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Informist, Tuesday, May 13, 2025

By Kabir Sharma

MUMBAI – A sharp rise in gold loan disbursements and easing competitive pressure in unsecured lending are likely to lift Muthoot Finance Ltd.'s profit in the March quarter. The sharp rise in gold prices has supported disbursement volumes, while easing competition in unsecured lending has helped Muthoot Finance, which is focused on gold loans, reclaim market share, brokerages said.

The net profit of the non-banking finance company is seen rising nearly 50% on year to INR 15.71 billion, according to the average of estimates from eight brokerages. On a sequential basis, the bottom line is seen rising 15%. The estimates for net profit are in the range of INR 14.27 billion to INR 19.86 billion. 

The March quarter earnings follow the strong December quarter for the company, when it reported a net profit of INR 13.63 billion, up 33% from the previous year and 9% over the previous quarter. That growth was fuelled by assets under management hitting an all-time high, a trend that has continued into the March quarter, brokerages said.

A surge in the gold loan portfolio is the main growth engine this quarter for the company, brokerages. IDBI Capital credits the momentum to an 18% quarter-on-quarter increase in gold prices, alongside softer competition. Equirus Securities expects a strong loan growth of about 40% on year on the back of the increase in gold prices, moderation in competitive intensity and tighter underwriting norms in unsecured loans.  

Muthoot Finance's standalone total loan assets under management were at a record high of INR 974.87 billion as on Dec. 31, up 37% from the previous year. Its gold loan assets rose by 34% year-on-year to INR 929.64 billion at the end of December.

While demand for gold loans remains the main growth engine, brokerages expect strong operating leverage to further lift earnings. IDBI Capital projects a 40% on-year rise in net interest income, a 52% increase in pre-provision operating profit, and a 41% increase in profit after tax. 

The company's net interest income is expected to rise 37% on year and 7% on quarter to INR 29.20 billion in the reporting quarter, according to the average of estimates from brokerages. The estimates for net interest income range from INR 28.36 billion to INR 30.07 billion. 

Muthoot Finance's total revenue from operations in Oct-Dec rose 40% on year to INR 44.23 billion, with interest income contributing INR 43.69 billion.

On margins, Elara Securities has projected a 366 basis point expansion on quarter, while Kotak Institutional Equities expects a slight compression in net interest margin. The net interest margin was at 11.60% in the December quarter.

Provisions are expected to remain elevated, primarily due to the non-gold portfolio, and more particularly due to the stress in microfinance and vehicle loans. Elara anticipates a 162 bps on-quarter increase in provisions, though the "asset quality is expected to remain stable" for the gold loan book. 

On Tuesday, Muthoot Finance's shares ended at INR 2,216.50 on the National Stock Exchange, down 1.8%. 

The gold financier will announce its quarterly earnings on Wednesday. 

Following are the Jan-Mar earnings estimates for Muthoot Finance based on reports from eight brokerage firms in descending order of the estimate of net profit:

End

Edited by Saji George Titus

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