Established market position in gold financing, supported by the extensive experience of the promoters

MFL has an established market position in gold financing. The promoters have spent over seven decades in lending against gold jewellery. Over the years, the group has established a strong reputation and brand in South India and has an appropriate assessment and underwriting methodology. Gold loan business registered a steady 2.3% compound annual growth rate over fiscals 2021-2024, despite increase in competition from banks.

Diversified product profile of the MPG -

The MPG has diversified its product profile over the past few years. Currently, the group operates in five major segments: loan against gold jewellery, two-wheeler finance, microfinance, housing finance and small business loans. Overall managed AUM of the group was around Rs 42,378 crore as on June 30, 2024 (Rs 39,170 crore as on March 31, 2024)

Improvement in capitalisation with the recent infusion

Net worth at standalone level stood at Rs 4,875 crore (including CCCPS) as on June 30, 2024, against Rs 4,423 crore as on March 31, 2024. Capitalisation is further supported by low asset-side risks (security of gold jewellery, which is liquid and in the lenderu2019s possession). On a consolidated level, networth stood at Rs 6,570 crore (including CCCPS) as on March 31, 2024, against Rs 4,904 crore (adjusted for real estate and cash) as on March 31, 2023, which was bolstered by recent capital infusion in the microfinance subsidiary during December 2023 through an IPO with fresh equity of Rs 760 crore and Rs 200 crore through offer for sale.

Healthy asset quality in the gold loan segment to support overall group asset quality

Gross non-performing assets (GNPAs) for MFL stood at 1.5% as of June 2024 against 1.6% in March 2024. Furthermore, there is negligible impact of the Reserve Bank of India (RBI) clarification released in November 2021 on the NPAs as gold loans are demand loans where the interest and principal are due for payment at the end of the tenure. Nevertheless, during the last 6-8 quarters, the company steadily commenced lending to the MSME, retail outlets and has also been offering LAP loans to salaried customers (against collateral of property).

Improving earnings profile

Profitability, both at consolidated and standalone level, has seen substantial improvement during last 1-2 years. On a standalone basis, RoMA improved to 2.5% during Q1 of fiscal 2025 (one of its highest since last 4-5 years) as against 2.1% during fiscal 2024 (1.9% during fiscal 2023). If we adjust for cash and cash equivalents, profitability improves to 2.6% in Q1 of fiscal 2025. The company has maintained its focus on regular interest collections in its gold loan portfolio in order avoid for any higher delinquencies and reduce loss, if any, post auctions.