- Muthoot Finance shares fell up to 5% after Q4 results showed fewer active customers and higher impairments
- Active customers dropped 2% sequentially, with losses in low-ticket borrower segment for two quarters
- Gold tonnage pledged declined 4% to 196 tonnes, while operating costs remained high relative to loans
Muthoot Finance shares slid as much as 5% on Friday after the gold financier's fourth-quarter results revealed a shrinking active customer base and a sharp jump in impairments, overshadowing a stellar profit performance.
Active customers declined 2% quarter-on-quarter, with the company losing ground among low-ticket borrowers — a trend that has now stretched into a second consecutive quarter. Gold tonnage, a key operational metric tracking the weight of gold pledged by borrowers, fell 4% sequentially to 196 tonnes. Operating expenditure relative to average loan assets remained elevated, and management's guidance pointed to a further rise in borrowing costs — factors that collectively dampened investor sentiment.
Profit Doubles, But Stress Signals Emerge
The headline financials told a different story. Standalone net interest income jumped 78.8% year-on-year to Rs 5,194 crore, while profit after tax more than doubled to Rs 3,086 crore. Gold loan AUM rose 50% year-on-year to Rs 1,54,084 crore, buoyed by higher gold prices and improved loan-to-value ratios. Net interest margin widened to 13.38% from 12.77% sequentially.
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The concerns, however, lay beneath the surface. Impairments surged 136.7% quarter-on-quarter to Rs 240 crore, and Stage 3 loan assets deteriorated to 2.35% from 1.58% in the prior quarter.
What Brokerages Say — And The New Target Price
Jefferies retained its Buy rating on the stock but cut its target price to Rs 4,350 from Rs 4,750, describing the quarter as a strong profit beat driven by margins while flagging customer churn as a watch item. Bernstein maintained its Outperform rating with a target price of Rs 4,500.
Both brokerages remain broadly positive on Muthoot Finance's earnings trajectory, though near-term pressure on customer retention and rising costs could weigh on the stock in the short run.
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