MUMBAI: Reflecting the headwinds flogging the microfinance industry, leading player Muthoot Microfin has reported a steep 44 percent plunge in net income at Rs 62 crore in the September quarter, down from Rs 109 crore a year ago.
The micro lending industry has been facing increasing headwinds after going on a lending spree till the recent past, leading to high level of delinquencies, which industry and analysts admit to be at least a third of their loan book. Most of these companies have been taking in new borrowers who have already borrowed from two or more other lenders, leading to overleverage and the resultant inability to pay the dues to any of their lenders.
The Delhi-based company in a statement Tuesday said profit was impacted as it has “provided for an additional overlay of Rs 31 crore given the bulging industry concerns and to address any further impact from disruption in the field due to floods or political activism.”
The Muthoot Pappachan group company said its gross NPAs jumped 33 bps to 2.70 percent and net NPAs rose to 0.97 percent from 0.88 percent. Despite this, margins improved by 57 bps from 12.79 percent to 13.36 percent in the reporting period, leading to a 26 percent increase in pre-provision operating profit from Rs 187 crore to Rs 236 crore.
While income grew 18 percent from Rs 565 crore to Rs 667 crore, AUM increased 15.2 percent from Rs 10,867 crore to Rs 12,518 crore. The margin spike was also due to fall in cost of funds, which declined by 14 bps from 11.20 percent to 11.06 percent. The borrower base grew 7.7 percent to 34 lakh.
The South now comprises 50 percent of the loan portfolio as the company has made inroads into Telangana and Andhra.
Total income rose 18 percent from Rs 565 crore to Rs 667 crore, while net interest income increased by 18 percent from Rs 338 crore to Rs 399 crore.
Thomas Muthoot, the managing director, said, "Despite the ongoing industry challenges, we delivered a solid performance this quarter, achieving a 15.2 percent on-year growth in loan portfolio at Rs 12,518 crore. Our robust underwriting standards have helped us preserve asset quality, with gross NPA of 2.70 percent and net NPA of 0.97 percent which are only marginally up."
Sadaf Sayeed, the chief executive, said the company has seen net disbursements rise to Rs 2,674 crore in the September quarter, up from Rs 2,204 crore in the previous quarter and returning to similar levels as last year.
“We expect growth to reaccelerate in coming quarters with usual seasonal upswing coupled with our focus on harnessing existing customers and strengthening our core geographies,” Sayeed said, adding their "asset quality remains stronger than the peers thanks to the robust underwriting and collection practices." This increase in provisioning has resulted in creating Rs 153 crore surplus provision.