Muthoot Finance Shares Hammered Despite Strong Q4 Results — Why The Gold Loan NBFC Is Under Pressure

Shares of Muthoot Finance have slipped nearly 7% in trade so far despite the company posting a surge in both total income and net profit in the March quarter.

The company on Wednesday reported a 43% uptick in the standalone total income for the fourth quarter at Rs 4,889 crore, as compared to Rs 3,418 crore in the year-ago period.

The gold loan issuer's bottomline was also up 42.7% at Rs 1,508 crore, as against Rs 1,056 crore in the same quarter last year.

Despite the positive results, the scrip was hammered in the trade on Thursday.

A closer look shows that the growth in the company's assets under management is largely driven by sharp surge in gold prices during the year so far.

Gold prices rallied by 37% in financial year 2025 and this has fueled a 43% growth in gold loans, according to Kotak Institutional Equities. This implies that a volatility or fall in the yellow metal's prices poses a risk to the margins and growth of the company.

The brokerage has also downgraded the stock from 'Add' to 'Reduce' taking a cautious stance. Further, the loan accounts and number of customers have only seen a 2% uptick in the quarter under review.

The pricing behavior is also to be closely monitored given entry of multiple new players in gold loans.

The maintained gold loan guidance of 15% for financial year 2026 is to be reviewed in the second quarter of financial year 2026. This is compared to the over 40% gold loan guidance in financial year 2025.

"Muthoot Finance’s new customer acquisition strategy hinges on branch expansion. The company opened only one branch in financial year 2025, following 115 branches in the previous year and 122 branches in financial year 2023," Kotak Institutional Equities said in a note.

The asset quality in microfinance institution portfolio has also worsened as loans in stage 3—a category for loans with significant deterioration—in MFI book inched up significantly by 207 basis points to 5%. The current loan-to-value is at 61%, and the maximum it can go up to is 62% to 63% LTV as per the new draft gold loan circular.

These regulatory headwinds paired with enhanced competition are key obstacles for the company, as per analysts. The entry of multiple new players increases probability of competitive pricing, calling for a cautious stance going ahead.

Muthoot Finance's shares fell as much as 7.74% during the day to Rs 2,085 apiece on the NSE. The scrip settled at Rs 2,108, down 6.72%, compared to 1.6% rise in the benchmark Nifty 50.

The stock has declined 1.43% in the last 12 months and 25.97% on a year-to-date basis.

All of the five analysts tracking the company have a 'buy' rating on the stock, according to Bloomberg data. The 12-month analysts' consensus target price on the stock is Rs 2,027.5, implying an upside of 34.7%.