Muthoot Microfin, the newly-listed lender to the bottom of the pyramid segment, has decided to reduce lending rates by up to 55 basis points on fresh loans to existing customers, after nearly two years of upward movement.
This would not affect its net interest margin, which rose to 12.6% for the December 2023 quarter, as the lender managed to bring down its incremental cost of borrowing, chief executive Sadaf Sayeed said.
Microfinance rates rose sharply ever since the Reserve Bank of India removed the lending cap on NBFC-MFIs with effect from April 2022 to put them on a similar platform like banks and other non-bank lenders. Some lenders raised the rates as much as 450-500 basis points to cover the higher credit cost post Covid pandemic.
Muthoot Microfin, a part of Kerala’s Muthoot Pappachan group, had raised rates by 150 basis points over the last two years.
“Now, we have decided to pass on the benefit of lower incremental cost of funds to our low-risk borrowers. We are also expecting a rating upgrade, which would help contain the cost of funds further,” Sayeed told ET.
The lender’s average cost of funds is 11.2% while it has managed to raise fresh funds at a much lower rate of around 10.4% a year over the last six months.
Its lending rates hover between 22.5% and 24.9%, depending on the borrower’s risk profile. At the lower end, the new rates would be 21.95% while at the higher end, rates will come down by 25 basis points to 24.65%.
The weighted average lending rate at present is 23%.
Existing customers, whenever they take a fresh loan, would get the benefit.
In parallel, the NBFC-MFI is planning to raise around $120 million in external commercial borrowing and another Rs 300 crore this quarter through non-convertible debentures to fund its business growth.
Its gross loan portfolio grew 38.64% year-on-year to Rs 11,458 crore with one-fourth of its business coming from Tamil Nadu. Kerala accounts for 16% of its business.
Its shares closed 8.74% higher Tuesday at Rs 254.40 apiece on BSE, off from the day’s high of Rs 266.55 following a 119% rise in net profit at Rs 125 crore and a rise in NIM.
The shares were listed on December 26 last year at a 5.4% discount to the IPO price of Rs 291 and had been under pressure since then.
