Whalesbook
Sectoral Turnaround Confirmed
Muthoot Microfin Chief Executive Officer Sadaf Sayeed has declared the microfinance sector's most challenging period is behind it, signaling a definitive turnaround. The sector is now experiencing a steady recovery driven by improving collections and lower delinquencies.
Muthoot Microfin anticipates its assets under management (AUM) will climb 15% in the fiscal year ending March 2026, growing from approximately ₹12,200 crore to nearly ₹14,000 crore. Disbursements have gathered momentum, reaching about ₹6,500 crore year-to-date, with the full-year target set close to ₹10,000 crore.
Financial Metrics Strengthen
Asset quality has seen substantial improvement, with the portfolio disbursed this financial year exhibiting minimal stress. Delinquencies are hovering around 0.5%, and non-performing assets remain negligible. Profitability metrics are on an upward trajectory, with credit costs expected to close the year below 4%, a significant reduction from last year's 9.4%.
This operational efficiency is projected to yield a return on assets of about 1.75%, translating into a return on equity between 12% and 15%. The cost-to-income ratio is also trending downwards, aiming for below 55% by FY26.
Strategic Shift to Bond Funding
To support its growth ambitions and optimize its funding mix, Muthoot Microfin is increasingly leveraging the bond market. Bonds are becoming a vital component, diversifying funding away from a heavy reliance on bank loans. The company targets raising approximately ₹2,000 crore from the bond market this year.
The increased use of bonds, typically of three to five-year tenures, aligns with the expansion into longer-term products like individual loans and loan-against-property. This strategic move improves asset-liability matching and offers greater financial flexibility for the company.