Muthoot Microfin has raised its FY27 assets under management (AUM) growth guidance to 20%, from 12-15% at the beginning of the year. Chief Executive Sadaf Sayeed tells Narayanan V that the upward revision is driven by strong disbursements, lower borrowing costs and improving credit quality in the microfinance sector. Edited excerpts:
What prompted an ₹250 crore NCD fundraise?
This latest fundraising forms part of our continued strategy to strengthen funding profile, diversify liability mix, and optimise its overall cost of borrowing. Around 50% of our borrowings come from banks, including term loans or structured products such as pass-through certificates and direct assignments. Another 30% comes through NCDs and commercial papers. The NCD market has been quite supportive. This is our first issue after achieving AA-rating. We were also anticipating a rate hike in the coming months. We thought it would be a good environment to raise money from the NCD market and take advantage of our rating. We issued the paper at 9.25%, and it was fully subscribed very quickly.
What are your full-year fundraising plans?
We have raised around ₹4,200 crore so far in this financial year. We are looking at around ₹8,000 crore of disbursements in the remaining year. So, we would need another ₹7,000 crore during this period. It will be a mix of term loans, NCDs and some commercial papers. We already have around ₹5,000 crore of sanctions in hand. There is also a lot of interest from foreign investors in extending external commercial borrowings (ECBs), but we are waiting for the hedging cost to rationalise a little. After that, we can take some borrowings.
Banks have surplus liquidity post FCNR(B) deposit mop-up. Will it translate into higher funding for MFIs?
Banks have become a lot more comfort with microfinance now. They have a lot of liquidity and they are more than willing to deploy funds. The advantage with us is that we are able to negotiate better and get better rates. We have been able to bring down our cost of funds by 14 basis points last quarter. Our incremental cost of funds is 9.7%, while our overall cost was 10.13%. This quarter, our costs will definitely drop to single digits for the first time. That said, the bulk of bank disbursements is restricted to around 12 (large) players. There will be a little bit of a challenge for the smaller ones, but the credit guarantee scheme under which some disbursements have taken place will help those smaller entities improve their financial situation. Hopefully, there will be follow-on funding from other banks.
How is your asset diversification plan coming along?
We were planning to have a 75:25 mix between joint liability group (JLG) and non-JLG loans by the end of this financial year. Our non-JLG portfolio has already reached 24%. The non-JLG portfolio is driven by individual loans, which is now a ₹3,200 crore portfolio. Our gold loan portfolio is disbursing ₹100 crore per month. We have already disbursed ₹500 crore this year. Loans against property are also touching ₹100 crore now. Overall, we are looking at 20% growth in assets under management (AUM) this year. The trends are quite positive, and asset quality is good. So, we have revised our growth target to 20%.