. Oommen K. Mammen CFO answered that it was around INR223 crores.

• [00:39:43] Nidhesh Jain with Investec enquired about the strategy in housing finance subsidiary. George Muthoot MD clarified that the company restarted housing finance, personal loan, vehicle loan and MSME loan businesses after the COVID period. For housing finance a new CEO has been appointed.

• [00:45:11] Vishal at ICICI Securities enquired about credit cost going forward. George Muthoot MD replied that the company will see lesser credit cost in future.

• [00:45:32] Arul Selvan from Independent Advisors enquired if the company has any plans of demerging of growing unique businesses like housing loans or microfinance loans etc. George Muthoot MD said the company has not considered growing and then hiving off its other divisions. Instead, it plans to have experienced CEOs in those fields and maintain overall managerial control.

• [00:49:49] Pallavi Deshpande from Sameeksha asked about the borrowing cost, if there will be steeper hike in 4Q23. Oommen K. Mammen CFO answered that the borrowing cost was around 8.13% for 3Q23, which would likely move up to 8.5% in 4Q and beyond due to incremental cost going up.

• [00:49:59] Pallavi Deshpande from Sameeksha queried about the attrition rate and the hike given out. George Muthoot MD said attrition would be above 20% and it’s the lower level employees who are leaving.