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Informist, Monday, Oct. 27, 2025

By Sagar Sen

NEW DELHI – Rising gold prices and an expanding loan book are expected to help Muthoot Finance Ltd. report strong on-year growth in net profit as well as net interest income for the September quarter. The non-banking finance company's net profit is projected to rise 55% on year to INR 19.44 billion in the reporting quarter, according to the average of estimates from six brokerages.

The bottom line is, however, expected to shrink 5% from the trailing quarter. The company is yet to announce the date on which it will declare the September quarter results. The highest estimate for net profit is INR 21.6 billion from Nuvama Wealth Management Ltd. while the lowest estimate is INR 15.89 billion from Nirmal Bang Equities Pvt. Ltd.

Spot price of gold as on Sept. 30 was up 53% on year, while it was up 20% from Jun. 30. Analysts expect the incessant rally in gold price to provide growth tailwind for Muthoot Finance. Any increase in gold prices allows borrowers to borrow higher loan amounts or avail 'top-up' loan facility against the gold already available with the lender as collateral. As a result, the company's loan portfolio expands and helps revenue.

Analysts expect robust on-year growth in the lender's assets under management, which were INR 1.20 trillion as on Jun. 30. Overall gold loan assets had risen 40% on year to INR 1.13 trillion. India's largest gold financing company held over 209 tonnes of gold as security as on Jun. 30, up marginally from March and from 194 tonnes a year ago. The stock is up 30% since the company announced its earnings for the June quarter. "Gold loan NBFCs are expected to see strong loan growth and lower credit costs due to elevated gold prices during Jul-Sep. Tonnage and client additions are expected to remain strong for Muthoot Finance," Nirmal Bang Equities said in a report.

Muthoot Finance's net interest income is expected to rise to INR 36.58 billion in the September quarter, up 45% on year and 5.3% on quarter. The highest estimate for net interest income is INR 41.82 billion from YES Securities (India) Ltd, while the lowest estimate is INR 31.06 billion from brokerage Nirmal Bang.

Analysts expect margins to shrink slightly from the trailing quarter as well as from last year as lending yields moderated due to the repo rate cuts by the Reserve Bank of India's Monetary Policy Committee. "Net interest margin compression is likely during the quarter as lending yields soften, with companies expected to pass on cost of fund reductions to customers to sustain growth momentum with neutral impact on spreads," Nirmal Bang said in its report. The RBI's rate-setting panel has cut the benchmark repo rate by 100 basis points so far in 2025.

Brokerages will keep an eye on the company's commentary on gold loan growth and margin guidance. The gold financier is not expected to face any asset quality concerns during the quarter. Asset quality had improved sharply in the June quarter as gross stage III asset ratio fell to 2.58% as on Jun. 30 from 3.41% a quarter ago and 3.98% a year ago. Net stage III asset ratio declined to 2.10% at June-end, from 2.79% as on Mar. 31 and 3.48% a year ago. Stage III assets of NBFCs refer to loans that have been overdue for more than 90 days.

Of the 11 brokerage reports on the lender available with Informist, eight have a 'buy' rating with an average target price of INR 2,546, with a high of INR 2,993 a share and a low of INR 1,627. Two brokerages have a 'hold' rating with an average target price of INR 2,645, while one brokerage has a 'sell' call with target price of INR 2,550.

Monday, shares of Muthoot Finance closed at INR 3,145.90 on the National Stock Exchange, down 0.5% from the previous session.

Following are the Jul-Sept earnings estimates for Muthoot Finance from six brokerages in descending order by the estimate of net profit:

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Edited by Ashish Shirke

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