Reflects improving asset quality, margin expansion, and diversification into new product segments
MUMBAI, Nov 10 (The CONNECT) – JM Financial Institutional Securities, which has upgraded Muthoot Microfin Limited to a ‘BUY’ rating with a revised target price of ₹190 (up from ₹155), implying an upside potential of approximately 18%. Kindly find the report attached for your reference.
Muthoot Microfin Limited (MML), the microfinance arm of Muthoot Pappachan Group, is one of the leading and fast-growing microfinance institutions (NBFC-MFI) in India. The company is focused on providing micro-loans to women entrepreneurs with a focus on rural regions of India.
The upgrade reflects improving asset quality, margin expansion, and diversification into new product segments, reinforcing Muthoot Microfin’s strong positioning in the microfinance sector.
Key highlights from the report:
- PAT of ₹305 million, a 41% beat over estimates, driven by lower credit costs (3.6%).
- Asset quality improvement: GNPA reduced to 4.6% and NNPA to 1.4%.
- Collection efficiency strengthened to 93.3%, with x-bucket CE at 99.8%.
- Disbursements grew 28% QoQ, signalling a steady pick-up in growth momentum.
- Net Interest Margins expanded by 40 bps QoQ, aided by lower cost of funds.
- Capital Adequacy Ratio remains strong at 28.9%.
- Introduction of new products – Micro LAP loans, Gold Loans (through a co-lending partnership with Muthoot Fincorp), and Individual MSME Loans – is expected to drive future growth.
JM Financial notes that with steady improvement in collection efficiencies and the anticipated growth from non-MFI products, Muthoot Microfin is expected to deliver RoA of 2.1%/3.6% for FY26E/FY27E.
