Why Did Muthoot Capital Services Shares Crash 15% Despite 155% QoQ Increase in Net Profit?

Synopsis: Muthoot Capital shares crashed 15% despite 15% YoY NII growth, as profits fell 33% due to a sharp rise in impairment costs and higher provisioning buffers, impacting short-term profitability.

The shares of this company, which is a deposit-taking NBFC & part of Muthoot Group. The group has established a strong reputation and brand in India, particularly in South India. The company started its business in 2-wheeler financing in 1998 and since then expanded into financing used cars, consumer durables, and small-ticket business loans and had its shares crash about 15% despite reporting a positive result. Let us see why. 

With the market cap of Rs 368 crore, the shares of Muthoot Capital Services Ltd crashed about 15% and made a low at Rs 214.90, compared to its previous day closing price of Rs 251.80, and are trading at a PE of 29.6, whereas its industry PE is at 19.7. 

Q3 FY26 Result highlights 

The net interest income for the company stood at Rs 73.92 crore when compared to Rs 64.17 crore in Q3 FY25, up by about 15 per cent on a YoY basis and on a QoQ basis up by 2.4 per cent from Rs 72.16 crore in Q2 FY26.

When it comes to profitability, the company has gone from an Rs 12.69 crore profit in Q3 FY25 to an Rs 8.43 crore profit in Q3 FY26, down 33.5% YoY, and from Rs 3.31 crore in Q2 FY26, up about 155% QoQ. 

Why the fall in profits?

Profit for the company has decreased despite a rise in revenues, mainly due to a sharp rise in impairment and a cautious approach to sustaining provisions as a buffer. According to the company’s finances, the company has seen a sharp rise in impairment of financial instruments to Rs 11.21 crore for Q3 FY26 from Rs 1.6 crore for Q3 FY25. 

Apart from that, as a safety buffer for its credit-impaired assets as per its risk management policy ratified by the board, the company has maintained an additional overlay provision of Rs 36.54 crore. Such a move has improved its balance sheet position but has had a negative impact on its short-term profitability.

AUM and its product-wise contribution 

From a product perspective, there is a robust and well-diversified growth pattern in this respect, with overall AUM increasing progressively from Rs 2,382.71 crore in Q3 FY25 to Rs 3,398.95 crore in Q3 FY26, indicating a healthy overall growth rate. 

Also, the two-wheeler (TW) business continues to be a major contributor of around Rs 3,000 crore, signifying a stable demand in this sector, whereas commercial vehicle (CV) loans have seen a significant increase from around Rs 32 crore to a substantial Rs 186 crore currently, reconfirming a planned focus on secured loans in a higher category. Used vehicles (4W) and loans against property (L&L PL) also demonstrate a focus on secured offerings.

The comparison of AUM presents sharp growth on both QoQ and YoY; total AUM grew from Rs 3,283.66 crore in Q2 FY26 to Rs 3,398.95 crore in Q3 FY26, registering approx. 3.5% growth in QoQ, largely due to steady growth in retail loans. On YoY, AUM growth is sharp from Rs 2,832.71 crore in Q3 FY25 to Rs 3,398.95 crore in Q3 FY26, registering 20% growth, pointing towards positive business performance. 

The business has steadily maintained a stiff focus on retail loans, while a decline in corporate loans and others has been seen from Rs 30.78 crore to Rs 19.73 crore QoQ.

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