- JPMorgan initiates overweight ratings on IIFL, Manappuram, and Muthoot Finance gold lenders
- Gold loans' share of system credit could rise to 10% in five years from current 5%
- Gold loans have lowest bad-loan ratio at 0.2%, better than mortgages and unsecured loans
JPMorgan has initiated coverage on India's three listed gold-loan lenders, IIFL Finance, Manappuram Finance and Muthoot Finance, with an "overweight" rating on all three, arguing that the sector's growth phase is only beginning despite a sharp run-up in recent years.
In a note titled "India Gold Lenders: The Credit Gold Rush," the brokerage said gold loans' share of system credit could rise to around 10% over the next five years from 5% currently, driven by a "multi-year cultural shift" as gold moves from a family heirloom to a monetisable asset. It pointed out that just around 11% of gold held by bottom-60% households is currently pledged against loans, leaving a long runway for lenders.
Here are JPMorgan's target prices:
- IIFL Finance: "Overweight", target price of Rs 750, implying around 18% upside. JPMorgan called it a "re-rating play on turnaround."
- Manappuram Finance: "Overweight", target price of Rs 395, implying around 13% upside, citing the Bain Capital-backed management transition.
- Muthoot Finance: "Overweight", target price of Rs 3,400, implying around 15% upside, with the brokerage flagging Muthoot's book value compounding as the key long-term driver.
NBFC Gold Lenders And Their Stock Comparision
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JPMorgan named IIFL Finance its top pick in the space, while flagging that Muthoot's profitability has likely peaked for now but should normalise at industry-leading levels. It warned that a sharp decline in gold prices and intensifying competition from banks remain key risks to the sector.
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Why JPM Is Bullish On Gold Loan Business
JPMorgan's optimism rests on a simple substitution story: households and small businesses are increasingly choosing gold loans over personal and business loans. The brokerage noted that gold loans' share of retail credit disbursements has jumped to 41% in FY26 from 18% in FY23, coming largely at the expense of unsecured personal and small business loans, whose share fell to 41% from 55% over the same period. The shift is being driven by a 300-600 basis point rate gap, gold loans cost far less than unsecured credit, along with rising financial literacy among borrowers and banks' reduced appetite for unsecured lending after recent stress cycles.
Why JPM thinks gold loan business is a serious opportunity in India
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The brokerage also flagged that gold loans carry the lowest bad-loan ratio among retail credit categories, at around 0.2% versus 0.5-0.6% for mortgages and auto loans, and above 1% for unsecured products. It said this asset quality has held up even through sharp swings in gold prices, since collateral coverage and reasonable loan-to-value ratios of 55-65% offer a wide margin of safety. Recent regulatory changes on lending against gold, effective from April 2026, have raised headline loan-to-value caps in a tiered manner while tightening how collateral is valued, a shift JPMorgan expects to be broadly neutral for established gold-NBFCs, given they already operate at conservative LTVs.
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