After the gold financier reported a weak set of numbers for the January-March quarter of FY 22, the shares fell 9.4 per cent to Rs 1,060, down about 7 per cent, against a 0.6 per cent rise in the benchmark S&P BSE Sensex, the shares fell 9.4 per cent to Rs 1,029 per share on the BSE in Friday's intra-day trade.
India's largest gold financing company reported a 4 per cent decline in the standalone profit at Rs 960 crore compared to Rs 996 crore profit last year. The company's standalone income fell 5 per cent to Rs 2,678. 37 crore.
The net profit came to Rs 1,006 on a consolidated basis. The profit of Rs 1,023 was down 23 crore. Last year, there were 76 crore. As of March 31, 2022, the loan assets under management increased to Rs 64,494 crore, up 11 per cent from the same period a year ago.
For Muthoot, Q 4 FY 22 was characterized by Gold AUM growth of 6 per cent QoQ, despite auctions of Rs 2,100 crore, a decline of 160 bp QoQ in spreads to 11.4 per cent, driven by competition in high-ticket gold loans and pre-vision profit declining 17 per cent QoQ, and PAT fell 7 per cent, led by provision write-backs of Rs 70 crore, highlighted by Motilal Oswal Financial Services.
According to the brokerage firm, FY 23 will be a difficult year for Muthoot with a clear trade-off between growth and margin. It said the stock traded at 1.9 x FY 24 EBVPS, reflecting concerns about the muted Gold loan growth and a decline in profitability.
The spreads margin will be compressed at the cost of the incremental growth for incumbents, even though players will need to undercut each other on offered interest rates. In FY 23, FY 24 we expect Muthoot to deliver a standalone AUM growth of 8 per cent 13 per cent. Return on Equity RoE and Return on Asset RoA are likely to decline over the next two years, it added.
Two headwinds - namely lower organic expansion and muted gold prices - may affect Muthoot's growth going forward, according to those at Kotak Institutional Equities.
We are reducing our estimates by 7 -- 10 per cent due to lower loan growth, margins and higher operating expenses. We don't rule out downside risk to growth 10 -- 13 per cent due to the challenges. We expect NIM to expand a bit as pricing power improves, unless a sharp gold price correction hits loan-to-value LTV and yields. The company has a good track record of maintaining asset quality. It said that REDUCE has a fair value of Rs 1,200.