Concall Summary: Muthoot Capital Services Ltd Q4FY20

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Business Overview

  • Disbursement for the quarter was Rs 347 crores as compared to Rs 465 crores in Q3FY20; the company disbursed Rs 605 crores in Q4FY19
  • Loan book at Rs 2,650 crores vs Rs 2,751 crores QoQ
  • PAT at Rs 13.6 crores vs Rs 22.7 crores YoY

Participants

  • India Advisory
  • HSBC
  • Sundaram Mutual Fund
  • SBI Mutual Fund
  • DSP
  • Centrum PMS
  • Valuequest
  • Emkay Investment Managers
  • Focus Capital

Concall Highlights

  • Operating expenses were lower mainly on account of lower collection and sourcing cost
  • Muthoot Capital Services Ltd. (MCSL) collected only Rs 2 crores post-March 22nd
  • Loan loss provision has jumped as the company has made an additional provision of Rs 18 crores for COVID impact
  • Full-year finance cost has increased significantly. Cost of fund for FY20 was 10.3% vs 9.6% in FY19
  • 2Wheeler sales drop 18% from last year to 1.74 crore units; this year sales would be around 1.5 crore units
  • MCSL has maintained its market share at 1.6% on pan India basis; in terms of finance share company has 4% market share
  • 2Wheeler disbursement down 8% as compared to last year
  • Close to 70% area where MCSL operates is in amber and green zone and 30% of the area in the red zone
  • All the of Muthoot Fincorp Limited (MFL) branches opened in 3rd week of April
  • Cash collection has improved significantly in the month of May
  • Finance penetration is only 37-38% in 2Wheeler
  • MCSL had no write-off during this financial year
  • During FY20, MCSL had repossessed and sold 10,271 as compared to 8,700 did in FY19; charged Rs 26.9 crores into P/L. The average recovery rate of 45%
  • Dealers are working with only 35% of capacity due to restriction
  • Safety concern would likely to drive 2Wheeler sales as many people would avoid public transport
  • Affordability is not a big concern for 2-Wheeler, but due BS-VI norms prices would go up and more people would opt for finance
  • Moratorium: MCSL had collected 215,000 EMIs during April against an average of 600,000 on a monthly basis. Company is expecting that 315,000 EMIs will be collected in May
  • Corporate NPA is around Rs 10.53 crores. There are two corporate NPA account: MFI and Used CV
  • MFL used to source 2W business for MCSL, as 2W business is down MCSL team is working with MFL on different cross-sell programs
  • MCSL has re-started the gold loan business on a temporary basis as 2Wheeler business is down currently and the company has credit limits which can be monetized during this period.
  • MCSL will scale down gold loan business once 2Wheeler business picks up
  • Close to 90-95% customer pays through branch and collection agent
  • MCSL to run a massive campaign for FD program in Kerala and likely to raise Rs 350 crores in the next 6 months; the cost would be 7.5-8%
  • Muthoot is a household name in Kerala and there is a strong loyal customer base
  • Market share: Kerala- 30%; Karnataka – 10-15% ; AP- 15%. MCSL entered East two years  ago and currently has 8-10% market share in West Bengal
  • 40-45% of customers of MCSL are new to credit
  • As of now, the company has no plans for any equity raising
  • Overall Yield for the year was 21-22%; no negative mismatch in any of the bucket up to three years
  • West is a very big market for used vehicle financing
Also Read on FinMedium:  Concall Summary: Aarti Drugs Ltd Q4FY20

Image source: Company website

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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