Muthoot Finance Q4 Review: Draft Norms Affecting LTV Remains A Key Concern, Says IDBI Capital, Maintains Hold

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IDBI Capital Report

Muthoot Finance Ltd. reported robust gold loan growth at 41% YoY vs 34% YoY (Q3 FY25) led by higher gold prices and new customer additions. Overall AUM growth improved to 43% YoY vs 37% YoY (Q3 FY25). Management maintained guidance at 15% gold loan growth for FY26. We expect 12% vs 15% CAGR (FY25-27E) gold loan growth. Net interest margins declined QoQ led by increase in cost of funds. Net interest income grew strongly by 36% YoY; pre-provision operating profit grew by 42% YoY led by lower operating expenses (up 26% YoY).

Provisions increased by two times YoY due to higher write offs; PAT grew by 43% YoY. Stage III loan assets declined to 3.4% vs 4.2% QoQ led by higher auctions.

We have revised estimates downwards led by lower AUM growth and maintain the ‘Hold’ rating with a new target price of Rs 2,390 (earlier Rs 2,416), valuing it at 2.4x price/book value FY27E.

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