Muthoot Capital Services: CRISIL lifts ratings outlook to 'positive'

CRISIL Ratings has revised the outlook on Muthoot Capital Services Limited's (MCSL) long-term bank facilities and debt instruments to 'Positive' from 'Stable', while reaffirming existing ratings. Additionally, 'Crisil A+/Positive' has been assigned to its INR 50 crore subordinated debt. The commercial paper rating has been reaffirmed at 'Crisil A1+'. This positive revision aligns with a similar upgrade for Muthoot Fincorp Limited (MFL), the flagship company of the Muthoot Pappachan group, to which MCSL belongs and receives significant support from.

The company's asset quality has improved, with gross non-performing assets (NPAs) falling to 4.9% as of March 31, 2025, from 10.2% in fiscal 2024. Despite a slight uptick to 5.76% in Q1 FY2026, the average monthly collection efficiency remained above 97% over the last 12 months. MCSL's assets under management (AUM) grew to approximately INR 3239 crore as of June 30, 2025, up from INR 2018 crore as of March 31, 2024, supported by average monthly disbursements of INR 220 crore during fiscal 2025.

Capitalization remains adequate, with net worth at INR 654 crore and gearing at 4.6 times as of June 30, 2025. The company aims to maintain gearing around 5 times. Profitability, however, saw a moderation with a reported loss of INR 4.9 crore and RoMA of -0.5% in the first quarter of fiscal 2026, impacted by higher credit costs and a reduction in net interest margin.