Digant Haria

Muthoot Finance Q2 - When rising NPAs do not signal bad news For lending companies, the most dreaded acronym is NPA. Rising NPAs generally imply lower future growth & profits. The only exception to this is gold loans due to the technicalities involved in the product. Let's understand this from what happened in Muthoot Finance's Q2 results - NPAs increased sharply, almost doubling in just one quarter. Why did the NPAs increase? Prior to 1st April 2026, Muthoot used to offer 12 month bullet repayment loans. Thus, an account would become NPA only if the customer doesn't pay anything for 15 months. In order to comply with new RBI guidelines on LTVs, most gold loan NBFCs including Muthoot launched new products such as monthly repayment loans, 3 month bullet repayment loans, 6 month bullet repayment loans from 1st April 2026. These loans can become NPA in the 4th, 7th, 10th month respectively if the customer doesn't pay regularly (which is the case with most NBFC type customers). The current increase in NPAs for Muthoot Finance are a result of the above changes. Comparing today's NPA with previous years is a meaningless exercise, because most current NPAs are technical in nature (and do not signify a 15 month delay in repayment). In all likelihood, the NPAs will increase further in the coming quarters as the new products season. Do these NPAs impact Muthoot's profits? NPAs are a problem only if they lead to losses in future. In case of Muthoot, they mentioned in the concall that the LTV on their Stage 2 and Stage 3 portfolio is less than 68%, which means that the value of the gold it holds against these loans is 50% higher than the outstanding dues. Thus, the potential of loss on these loans is extremely low. Surely, there is a near term impact in terms of interest income reversal and provisioning. But that will get reversed in the subsequent quarters when the customers come and repay their loans. The analyst and investor community may take some time to come to terms with this new reality of the gold loan business -- optically high NPAs, but no meaningful impact on long term profitability. Q2 performance (beyond NPA) Muthoot Finance's quarterly performance was characterised by strong loan growth, decent tonnage growth, good improvement in lending yields, and sharp rebound in profitability. Beyond the numbers, this quarterly performance also put an end to some negative narratives that are prevalent in the market Narrative: Muthoot is the biggest loser in this hypercompetitive market Fact: Muthoot has not only grown its tonnage & loan growth, but has also been able to improve its lending yields. Narrative: Muthoot will report zero profit growth in FY27 Fact: Despite the high base of FY26, Muthoot has been able to grow its profits in high double digits. It seems to be on track to report 15%+ growth in profits for FY27 vs. analyst expectation of 0%. It is an ideal set-up for negativity to end and positivity to start. Muthoot is India's largest gold loan NBFC and its share price has corrected by ~40% since Feb26 despite delivering three good quarters in a row. It is trading at 1.9x on FY27 book (30% discount to long term average) despite growing at 20%+ and reporting best-in-India RoEs of 25%+ Due to its long history, Muthoot Finance navigated through multiple regulatory & gold price cycles. Thanks to its relentless focus on gold appraisal and deep customer connect, it has always managed to come out with negligible credit losses. There is no reason to believe that things will not be the same in this cycle. The only risk is if gold prices crack another 15-20% from current oversold levels of $3900. Note: 100% of this has been written by human intelligence

Is Piramal's gold loan commentary even worth it? Twitter has gone gaga over Piramal's statement on its Q2FY27 concall that "23% of all gold loans have gone to customers who have defaulted somewhere else". While this data may or may not be true, anyone giving credence to this should understand these two things: 1) Gold loans have always been a "no questions asked loan" i.e. you give me gold, i do your KYC, check the purity of gold, and lend you the money". I am not concerned with your business activities or your cashflows or your other loans. Even historically, 10-20% of customers would have been defaulters somewhere. Just that now credit bureau data is available, it can be presented in a sensational manner. 2) Piramal's comments seem more like that of an analyst, who just looks at data and tries to comment. Their business experience in gold loans is just two quarters. Their loan book is around 70crs, yes only 70crs (many old branches of Muthoot or IIFL may have more AUM than entire of Piramal's gold as of today) The competition narrative around gold loans also seems to be overblown. Cos like IIFL & FedFina who have reported earnings, have been able to grow well and defend their yields too. Muthoot Finance is trading at 8x earnings and probably 2.0x book (cheapest in history), making it the cheapest large cap in India (and growing at 18%+)

Gold - tired or getting ready for second run? The recent volatility in gold has unnerved many investors. Read on to understand: 1) Reasons for the recent correction & volatility 2) Reasons why bull market can re-start towards end of 2026 3) Aawakening of the wester investor 4) How gold helps your family stay rich over the decades greenedgewealth.com/gold-set…

Northern Arc - Overhang over? Big block (13%) got exchanged today morning. Accion & Fidelity private equity were looking to sell since long. 1) At 306, stock is trading at 1.1x FY27 book 2) Growth of 20%+ & RoE of 14%+ possible 3) MFI & Fintech cycle is getting stronger

Letter to our investors (June 2026) 1) Dark clouds over Indian economy are clearing 2) Next 12 months could see a good rally 3) Macros, stocks, gold - how are you positioned? greenedgewealth.com/India-st…

Investing Eleven Conclave 2.0 Excited to share that I would be presenting two ideas tomorrow - one in the precision engineering space, other in electricity space learn.alphawealth.co.in/lear…

India story - Calm inside, storm outside 1) Internal variables are improving 2) External variables deteriorated, but can soon stabilize 3) Navigating the risks & opportunities in such situation greenedgewealth.com/India-st…

Northern Arc - Good performance not rewarded? While this is story of many smallcaps, Northern Arc warrants a deeper look 1) Analysis of Q3FY26 results 2) Re-cap of the long term thesis greenedgewealth.com/Northern…

Tata Capital IPO Price band = 310 to 326 per share. At 326, it will trade at 3.2x on P/B (post money), which is ~5% discount to HDBs valuation. Tata Cap is also "jack of all & master of none" NBFC. Not much to gain for IPO investors and 55% loss for unlisted mkt investors.

Where is the NBFC upcycle? 1) Housing Finance 2) Vehicle Finance 3) Gold Finance 4) Micro Finance 5) Consumer Finance A deep-dive into 5 sub-segments and 45 NBFCs youtube.com/watch?v=iLNQMofz…

Where is the NBFC upcycle? 1) Housing Finance 2) Vehicle Finance 3) Gold Finance 4) Micro Finance 5) Consumer Finance A deep-dive into 5 sub-segments and 45 NBFCs youtube.com/watch?v=2M_ztxjZ…

JM Financial Q1 - Walking the talk Focused business 1) Strong traction in capital markets 2) Expansion in wealth mgmt 3) Scale-up in private credit 4) Stake sale in HFC at ~3.2x book Old business 1) NPA pain over, recovery started Interesting times ahead. Read our past notes.

Discussion on NBFCs GreenEdge Wealth on CNBC TV18's new show "Finding Alpha" with @Nigel__DSouza Discussion on housing fin, CV fin, gold fin, consumer fin, micro lending. Below is the link to the whole conversation youtu.be/MNlcYv7kUX8?si=qPyF…

Northern Arc - Riding the NBFC wave The business cycle for NBFCs is turning (+ve). A deep dive into an NBFC which can give you an exposure to 100s of other NBFCs and millions of customers. greenedgewealth.com/Northern…

HDB Financial - Missing the HDFC magic Private market investors are shocked to discover the valuations have corrected from 5.5x book to 3.5x book in the IPO Read on to find out the correct valuation for HDB greenedgewealth.com/HDB-Fina…

Microfinance - This time is different! When Brahma (creator) and Vishnu (preserver) are disappointed, what will is take to turnaround? Probably, its time for Mahesh (destroyer) to start the dance of creative destruction greenedgewealth.com/Microfin…

JM Financial - Entering the fast lane A deep dive on 12 months of transformation and what lies ahead: 1) End of a pain cycle 2) Improved capital allocation 3) Accelerated growth in Wealth, AMC & HFC 4) Rising dividends and undemanding valuations greenedgewealth.com/JM-Finan…

Microfinance - How deep is the pain? Stage 1: Accept the problem (Jun'24) Stage 2: Growth decelerates, customers deleverage & provide for bad asset (Up to Mar'25?) Stage 3: Good cycle starts (Jun'25?), strong players bounce back youtube.com/watch?v=ZpLwkwCN… @kothariabhishek

Metals & Mining Considered "un-investible" in the past decade, these sectors are now showing promise! Take a deep dive into each of them 1) Coal 2) Oil & Gas 3) Iron Ore & Manganese Ore 4) Aluminium & Copper 5) Gold & Silver youtu.be/osKVi2JSIzQ?si=svlU…

Gold loans - Strong cycle, but few beneficiaries? Despite the best demand environment in many years, why are only 2 players able to benefit from it? List 1: PSU, Pvt banks, Fintechs, Manappuram, IIFL & CSB Bank List 2: Muthoot Finance, Muthoot Fincrop tinyurl.com/4xp9wp4d