19 August 2020
1QFY21 Results Update | Sector: Financials
Muthoot Finance
Estimate change
TP change
Rating change
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CMP: INR1,256
TP: INR1,300 (+4%)
Neutral
Business muted; Liquidity on balance sheet increasing
Muthoot Finance’s (MUTH) 1QFY21 PAT increased ~60% YoY to INR8.4b (2%
miss). While total income missed our expectations by 8%, it was offset by
lower opex and credit costs. However, according to management, the cost
reduction is one-off and unlikely to sustain.
As the company opened branches in May’20, it witnessed more collections
than disbursements. Hence, its loan book declined marginally QoQ.
Standalone AUM moderated 1% QoQ to INR413b, driven by stronger
collections. However, disbursements picked up toward end-1QFY21 and
have sustained in 2QFY21 too. A key factor was the online disbursements
(wherein the company is offering cash-backs), which have jumped 4x since
the start of the lockdown.
~40% of customers are now transacting online.
The number of loan accounts and gold tonnage declined ~5% QoQ/YoY,
given the sharp increase in gold prices.
In 2HFY20, MUTH’s yields improved to 24-25% (earlier 21-22%), driven by
higher penal charges.
However, in 1QFY21, yields reverted to 23%. MUTH
has also offered cash-backs for customers transacting digitally.
Over the past year, the company has enhanced liquidity on its Balance
Sheet – from INR9b in 1QFY20 to INR85 in 1QFY21. The higher liquidity
weighed down on margins as borrowings have grown 38% YoY (v/s 15% YoY
growth in the loan book). Management has guided to keep liquidity on the
balance sheet at 10%.
Guidance of 15% AUM growth for FY21, irrespective of gold prices.
Collection efficiency in Jul’20 – MFI (76%), HL (87%), VF (75%).
MUTH took INR320m COVID-19 provisions for non-gold portfolio in 1QFY21.
Muthoot Homefin:
AUM stood at INR19.8b (flat QoQ/YoY) while PAT for
the quarter was only INR4m.
Belstar Investment and Finance:
Loan book was sequentially flat at INR26b
while PAT declined ~36% QoQ/YoY to INR145m. GNPL ratio deteriorated
20bp QoQ to 1.1%.
AUM largely steady; Yields decline off a high base; Enhanced liquidity
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
MUTH IN
401
503.8 / 6.6
1405 / 478
0/50/96
2077
Financials & Valuations (INR b)
Y/E March
2020 2021E
NII
57.7
63.4
PPP
41.5
47.3
PAT
30.2
34.1
EPS (INR)
75.3
85.1
EPS Gr. (%)
52.9
13.1
BV/Sh.(INR)
289
356
Ratios
NIM (%)
14.9
14.0
C/I ratio (%)
30.0
27.8
RoA (%)
6.8
6.5
RoE (%)
29.0
26.4
Payout (%)
19.9
17.0
Valuations
P/E (x)
16.7
14.8
P/BV (x)
4.4
3.5
Div. Yld. (%)
1.2
1.2
Shareholding pattern (%)
As On
Jun-20 Mar-20
Promoter
73.4
73.4
DII
7.3
7.1
FII
14.6
14.4
Others
4.7
5.1
FII Includes depository receipts
2022E
73.7
55.4
40.0
99.8
17.2
435
14.3
27.5
6.9
25.2
17.0
12.6
2.9
1.4
Highlights from management commentary
Subsidiary performance
Jun-19
73.5
8.4
13.9
4.3
Valuation and view
While AUM growth took a backseat in 1QFY21, we believe this is a one-off given
the muted disbursements in Apr-May’20. Demand for gold loans picked up in
Jul-Aug’20, and we expect it to sustain given the tough economic environment.
Over the past year, MUTH has increased liquidity on the balance sheet from 3%
of loans to 20% of loans, which is comforting. However, this is likely to be a drag
on margins going ahead. While MUTH’s subsidiaries have witnessed improving
collection efficiency, we remain cautious on the asset quality outlook. Maintain
Neutral
with TP of INR1,300 (3x FY22E BVPS).
Research Analyst: Alpesh Mehta
(Alpesh.Mehta@MotilalOswal.com) |
Piran Engineer
(Piran.Engineer@MotilalOswal.com)
Nitin Aggarwal
(Nitin.Aggarwal@MotilalOswal.com)|
Divya Maheshwari
(Divya.Maheshwari@Motilaloswal.com)
Investors are advised to refer through important disclosures made at the last page of the Research Report.
14 January
research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
1
Motilal Oswal
2020
 Motilal Oswal Financial Services
Muthoot Finance
Quarterly Performance
Y/E March
Income from operations
Other operating income
Total Operating income
YoY Growth (%)
Total Income
YoY Growth (%)
Interest Expenses
Net Income
Operating Expenses
Operating Profit
YoY Growth (%)
Provisions
Profit before Tax
Tax Provisions
Net Profit
YoY Growth (%)
Key Operating Parameters (%)
Yield on loans (Cal)
Cost of funds (Cal)
Spreads (Cal)
NIMs (Cal)
Credit Cost
Cost to Income Ratio
Tax Rate
Balance Sheet Parameters
AUM (INR b)
Change YoY (%)
Gold loans (INR b)
Change YoY (%)
Gold Stock Holding (In tonnes)
Avg gold loans per branch (INR
m)
Borrowings (INR b)
Change YoY (%)
Borrowings Mix (%)
Listed secured NCDs
Term loans
Commercial Paper
Others
Debt/Equity (x)
Asset Quality Parameters (%)
GS 3 (INR m)
Gross Stage 3 (% on Assets)
Total Provisions (INR m)
Return Ratios (%)
RoAUM (Rep)
RoE (Rep)
E: MOSL estimates
1Q
18,274
294
18,568
13.8
18,587
13.8
6,416
12,171
3,972
8,199
8.2
33
8,166
2,866
5,300
7.8
21.2
9.3
11.9
13.9
0.0
32.6
35.1
358
15.5
352
15.1
176
78
281
21.1
28.1
49.0
17.1
5.8
2.9
(INR M)
Act v/s
Est. (%)
-4
63
-3
-13
-3
-13
7
-8
-18
-4
-14
-64
-2
-4
-2
-5
FY20
2Q
3Q
21,057 22,806
312
399
21,369 23,206
29.5
35.2
21,405 23,209
29.7
35.2
6,699 7,094
14,707 16,115
3,969 4,542
10,738 11,573
43.6
47.6
265
612
10,473 10,961
1,894 2,809
8,579 8,152
77.3
68.0
23.9
9.5
14.4
16.4
0.3
27.0
18.1
357
10.6
349
9.1
171
77
285
17.0
30.4
47.0
17.2
5.5
2.6
25.0
9.3
15.7
17.4
0.7
28.2
25.6
385
18.6
377
18.7
173
83
326
29.2
31.9
39.6
14.1
4.5
2.7
9,769
2.5
8,377
8.8
29.6
4Q
23,506
497
24,004
27.7
24,026
27.8
7,700
16,326
5,304
11,021
35.3
48
10,974
2,822
8,151
59.4
24.0
8.8
15.1
16.3
0.0
32.5
25.7
416
21.5
408
21.4
176
89
372
38.3
26.0
39.2
9.7
4.8
2.9
1Q
23,160
691
23,851
28.4
23,854
28.3
8,715
15,139
3,738
11,400
39.0
146
11,255
2,847
8,408
58.6
23.0
9.2
13.9
14.6
0.1
24.7
25.3
413
15.3
405
15.1
165
89
389
38.2
23.2
40.3
12.7
4.4
2.6
FY21
2QE
3QE
24,086 25,411
470
470
24,556 25,881
14.9
11.5
24,576 25,906
14.8
11.6
8,889 9,156
15,687 16,750
4,167 4,769
11,520 11,981
7.3
3.5
400
500
11,120 11,481
2,813 2,905
8,307 8,576
-3.2
5.2
4QE
26,930
473
27,402
14.2
27,429
14.2
9,467
17,962
5,565
12,397
12.5
538
11,858
3,001
8,858
8.7
FY20
FY21E
1QFY21E
24,211
425
24,636
32.7
24,666
32.7
8,162
16,504
4,567
11,937
45.6
400
11,537
2,953
8,583
61.9
85,644 99,587
1,502
2,103
87,146 1,01,691
26.7
16.7
87,228 1,01,766
26.8
16.7
27,909 36,227
59,319 65,538
17,787 18,240
41,531 47,298
33.8
13.9
957
1,584
40,574 45,714
10,391 11,566
30,183 34,148
53.0
13.1
22.1
8.7
13.4
14.9
0.2
30.0
25.6
22.0
9.6
12.4
14.0
0.4
27.8
25.3
479
12.5
434
21.4
455
18.3
479
15.2
426
22.0
371
38.4
383
3.3
11,474 12,267
3.2
3.4
8,095 8,213
6.1
21.7
9.6
33.7
8,992 10,553
2.2
2.6
8,381 8,492
8.1
28.4
8.1
28.2
8,992
2.11
9,844
2.05
6.8
29.0
6.5
26.4
19 August 2020
2
 Motilal Oswal Financial Services
Muthoot Finance
Highlights from management commentary
Business Updates
Most branches were closed in Apr’20, but the situation is back to normal now.
Bulk of the lending in 1QFY21 came from top-ups.
Guidance of 15% AUM growth for FY21, irrespective of gold prices.
Don’t see much competition from banks on back of recent increased LTV cap.
Going slow on auctions of NPLs as the collateral buffer is adequate. Rather, the
company is giving time to its customers to repay.
More than 40% customers are now transacting online. Barring depositing gold
and taking back gold, the customer can do everything online.
The company took two new initiatives this quarter – (1) ‘Loans@Home’ wherein
MUTH’s staff visits a customer’s home, collects the gold and disburses the loan
instantly. Currently, MUTH is doing this for ticket sizes above INR200k. (2) ‘Gold
Unlocker’ – Customers can keep jewelry in MUTH’s lockers and take loans
whenever they want.
Average LTV of the outstanding portfolio currently stands at 54%.
Opex reduction in 1QFY21 is not sustainable over the long term.
Expect yields to remain stable at 22%.
Plans are afoot to open 250 branches over the next 12 months.
Liquidity/Funding
Cost of borrowings increased QoQ due to the full impact of ECB cost (which
came in on 1
st
Mar’20). MTM on ECBs goes into ‘OCI’ directly. ECBs raised last
year came in at double-digits (first tranche) and single-digits (second tranche).
INR15b worth CPs mature every month.
Will maintain 10% liquidity on the balance sheet.
Subsidiaries
MFI
– Have slowly started lending (disbursed INR1b in Jul’20) and should be
back to normal in the next 2-3 months. 60%+ of the portfolio is SHG and the
remaining is JLG.
Housing Finance
– Will wait for the moratorium period to end and see how
customers are behaving. Will resume lending after that only.
Vehicle Finance –
Only collections happening right now.
Expect share of subsidiaries to decline from 12% currently to 9-10% by end-FY21
due to muted growth
Provisions for subsidiaries were made for the loan book under moratorium.
Collection efficiency in July: MFI – 76%; HL – 87%, VF – 75%.
Others
MUTH is offering free COVID-19 insurance cover up to INR100k to all new gold
loan customers.
Internally, the company combined its 1Q-2QFY21 targets to a single 1HFY21
target. The company is confident of achieving the same.
When gold prices rise, competition typically increases, but only temporarily.
Got discounts on rentals from their landlords for 1 month.
When customers come to MUTH, they come with an amount in mind. Only 10-
20% of customers come to take loans at maximum LTV.
3
19 August 2020
 Motilal Oswal Financial Services
Muthoot Finance
Average loan duration is 3-5 months.
80% of customers are repeat customers (not necessarily renewal customers).
4% of the portfolio is from new customers in 1QFY21, while in FY20, it stood at
27%.
In FY20, the company auctioned only ~INR5b worth of loans.
Gold loan interest rates vary between 12-23%.
Key Exhibits
Exhibit 1: AUM growth slows (%)
AUM (INR b)
17
11
15
18
16
YoY Growth (%)
22
19
Exhibit 2: Trend in productivity
Avg Gold Loans/Branch (INR m)
15
9
YoY Growth (%)
19
14
10
12
16
11
13
11
5
310
323
325
342
358
357
385
416
413
70
73
72
75
78
77
83
89
89
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 3: South dominates the mix at ~48%
East
50
23
50
23
49
West
49
49
North
48
23
20
South
48
23
20
49
48
23
20
Exhibit 4: Branches opened during the quarter
Branches opened during the quarter
52
26
58
38
19
31
-4
6
23
20
23
20
23
20
23
19
22
19
19
Source: MOFSL, Company, Gold loan portfolio mix
Source: MOFSL, Company
Exhibit 5: Spreads decline 150bp sequentially (%)
Yields (%)
21.7
9.0
20.8
9.0
21.2
9.5
22.5
9.4
21.2
9.3
CoF (%)
23.9
25.0
24.0
23.0
Exhibit 6: Share of CPs up ~300bp sequentially
NCD
-
3.0
11.8
-
2.5
12.4
48.5
35.4
Term Loans
-
2.4
15.9
48.1
33.1
-
2.1
17.7
48.7
31.3
Sub Debt
-
2.9
17.1
49.0
31.0
CP
Others
9.8
2.4
14.1
39.6
34.0
20.3
3.2
9.7
39.2
27.7
ECB
19.4
2.9
12.7
-
2.8
17.2
47.0
33.0
47.2
9.5
9.3
8.8
9.2
35.5
40.3
24.7
Source: MOFSL, Company
Source: MOFSL, Company
19 August 2020
4
 Motilal Oswal Financial Services
Muthoot Finance
Exhibit 7: One-offs lead to decline in expense ratio QoQ (%)
Opex. To AUM (%)
5.0
5.5
4.2
4.9
5.3
3.6
Exhibit 8: GNPA inched up in the quarter %
4.6
4.5
4.4
Source: MOFSL, Company
Source: MOFSL, Company
Exhibit 9: Trend in PAT
PAT (INR b)
43
9
Exhibit 10: Strong profitability continues
YoY Growth (%)
77
68
59
59
6.5
RoE (%)
RoAUM (%)
9.6
8.8
8.1
8.1
1
1
8
6.1
6.0
6.3
6.1
4.9
4.8
4.9
5.1
5.3
8.6
8.2
8.2
8.4
24.4
22.7
21.5
21.5
21.7
33.7
29.6
28.4
28.2
Source: MOFSL, Company
Source: MOFSL, Company, Reported
Valuation and view
Over the past few quarters, there have been tailwinds to growth from increasing
gold prices and stronger demand. While 1QFY21 was muted, we expect this to
continue over the next 12 months given the (a) sharp run-up in gold prices, and
(b) higher gold loan demand due to the lockdown impact on customers.
Positive ALM (due to short loan tenure of up to 12 months) and adequate
balance sheet liquidity have helped MUTH access debt capital with relative ease.
Over the past year, MUTH raised USD1b from ECBs – this liability diversification
will be helpful going ahead. Spreads have sustained at ~14%, though we expect
some compression due to lower penal interest income/costlier forex funding.
The company is well capitalized with Tier I ratio of 25% – we do not foresee any
dilution in the medium term even if AUM growth continues at 20% YoY.
We estimate loan growth at 13% for FY21, followed by moderation to 15% for
FY22/23E. We forecast 16% PAT CAGR over FY20-23E. We have cut our EPS
estimates by 5%/3% for FY21/22E on the back of moderation in loan growth.
We have turned cautious on the outlook for MUTH’s HFC/MFI subsidiaries. We
expect FY21 to be a tough year for these companies. Maintain
Neutral
with TP
of INR1,300 (3x FY22E BVPS).
19 August 2020
5
 Motilal Oswal Financial Services
Muthoot Finance
Exhibit 11: We have cut our estimates by ~4%
INR B
NII
Other Income
Net Income
Operating Profits
Provisions
PBT
Tax
PAT
Loans
Borrowings
Spread (%)
RoA (%)
RoE (%)
FY21
68.2
1.9
70.1
50.0
1.6
48.4
12.4
36.0
494
412
13.5
6.7
27.7
Old Est
FY22
77.8
2.1
79.9
57.0
1.8
55.2
14.1
41.1
554
450
13.3
6.7
25.6
FY23
86.4
2.4
88.8
63.2
2.1
61.2
15.7
45.5
620
484
13.0
6.6
23.3
FY21
63.4
2.2
65.5
47.3
1.6
45.7
11.6
34.1
479
383
12.4
6.5
26.4
New Est
FY22
73.7
2.6
76.3
55.4
1.8
53.6
13.6
40.0
551
424
12.3
6.9
25.2
FY23
86.1
3.0
89.1
65.0
2.1
62.9
15.9
47.0
634
470
12.3
7.1
24.3
FY21
-7
-6
-5
-2
-6
-7
-5
-3
% Change
FY22
-5
-4
-3
-2
-3
-4
-3
0
FY23
0
0
3
1
3
2
3
2
Source: MOFSL, Company
Exhibit 12: One-year forward P/E
P/E (x)
Min (x)
15.5
13.6
13
10.5
8
5.5
3
3.9
10.0
Avg (x)
+1SD
Max (x)
-1SD
13.5
Exhibit 13: One-year forward P/B
P/B (x)
Min (x)
3.6
2.8
2.2
2
1.2
0.4
1.7
1.2
0.6
Avg (x)
+1SD
3.3
Max (x)
-1SD
3.3
8.1
6.2
Source: MOFSL, Company
Source: MOFSL, Company
Valuation Matrix
66
Rating
FY22E
HFCs
LICHF
PNBHF
Vehicle fin.
SHTF
MMFS
CIFC
Diversified
BAF
SCUF
LTFH
MUTH
MAS
Buy
Neutral
Buy
Buy
Buy
Neutral
Buy
Buy
Neutral
Buy
CMP
(INR)
278
275
689
138
226
3,409
974
67
1,256
687
Mcap
(USDb)
1.8
0.6
2.1
1.1
2.5
27.4
0.8
1.8
6.6
0.5
P/E (x)
FY21E
FY22E
6.5
6.2
9.7
18.7
15.8
46.1
8.5
13.6
14.0
22.3
5.8
4.6
6.0
15.4
11.5
28.3
7.0
7.0
12.3
18.6
P/BV (x)
FY21E
FY22E
0.7
0.5
0.8
1.1
2.1
5.6
0.8
0.9
3.5
3.4
0.6
0.5
0.7
1.0
1.8
4.8
0.7
0.8
2.8
3.0
RoA (%)
FY21E
FY22E
1.0
1.0
1.5
1.2
1.8
2.5
2.5
0.9
6.7
3.7
1.1
1.3
2.3
1.5
2.2
3.6
3.0
1.7
6.7
4.0
RoE (%)
FY21E
FY22E
11.5
9.1
9.2
6.8
13.8
12.9
10.0
6.7
27.7
16.0
11.8
11.3
12.9
7.0
16.6
18.3
11.0
12.0
25.6
16.9
19 August 2020
6
 Motilal Oswal Financial Services
Muthoot Finance
Financials and Valuations
INCOME STATEMENT
Y/E MARCH
Interest Income
Interest Expense
Net Interest Income
Change (%)
Other income
Net Income
Change (%)
Operating Expenses
Pre Provision Profits
Change (%)
Provisions
PBT
Tax
Tax Rate (%)
PAT
Change (%)
Proposed Dividend
BALANCE SHEET
Y/E MARCH
Equity Share Capital
Reserves & Surplus
Networth
Borrowings
Change (%)
Other liabilities
Change (%)
Total Liabilities
Loans
Change (%)
Investments
Net Fixed Assets
Other assets
Total Assets
E: MOSL Estimates
2016
47,995
22,577
25,418
17.9
755
26,173
18.0
11,381
14,792
38.9
1,624
13,168
5,072
38.5
8,096
20.7
2,393
2017
56,369
22,938
33,431
31.5
1,098
34,529
31.9
12,503
22,026
48.9
2,816
19,210
7,411
38.6
11,799
45.7
2,397
2018
62,021
19,314
42,707
27.7
1,310
44,017
27.5
13,174
30,843
40.0
2,397
28,447
10,671
37.5
17,776
50.7
4,010
2019
67,570
22,368
45,202
5.8
1,236
46,438
5.5
15,394
31,044
0.6
275
30,768
11,047
35.9
19,721
10.9
4,812
2020
85,644
27,909
57,735
27.7
1,584
59,319
27.7
17,787
41,531
33.8
957
40,574
10,391
25.6
30,183
53.0
6,016
2021E
99,587
36,227
63,360
9.7
2,178
65,538
10.5
18,240
47,298
13.9
1,584
45,714
11,566
25.3
34,148
13.1
5,805
2022E
1,12,066
38,353
73,713
16.3
2,624
76,337
16.5
20,959
55,378
17.1
1,803
53,575
13,554
25.3
40,020
17.2
6,803
(INR M)
2023E
1,27,394
41,326
86,069
16.8
3,028
89,096
16.7
24,077
65,019
17.4
2,074
62,945
15,925
25.3
47,020
17.5
7,993
(INR M)
2023E
4,010
2,07,968
2,11,978
4,69,533
10.7
26,734
15.0
7,08,245
6,33,870
15.0
19,144
2,965
52,266
7,08,245
2016
3,990
52,202
56,192
1,85,670
-4.5
28,625
27.2
2,70,487
2,45,241
4.2
983
2,274
21,990
2,70,487
2017
3,995
61,170
65,164
2,09,855
13.0
32,112
12.2
3,07,131
2,74,242
11.8
2,091
2,182
28,615
3,07,131
2018
4,000
74,120
78,120
2,11,670
0.9
18,132
-43.5
3,07,923
2,95,068
7.6
3,954
1,922
6,978
3,07,923
2019
4,007
88,151
92,158
2,68,332
26.8
20,198
11.4
3,80,687
3,49,329
18.4
9,826
1,867
19,666
3,80,687
2020
4,010
1,11,708
1,15,718
3,71,300
38.4
17,578
-13.0
5,04,597
4,26,042
22.0
14,383
2,227
61,944
5,04,597
2021E
4,010
1,38,832
1,42,842
3,83,438
3.3
20,215
15.0
5,46,494
4,79,297
12.5
15,822
2,450
48,925
5,46,494
2022E
4,010
1,70,620
1,74,630
4,23,993
10.6
23,247
15.0
6,21,870
5,51,191
15.0
17,404
2,695
50,580
6,21,870
19 August 2020
7
 Motilal Oswal Financial Services
Muthoot Finance
Financials and Valuations
RATIOS
Y/E MARCH
Spreads Analysis (%)
Avg Yield on loans
Avg Cost of funds
Spreads on loans
NIMs on AUM
Profitability Ratios (%)
RoE
RoA
RoA on AUM
Cost to Income
Empl. Cost/Op. Exps.
Asset-Liability Profile (%)
GNPL ratio (%)
Debt/Equity (x)
Average leverage
Valuations
Book Value (INR)
Price-BV (x)
EPS (INR)
EPS Growth (%)
Price-Earnings (x)
Dividend
Dividend Yield (%)
E: MOSL Estimates
2016
20.1
11.9
8.2
10.6
2017
21.8
11.6
10.2
12.9
2018
21.8
9.2
12.7
15.0
2019
21.0
9.3
11.7
14.0
2020
22.1
8.7
13.4
14.9
2021E
22.0
9.6
12.4
14.0
2022E
21.8
9.5
12.3
14.3
(%)
2023E
21.5
9.3
12.3
14.5
15.1
3.0
3.4
43.5
56.4
19.4
4.1
4.6
36.2
61.1
24.8
5.8
6.2
29.9
59.4
23.2
5.7
6.1
33.2
58.3
29.0
6.8
7.8
30.0
57.8
26.4
6.5
7.5
27.8
57.8
25.2
6.9
7.8
27.5
57.9
24.3
7.1
7.9
27.0
57.9
2.2
3.3
3.6
2016
140.8
20.3
20.4
6.0
2.8
3.2
3.3
2017
163.1
29.5
45.6
6.0
4.4
2.7
2.9
2018
195.3
44.4
50.4
10.0
2.7
2.9
2.8
2019
230.0
49.2
10.8
12.0
2.2
3.2
3.1
2020
288.5
4.4
75.3
52.9
16.7
15.0
1.2
2.1
2.7
2.9
2021E
356.2
3.5
85.1
13.1
14.8
14.5
1.2
2.0
2.4
2.5
2022E
435.4
2.9
99.8
17.2
12.6
17.0
1.4
1.9
2.2
2.3
2023E
528.6
2.4
117.2
17.5
10.7
19.9
1.6
19 August 2020
8
 Motilal Oswal Financial Services
Muthoot Finance
Explanation of Investment Rating
Investment Rating
Expected return (over 12-month)
BUY
>=15%
SELL
< - 10%
NEUTRAL
< - 10 % to 15%
UNDER REVIEW
Rating may undergo a change
NOT RATED
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within
following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the
Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial
products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are
available on www.motilaloswal.com. MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a
registered Trading Member with National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and
National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National
Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance
Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance products.
Details of associate entities of Motilal Oswal Financial Services Limited are
available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and
buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other
compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have
any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report
should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific
merchant banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the
website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental
research and Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated
from MOFSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability
or use would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong
Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst
Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of
research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity
to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these
securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not
located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under
applicable state laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers
Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any
brokerage and investment services provided by MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is
intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as
"major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which
this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration
provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange
Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S. registered broker-
dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this
chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.
registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public
appearances and trading securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets
services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and
Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL
in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,
of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the
SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and
inform MOCMSPL.
Specific Disclosures
1 MOFSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOFSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOFSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOFSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOFSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOFSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOFSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOFSL has not received any compensation or other benefits from third party in connection with the research report
10 MOFSL has not engaged in market making activity for the subject company
19 August 2020
9
 Motilal Oswal Financial Services
Muthoot Finance
********************************************************************************************************************************
The associates of MOFSL may have:
- financial interest in the subject company
- actual/beneficial ownership of 1% or more securities in the subject company
- received compensation/other benefits from the subject company in the past 12 months
- other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the
specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even
though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
- acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
- be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the
company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)
- received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not
consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the
research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and
may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent
of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in
nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,
representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The
report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as
customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or
distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for
informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing
in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.
The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment
objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this
document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this
document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views
expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade
securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of
the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and
should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make
modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from
time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to
perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of
information that is already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or
may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,
directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or
entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,
regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in
all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction.
Neither the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost
revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its
affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any such
misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages,
expenses that may be suffered by the person
accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263;
Website
www.motilaloswal.com.CIN
no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road,
Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst:
INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company
Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is
a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt.
Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL.
Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no
assurance or guarantee of the returns. Investment in securities market is subject to market risk, read all the related documents carefully before investing. Details of Compliance
Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National
Company Law Tribunal, Mumbai Bench.
19 August 2020
10