According to reports from The Economic Times, Muthoot Microfin is in discussions with two non-banking financial companies (NBFCs) operating in the micro loan against property (LAP) segment to acquire a majority stake. The company is exploring this inorganic growth route to expand its secured lending portfolio and reduce reliance on unsecured microfinance loans. As reported by The Economic Times, the inorganic route would provide the company a stronger platform for micro LAP business, helping it acquire the necessary expertise for property valuation and assessment before lending. A person close to the company explained that "Muthoot Microfin is exploring a majority stake buyout which would help it acquire the know-how of this business. For lending against property, the company needs experts to do the valuation and assessment of the property title before lending." CEO Sadaf Sayeed declined to comment on the specific acquisition discussions.
The acquisition strategy is part of Muthoot Microfin's broader diversification initiative following recent Reserve Bank of India policy changes. According to The Economic Times, NBFC-MFIs are now allowed to increase their exposure to non-microfinance loans to 40% of their portfolio, up from the previous requirement of 85% in microfinance loans. Currently, Muthoot Microfin has approximately 85% of its total ₹13,078 crore portfolio in unsecured joint liability group (JLG) loans, with the balance 15% in non-JLG loans. As reported by The Economic Times, CEO Sadaf Sayeed indicated on an earnings call that the company aims to achieve a 70-30 mix by the next financial year-end. "By the next financial year-end, we should be close to around 70-30 mix," Sayeed said on an earnings call on February 10. "I think right now, everybody is recalibrating the model a little bit. and how the strategy has to be kind of deployed in terms of diversification."
As reported by The Economic Times, of the assets under Muthoot Microfin's management, micro loans account for ₹11,959 crore, individual loans for ₹1,097 crore, and LAP for ₹22 crore. The lender aims to expand its book to ₹14,000 crore by the end of March and target about 20% growth in the next financial year. According to The Economic Times, the company's shares closed about 1.5% lower at ₹187.85 apiece on the BSE on Tuesday, when the benchmark index ended with a marginal gain of 0.2%.
