CRISIL Ratings has revised the credit rating outlook of Muthoot Microfin Limited (MML) from 'Stable' to 'Positive' and reaffirmed the rating at 'CRISIL A+'. The rating on commercial paper has been reaffirmed at 'CRISIL A1+'.
The revision in outlook follows a similar rating action on Muthoot Fincorp Limited (MFL), the parent and flagship company of the Muthoot Pappachan group (MPG).
The ratings factor in the expectation of continued support from the parent, MFL, as well as MML's adequate capital position and diversified resource profile. These strengths are partially offset by geographical concentration in the loan portfolio, moderate asset quality and susceptibility of the microfinance sector to regulatory and legislative changes.
MML's portfolio quality has been affected in line with issues faced by the sector over the last few quarters. The 90+ day past due (dpd) stood at 6.2% as on June 30, 2025, as against 4.3% as on March 31, 2024. Gross non-performing assets (GNPAs) stood at 4.8% as on June 30, 2025, as against 2.3% as on March 31, 2024. Assets under management (AUM) degrew slightly during the first quarter of fiscal 2026 to ₹12,253 crore from ₹12,357 crore as on March 31, 2025.
Higher delinquencies led to elevation of credit cost, thereby affecting overall profitability. Credit cost rose to around 7.5% during fiscal 2025, from 4.2% in fiscal 2024, while operating expense stood at 5.5% (5.2%), following the implementation of enhanced collection incentives to drive recoveries. The operating expenses inched up further during Q1 of fiscal 2026 to 6.1% (annualised), however, the credit cost have shown a decline to 3.6%. As a result, the company reported marginal profits during the quarter of ₹6 crore with return on managed assets (ROMA) at 0.2% (annualised) as against the loss of ₹222 crore, with return on managed assets assets (RoMA) at -1.6% during fiscal 2025.
The company remained well-capitalised, as reflected by networth of ₹2,641 crore and gearing of 2.8 times as on June 30, 2025. Capital position of the company also benefits from its strong parentage, which enables it to raise funds in a timely manner.
Analytical Approach
To arrive at the ratings, CRISIL Ratings has taken a standalone view of MML and factored in expected support from MFL, the parent and flagship company of the Muthoot Pappachan group (MPG).
Key Rating Drivers
Strengths
Expected financial, operational and management support from the parent and adequate capitalisation and diversified resource profile are key strengths.
Weaknesses
Average asset quality and geographical concentration remain areas of concern.
Liquidity: Adequate
MML had cash and equivalents of ₹537 crore as on June 30, 2025, against debt obligation of ₹1,218 crore due for servicing over July and August 2025. This represents liquidity cover of 1.2 times for two months. In addition, the company had securitisation lines of ₹1,002 crore as on June 30, 2025. Liquidity is further backed by steady collections reported for the last 2-3 months, and fresh sanctions in the pipeline, and expectation of need-based and timely funding support from the parent, MFL.
CRISIL Ratings believes MML will continue to benefit from the strong support of its parent, MFL.
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