Muthoot Finance surges 9% on strong Q2 results

Shares of Muthoot Finance surged nine per cent to Rs 711 in the intra-day trade on the BSE on Thursday after the company reported a healthy 41 per cent year-on-year (YoY) growth in profit before tax (PBT) at Rs 1,047 crore for September quarter (Q2FY20), on the back of strong operational income.

The stock of the non-banking finance company (NBFC) was trading close to its all-time high level of Rs 718 touched on October 31, 2019.

The company’s net interest income (NII) jumped 32 per cent YoY to Rs 1,467 crore against Rs 1,114 crore in the corresponding quarter of the previous fiscal. Net profit rose 77 per cent to Rs 858 crore from Rs 484 crore in the year-ago quarter.

All subsidiaries i.e. micro finance institution (MFI), housing, commercial vehicle (CV) and insurance have performed quite well. Subsidiaries now contribute to 13 per cent of consolidated assets under management (AUM) and 6 per cent of profits.

The management said the demand for gold loans continues to remain strong. Gold loan book growth for FY20 will be 15 per cent, as company has tapped various funding avenues, it said. 

“Gold prices at life highs in rupee terms have resulted in strong demand for new loans and huge margin of safety on existing portfolio. Availability of loans for end customer has become difficult due to funding constraints faced by majority of NBFCs. In such a situation, gold loan becomes extremely important avenue of funds for the customers. To top it up, Muthoot Finance's self liquidating portfolio and strong balance sheet provides huge comfort to lenders and allows easy access to growth capital on the debt side,” analysts at Antique Stock Broking said in a result update.

“Over the past 12-18 months, Muthoot Finance has received a tailwind to growth from increasing gold prices and stronger demand. The short loan tenure has also ensured positive asset liability management (ALM). Spreads have been maintained. Though MUTH’s subsidiaries are gaining scale and becoming key value contributors, we do not expect profit from them to exceed 10 per cent of consolidated,” Motilal Oswal Securities said in a result update.

At 11:46 am, the stock was trading 9 per cent higher at Rs 708 on the BSE, as compared to a 0.31 per cent gain in the S&P BSE Sensex. The trading volumes on the counter rose an over 7-fold with a combined 3.9 million shares changed hands on the NSE and BSE so far.