Muthoot Capital Q4 FY26: Higher yields, stable capital, and a deliberate shift away from co-lending

Muthoot Capital Services Limited is a listed NBFC under the Muthoot Pappachan Group, focused on vehicle and retail lending. In Q4 FY26 and across FY26, the company’s operating story was shaped by three themes: steady balance sheet expansion, a visible change in portfolio mix away from co-lending, and continued work on asset quality and provisioning.

For the quarter ended March 31, 2026, Muthoot Capital reported profit after tax of ₹5.02 crore. For the full year, PAT stood at ₹12.36 crore. Disbursements were ₹569 crore in Q4 and ₹2,349 crore for FY26. AUM including the managed book was reported at ₹3,441 crore, while on-balance sheet AUM was ₹3,350.5 crore at March 2026. The company closed the year with a debt equity ratio of 4.94x and a capital adequacy ratio around the low 20s, reported as 22.04 and also shown at 22.7 percent for Q4.

A quarter defined by mix change and pricing discipline

The most important operating shift in the presentation is the changing balance between MCSL’s own book and the co-lending book. The core MCSL portfolio grew 30 percent year on year to ₹2,775.36 crore at March 2026 from ₹2,118.18 crore at March 2025. In contrast, the co-lending portfolio declined 37 percent year on year to ₹595.89 crore from ₹939.58 crore. This is not a small tactical tweak. It is a rebalancing of how the company wants to deploy capital and manage risk.

Retail disbursements also show the same direction. Across recent quarters, MCSL’s share of total disbursement rose to 89.51 percent in Q4 FY26, while co-lending fell to 10.49 percent. This matters because it changes the economics of the business. It also changes how credit and collections performance flows through the reported numbers.

On pricing, the two-wheeler blended rate ended Q4 FY26 at 20.60 percent, after moving through 20.13 percent in Q1 FY26, 19.64 percent in Q2, and 21.10 percent in Q3. The retail loan yield for the quarter was reported at 21.02 percent. On the cost side, the presentation’s quarterly trend shows cost at 6.98 percent in Q4 FY26, down from 7.18 percent in Q1 and 7.20 percent in Q2, but above 6.64 percent in Q3. The spread picture therefore looks stable, with yield holding up even as borrowing costs fluctuate.

AUM movement across the year was steady, with a modest pullback in the last quarter: ₹3,057.76 crore at Q4 FY25, ₹3,238.74 crore at Q1 FY26, ₹3,283.66 crore at Q2, ₹3,398.95 crore at Q3, and ₹3,350.50 crore at Q4. The company also reported a Q4 FY26 balance sheet size of ₹4,056 crore and total borrowings of ₹3,421 crore.

Product mix tilts toward two-wheelers, while CV scales up

On the book composition, two-wheelers remain the anchor, but commercial vehicles expanded meaningfully in FY26 disbursements. The FY25 versus FY26 product table shows MCSL two-wheeler disbursements rising 3 percent to ₹1,660.62 crore, while co-lending two-wheeler disbursements fell sharply 62 percent to ₹304.36 crore. CV disbursements increased from ₹64.39 crore to ₹213.47 crore, up 232 percent. Loyalty and personal loans nearly doubled from ₹30.19 crore to ₹56.38 crore.

At the portfolio level, the Q4 FY26 product wise AUM total is ₹3,350.50 crore. Within that, the two-wheeler portfolio is shown as ₹2,870.4 crore. Used four-wheeler is ₹155.03 crore, three-wheeler is ₹5.95 crore, loyalty and personal loan is ₹55.89 crore, and commercial vehicle is ₹237.36 crore. Corporate loan and others is shown as ₹25.85 crore. The company also flags AUM growth of 10 percent year on year and a 1 percent decline quarter on quarter for this product view.

Distribution mix reinforces the same strategy. In the segment wise disbursement table, dealer sourcing rose from ₹1,474.92 crore in FY25 to ₹1,692.45 crore in FY26. GRDC also increased from ₹295.44 crore to ₹340.30 crore. Co-lending declined from ₹833.74 crore to ₹304.36 crore. Deccan fell to ₹4.44 crore from ₹16.98 crore.

This mix change is also supported by a clear statement in the partnerships section: new disbursements under co-lending arrangements with Wheels EMI, Manba, and CreditWise Capital have been stopped, though collections will continue as per existing schedules. That single line explains much of the year-on-year co-lending shrinkage and suggests the company is prioritizing control over underwriting and customer relationships, even if it changes near-term growth optics.

Asset quality work continues, with provisioning conservatism visible

Credit metrics remain a central part of the FY26 narrative. The company reported GNPA of 6.41 percent on POS basis and 6.96 percent including accrued. NNPA was 3.50 percent on POS basis and 4.12 percent including accrued. The presentation also notes that including the managed book, GNPA and NNPA were 5.58 percent and 2.72 percent.

The portfolio analysis page shows regular assets at ₹3,117.40 crore, representing 93.04 percent, and NPA at ₹233.09 crore, representing 6.96 percent. Segment wise regularity is high across vehicle categories, while corporate loan and others stands out with regular at 39.23 percent and NPA at 60.77 percent. Source wise, dealer and alternate channels show NPA shares of 8.03 percent and 7.80 percent respectively. Co-lending is shown at 100 percent regular and 0 percent NPA in that view.

The stage wise AUM and ECL summary adds detail under Ind AS. Total POS is ₹3,284.35 crore with interest accrual of ₹66.15 crore, resulting in closing assets of ₹3,350.50 crore. Total provisions are ₹119.02 crore, leading to net assets of ₹3,231.48 crore. Stage 3 shows POS of ₹192.07 crore and interest accrual of ₹21.99 crore, with provisions of ₹92.26 crore.

Provisioning conservatism is explicit in the ECL versus IRACP table. At March 2026, total ECL provision is ₹119.01 crore versus IRACP provision of ₹67.44 crore, an excess of ₹51.57 crore. For S3 hypothecation loans, ECL is ₹97.45 crore versus IRACP of ₹53.22 crore.

Write-offs were also disclosed with granularity. The table shows a total of 5,750 accounts with POS of ₹12,34,88,153, split between fraud incident cases and NPA irrecoverable accounts. The P and L impact table shows total impairment expenses of ₹12,34,88,153, provision reversal of ₹6,17,44,077, income reversal of ₹1,27,09,754, and P and L impact of ₹7,44,53,830.

Collections and repayment behavior are another stabilizer. Across FY26, the mix of collections tilted further toward NACH. NACH share rose from 62 percent in Q1 FY26 to 66 percent in Q4 FY26, while cash fell to 34 percent. In Q4 FY26, NACH collections were ₹242.67 crore and cash was ₹123.70 crore. This shift suggests better predictability and lower friction in collections, which becomes more important when the company runs a large two-wheeler book with high account volumes.

Funding, liquidity, and balance sheet resilience

Muthoot Capital ended March 2026 with total borrowings of ₹3,420.68 crore. The borrowing profile table shows the mix changing over the year. NCD and MLD outstanding was ₹1,223.27 crore at March 2026 at 9.73 percent, down from ₹1,392.56 crore at December 2025. Banks and FI borrowings were ₹1,161.10 crore at 9.44 percent. PTC rose to ₹757.53 crore at 9.72 percent. Public deposits were ₹78.68 crore at 8.64 percent, and CP was ₹173.90 crore at 8.80 percent.

Overall average borrowing rate improved slightly versus March 2025: 9.96 percent at March 2025, 9.68 percent at December 2025, and 9.63 percent at March 2026. The company also reported all-in cost at 10.30 percent on total borrowings as of March 31, 2026, with short term all-in cost at 9.75 percent and long term all-in cost at 10.45 percent.

Sanctions provide additional headroom. During FY25-26, the company received total sanctions of ₹865 crore, with ₹340 crore unutilized. ₹300 crore came from PSU banks. This matters because the AUM profile is still growing year on year, and operating flexibility in funding reduces the need for expensive incremental borrowing at short notice.

Liquidity coverage ratio remained above 100 percent throughout the period shown, ending at 129 percent in March 2026. The low point in the series is May 2025 at 105.41 percent, with recovery to 117 percent in December 2025 and then 129 percent in March 2026.

Public deposits are still a small part of the mix but growing. Balance as on March 31, 2026 is shown around ₹79 to ₹80 crore, with the table total at ₹79.83 crore. The company reports 90 percent year-on-year deposit growth and Q4 FY26 new deposits collection of ₹16.21 crore, with renewals of ₹1.77 crore.

The presentation also highlights the company’s ratings, with CRISIL A+ with Positive outlook and ICRA A+ with Stable outlook across instruments. An ESG impact score of 73 is disclosed with sub-scores for environment, social, and governance.

What to watch from here

Muthoot Capital’s Q4 FY26 story is not just about a single quarter’s profit. It is about the shape of the balance sheet the company is building. The company grew its own portfolio while shrinking co-lending exposure, and the disbursement composition shows that decision is already visible in the numbers. Two-wheeler remains the scale engine, but CV growth in FY26 disbursements signals an attempt to diversify within vehicle finance.

Asset quality remains an active area. GNPA at 6.41 percent on POS basis and provisioning detail suggests the company is carrying meaningful credit costs, but it is also maintaining a higher ECL provision than IRACP, which points to a conservative stance under Ind AS. Collections shifting further toward NACH is a practical positive because it can reduce volatility in monthly cash flows.

Funding trends are supportive. Total borrowing costs moved slightly lower year on year, the funding mix is diversified across banks, NCDs and PTC, and liquidity coverage strengthened into March 2026. With capital adequacy staying around 22 percent and net worth rising to ₹670.4 crore by Q4 FY26, the company has room to pursue measured growth.

The key investor takeaway is that FY26 looks like a year of disciplined execution rather than aggressive expansion. Growth continues, but the company appears to be choosing where it wants to grow, tightening the operating model, and keeping liquidity and capital metrics stable. If this discipline persists, the next phase will be judged on whether asset quality improves as the book seasons and whether returns strengthen as the portfolio mix becomes more owned and less managed.