This is a small-cap microfinance company, recently listed in the market. The company manages assets totaling 10,800 crore INR and serves 32 million customers across 18 states and union territories. Muthoot Microfin distinguishes itself with its tech-driven approach, boasting in-house loan management systems, loan origination systems, and a customer app for digital collection and disbursement.
Recent regulatory changes by the RBI grant Muthoot Microfin pricing flexibility to tailor credit rates according to risk and geographies, thereby enhancing yields and net interest margins. Despite facing rejection rates of 20%, the company remains optimistic about sustaining its impressive 36% CAGR in assets under management growth.
Geographic portfolio balance is a key strategy for Muthoot Microfin, with allocations of 51% in the south, 23% in the north, 13% in the east, and 12% in the west India. This balanced approach aligns with the company's goals of customer acquisition and maintaining service quality.
The financials give a neutral sentiment, and there is not much information available about the analysts' expectations. The shareholding pattern is the major factor that caught my interest in the scrip. After the promoters, FIIs are the largest shareholders. DIIs also have a small amount of holding. Retailers hold just about half of the institutional holding. So obviously strong hands have an influential holding power in the company and are interested in the business model. The valuation is also not that high fundamentally, and technically the stock is trading at a support level.
So, I've decided to take a position for about 1.25% of the net capital, targeting the high for a profit of about 20%. I will not consider a re-entry until better clarity on the fundamentals of the company is available, which might take a few quarters.
Recent regulatory changes by the RBI grant Muthoot Microfin pricing flexibility to tailor credit rates according to risk and geographies, thereby enhancing yields and net interest margins. Despite facing rejection rates of 20%, the company remains optimistic about sustaining its impressive 36% CAGR in assets under management growth.
Geographic portfolio balance is a key strategy for Muthoot Microfin, with allocations of 51% in the south, 23% in the north, 13% in the east, and 12% in the west India. This balanced approach aligns with the company's goals of customer acquisition and maintaining service quality.
The financials give a neutral sentiment, and there is not much information available about the analysts' expectations. The shareholding pattern is the major factor that caught my interest in the scrip. After the promoters, FIIs are the largest shareholders. DIIs also have a small amount of holding. Retailers hold just about half of the institutional holding. So obviously strong hands have an influential holding power in the company and are interested in the business model. The valuation is also not that high fundamentally, and technically the stock is trading at a support level.
So, I've decided to take a position for about 1.25% of the net capital, targeting the high for a profit of about 20%. I will not consider a re-entry until better clarity on the fundamentals of the company is available, which might take a few quarters.
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Disclaimer: The analysis shared here is for informational purposes only and should not be considered as financial advice. Trading in all markets carries inherent risks, and past performance is not indicative of future results. It's essential to conduct your own research and assess your risk tolerance before making any investment decisions. The views expressed in this analysis are solely mine. It's important to note that I am not a SEBI registered analyst, so the analysis provided does not constitute formal investment advice under SEBI regulations.