Muthoot Finance – 5 Point Stock Analysis

Detailed Stock Analysis of Muthoot Finance

Introduction

In this article, we are going to discuss 5 point stcok analysis of Muthoot Finance. Lets analyze the stock based on its current statistics, shareholding pattern, geographical presence, loan book and NIM, NPA provisioning etc.

Muthoot Finance – 5 Point Stock Analysis

1.Current Statistics

Muthoot Finance Ltd. is India’s largest gold financing company in terms of loan portfolio. It is trusted pan-India brand in the gold loans sector which has revolutionised India’s gold banking.

1. Presence in 29 States/Union Territory with 4500+ pan-India branches.
2. Gold Security :
   • Muthoot finance provides personal and business loans secured by gold jewellery, or Gold Loans.
   • So it is having total 169 tonnes of gold/ gold jewellery kept as security. Thus, the company is having a gold portfolio close to Rs.59,000 Cr or $8.4 Billion.
3. Loan Portfolio :
   • It is the largest gold financing company in India in terms of loan portfolio. Total loans are around Rs.34,246 Cr out of which loans amounting hardly Rs.660 Cr are other typr of loans. And the remaining loans of Rs.33,585 Cr are gold loans.
   • Thus, we can see that the company has securitised its loan book of Rs.33,585 Cr by Rs.59,000 Cr gold security. So major portion of loan book is securitized loan book, which is a great advantage for the company.
4. Retail Investor Base :
   • The company is having 1 Lakh+ retail investor base across the debenture and subordinated debt portfolio.
5. Rating :
   • Crisil Rating for Muthoot Finance’s subordinated debt is AA with stable outlook, which indicates its high Degree of safety with regard to timely servicing of financial obligations and carry very low credit risk.
   • Thus, Muthoot Finance does not find any problems for raising funds.

2.Shareholding Pattern

• Out of the promoters’ shareholding of 73.49%, not a single share is pledged, which is a very positive sign for the company.
• FIIs holdins have been growing at 10-15% every quarter since last 4 quarters. It shows the confidence the foreign investors are having for the company’s business.

3.Geographical Presence

Muthoot Finance is originally a south India based company.

• Rural India accounts for about 65% of total gold stock in the country. Large portion of the rural population has limited credit access. Therfore, Muthoot Finance is aimed at catering to under-served rural and semiurban markets through strong presence.
• The comany is having a diversified gold loan portfolio across India. That is its geographical spread is very good.

4.Loan Book & Net Interest Margin(NIM)

• Loan Book :
  • Total loan book of the company is Rs.34,246 Cr, out of which Rs.33,585 cr are gold loans and Rs.660 Cr comes under other types of loans. And company’s focus continued to be on gold loan.
  • Interest income on average loan asset is 21.63%. It means muthoot Finance charge interest rate of 21.63% on the gold loans since these are generally short-term or emergency loans availed from the company. The repayment of the amount is within specified short-term durations.
• Net Interest Margin :
  • As a result of short-term high interest laons availed bt the company, the net interest margin is comparatively high, almost around 14.3% in case of gold loans.
  • So, the comapny is having an added advantage on account of higher NIM on its loan portfolio.

5.NPA Provisioning

• The comapny is having gold assets of Rs.52,000 Cr, while the total loans of Rs.34,246 Cr are availed. So we can see that the Muthoot finance have more than one and half of the security. This is a big advantage with the company.
• Thus there is 0 Rs allocation for NPA provisioning. This is the greatest advantage and positive side for the company.
• The stock has grown almost 40%-50% since last 1 year.