Muthoot Capital Q4 FY26: AUM scales, co-lending runs off, and asset quality takes a corporate loan hit

Muthoot Capital Services Limited closed Q4 FY26 with a larger balance sheet, a more own-book driven disbursement mix, and an unusually detailed management narrative around digital and AI-led operations. The company reported AUM including the managed book at 3,441 crore, disbursements of 569 crore for Q4 and 2,349 crore for FY26, and PAT of 5.02 crore for the quarter and 12.36 crore for the year.

Asset quality remained the key investor concern. The company reported GNPA at 6.41% on principal outstanding and 6.96% including accrued interest. Management attributed a meaningful part of the quarter-end GNPA movement to a corporate loan account, Up Money, which was recognized as NPA in March with an outstanding of 15.51 crore. Alongside that, the company also continued to clean up legacy retail accounts, including write-offs of older, low-recovery pools.

A year of mix shift: MCSL book grows while co-lending shrinks

The most visible structural change through FY26 was the reduction in co-lending and a corresponding rise in the company’s own-book disbursement share. The presentation shows the MCSL portfolio growing to 2,775.36 crore by March 2026, up from 2,118.18 crore a year earlier. Over the same period, the co-lending book fell to 595.89 crore from 939.58 crore.

That mix shift showed up in quarterly disbursement composition too. In Q4 FY26, about 89.51% of retail disbursements came from MCSL’s own book, compared with a far more co-lending heavy mix earlier in the cycle. Management described this as a conscious decision, including stopping new co-lending disbursements under arrangements with Wheels EMI, Manba Finance, and CreditWise Capital, while continuing collections on the existing run-off.

Financial and operating snapshot

The presentation provides a broad operating view of scale and balance sheet funding.

The company’s quarterly PAT path was volatile. The presentation shows Q1 FY26 PAT at -4.4 crore, followed by 3.3 crore in Q2, 8.4 crore in Q3, and 5.0 crore in Q4. Management argued that FY26 included several clean-up actions and one-time hits that masked underlying improvement.

Product diversification is working, but it is still small versus two-wheelers

Muthoot Capital continues to be anchored in two-wheeler finance, but FY26 showed clear scaling in commercial vehicles and used cars.

On the portfolio side, the Q4 FY26 product-wise portfolio in the presentation indicates a two-wheeler book of 2,870.4 crore, with other products still much smaller. Within the non-TW set, CV expanded to 237.36 crore and used four-wheeler to 155.03 crore, while loyalty and personal loans stood at 55.89 crore.

Disbursement data for FY26 further highlights where the company is leaning in:

• MCSL two-wheeler disbursements were 1,660.62 crore for FY26.
• Co-lending two-wheeler disbursements fell sharply to 304.36 crore from 802.42 crore in FY25.
• CV disbursements rose to 213.47 crore from 64.39 crore in FY25.
• Used car disbursements increased to 106.71 crore.
• Loyalty and personal loans nearly doubled to 56.38 crore.

Management also provided yield on disbursements for Q4 FY26: two-wheeler at 22.02%, used four-wheeler at 18.45%, commercial vehicle at 17.31%, construction equipment at 16.82%, and loyalty loan at 24.92%.

Asset quality: corporate loan recognition and legacy write-offs dominate the narrative

The company’s reported GNPA and NNPA at quarter end were elevated. The presentation shows GNPA at 6.41% on POS and 6.96% including accrued interest, with NNPA at 3.50% on POS and 4.12% including accrued interest.

Management’s main explanation in the call was the Up Money corporate loan, where 15.51 crore was recognized as NPA in March due to RBI norm timing, even though the company stated it has security and expects recovery through enforcement.

The presentation also lays out the stage-wise AUM and provisioning under Ind AS, with total provisions of 119.02 crore against total closing assets of 3,350.50 crore. A key disclosure was that ECL provisions exceeded IRACP provisions, with the company showing an excess of 51.57 crore as of March 2026.

The company also disclosed write-offs. The write-off table shows 5,750 accounts written off with total POS of 12.35 crore (12,34,88,153 in absolute rupees). The P&L impact of these write-offs was shown as 7.45 crore, driven mainly by two-wheeler write-offs.

From an investor’s lens, FY26 was a year where management seemed to prioritize cleaning up older pools and tightening underwriting, even at the cost of near-term profitability volatility.

Funding, liquidity, and the cost of money improved

Muthoot Capital highlighted improved access to funding and a lower cost of funds. Total bank sanctions in FY26 were 865 crore versus 435 crore in FY25, with 340 crore unutilized. Total borrowings stood at 3,420.68 crore at March 2026.

The borrowing profile table shows the overall average borrowing rate declining to 9.63% at March 2026 from 9.96% at March 2025. Management stated that total cost of funds was reduced to 9.48% in Q4 compared with 10.09% in Q3.

Liquidity metrics also appeared comfortable. The presentation shows Liquidity Coverage Ratio staying above 100% throughout the year and reaching 129% in March 2026.

Public deposits remained a smaller portion of the funding mix but grew meaningfully, with deposits around 80 crore at March 2026 and a stated 90% year-on-year growth.

The strategy bet: AI and digital operations as a scale lever

The most distinctive part of the earnings call was management’s emphasis on building a digital and AI-driven operating model. The CEO stated that 100% of pre-delinquency calls are now handled by AI agents and that by end of Q1 the entire soft-bucket calling would be handled by AI with no human interaction in those buckets.

Management also described a wider automation roadmap: automated collections, account aggregator, workflow modernization, AI-based ticket segregation for compliance and grievance handling, speech and voice analytics, smart debt collection initiatives, AI-assisted monitoring, and data-driven underwriting.

On operating efficiency, management claimed it has built AI tooling for the final operations step in two-wheeler disbursement and that straight-through processing at application level is about 65%, with an expectation to reach 90% in 2 to 3 months as the model learns.

For investors, the key gap is timing: management acknowledged that cost savings from automation will not show up immediately because headcount cannot be reduced instantly. The claim is that once volumes scale, the company can grow without adding proportional staff.

What to watch from here

Muthoot Capital’s FY26 story is best read as a transition year. The company scaled its own book while letting co-lending run off, diversified into CV and used cars, and invested heavily in digital infrastructure. At the same time, asset quality remained under pressure, amplified by a corporate loan NPA recognition and legacy write-offs, and quarterly profitability stayed uneven.

Management’s near-term marker is its stated target of close to 3,000 crore of disbursements in the coming year. Longer term, management reiterated an ambition of 10,000 crore AUM by 2028 to 2029, and indicated it is exploring an equity raise structure of up to 400 crore in tranches linked to milestones.

For investors, the next few quarters will need to answer two questions clearly: whether GNPA trends improve as the co-lending denominator disappears and new-book underwriting seasons, and whether the heavy digital and AI spend starts translating into visible operating leverage and steadier ROA.