Muthoot Microfin looking at maintaining 35% CAGR in FY25: CEO Sadaf Sayeed

In addition, Sayeed said that the company will soon enter a co-lending partnership with the State Bank of India for micro enterprise and other business segments.

Muthoot Microfin, the microfinance arm of the Muthoot Pappachan Group, is looking to maintain a compound annual growth rate (CAGR) of 35 percent in financial year (FY) 2024-25, said Sadaf Sayeed, chief executive officer (CEO).

“Growth has remained consistently around 35 percent CAGR. We believe that we can continue to grow at the same pace, and we have a good kind of infrastructure that we have already put in place, in terms of our branch network, the processes, system, people,” Sayeed told Moneycontrol in an interview after announcing the company’s Q4FY24 results on May 13.

Sayeed also said that the company will soon enter into a co-lending partnership with the State Bank of India (SBI) for micro enterprise and other business segments.

In FY25, the company plans to diversify its fund-raising pattern from the existing 70:30 ratio from banks and other avenues to a ratio of 50:50 .

Edited excerpts:

You had your IPO in FY24 and you reported strong numbers, too. What are your thoughts on your Q4FY24 and FY24 numbers?

FY24 was a great year for us as we concluded our IPO and we were able to raise Rs 960 crore. Of this, around Rs 760 crore has been utilised to expand our business, put branches in place and disburse more loans. We disbursed the maximum amount of loans,  of around Rs 10,660 crore, and also opened around 356 branches, taking our total count to 1,508 . We entered a new state, Telangana, last year . Very soon, we will also be in Andhra Pradesh.

Also read: Muthoot Microfin to open up to 30 branches in Telangana and AP this quarter: CEO

We recorded our highest profit in a financial year in FY24 , with a profit of Rs 449 crore. As a result, our return on asset (RoA) has jumped from 2 percent last year to around 4.2 percent. Our return on equity (RoE) has also increased to around 20 percent. We reduced our gross non-performing assets (GNPAs) from 2.97 percent last financial year to around 2.29 percent. Net NPAs have reduced from 0.60 percent to 0.35 percent.

You had a fall in profit sequentially. What happened ?

In Q3FY24, we had a one-time tax benefit of around Rs 17 crore. Secondly, in Q4, we have taken some accelerated write-off, because of the farmers' strike and some other challenges in Punjab. Our exposure to Punjab is only 1.3 percent of our total portfolio and our portfolio-at-risk is around Rs 31 crore. Out of this, we wrote off Rs 12 crore .

What are your fund-raising plans in FY25?

We are constantly diversifying our sources of funds and currently 70 percent of our funding comes from banks and the balance from development finance institutions (DFIs) and foreign institutions like foreign DFIs through non-convertible debentures (NCDs).

Going ahead, we definitely want to increase our portion of NCDs and we will also look at more external commercial borrowings (ECBs). We had done a market deal in March 2023 where we raised around Rs 622 crore in ECBs, at a very effective rate. We would like to do more such transactions in the current financial year and we would also issue more NCDs.

How are you looking at growing branches and co-lending deals?

Every year, on an average, we are opening around 225 branches. Last year, we had opened 336 branches, 111 more than what we open every year. And we have put in a lot of investments in FY24. Definitely, we will open more branches in FY25. In FY24, we entered Telangana. We plan to go deeper into Telangana this year and will also enter Andhra Pradesh.

In terms of our co-lending deals, we are at a very advanced stage with SBI. We will definitely announce the SBI partnership very shortly. The integration processes in the works.

And what would be your growth outlook for FY25?

Our growth has remained consistently around 35 percent CAGR. We believe that we can continue to grow at the same pace and we have the infrastructure that we have already put in place, in terms of our branch network, the processes, system, people, etc.

The profitability will improve from the perspective that our net interest margins are expanding. It has already reached around 12.7 percent. Our overall cost may reduce with further reduction in cost of funds and the equity that we have raised. Our credit cost this year was 1.7 percent and we believe that, in FY25, we can actually retain or improve the credit cost.

And all of this will add to our improvement in RoAs, which is currently at 4.2 percent and we anticipate it to be at 4.5 percent in FY25.