This article first appeared on GuruFocus .
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Disbursements:INR2,644 crores in Q1 FY27, the highest-ever Q1 disbursement, up 49% year over year.
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Earnings:Increased 20% year over year and 5% quarter over quarter.
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PPOP (Pre-Provision Operating Profit):Improved 43% year over year and 3% quarter over quarter.
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Operating Cost:Reduced to 6.3%.
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Credit Cost:Reduced to 2.6% from 2.8% in the previous quarter.
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AUM Growth:18% year over year.
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Cost of Funds:Reduced from 10.27% to 10.14% in Q1, with incremental borrowing cost at 9.8%.
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Asset Quality:Overall on-time collection at 97.97%; 30-plus delinquency at 1.2% for the post-April 2025 book; individual loan portfolio has 30-plus delinquency of 0.02% with no 60-plus or 90-plus delinquency.
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Overdue Collections:INR53 crores in the quarter, 25% higher than Q1 last year.
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Portfolio Mix:76% income-generating JLG loans and 24% non-JLG loans, with individual loans at approximately INR3,200 crores.
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Growth Guidance:Revised to 20% for the fiscal year.
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Release Date: August 07, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Record Q1 disbursements of INR2,644 crores, up 49% year-over-year, with strong growth momentum.
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Asset quality improving rapidly with 97.97% on-time collection efficiency and 99.9% for fresh loans.
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Strategic diversification into non-JLG products (individual loans, gold loans) is performing well with minimal delinquency.
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Cost of funds reduced to 10.14% with incremental borrowing at 9.8%, expected to reach single digits due to rating upgrade.
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Revised growth guidance upward to 20% AUM growth, supported by strong liquidity and product expansion.
Negative Points
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Active customer base saw a slight quarter-over-quarter decline of 0.6% due to deliberate pruning of lower-quality customers.
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Branch network declined year-over-year, though expansion is planned in newer geographies.
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Yield on portfolio remains flat due to historical NPA portfolio, limiting immediate NIM expansion.
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Credit cost guidance revised lower but still elevated at 2.6%, reflecting ongoing asset quality challenges.
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Gold loan business is still in early stages with minimal co-lending, relying heavily on referral model.
Q & A Highlights
Q: What is the company's growth guidance and the outlook for disbursements, yields, and margins? A: Sadaf Sayeed, CEO, stated that the company has revised its growth guidance upward to 20% for FY27, driven by strong Q1 momentum, the upcoming festive season, and ample liquidity. He confirmed that monthly disbursements of INR1,000 crores will be achieved, with total planned disbursements exceeding INR12,000 crores for the year. On yields, the blended portfolio yield is around 23%, and while it appears flat due to the historical NPA portfolio in the denominator, NIMs are expanding. The company has guided for NIM in the range of 12.3% to 12.5% and expects to reach the upper end of this spectrum.
Q: What are the key drivers for improving Return on Assets (ROA) and Return on Equity (ROE), and what are the long-term targets? A: Sadaf Sayeed, CEO, explained that the company's ROA guidance for FY27 is 3.3% on the upper spectrum, with an ROE of around 18%. The strategy to overachieve these targets includes improving branch productivity (from INR8.6 crores to a target of INR12-13 crores per branch), reducing operating expenses (from 6.3% to a long-term range of 5.5%-5.75%), and expanding NIMs through lower cost of funds. The company aims to reach a 4% to 4.5% ROA within 18 months and a 5% ROA by 2030, driven by product diversification, risk-based pricing, and efficiency gains.
Q: Can you provide details on the new consumer durable loan business and its potential impact? A: Sadaf Sayeed, CEO, announced that the Board has approved a pilot for consumer durable loans, starting with a portfolio of INR500 crores. The yield on this product is expected to be around 22% to 23%. The strategy is to fund these shorter-tenure loans (6-9 months) using the company's Commercial Paper (CP) facility at a cost of around 8.1%-8.2%, creating a significant margin. Industry delinquency for this product is low (around 1% for 90+ days), and it addresses a key customer need, making it a high-margin addition to the portfolio.
Q: What is the progress and strategy for the gold loan business, and what is the potential market opportunity? A: Sadaf Sayeed, CEO, stated that the gold loan business is scaling rapidly, with monthly disbursements of over INR100 crores and a total of INR360 crores disbursed to date. The company is leveraging its parent company's (Muthoot FinCorp) infrastructure for gold storage and assessment, with a co-lending arrangement (60% on Muthoot Microfin's book, 40% on parent's book) and a referral model (earning a 1.5% fee). The potential is significant, as a propensity analysis shows that gold loans are the first borrowing outside MFI for customers, and there is an estimated INR11,000 crores of gold loan outstanding among Muthoot Microfin's own customers. The company aims to capture 30-40% of this market.
Q: How is the company managing asset quality, and what is the current credit cost guidance? A: Sadaf Sayeed, CEO, highlighted that asset quality is improving rapidly. Overall on-time collection efficiency is at 97.97%, with the fresh book (disbursed after April 2025) showing 30+ days past due (DPD) of just 1.2%. The individual loan portfolio (INR3,200 crores) is performing exceptionally well with 0.02% 30+ DPD and no 60+ or 90+ DPD. The credit cost for Q1 was 2.6%, which is below the lower end of the initial guidance of 2.7%-3.5%. The company has revised its guidance and expects credit costs to remain lower, potentially reaching a long-term normalized level of 2% to 2.25%.
Q: What is the company's strategy for customer acquisition and branch network expansion? A: Sadaf Sayeed, CEO, acknowledged a minor 0.6% QoQ decline in the active customer base, which is part of a deliberate strategy to focus on a "creamy layer" of high-quality customers (700+ credit score). The company is prioritizing customer retention and wallet share over sheer numbers. On the branch network, the company plans to expand from its current 1,670 branches to a range of 1,740-1,750 branches, with a focus on deeper penetration in newer geographies like Andhra Pradesh and Assam.
Q: What is the current status of the cost of funds, and what is the outlook for further reduction? A: Sadaf Sayeed, CEO, reported that the cost of funds has reduced by 14 basis points in Q1 to 10.14%. This reduction has occurred before realizing the full benefit of the recent credit rating upgrade to AA- (Crisil). The incremental borrowing cost is already at 9.8%. The company expects to achieve a single-digit cost of funds by the end of FY27, aided by the rating upgrade, access to new funding sources like mutual funds and insurance companies, and the utilization of the remaining INR800 crores from the credit guarantee scheme.
Q: How is the company positioned against potential macro risks like El Nino and rural consumption slowdown? A: Sadaf Sayeed, CEO, stated that the company is well-insulated from macro risks. The initial rain deficit of 43% has narrowed to around 12%, reducing the risk to crop yields. A detailed analysis shows that less than 2% of the portfolio is directly dependent on rain-sensitive agri activities. Furthermore, all customers are covered by natural calamity insurance, which includes drought coverage. The company is witnessing improving rural cash flows, reflected in rising collection efficiencies, and does not foresee any impact on its 20% growth guidance.
Q: What are the key initiatives being undertaken by the Self-Regulatory Organization (SRO) for the microfinance industry? A: Sadaf Sayeed, CEO, outlined two key SRO initiatives. First, the SRO is focused on preventing multiple and over-lending, which is leading to a healthier customer profile (46%
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
