Muthoot Finance standalone Stage III ratio climbs to 3.87%

Muthoot Finance Limited reported a standalone gross Stage III loan-assets ratio of 3.87% at September 30, 2026, up from 2.28% three months earlier and 2.25% a year earlier. Muthoot Finance’s net Stage III ratio increased to 3.41%, while its disclosed provision coverage ratio fell to 11.80% from 17.19% a year earlier.

Why did Muthoot Finance’s Stage III ratios increase?

Muthoot Finance reported higher gross and net Stage III ratios, although its filing does not identify the products, borrower groups or events behind the movement. Gross Stage III loan assets as a share of gross loan assets rose by 159 basis points from 2.28% at June 30, 2026 to 3.87% at September 30, 2026. One basis point equals one-hundredth of a percentage point.

The year-on-year increase was 162 basis points, from 2.25% at September 30, 2025. The September 2026 gross Stage III ratio was also 152 basis points above the 2.35% disclosed for the year ended March 31, 2026, indicating that the ratio increased during the first half of the financial year.

Muthoot Finance’s net Stage III loan-assets-to-gross-loan-assets ratio was 3.41% at September 30, 2026, compared with 1.99% at June 30, 2026 and 1.86% at September 30, 2025. The company defines this measure as Stage III loan assets less expected credit loss provisions for Stage III loan assets, divided by gross loan assets based on principal amount.

What happened to Muthoot Finance’s provision coverage ratio?

Muthoot Finance’s provision coverage ratio declined to 11.80% at September 30, 2026 from 13.01% at June 30, 2026 and 17.19% at September 30, 2025. The sequential decline was 121 basis points, while the year-on-year decline was 539 basis points, alongside increases in both disclosed Stage III measures.

The filing defines provision coverage ratio as expected credit loss provision for Stage II loan assets divided by Stage II loan assets. Therefore, the 11.80% figure is not a stated coverage ratio for gross Stage III loan assets of 3.87%. Muthoot Finance did not disclose absolute Stage II or Stage III expected credit loss provision amounts in the annexure.

Muthoot Finance reported impairment on financial instruments of Rs 565.951 crore for the half year ended September 30, 2026, compared with Rs 157.331 crore for the half year ended September 30, 2025. Quarterly impairment was Rs 392.750 crore in the September 2026 quarter, compared with Rs 514.923 crore in June 2026 and Rs 551.333 crore in September 2025.

How much did Muthoot Finance’s standalone loan book grow?

Muthoot Finance’s standalone loans increased to Rs 189,965.701 crore at September 30, 2026 from Rs 161,602.140 crore at March 31, 2026. The balance-sheet increase was Rs 28,363.561 crore over six months, or about 17.6% based on those reported figures, coinciding with the increase in the Stage III ratios.

The cash-flow statement recorded an increase in loans of Rs 28,931.158 crore in the half year ended September 30, 2026, compared with Rs 22,841.170 crore in the corresponding 2025 period. This cash-flow movement differs from the balance-sheet change, but both reported measures show loan expansion during the six-month period.

Muthoot Finance said it operates mainly in financing and has no separate reportable operating segments under Indian Accounting Standard 108, or Ind AS 108. As a result, the standalone filing does not provide a product, geographic or borrower-category split of the Rs 189,965.701 crore loan book or the 3.87% Stage III ratio.

What do Muthoot Finance’s co-lending disclosures show?

Muthoot Finance disclosed four co-lending arrangements at September 30, 2026, covering 14,956 outstanding cases and gross outstanding of Rs 86.315 crore. The arrangements were in supply-chain finance and carried a weighted average interest rate of 13.55%, while fees paid during the year were reported as nil.

The company reported Rs 86.315 crore of standard loans under these arrangements and did not report an amount for non-performing loans in the performance table. The disclosed default loss guarantee was 5% of the disbursed amount, which describes the contractual risk-sharing mechanism rather than a reported credit-loss amount.

Muthoot Finance’s co-lending outstanding represented a small disclosed amount against standalone loans of Rs 189,965.701 crore at September 30, 2026. The filing does not state whether co-lending cases contributed to the change in gross Stage III loan assets, so no link between the two disclosures can be established from the results.

What do Muthoot Finance’s other standalone indicators show?

Muthoot Finance reported standalone net profit after tax of Rs 2,976.629 crore for the quarter ended September 30, 2026, compared with Rs 2,550.476 crore in the preceding quarter and Rs 2,345.170 crore a year earlier. For the half year ended September 30, 2026, net profit after tax was Rs 5,527.105 crore, versus Rs 4,391.469 crore in the corresponding prior-year period.

Quarterly interest income rose to Rs 8,729.666 crore from Rs 7,505.979 crore in June 2026 and Rs 6,304.366 crore in September 2025. Finance costs were Rs 3,364.638 crore, compared with Rs 3,145.862 crore in the preceding quarter and Rs 2,312.636 crore a year earlier.

Muthoot Finance’s debt-equity ratio was 3.90 at September 30, 2026, versus 3.83 at June 30, 2026 and 3.52 a year earlier. Total debts to total assets were 77.75%, compared with 77.52% in the preceding quarter, while the capital adequacy ratio was 19.81%, down from 20.30% at June 30, 2026.

How were Muthoot Finance’s results reviewed and what is pending?

Muthoot Finance’s Audit Committee reviewed the results on October 30, 2026 and its board approved them on October 31, 2026. The joint statutory auditors’ limited review report dated October 31 stated that nothing had come to their attention that caused them to believe the standalone statement was not prepared in accordance with applicable requirements.

The reported asset-quality ratios are based on standalone financial results rather than consolidated results. Muthoot Finance’s consolidated group includes seven subsidiaries, but the Stage III, capital adequacy and provision coverage figures in the annexure apply to the company’s standalone lending business.

Muthoot Finance maintained security cover for secured listed non-convertible debentures with principal value of Rs 55,381.678 crore at September 30, 2026. Outstanding debt, defined as debt securities, borrowings other than debt securities and subordinated liabilities, was Rs 163,779.211 crore on the same date.

Conclusion

Muthoot Finance’s September 2026 standalone results show a larger loan book alongside higher reported asset-quality stress. Gross Stage III reached 3.87% and net Stage III reached 3.41%, both exceeding the June 2026 and September 2025 readings, while the separately defined Stage II provision coverage ratio decreased to 11.80%.

The next disclosed matter to watch is the proposed amalgamation of wholly owned subsidiary Muthoot Money Limited with Muthoot Finance, which the board approved on August 31, 2026. The scheme remains subject to sanction by the National Company Law Tribunal, Kochi Bench, and approvals from the Reserve Bank of India, shareholders, creditors and other authorities, as applicable.