Muthoot Microfin (MUTHOOTMF) Q2 FY27 Profit Surges 263% as Margins and Asset Quality Recover
The microfinance lender's quarterly profit crossed ₹100 crore for the first time, driven by a sharp expansion in net interest margin and a falling cost of funds.
Muthoot Microfin's Q2 FY27 profit soared 263% year-on-year to ₹110.8 crore. Record disbursements and a net interest margin of 12.5% powered the earnings, while asset quality continued to improve.
For microfinance lenders, the past year has been about recovery from stress, with the real test being whether growth can return alongside profitability. Muthoot Microfin’s September quarter shows it can, with profit surging 263% year-on-year to cross the ₹100 crore mark for the first time. The leap was powered by a widening interest margin and a portfolio that is diversifying faster than planned.
The numbers tell a story of accelerating momentum. Revenue grew 27% year-on-year to ₹730.7 crore, while profit before tax jumped over 300%. Sequentially, profit grew 36% on a 9% rise in revenue, pushing the net profit margin to 15.2%, a 300 basis point improvement from the June quarter.
Revenue & profit
Revenue (₹ Cr)
Profit (₹ Cr)
Net Profit Margin
| Metric | CurrentQ2 FY27 (Sep '26) | PreviousQ1 FY27 (Jun '26) |
|---|---|---|
| Revenue (₹ Cr) | 730.66 | 668.63 |
| Profit (₹ Cr) | 110.78 | 81.34 |
| Net Profit Margin | 15.2% | 12.2% |
The twin engines of margin expansion
The profit surge was not just a low-base effect. It was driven by two fundamental shifts. First, the net interest margin expanded 50 basis points quarter-on-quarter to 12.5%, as reported by The Hindu BusinessLine. Second, the average cost of borrowing fell below 10% for the first time, reaching 9.93%.
CEO Sadaf Sayeed told PTI that securitisation is helping lower funding costs, and the company expects NIM to reach 12.75-13% by the fourth quarter. This structural improvement in margins is a key pillar for sustainable earnings.
Diversification ahead of schedule
Growth is also becoming less reliant on traditional group loans. The non-Joint Liability Group portfolio reached 31% of assets under management, surpassing the full-year target of 30%. The small business loan book stands at ₹4,164 crore with near-zero delinquency.
This shift supports both asset quality and margins. Gross NPAs improved to 3.38%, down 32 basis points from the prior quarter. Credit cost remained stable at 2.6%, within the guided range.
Funding the growth runway
The company raised ₹3,213 crore during the quarter and closed with liquidity of ₹1,835 crore and substantial unavailed credit lines. With a capital adequacy ratio of 25.5%, the balance sheet is well-positioned to support the 20% AUM growth guidance for FY27.
Management, in the earnings call, expressed confidence in achieving its full-year profit guidance of ₹425-450 crore. They expect to beat the upper end of their return-on-equity guidance of 18%.
Key Points
- Quarterly profit surpassed ₹100 crore for the first time, rising 263% year-on-year and 36% sequentially.
- Net interest margin expanded to 12.5%, aided by a falling cost of borrowing that entered single-digit territory.
- Asset quality improved, with gross NPA declining to 3.38%, and portfolio diversification ahead of target.
- The company is on track to meet its FY27 guidance, with management confident of beating ROE and NIM targets.
Hexa Perspective
The quarter demonstrates a clean recovery where growth, margins, and asset quality are moving in unison. The 263% profit jump is flattered by a weak year-ago quarter, but the underlying trends—margin expansion, falling credit cost, and disciplined diversification—are real.
The sustainability of these gains hinges on two factors: maintaining the cost-of-funds advantage in a potentially rising rate environment, and ensuring the rapid growth in non-JLG loans does not compromise underwriting standards. The current valuation at a significant discount to the industry PE suggests the market is still pricing in past sectoral stress rather than this improving execution.
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