Muthoot Microfin returns to profit despite sharp year-on-year drop

Muthoot Microfin is back to black with a slim Rs 6.2 crore net profit for the first quarter of the fiscal, while the profit dropped 95% year-on-year as compared with Rs 113.2 crore in the year ago period.

The microfinance company had made a net loss of Rs 401 crore in the fourth quarter of FY25.

Its gross non-performing assets ratio rose 275 basis points year-on-year to 4.85% at the end of June. Its assets under management stood at Rs 12253 crore, hardly changed from the year-ago position.

The lender made significantly higher provisions to cover bad loans in the first quarter at Rs 125 crore as compared with Rs 71 crore in the year ago period. Provisions were, albeit, much higher at Rs 652 crore in the fourth quarter.

However, it has not made any management overlay like last year given the improvement in collection efficiency, the company said in a regulatory filing to stock exchanges.

During FY25, it created a management overlay of Rs 230 crore including Rs 133 crore to guard the impact due to the implementation of Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Ordinance.The company said that there have been instances of breach of covenants relating to borrowings outstanding as at June 30. “Based on the discussions with the lenders, the company has no reason to believe that any adverse action, such as levy of higher interest or a recall of the facility, will be invoked by the lenders on account of such breach; and as of the date of these financial results, none of the lenders have intimated about initiation of any remedial action,” it said in the regulatory filing.