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Informist, Monday, Aug. 17, 2026

 

--Fitch affirms Muthoot Fin long-term foreign currency issuer rtg at 'BB+'

 

NEW DELHI – Fitch Ratings has affirmed Muthoot Finance Ltd.'s long-term foreign-currency and local-currency issuer default ratings at "BB+", with a "stable" outlook. The rating reflects the Kerala-based gold financier's leadership in gold jewellery-backed loans and its strong presence in rural and semi-urban markets in India. The liquid gold collateral helps to support healthy asset quality. Fitch said the ratings reflect the company's experienced management, greater regulatory clarity on gold-backed lending, healthy profitability, a generally diversified funding mix, and a liquidity profile supported by short-tenor loans.

 

"Gold-backed loans have expanded faster in recent years as an alternative source of secured retail credit amid tightening industry underwriting standards for unsecured loans," Fitch said. "Higher gold prices have also supported growth, and we believe collateral value buffers and other mitigating measures remain sufficient for rated lenders with established risk controls." The company's loan assets under management were at INR 1.72 trillion as on Jun. 30, up 43%. At present, the non-bank lender has a total of 7,654 branch offices spread across India with an average gold loan assets under management per branch of INR 324.7 million as on Jun. 30, up 40% on year.

 

Fitch expects gold-backed lending, a low-risk segment, to continue dominating the gold financier's portfolio over the medium term. The segment accounted for 90% of the company's consolidated gross loans as of the end of June. Fitch said Muthoot Finance's established franchise and business practices support strong customer retention. Other products such as microfinance, affordable housing and vehicle loans provide some diversification, but the agency does not expect Muthoot Finance to expand aggressively in these segments over the medium term.

 

"MFL's (Muthoot Finance's) focus on gold-backed loans keeps credit costs low, supported by recoveries from the underlying gold collateral," Fitch said. "Credit costs stood at 0.3% annualised at the end of June, against a non-performing loan ratio of 2.2%. The regulatory loan-to-value cap on smaller-ticket gold loans was recently raised to 85% from 75%, but we expect Muthoot Finance to maintain a lower aggregate loan-to-value to manage collateral price risk."

 

The rating agency does not expect a further rise in leverage in the medium term, as internal capital generation should remain sufficient to support growth. Muthoot Finance's debt-to-tangible equity ratio rose to 3.8 times at the end of the financial year 2025-26 (Apr-Mar) from 3.3 times at the end of FY25 on strong loan growth. Nonetheless, leverage remains controlled and provides an acceptable buffer against unforeseen losses.

 

Fitch said a downgrade could be triggered by a significant deterioration in the operating environment or a sharp fall in asset quality and gold collateral values that hit the non-banking financial company's profitability and capitalisation. The rating agency also flagged risks from aggressive expansion into new lending segments or a loosening of underwriting standards, intense competition that erodes its gold loan franchise, and excessive operational losses. A weakening of liquidity coverage, reduced funding access, or debt-to-tangible equity rising above 4.5 times for a sustained period could also be negative for the ratings.

 

Fitch said an upgrade could be driven by a significantly improved operating environment and substantial enhancements in the business and risk profiles. This would include a lower impaired loan ratio while maintaining adequate profitability, stable capitalisation, and a stronger funding and liquidity profile. 

 

The ratings on the non-banking finance company's dollar medium-term note programme and foreign-currency senior secured debt are at the same level as its long-term foreign-currency issuer default rating, according to the rating agency. "The ratings on Muthoot Finance's dollar MTN (medium-term note) programme and senior secured debt are sensitive to its long-term foreign-currency issuer default rating," Fitch said. "Any action on the long-term foreign-currency issuer default rating will drive similar action on the MTN and senior secured debt ratings."

 

For the June quarter, the gold financier reported a net profit of INR 25.50 billion, up nearly 25% on year. Sequentially, the net profit was down 17.4%. Monday, its shares ended at INR 2,888.50 on the National Stock Exchange, up 1.6% from Friday.  End

 

Reported by Vaishali Tyagi

Edited by Himanshi Gupta

 

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