Belstar Microfinance to prioritise consolidation over growth in coming qtrs

MFI's stressed loans rise sharply to 3.5% in September from 1.47%

With asset quality pressure rising in micro loans, Muthoot Finance Ltd-controlled Belstar Microfinance Ltd will focus on consolidating its portfolio over the next two to three quarters rather than pursuing growth. Its share of stressed assets rose sharply to 3.5 per cent in September 2024 from 1.8 per cent a year ago.

 

George Alexander Muthoot, managing director, Muthoot Finance, told Business Standard, “In microfinance, there was no growth in the last quarter. It has been kept steady. I think for the next two, three quarters, it will be consolidation time.”

 

The company's loan assets under management grew by 22 per cent year-on-year (YoY) to Rs 9,625 crore. However, sequentially, they declined from Rs 9,951 crore.

 

 

The MFI unit posted a drop in net profit to Rs 52.6 crore in Q2FY25 from Rs 83.1 crore in September 2023 (Q2FY24) and Rs 89.8 crore in Q1FY25. Its stage 3 assets grew to Rs 298 crore in September 2024 from Rs 95.7 crore a year ago. In non-banking finance companies (NBFCs), stage 3 assets are loans that have been overdue for more than 90 days. Muthoot Finance holds a 66.13 per cent stake in Belstar.

 

Muthoot said, “All microfinance institutions are going through a tough time. But we are actually better than most of the other microfinance companies.”

 

MFIs are collectively working to overcome the situation. “They (MFIs) faced similar challenges five to ten years ago and managed to recover. After some time, these institutions will recover as well,” Muthoot added.

 

Referring to the growth outlook for the gold loan business, he said Muthoot Finance expects an increase in gold loan business as banks and NBFCs slow down on unsecured loans. Its gold loan portfolio expanded by 28 per cent YoY to Rs 86,164 crore.

 

The Reserve Bank of India and the government have advised finance companies and banks to go slow on high-risk and personal loans. Fintech companies have almost halted business. As a result, customers who were borrowing from them are now finding it difficult to obtain funds. Muthoot is able to assist these customers by monetising their idle gold. This is one of the reasons for the small uptick in business demand, he added.