Muthoot Finance Share | Muthoot Finance Share Analysis | Yadnya Investment Academy

Muthoot Finance Share | Muthoot Finance Share Analysis | Yadnya Investment Academy

Muthoot Finance- What should a Shareholder Do?: Muthoot Finance Analysis

Muthoot Group Chairman, MG George Muthoot, died on Friday 5th of March, 2021, tragically. He was the Chairman of India’s largest Gold NBFC ‘Muthoot Group”. Let us understand if there are any repercussions of this event on the company’s operations.

Introduction: Muthoot Finance Investor Relations

Several Lessons from the past, such as Euro Crisis (2012-13) or Covid-19 Pandemic has shown the investor’s reaction towards the prevailing news in the market. At the same time, market has also taught the lessons not to respond impulsively to any news in the market straight away; doing this can result in investors incurring losses.

Undoubtedly, the news of the demise of a key person of the group of companies will have a short-term impact on the stock price. Still, we need to review the business and its financials and check whether this news is worrisome or an investor should carry on with their investments in this stock.

Background of Muthoot Group of Companies: Muthoot Finance Company History

Muthoot Family is having a track record of almost 800 years in this line of business. The Muthoot Group formation story dates back to 1887, founded in Kerala by Shri Ninan Mithai Muthoot.

Muthoot Group started their business operations from Kerala, and Kerala did not have any supportive business environment due to worker unions, frequent strikes, etc. The company managed to handle this environment efficiently and diversified its base to almost all country states.

Business Overview of Muthoot Finance: Muthoot Finance Business Model

• Muthoot Finance was able to diversify its business in terms of geography by expanding its business. Currently, the business has a presence in 29 States & Union Territories.
• The company possesses 166 tonnes of Gold as security with themselves against which it has provided loans.
• Across the country, more than 25,000 employees are employed by the company.
• The company has 4,632 branches in India, which presents its strong position in Gold NBFC players in India.
• Muthoot Group has not only diversified their business geographically but has also done remarkably in terms of customer base. The company is highly retail oriented.
• At present, Muthoot finance products are mainly gathered to a Retail Investor Base of more than 1 lakh. Retail Investor includes depositors, NCD deposits, etc.
• As of 31st December 2020, Company serves more than 2 lakh customers per day.
• Muthoot Finance has Asset Under Management (AUM) in a total of Rs. 50,390 crores.
• Market Capitalisation of Muthoot Finance also crosses the mark of Rs. 50,000 crores.

Muthoot Finance Return Ratios: Muthoot Finance Financials

• A particular Point one should keep in mind in the case of NBFC companies is RoCE is of not much importance.
• Return on Capital Employed (RoCE) of the company is 16.08%. Generally, RoCE of Banking & NBFC companies resides on a single-digit value.
• While the Return on Equity (RoE) of the company is 28.8% which is also quite strong.

Muthoot Finance Valuation

• The company’s current PE is also hovering around the Historical Median of the Last 3-Years and 5-Years, i.e., 13x-14x.
• As per Muthoot Finance financial results, the company has given a phenomenal return of 52% in the last 1 year, but PE is stable due to strong growth in EPS.
• Historically, EPS has grown extremely well. EPS has grown by 12% 27%, 38% & 36% in last 1 year, 3-years & 5-years respectively.

Conclusion:

On a short-term basis, Muthoot Finance Stock can witness some pitfalls due to the unfortunate news of the Group Chairman’s demise. But on a longer horizon, the businesses and valuation look well settled. The business’s valuation part, where PE is 13-14, and a decent EPS growth, presents a clear image of high business potential. Also, there are no red flags in the corporate governance of the group till date. Hence, at this point, Investor should not respond to news instantly, rather should strict to business and financials and then only ought to make a decision.

The investors can check out numerous other resources available on our website to track Muthoot Finance’s performance. We offer many stock articles which provide a detailed Muthoot Finance stock review; these include Muthoot Finance Ltd Detailed Analysis, Muthoot Finance Ltd Stock Analysis: Valuation Perspective & many more! Check out Invest Yadnya for more such quality content!

 

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