Muthoot Finance Ltd:Annual Report 2023-24 Analysis

Muthoot Finance Ltd.: A Comprehensive Overview #

About the Company #

Year of Establishment and Founding History:

Muthoot Finance Ltd. was founded in 1887 as a trading business in Kerala by Ninan Mathai Muthoot. The company transitioned to gold loan business in 1939 and has since grown into India’s largest gold loan NBFC.

Headquarters Location and Global Presence:

The headquarters of Muthoot Finance Ltd. is located in Kochi, Kerala, India. While their primary operations are in India, they also have a presence in the United Kingdom through a subsidiary.

Company Vision and Mission:

• Vision: To be the most trusted and respected financial services provider in India.
• Mission: To empower people by providing accessible and affordable financial solutions, enabling them to achieve their dreams and aspirations.

Key Milestones in Their Growth Journey:

• 1887: Founded as a trading business.
• 1939: Transition to gold loan business.
• 2011: Initial Public Offering (IPO).
• Consistent growth and expansion of branch network across India.
• Diversification into other financial services.

Stock Exchange Listing Details and Market Capitalization:

Muthoot Finance Ltd. is listed on the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). (You can check live market data for the current market capitalization).

Recent Financial Performance Highlights:

(This section needs real-time data. Please replace this with the most recent financial highlights.) For instance:

• Revenue Growth: [Insert Percentage] increase in revenue compared to the previous year.
• Net Profit: [Insert Amount] net profit for the fiscal year.
• Assets Under Management (AUM): [Insert Amount] AUM.

Management Team and Leadership Structure:

• Chairman: George Jacob Muthoot
• Managing Director: George Alexander Muthoot

Any Notable Awards or Recognitions:

(This section needs real-time data. Please replace this with recent notable awards.) For instance:

• “Best Gold Loan Company” by [Awarding Body]
• “Top NBFC” in [Industry Ranking]

Their Products #

Complete Product Portfolio with Categories:

• Gold Loans: Core product offering, providing loans against gold ornaments.
• Personal Loans: Unsecured loans for various needs.
• Business Loans: Loans for small and medium-sized enterprises (SMEs).
• Housing Finance: Home loans for purchase, construction, or renovation.
• Microfinance: Loans to women entrepreneurs in rural areas.
• Money Transfer: Domestic and international money transfer services.
• Insurance: Providing insurance products through partnerships.
• Vehicle Finance: Loans for purchasing two-wheelers and commercial vehicles.

Flagship or Signature Product Lines:

• Gold Loans: Remains the flagship product, characterized by quick disbursal and accessibility.

Key Technological Innovations:

• iMuthoot App: Mobile application for loan management, payments, and other services.
• Online Gold Loan (OGL): Facility to avail gold loans online.

Primary Customers #

Target Industries and Sectors:

• Agriculture: Farmers requiring funds for agricultural inputs and related expenses.
• Small Businesses: Small and medium-sized enterprises needing capital for expansion and working capital.
• Individuals: Salaried and self-employed individuals with immediate financial needs.

Geographic Markets (Domestic vs. International):

• Domestic: Primarily India, with a wide network of branches across the country.
• International: Limited presence, primarily in the United Kingdom.

Major Client Segments:

• Rural: Significant focus on providing financial services to rural communities.
• Urban: Serving the financial needs of urban populations.

Distribution Network and Sales Channels:

• Branch Network: Extensive network of branches across India.
• Online Channels: Website and mobile app for online loan application and management.

Major Competitors #

Direct Competitors in India and Globally:

• Muthoottu Mini Financiers Ltd: Another significant player in the gold loan sector.
• Manappuram Finance Ltd: A leading gold loan NBFC in India.
• Banks: Public and private sector banks offering gold loans.

Competitive Advantages and Disadvantages:

• Advantages:
  • Strong brand reputation and established presence.
  • Extensive branch network.
  • Quick loan disbursal process.
• Disadvantages:
  • Subject to regulatory changes and gold price volatility.
  • Competition from banks and other NBFCs.

How They Differentiate from Competitors:

• Customer Service: Focus on providing personalized customer service.
• Technology Integration: Utilizing technology to enhance customer experience.
• Product Diversification: Offering a wide range of financial products beyond gold loans.

Future Outlook #

Expansion Plans or Growth Strategy:

• Expanding the branch network in underserved areas.
• Strengthening digital channels and online presence.
• Diversifying into other financial services.

Sustainability Initiatives or ESG Commitments:

• Focus on financial inclusion and empowering women entrepreneurs.
• Promoting responsible lending practices.

Industry Trends Affecting Their Business:

• Increasing demand for gold loans in rural areas.
• Growing adoption of digital financial services.
• Regulatory changes in the NBFC sector.

Long-Term Vision and Strategic Goals:

• To be the most trusted and respected financial services provider in India.
• To contribute to the financial inclusion of underserved communities.
• To create long-term value for shareholders.

Muthoot Finance Limited - Financial Analysis Report (FY 2023-24) #

3-Year Trend Analysis of Key Financial Metrics (Standalone) #

Consolidated Performance Highlights (FY24) #

• Consolidated Loan AUM crossed ₹890 billion (25% YoY growth).
• Consolidated PAT stood at ₹44,676 million (22% YoY growth).
• Contribution of subsidiaries to consolidated loan assets increased from 12% to 15%.
• Contribution of subsidiaries to consolidated PAT increased from 6% to 10%.

Business Segment Performance (FY 2023-24) #

Gold Loans (Muthoot Finance Standalone) #

• Remains the core business, achieving highest ever gold loan advances to new customers (₹164,152 million) and highest ever gross gold loan advance (₹1,657 billion).
• Gold Loan AUM increased by ₹110,032 million (18% YoY).
• Active gold loan customers increased to 5.67 million (from 5.32 million in FY23).
• Number of gold loan accounts increased to 8.74 million (from 8.14 million in FY23).
• The increase in gold prices provided an attractive proposition for borrowers.

Housing Finance (Muthoot Homefin (India) Limited - MHIL - Wholly-owned subsidiary) #

• Loan AUM: ₹20,353 million (42% YoY growth).
• Disbursements: ₹8,146 million (265% YoY growth).
• PAT: ₹185 million (78% YoY growth, up from ₹104 million).
• Focus on EWS and LIG segments in Tier-II and Tier-III cities.

Microfinance (Belstar Microfinance Limited - BML - 63.86% stake) #

• Loan AUM: ₹100,232 million (62% YoY growth).
• Disbursements: ₹97,080 million (68% YoY growth).
• PAT: ₹3,399 million (161% YoY growth, up from ₹1,303 million).
• Added 247 branches. Filed DRHP for IPO. Credit rating upgraded by CRISIL to AA/Stable.

Vehicle & Gold Loans (Muthoot Money Limited - MML - Wholly-owned subsidiary) #

• Loan AUM: ₹11,227 million (190% YoY growth from ₹3,870 million).
• PAT: ₹46 million (significant increase from ₹2 million in FY23).
• Stage 3 loans decreased to 1.48% (from 3.72% in FY23).
• Added 321 new branches, total 470.

Insurance Broking (Muthoot Insurance Brokers Private Limited - MIBPL - Wholly-owned subsidiary) #

• Total Premium Collection: ₹6,560 million.
• Total Revenue: ₹1,528 million (125% YoY growth).
• PAT: ₹418 million. Net worth crossed ₹2,000 million.

Sri Lanka Operations (Asia Asset Finance PLC - AAF - 72.92% stake) #

• Loan Portfolio: LKR 20.56 billion.
• Total Revenue: LKR 6.60 billion (10% YoY growth from LKR 6.01 billion).
• PAT: LKR 344 million (highest in its 54-year history).
• Fitch Rating Sri Lanka: A+ (stable outlook).

Major Strategic Initiatives and Their Progress #

• Diversification of Loan Portfolio: Continued focus on growing non-gold loan segments (housing, microfinance, personal, vehicle, SME loans). Subsidiaries’ contribution to consolidated loan AUM increased to 15% in FY24 from 12% in FY23, and their PAT contribution rose to 10% from 6%.
• Digital Transformation & Technology Adoption:
  • iMuthoot Mobile App & Muthoot Online: Enhanced with features like loan applications, repayments, bill payments, KYC updates, NCD purchase, NPS enrollment, insurance purchase, and reward points.
  • Fund Transfer Automation: Collaboration with banks for seamless, real-time fund disbursement using NPCI and UPI.
  • Robotic Process Automation (RPA): Implemented for KYC verifications, digital transaction reconciliation, and BBPS repayment reconciliation.
  • AI/ML Initiatives:
    • AI-enabled chatbot for customer service, transactions, and multilingual support.
    • AI-enabled voice bot for EMI/insurance reminders and recovery calls.
    • AI-enabled security systems at branches for real-time alerts.
    • AI/ML models for credit decision-making, collections, and business intelligence (Looker Studio).
  • Data Security & Compliance: AML software (CFSS), KYC data refinement, and protection measures.
  • Bingo Mobile Application: For lead management by branch users, customer care, and field agents.
  • Click-to-Call Application: For customer follow-ups and campaign tracking with call masking.
  • Cloud Adoption: Utilizing GCP and AWS for scalability, data security, and operational efficiency.
  • Core Platform Enhancements: Integrations for fund transfers, BBPS, POS machines with VPA, upgraded API platform, and digitized pledge forms.
• Branch Network Expansion:
  • Muthoot Finance Standalone: Opened 115 new branches in FY24, total 4,854. Plan to add 150-200 branches annually.
  • Muthoot Money Ltd: Added 321 new branches, total 470.
  • Belstar Microfinance Ltd: Added 247 branches, total 1,014.
  • Group-wise: Opened 703 new branches in India and Sri Lanka.
• Customer Acquisition and Engagement:
  • Highest ever gold loan disbursements to new customers in FY24 (₹164 billion).
  • Increased active customer base and loan accounts.
  • Marketing campaigns like “Bharosa India Ka” (with Madhuri Dixit) and “Kholiye Khushiyon Ki Tijori” (with Amitabh Bachchan).
  • Semi-naming rights for metro stations (Jaipur, Delhi, Chennai) to enhance brand visibility.
• Strengthening Capital Base: Capital Adequacy Ratio (Standalone) at 30.37% (Tier I: 29.61%). Raised ₹13,590.54 million via Public NCDs and ₹65,205 million via Private Placement NCDs in FY24.
• Focus on Cross-Selling: Aim to provide a suite of financial products (home, personal, business, vehicle loans) to existing gold loan customers and vice-versa.

Risk Landscape Changes #

The company identifies credit risk, liquidity risk, market risk (interest rate, price, foreign currency, prepayment), and operational/business cycle risk as primary exposures.

• Credit Risk:
  • Gold Loans: Considered low risk due to collateral (gold ornaments), LTV margins (minimum 25%), quick appraisal, and auction policy. Sentimental value of gold also encourages redemption.
  • Non-Gold Loans: More care taken for unsecured loans, focusing on creditworthiness and repayment capacity.
  • ECL Model: Uses PD, EAD, and LGD. Historical info used for PD; for certain pools, external agency data considered. LGD for gold loans is 9.96% (FY24), reflecting high collateral recoverability. For unsecured personal loans, LGD is 100%. For corporate loans, LGD is 65%.
• Liquidity Risk: Managed by ALCO and ALM Committee. Focus on diversified funding sources (banks, FIs, capital markets) and maintaining a mix of short-term and long-term borrowings. LCR maintained as per RBI norms (226% for Q4 FY24, against requirement of 85%).
• Market Risk:
  • Interest Rate Risk: Mitigated by borrowing at competitive rates, diversified borrowings, and different tenors. Majority of borrowings are fixed rate; floating rate borrowings pose risk. Interest Rate Swaps used for hedging. A 1% increase in interest rates on floating rate borrowings would impact PBT by ₹3,074.36 million (FY24).
  • Price Risk (Gold): Mitigated by LTV margins (minimum 25%), valuing only gold content, and sentimental value. Sustained decrease in gold prices could impact loan portfolio size and interest income.
  • Equity Price Risk: Exposure from FVTPL and FVOCI equity securities. A 10% change in equity prices would impact PBT by ₹23.24 million and OCI by ₹225.16 million (FY24).
  • Foreign Currency Risk: Arises from foreign currency borrowings (USD). Fully hedged using forward contracts and cross-currency swaps, minimizing sensitivity to exchange rate changes. No outstanding ECB as of March 31, 2024 (Standalone).
• Operational Risk: Managed through control frameworks, segregation of duties, internal audits, staff education, and technology (AI-enabled security, AML software). Seven-layer security transformation plan. Frauds by employees/customers amounted to ₹50.65 million (standalone) and ₹56.38 million (consolidated) in FY24, which were recovered/written off/provided for.
• Regulatory Landscape: Company identified as NBFC-Upper Layer under RBI’s Scale Based Regulation, requiring appointment of specific control functionaries (CRO, CCO, Head of Internal Audit, CISO). Adherence to RBI guidelines is crucial.

ESG Initiatives and Metrics #

• Governance:
  • Board-level ESG committee oversees policies, practices, and performance.
  • Adherence to NGRBC Principles. BRSR report with limited assurance provided.
  • Policies: Code of Conduct, Anti-Bribery and Anti-Corruption, Whistle-Blower, Stakeholder Engagement, Sustainable Sourcing, Diversity & Inclusion.
• Environmental Initiatives:
  • Renewable Energy: Owns three windmills in Tamil Nadu (3.75 MW capacity, generating ~8 million units annually). Plans to increase investment in renewables. Aim for 100% renewable energy in owned office buildings by 2030.
  • Energy Efficiency: Switching to LED lighting, LED glow signboards. Using inverters instead of diesel generators.
  • Water Management: Aim to integrate water-efficient technologies by 2025.
  • Waste Management: Limited impact due to NBFC operations, but ensures minimum waste generation.
  • Other: Support for lake restoration, afforestation. Installed a 25 KWp solar plant at Kerala Museum.
• Social Initiatives (CSR & HR):
  • CSR Expenditure (Standalone MFL): ₹1,002.53 million spent in FY24 against a requirement of ₹998.49 million. Excess of ₹4.04 million carried forward.
  • CSR Expenditure (Group): ₹1,036.51 million spent in FY24 against a requirement of ₹1,030

Detailed Analysis #

Balance Sheet Analysis #

Operating Performance #

Income Statement #

Cash Flow and Liquidity Analysis of Muthoot Finance Limited #

Cash Flow Analysis (FY 2023-24) #

Standalone Operations: #

• Operating Cash Flow (OCF): Net cash used in operating activities was INR (93,089.57) million, a significant increase in usage compared to INR (19,110.94) million in FY23. This was primarily driven by a substantial increase in loans disbursed (INR (1,29,069.51) million adjustment) despite higher operating profit before working capital changes (INR 1,00,336.72 million). Finance costs paid were INR (49,866.22) million and income tax paid was INR (14,584.31) million.
• Investing Cash Flow (ICF): Net cash used in investing activities was INR (7,014.25) million. Key components include purchase of Property, Plant, and Equipment (PPE) & intangible assets of INR (1,067.58) million, and investment in equity shares of subsidiary amounting to INR (7,530.00) million, partially offset by interest received on investments (INR 2,496.28 million).
• Financing Cash Flow (FCF_Financing): Net cash from financing activities was INR 86,610.52 million. This was driven by proceeds from debt securities (INR 26,116.82 million) and borrowings (other than debt securities) (INR 69,120.78 million), offset by dividend payments (INR (8,027.08) million).
• Free Cash Flow (FCF_Operational): OCF (INR (93,089.57) million) - Capex (INR (1,067.58) million) = INR (94,157.15) million.

Consolidated Operations: #

• Operating Cash Flow (OCF): Net cash used in operating activities was INR (1,37,233.97) million, a substantial increase in usage from INR (28,441.06) million in FY23. This was largely due to a significant increase in loans (INR (1,79,097.38) million adjustment), despite a higher operating profit before working capital changes (INR 1,16,075.93 million). Finance costs paid were INR (57,288.58) million and income tax paid was INR (16,106.56) million.
• Investing Cash Flow (ICF): Net cash from investing activities was INR 11.13 million. Major activities included purchase of PPE & intangible assets (INR (2,005.70) million) and investment in security receipts (INR (1,058.89) million), offset by proceeds from investment in mutual funds (INR 1,082.95 million) and interest received on investments (INR 3,107.06 million).
• Financing Cash Flow (FCF_Financing): Net cash from financing activities was INR 1,19,741.08 million. Key contributors were proceeds from debt securities (INR 28,073.83 million), borrowings (other than debt securities) (INR 99,051.94 million), and deposits (INR 1,072.70 million), partially offset by dividend payments (INR (8,027.08) million).
• Free Cash Flow (FCF_Operational): OCF (INR (1,37,233.97) million) - Capex (INR (2,005.70) million) = INR (1,39,239.67) million.

The significant cash outflow in operating activities for both standalone and consolidated figures reflects the core business activity of increased lending.

Working Capital Management Efficiency #

As an NBFC, traditional working capital metrics like inventory turnover are not applicable. Efficiency is better assessed through asset-liability management and operational fund utilization.

Key Performance Indicators #

Muthoot Finance Limited - Financial Analysis (FY24) #

Financial Performance #

Standalone Performance (FY24 vs FY23) #

• Total Income: Increased 20.39% to ₹1,26,940.44 million.
• Profit Before Tax (PBT): Increased 16.76% to ₹54,487.83 million.
• Profit After Tax (PAT): Increased 16.59% to ₹40,496.65 million (Highest Ever).
• Net Interest Margin (NIM): 11.23% (FY24) vs 11.38% (FY23).
• Interest Yield: 17.94% (FY24) vs 17.70% (FY23).

Consolidated Performance (FY24 vs FY23) #

• Total Income: Increased 26.37% to ₹1,51,005.91 million.
• Profit Before Tax (PBT): Increased 21.34% to ₹59,786.07 million.
• Profit After Tax (PAT): Increased 21.80% to ₹44,676.14 million (Highest Ever).
• Subsidiaries contributed 10% to consolidated PAT in FY24, up from 6% in FY23.

Key Profitability Drivers #

• Growth in gold loan AUM and new customer onboarding.
• Highest ever gold loan disbursements to new customers (₹164 billion in FY24).
• Appreciation in gold prices during FY24.

Market Position and Brand Recognition #

• Largest gold loan NBFC in India by loan portfolio.
• Recognized as “India’s No. 1 Most Trusted Financial Services Brand” for the 8th year (TRA’s Brand Trust Report 2024).
• Extensive branch network (4,854 standalone branches, 6,541+ group-wide) and diverse customer base.

Key Products/Services Performance #

Gold Loans (Standalone) #

• Loan Assets Under Management (AUM): Increased 20% YoY to ₹7,58,270 million (Highest Ever).
• Gold loan AUM: Increased by ₹110,032 million (18% YoY).
• Gross gold loan advance: ₹1,657 billion (Highest Ever).
• Gold loan advance to new customers: ₹164.15 billion (Highest Ever).
• Active gold loan customers: 5.67 million.
• Number of loan accounts: 8.74 million.
• Gold holdings: 180 tonnes.
• Average gold loan per branch: ₹149.3 Mn.

Subsidiary Performance (Consolidated Loan AUM crossed ₹890 billion, +25% YoY) #

• Muthoot Homefin (India) Limited (MHIL - Affordable Housing):

  • Disbursement: ₹8.15 billion (FY24) vs ₹2.23 billion (FY23), +265%.
  • Loan AUM: ₹20,353 million, +42% YoY.
  • PAT: ₹185 million (FY24) vs ₹104 million (FY23), +78% YoY.

• Belstar Microfinance Limited (BML - Microfinance):

  • Loan AUM: ₹100.23 billion, +62% YoY.
  • Disbursements: ₹97.08 billion, +68% YoY.
  • PAT: ₹3.40 billion, +161% YoY.

• Muthoot Money Limited (MML - Vehicle & Gold Loans):

  • Loan AUM: ₹11.23 billion (FY24) vs ₹3.87 billion (FY23), +190% YoY.
  • PAT: ₹46 million (FY24) vs ₹2 million (FY23).
  • Stage 3 loans: Decreased to 1.48% from 3.72%.

• Muthoot Insurance Brokers Private Limited (MIBPL - Insurance Broking):

  • Total Premium Collection: ₹6.56 billion (FY24).
  • Revenue: ₹1.53 billion (FY24).
  • PAT: ₹418 million (FY24).

• Asia Asset Finance PLC (AAF - Sri Lanka Operations):

  • Loan Portfolio: LKR 20.56 billion (FY24).
  • Revenue: LKR 6.60 billion (FY24) vs LKR 6.01 billion (FY23), +10% YoY.
  • PAT: LKR 344 million (FY24).

• Subsidiaries contributed to 15% of consolidated loan assets in FY24, up from 12%.

Geographic Distribution and Market Penetration #

Domestic #

• 4,854 standalone branches as of March 31, 2024 (up from 4,739 in FY23). Over 6,541 branches group-wide.
• Presence in 29 States and Union Territories.
• Focus on Tier-II, Tier-III, and Tier-IV cities.
• Plans to add 150-200 branches annually.

International #

• Asia Asset Finance PLC operates in Sri Lanka with 85 branches.
• Oversees Gold Loan & Remittance business in the United Kingdom.

Muthoot Finance Limited: Risk Analysis from 27th AGM Notice #

Overview of 27th Annual General Meeting (AGM) #

Muthoot Finance Limited (“the Company”) has scheduled its 27th AGM for Monday, September 30, 2024, at 3:30 PM (IST), conducted via Video Conferencing (VC)/Other Audio Visual Means (OAVM).

• E-voting Period: Commences Friday, September 27, 2024 (09:00 AM IST); Concludes Sunday, September 29, 2024 (05:00 PM IST).

Strategic Direction #

Strategic and Management Analysis #

ESG Framework #

ESG and Sustainability Analysis #

Future Projections and Guidance #

Audit & Compliance #

Audit and Regulatory Analysis #