Muthoot Finance Limited Q4 FY22 Earnings Conference Call Insights

Key highlights from Muthoot Finance Limited (MUTHOOTFIN) Q4 FY22 Earnings Concall

Management Update:

• MUTHOOTFIN said it expects borrowing costs to go up gradually during FY23. Gold AUM grew by 11% in FY22 and the company expects a growth of 12-15% for FY23.

Q&A Highlights:

• Abhijit Tibrewal of Motilal Oswal asked about weak gold loan demand in the core customer segments of 40,000-60,000 ticket size. George Muthoot MD replied that the ticket size of 40,000-60,000 has gone up to much higher levels as part of growth in the economy. People who were borrowing earlier are borrowing more.

• Abhijit Tibrewal of Motilal Oswal asked about yield compression of about 200 bp sequentially. George Muthoot MD answered that the company has consciously done teaser rates on the yields so that it can get more customers, which was successful as the company was able to get a lot of new customers during 4Q22.

• Abhijit Tibrewal of Motilal Oswal asked about the quantum of auctions in the accrued interest as on March 2022. Oommen Mammen CFO replied that auctions for 4Q22 was INR2,100 crores and the accrued interest was INR2,071 crores.

• Deepak Gupta of SBI asked about the impact on the Sri Lankan subsidiary due to the economic crisis there. George Muthoot MD replied that the company has mostly gold loan portfolio in Sri Lanka and due to the crisis the gold prices have gone very high, which makes the company very safe in Sri Lanka. As a portfolio, the company is safe.

• Deepak Gupta of SBI asked about last years’ credit growth guidance of 12-15%, which ended at 11%, if for FY23 the guidance will be the same. George Muthoot MD clarified the company will maintain the 12-15% guidance.

• Gaurav Kochar from Mirae Asset enquired that given the company has stopped doing loans at teaser rates, if it’s expected that spreads will improve from here on. George Muthoot MD said that the teaser rate impact will take some more months in 1Q23 also. Around 10% is what the company should see the spread to be, which is quite reasonable.

• Gaurav Kochar from Mirae Asset asked about the MFI environment for FY23 and growth targets. George Muthoot MD answered that MFI sector will continue to grow and there is potential for MFI going forward with new regulations about interest rate etc. also supporting MFI.

• Subhransu Mishra of UBS asked about the proportion of AUM below INR1 lakh, between INR1-2 lakh and above INR2 lakh. Oommen Mammen CFO replied that loans above INR1 lakh will be 58% and below INR1 Lakh will be 42%. Above INR3 lakhs will be 22%.

• Nischint C with Kotak Securities asked about new branch opening and if the company is facing any issues form the regulator. George Muthoot MD said that MUTHOOTFIN is also facing delays from the regulator like others. However added that business in existing branches is good, but few branches extra would have been better.

• Jitark Shah of SBI Pension Fund asked about the reason for other expenses going up 15-18% in 4Q22.  George Muthoot MD replied that the administrative expenses of FY21 was INR723 crores and for FY22 it’s INR742, which is hardly any increase. Quarter on quarter fluctuation is a seasonal thing.

• Prakhar Agarwal of Edelweiss asked about logic behind starting teaser loan and stopping it. George Muthoot MD said the teaser rates was for a specific period and purpose to get new set of customers. Since the company has achieved it, it has discontinued it.