Rating Action Summary

CareEdge Global Ratings has revised the outlook on Muthoot Microfin Limited (MML) from 'Stable' to 'Positive' while reaffirming the company's long-term foreign currency rating at 'CareEdge BB-'. This outlook revision follows CRISIL Ratings' upgrade of MML's long-term bank loan facilities and non-convertible debentures (NCDs) to 'Crisil AA-/Stable' from 'Crisil A+/Positive' in June 2026.

Rating Rationale and Coverage

The outlook revision relates to MML's USD 50 million external commercial borrowings (ECBs), comprising USD 15 million in existing borrowings (including its ECB listed in GIFT City) and USD 35 million in proposed borrowings. MML was the first microfinance institution to receive a global rating from CareEdge Global Ratings.

Financial Performance Metrics

Asset Quality Improvement:

  • Gross non-performing assets declined to 3.7% as of June 30, 2026, from 4.8% as of March 31, 2025
  • Credit costs (calculated on an adjusted total assets basis) declined to 3.0% in FY26 from 7.5% in FY25
  • Return on total assets improved to 1.1% in FY26 from minus 1.6% in FY25

Provisional Q2 FY27 Business Update:

  • Assets under management (AUM) stood at ₹15,323 crore as of September 30, 2026, up 22% year-on-year
  • Quarterly disbursements rose 28% year-on-year to ₹2,900 crore
  • Collection efficiency improved by 477 basis points to 98.11%
  • Cost of funds declined by 20 basis points from the previous quarter to 9.93%
  • Portfolio mix: JLG and non-JLG portfolio stood at 69:31 (compared with 83:17 as of March 31, 2026)
  • Small and micro enterprise individual loan portfolio reached ₹4,164 crore with near-zero delinquency

Strategic and Operational Highlights

CareEdge Global Ratings noted MML's established microfinance franchise, experienced management, comfortable capitalisation and diversified funding sources. The rating factors in expected support from parent Muthoot Fincorp Limited, which holds a 50.2% stake in MML and provides strategic oversight.

The Positive outlook reflects expectations that MML's credit profile could strengthen if improvements in operating performance and asset quality are sustained despite risks from higher inflation and interest rates. It also factors in the parent's enhanced financial flexibility to provide support when needed.

Management Commentary

Mr. Sadaf Sayeed, CEO, Muthoot Microfin Limited, stated: "Having been the first microfinance institution in India to receive a global rating from CareEdge Global, we are encouraged to now see our credit profile recognised with a 'Positive' outlook. Coming after CRISIL's upgrade in June, this is a meaningful endorsement of the progress we have made in strengthening asset quality and operating performance. As we diversify into individual and secured loans, we will stay disciplined on underwriting and collections to ensure this momentum is sustained. We remain committed to empowering women borrowers and their businesses, and to building a resilient, well-funded institution that earns the continued confidence of our lenders and investors."

Company Background

Muthoot Microfin Limited is a listed, Reserve Bank of India-registered non-banking financial company-microfinance institution (NBFC-MFI) and part of the Muthoot Pappachan Group. The company provides loans to women borrowers through the joint liability group (JLG) model and has expanded into individual enterprise loans, micro-loans against property, gold loan co-lending and referral arrangements.

Operational Statistics (as of September 30, 2026):

  • AUM: ₹15,323 crore
  • Branches: 1,675
  • Active customers: 32 lakh
  • Mahila Mitra app: 22 lakh cumulative downloads
  • Digital collections: 47% of collections in Q2 FY27