![](\"https:\/\/im.rediff.com\/money\/2020\/aug\/06gold-loan.jpg?w=670&h=900\")
<\/p>\nThe stock market has reacted positively to the July-September quarter (Q2) results of the gold-focused NBFCs, Muthoot Finance, and Manappuram Finance with both stocks recommended and gaining post-results.<\/p>\n
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Manappuram declared consolidated assets under management (AUM) growth of 27 per cent year-on-year (Y-o-Y) (5.1 per cent quarter-on-quarter or Q-o-Q) to Rs 38,950 crore.<\/p>\n
Net interest income (NII) saw a margin expansion of 24 basis points (bps) Q-o-Q to 15.44 per cent.<\/p>\n
NII stood at Rs 1,467 crore (up 6.5 per cent Q-o-Q and up 25.6 per cent Y-o-Y).<\/p>\n
The operating profit was at Rs 866 crore (up 8.0 per cent Q-o-Q and up 36.8 per cent Y-o-Y).<\/p>\n
Credit costs during (Q2FY24) was Rs 119.7 crore.<\/p>\n
The higher NII coupled with lower operating expenses (opex) led to PAT growth of 12.6 per cent Q-o-Q, 36.9 per cent Y-o-Y to Rs 560.7 crore.<\/p>\n
AUM growth was driven by non-gold AUM.<\/p>\n
Gold loan AUM was up 1 per cent Q-o-Q, up 8 per cent Y-o-Y.<\/p>\n
Management guided for 7-8 per cent gold loan growth for FY24, while overall growth guidance is for 20 per cent-plus, led by non-gold businesses.<\/p>\n
Microfinance loans (25.9 per cent of the AUM) were up 8.4 per cent Q-o-Q and up 41.7 per cent Y-o-Y followed by vehicle finance loans (8.1 per cent of the AUM) reporting growth of 13.1 per cent Q-o-Q and 66.7 per cent YoY. Housing finance (3.4 per cent of the AUM) was up by 8.5 per cent QoQ and 41.6 per cent YoY. Home loans were up 13.4 per cent.<\/p>\n
The non-Gold book is currently 46.6 per cent of the AUM and the management targets pushing this to roughly 50 per cent by FY25.<\/p>\n
Asset quality weakened on a sequential basis with Gross NPA\/Net NPA increasing by 20 bps Q-o-Q to 1.6 per cent and 1.4 per cent, respectively.<\/p>\n
This has led to higher credit costs.<\/p>\n
Credit costs in the Asirvad MFI book at 3.4 per cent were higher than the guidance of 2.5 per cent.<\/p>\n
Live customers in gold loans stood at 2.46 million with 4.03 lakh customers added – the loan to value (L\/TV) ratio was higher at 66 per cent (64 per cent previous) and yield was around 22 per cent.<\/p>\n
Auctions were to the tune of Rs 15 crore.<\/p>\n
An increase in fee income (Rs 31 crore) is due to fees received for selling items like pressure cookers, gas stoves, and solar lights, in the Asirvad MFI.<\/p>\n
This fee income will be sustainable.<\/p>\n
The AUM for financing consumer durable loans is Rs 350 crore.<\/p>\n
The company could see compliance records being under the lens with the RBI having just imposed a fine of Rs 0.43 crore.<\/p>\n
Muthoot Finance saw decline in net interest margins (NIMs) to 10.9 per cent in Q2 from 11.6 per cent in Q1FY24 due to higher cost of funds.<\/p>\n
Guidance for spreads is at 9 – 10 per cent in FY24.<\/p>\n
Gold loans grew by 2 per cent Q-o-Q.<\/p>\n
Overall AUM growth stood at 20.6 per cent Y-o-Y.<\/p>\n
AUM growth guidance is for 15 per cent for FY24.<\/p>\n
Asset quality improved as NPAs of Rs 700 crore were sold to ARC (asset reconstruction company).<\/p>\n
NII declined by 2 per cent but provisions declined by 86 per cent Q-o-Q and PAT grew by 2 per cent Q-o-Q.<\/p>\n
PAT was up 24 per cent Y-o-Y and stood at Rs 2,140 crore.<\/p>\n
The Belstar microfinance portfolio was up by 53 per cent Y-o-Y (at Rs 7,874 crore), while PAT increased 194 per cent Y-o-Y.<\/p>\n
The Muthoot home finance loan portfolio is up 14 per cent (at Rs 1,116 crore). Both managements flagged a decrease in competitive intensity in the gold business.<\/p>\n
The RBI’s latest move raising risk weights on unsecured loans, however, may have a bearing on the growth prospects of the NBFC sector.<\/p>\n
While there will not be any major impact on gold loans, some of the non-gold portfolios of Muthoot and Manappuram are likely to see an impact.<\/p>\n
As a result, the stocks could see some reaction in the coming days, halting the rally seen in the recent past.<\/p>\n