Manappuram Finance, Muthoot Finance Shares In Focus: The gold loan market has long been built on a simple equation i.e. gold in the household, cash when needed. But that equation is changing. As gold loans become more mainstream and lenders expand beyond their traditional strongholds in the South, a new competitive battle is taking shape, one that could reshape who captures the next wave of growth.
Jefferies analysts Bhaskar Basu, Kamal Mulchandani and Prakhar Sharma, in their report “Assessing the Evolving Competitive Landscape”, said gold loan growth remains strong even as it normalises, while competition is set to intensify as new players sharply accelerate branch additions in FY27.
The brokerage retains its ‘Buy' rating on Manappuram Finance and sees a balanced risk-reward for Muthoot Finance, with gold prices remaining the biggest swing factor for the sector.
Gold Loans Are Becoming A Mainstream Credit Product
Retail loans against gold jewellery grew 80% year-on-year (YoY) and 18% from March 2026 as of July 2026, according to Jefferies. Including agricultural gold loans, gold-backed loans grew 50% YoY to Rs 18.6 trillion, accounting for 11% of retail credit.
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The growth has been supported by higher gold prices and a greater willingness among households to monetise their gold holdings.
But there is another shift beneath the headline numbers.
The share of prime and above customers rose from 43% in CY2022 to 52% in CY2025, suggesting gold loans are moving beyond their traditional distress- or need-based image and becoming a more mainstream borrowing product.
That widening customer base is making the market increasingly attractive to new entrants.
The Gold Rush Is Moving Beyond The South
Competition is building quickly. Gold loans from new entrants grew 2.5 times YoY to Rs 61.9 billion as of July 2026, taking their share of retail gold loans to 7.6%, up 50 basis points from March 2025.
Jefferies estimates new players could add around 3,700 branches in FY27, compared with roughly 1,500 in FY26. That would equal about 20% of the existing network of the top four gold NBFCs.
One player is moving particularly fast: Bajaj Finance is estimated to account for 35% of the new branch additions. Its gold loan AUM stood at Rs 21.2 billion in June 2026, while it plans to add around 110 branches a month and target gold AUM of Rs 300 billion by FY27.
But the competitive map is changing in another important way — geographically.
Tamil Nadu, Andhra Pradesh, Telangana and Karnataka still account for 70% of gold loans, but origination growth is increasingly coming from states such as Uttar Pradesh, Rajasthan and Gujarat.
New entrants are targeting North, West and Central India, including Maharashtra and Madhya Pradesh, where established players such as Muthoot Finance and Manappuram Finance are present but have historically been less dominant than in the South.
Incumbents Have Trust — But New Players Have Branches
For Muthoot Finance and Manappuram Finance, the competitive response is not simply about cutting interest rates.
Jefferies notes that both have expanded product variants across ticket sizes and LTVs, including balance-transfer products, to defend yields and retain customers.
So far, pricing pressure has remained limited. However, there are instances of lenders offering attractive rates to acquire customers in selected markets.
The cost structure of new branches could provide some breathing room to incumbents.
New branches typically carry an initial opex-to-AUM of 6–8%, compared with 2.5–3.7% for Muthoot Finance and Manappuram Finance. With new branches targeting break-even in around 18 months, Jefferies expects limited flexibility to aggressively cut gold loan rates in the near term.
Gold Prices Remain The Wild Card
For all the competitive noise, Jefferies believes the bigger driver of AUM growth remains the price of the underlying collateral: gold.
Gold prices have fallen 6% after a 15% rally in August, with higher US yields, hawkish Federal Reserve comments and stronger US payroll data weighing on prices.
Near term, elevated real yields and a stronger US dollar could remain drags. But Jefferies sees US fiscal concerns, dollar debasement and central-bank buying as medium-term bullish drivers.
For lenders, higher gold prices can increase the value of the collateral pool and, in turn, ease some competitive pressure.
Why Jefferies Prefers Manappuram Over Muthoot
Jefferies retains Buy on Manappuram Finance, arguing that its smaller base gives it greater scope for customer additions and AUM growth.
The brokerage expects NIMs to stabilise after improving in the June quarter, while operating leverage and lower credit costs could drive 2.8x PAT growth over FY26–28E, alongside improving returns.
At 1.5x FY1E book value, Jefferies considers Manappuram's valuation reasonable.
Muthoot Finance, meanwhile, remains the stronger gold-loan franchise and offers greater leverage to gold prices. But its larger base could make growth harder to sustain as competition intensifies, particularly if gold prices remain range-bound.
Jefferies therefore sees a more balanced risk-reward for Muthoot at 2.1x FY1E book value, around its five-year average, despite a 25% ROE.
The gold loan market is getting bigger — but the easy gold is no longer sitting in just one part of the country. The next battle will be fought branch by branch, customer by customer, and increasingly beyond the South.
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