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Muthoot Finance Receives Hold Rating From Geojit
- Priya Sharma
- 2 days ago
- 4 min read
Muthoot Finance has received a “Hold” recommendation from brokerage firm Geojit Financial Services, with a target price of ₹3,478 per share. The brokerage highlighted the company’s strong operational performance, robust growth in its gold loan portfolio, and improving asset quality as key factors supporting its long-term outlook.
Despite the positive business momentum, analysts believe the stock is currently trading close to its fair value. Because of this, the brokerage recommends that investors maintain their existing positions rather than aggressively accumulating the stock at current levels.
Muthoot Finance continues to benefit from strong demand for gold loans in India, which has helped the company expand its lending operations and strengthen its financial performance.
Strong Growth in Assets Under Management
One of the major highlights of the company’s recent performance is the significant growth in its assets under management (AUM).
In the third quarter of FY26, Muthoot Finance reported consolidated AUM of ₹1,64,720 crore, representing a 48 percent year-on-year increase. This strong growth reflects the increasing demand for gold-backed loans and the company’s ability to scale its lending business.
The gold loan segment remains the primary driver of the company’s overall growth and continues to contribute the majority of its loan portfolio.
The steady expansion in AUM demonstrates the company’s strong market presence and the growing popularity of gold loans among borrowers.
Gold Loan Portfolio Remains the Core Business
Gold loans remain the backbone of Muthoot Finance’s operations. During the quarter, the company’s gold loan portfolio increased by 51 percent year-on-year to ₹1,47,552 crore.
This segment accounts for nearly 89 percent of the company’s total AUM, highlighting its central role in the company’s business strategy.
Gold loans have become an attractive financing option for borrowers because they offer quick disbursement, minimal documentation, and flexible repayment options. Customers can pledge their gold jewelry as collateral and receive funds quickly without selling their assets.
The continued rise in gold prices and increasing financial requirements among households have further boosted demand for gold loans.
Upward Revision in Gold Loan Growth Guidance
Encouraged by the strong demand and steady business expansion, Muthoot Finance has revised its gold loan growth guidance for FY26 to approximately 45 percent.
This revision indicates management’s confidence in the company’s ability to sustain high growth levels in the coming quarters.
The strong demand for gold-backed credit, especially in semi-urban and rural areas, is expected to support this growth momentum. The company’s extensive branch network and established brand reputation also provide a competitive advantage in attracting new customers.
Significant Profit Growth in FY26
Muthoot Finance has also reported impressive growth in profitability during the current financial year.
For the first nine months of FY26, the company recorded a standalone profit of ₹7,048 crore, representing a 91 percent increase compared with the same period last year.
The strong rise in profits has been driven by several factors, including higher loan disbursements, stable lending yields, and improved operational efficiency.
The company’s ability to maintain strong interest margins while expanding its loan portfolio has played a crucial role in boosting its earnings.
Stable Lending Yields Strengthen Earnings
Another key factor supporting the company’s financial performance is the stability of its lending yields.
During Q3 FY26, the gold loan yield stood at 20.34 percent, supported partly by recoveries from previously stressed loans.
However, analysts expect yields to normalize within the range of 18.5 percent to 19 percent in the coming quarters. Even at these levels, yields remain attractive and support the company’s profitability.
Stable yields are essential for maintaining strong interest income and ensuring consistent revenue growth.
Improvement in Asset Quality
Muthoot Finance has also shown significant improvement in asset quality. The Stage III ratio in the gold loan portfolio declined to 1.58 percent in Q3 FY26, compared with 4.22 percent in the same quarter of the previous year.
This improvement reflects stronger repayment behavior from customers and effective credit management by the company.
The company has also introduced flexible repayment options that encourage borrowers to regularize their loans. These measures have helped reduce the level of non-performing assets and strengthen the overall health of the loan portfolio.
Strong Collateral Provides Safety
Gold-backed lending provides a strong layer of protection for the company’s loan portfolio. Muthoot Finance currently holds around 205 tonnes of gold as collateral against its loans.
The company maintains an average loan-to-value ratio of approximately 57 percent, which provides a comfortable safety margin in case of fluctuations in gold prices.
This conservative lending approach ensures that the value of the pledged gold remains significantly higher than the loan amount, reducing the risk of potential losses.
The brokerage noted that the company maintains a margin of safety of around 43 percent, which further strengthens its risk management framework.
Investment Outlook
Geojit Financial Services believes that Muthoot Finance remains fundamentally strong due to its leadership in the gold loan industry and its consistent financial performance.
However, considering the current valuation levels, the brokerage has maintained a Hold recommendation with a target price of ₹3,478, based on 2.4 times FY28 estimated book value per share.
Existing investors may continue to hold the stock, while new investors may consider waiting for better entry opportunities.
Conclusion
Muthoot Finance continues to deliver strong financial performance driven by rapid growth in its gold loan portfolio, stable yields, and improving asset quality. The company’s disciplined lending practices and strong collateral backing provide a solid foundation for long-term growth.
While the stock may have limited upside in the short term due to current valuation levels, the company’s dominant position in the gold loan market and strong operational fundamentals make it a key player in India’s NBFC sector.
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