Muthoot Finance - Growth picks up as regulatory landscape settles - Edelweiss

Muthoot Finance reported a healthy set of numbers for Q3FY13 with PAT at INR2.7bn, in line with expectations, on the back of ~8% QoQ growth in AUMs at INR257bn. The growth comes after 2 quarters, as gold loan NBFCs, struggled under uncertain regulatory environment. Calculated yields moderated by ~30bps, though still at a robust 22%, leading to 15- 20bps decline in NIMs to 10.5%. GNPA, though technical in nature still continues in the 1% plus range for third quarter in a row.

Overall, we would like to re-iterate our positive stance on gold loan NBFCs expecting sustainable RoA/RoE of 3.5%/20% plus. The current quarter is a reflection of stability returning to the business and with the KUB Rao Committee report filed we believe the stage is set for growth to return. The quality of Muthoot Finance's operations as reflected in its employees, risk management practices and high branch productivity is also an advantage.

Maintain 'BUY' with a target price of INR287.

Source : Equity Bulls

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