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Time of India
23-05-2025
- Business
- Time of India
Why high gold prices are making both banks and borrowers smile
Soaring gold prices may have taken the yellow metal beyond the reach of millions, but for thousands who rely on it to run their small businesses or meet emergency financial needs, the surge has brought relief. The amount of gold auctioned by lenders due to defaults and compressed margin buffers decreased in the last fiscal year. Lenders attribute this trend to improved underwriting standards and better post-disbursal monitoring of loans, following a warning from the Reserve Bank of India (RBI) against malpractices. Additionally, the spurt in gold prices has helped borrowers, allowing them to leverage more by pledging less amount of housing gold. Impact of rising gold prices Gold prices have surged by 36% globally over the past year and have risen by 87% in international markets over five years. When the gold price increases, it leads to two scenarios: 1. Loan volume: The volume of gold loans rises as borrowers get more value for the pledged gold. Live Events 2. NPAs: Gold loan non-performing assets (NPAs) decrease as borrowers prioritise timely repayment to avoid any auction of their gold. They also get top-up loans when the price of the gold metal rises, which helps them repay the previous loan. Reduction in gold auction volumes Muthoot Finance , the largest gold loan provider in the non-banking space with ₹1.09 lakh crore assets under management (AUM) saw its gold auction volume decrease to ₹461 crore in FY25, down from ₹892 crore in FY24 and ₹2,203 crore in FY23, indicating reduction in dependency on collateral liquidation every year. Manappuram Finance , another significant lender in this segment with ₹24,658 crore AUM, saw a 40% reduction in its auction volume, from ₹979 crore in FY23 to ₹600 crore in FY25. However, in FY24, its auction volume was at ₹316 crore. These lenders now maintain a loan-to-value (LTV) ratio of around 60% in sync with rising gold prices. When prices fall, the LTV ratio increases. Indel Money , another south-based gold loan provider, reported a 76% decrease in its gold auction volume, which fell from ₹165.82 crore in FY24 to ₹89.75 crore in FY25. Further, in FY24, total NPA was at 3.29%. It came down to 1.27% in FY25. George Alexander Muthoot, managing director of Muthoot Finance told ET, "The decline in gold loan auctions is a testament to the improving credit behaviour of borrowers and the effectiveness of our proactive asset quality management." The company had 208 tonnes of gold jewellery as security at the end of FY25 as compared to 188 tonnes a year back. Lenders sell the gold jewellery pledged by borrowers typically after 90 days of classifying the loans as non-performing. Gold in small businesses Small businesses, kirana owners, small traders, and housewives, who find it difficult to access formal credit, mostly pledge their household gold for loans to run their businesses or to meet any emergency fund requirement. According to HSBC Global, about 25,000 tonnes of gold are lying in Indian households, exceeding the combined gold reserves of the world's top 10 central banks, including the Federal Reserve, Deutsche Bundesbank, Banca d'Italia, Banque de France, Central Bank of the Russian Federation, People's Bank of India, and Reserve Bank of India. The data from the RBI reveals that there has been a more than 100% jump in banks' outstanding loans against gold jewellery to INR2.09 lakh crore at the end of March 21, 2025, compared to INR1.03 lakh crore a year ago. "When there is a price uptrend, gold loan NPAs come down. If any account turns into an NPA, there are multiple ways to make it standard and retrieve the gold," said Umesh Mohanan, executive director and CEO of Indel Money. Recovery mechanisms Top bank executives said that they increased monitoring in response to the surge in loan demand, resulting in a lower delinquency rate. This follows the regulator's nudge for better monitoring of their gold loan portfolios and ensuring adequate controls over outsourced activities and third-party service providers. "We improved our recovery mechanism, and it happened primarily due to rigorous and timely follow-up measures undertaken at all levels," Ajay Kumar Srivastava, managing director of Indian Overseas Bank , told ET. IOB had a gold loan portfolio of ₹69,188 crore, which was nearly 28% of the bank's total advances of ₹2.50 lakh crore. "Continuous monitoring tools were introduced and proactive engagement with borrowers have resulted in better recoveries and a reduction in overdue accounts. As a result, the number of delinquent gold loans has remained low and under control," said Srivastava, adding that merely 0.03% of the gold loans slipped into NPAs compared to 0.10% a year back. Managing director of Indian Bank Vinod Kumar seconded. "Delinquency ratio has improved over the last year due to close monitoring at various levels. The bank has conducted exclusively recovery drives for jewel loans which has resulted in a reduction of overdue percentage," he said. At the end of March, Indian Bank's gold loan portfolio stood at ₹96,410 crore, representing 16.4% of its total advances of ₹5.88 lakh crore. The bank's gold loan NPA was approximately ₹53 crore (0.05% of the portfolio), down from ₹80 crore (0.10% of the portfolio) a year earlier.
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Business Standard
21-05-2025
- Business
- Business Standard
How to trade Muthoot Finance stock as it tests 200-DMA support? Find out
Muthoot Finance stock has slipped nearly 9 per cent in the last one week after the gold loan lender reported its Q4 results on May 14. For the quarter ended March 2025, Muthoot Finance posted a 30 per cent rise year-on-year (YoY) in consolidated net profit at ₹1,477.70 crore as against ₹1,389.1 crore in Q4FY24. Consolidated revenue from operations increased by 35 per cent YoY to ₹5,621.7 crore from ₹4,163.8 crore. Further, Muthoot Finance reported its highest-ever consolidated loan Assets Under Management (AUM) at ₹1,22,181 crore, reflecting a 37 per cent Y-o-Y growth. The company had earlier declared a dividend of ₹26 per share for the financial year FY25. As per reports, the stock has been facing selling pressure off late after the Reserve Bank of India (RBI) with an aim to bring more transparency and control proposed new rules to streamline gold loan practices. The Central Banker has proposed a uniform Loan-to-Value (LTV) cap of 75 per cent to all gold loans. READ MORE Meanwhile, in a recent interaction with Business Standard, the Muthoot Finance's Managing Director George Alexander Muthoot said the proposed gold loan guidelines, if implemented in the current form, would increase compliance cost, especially for new entrants, since it will weigh on the average asset under management (AUM) per branch. Catch Latest Stock Market Updates Today LIVE Commenting on the future plans, George said the company's plans to slow its microfinance business amid stress in the segment and shift focus to gold loans where demand remains strong. READ MORE Amid the recent fall in share price, Muthoot Finance stock is once again seen testing its 200-Day Moving Average - a key support the stock has broadly held since May 2023. Can the stock once again succeed in respecting the 200-Day Moving Average (200-DMA) support or will it break below the same? As such, here's a technical outlook on Muthoot Finance for the likely upside potential or downside risk. Muthoot Finance Current Price: ₹2,065 Upside Potential: 5.6% Downside Risk: 9% Support: ₹2,023; ₹1,979 Resistance: ₹2,145; ₹2,163 On Wednesday thus far, Muthoot Finance stock was seen trading with a gain of 1.6 per cent at ₹2,065 levels, after testing the 200-DMA support at ₹2,023. Technically, the key momentum oscillators on the daily and weekly chart are hinting towards further pain for the stock. As such, break and sustained trade below the 200-DMA, can drag the stock towards ₹1,880 levels, with interim support anticipated around ₹1,979 levels. On the other hand, in case, the stock manages to hold above the 200-DMA, it can attempt a pullback towards its short-term - the 50-DMA at ₹2,180 levels, with interim resistance likely around ₹2,145 and ₹2,163 levels. The stock will need to break and trade consistently above ₹2,180 for the sentiment to turn favourable, suggests technical charts.
Yahoo
15-05-2025
- Business
- Yahoo
Muthoot Finance Ltd (BOM:533398) Q4 2025 Earnings Call Highlights: Record Loan Growth and ...
Release Date: May 14, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Muthoot Finance Ltd (BOM:533398) achieved its highest-ever consolidated loan amount of 120,000 crores as of March, with a year-on-year growth in assets under management (AUM) of 37%. The company reported a consolidated profit after tax of 5,352 crores, marking a 20% increase year-on-year. Muthoot Finance Ltd (BOM:533398) declared a dividend of 260% of the face value, or INR 26 per equity share. The company opened 850 new branches during the year, expanding its reach significantly. S&P Global and Moody's upgraded Muthoot Finance Ltd (BOM:533398)'s credit ratings, reflecting improved financial stability and outlook. The company faces potential regulatory challenges with new draft guidelines on gold lending, which could impact loan-to-value (LTV) ratios and operational costs. There is increased competition in the gold loan market, with more players entering the sector, which could pressure margins. The company's credit costs have risen, partly due to non-gold loan portfolios, which could affect profitability. Operational and compliance costs are expected to rise due to new regulatory requirements, potentially impacting overall cost efficiency. There are concerns about the impact of new regulations in regions like Tamil Nadu, which could affect collections and operational dynamics. Warning! GuruFocus has detected 8 Warning Signs with BOM:533398. Q: How does Muthoot Finance view gold loan growth for the upcoming year, considering the strong performance in the past two years and the competitive landscape? A: Mr. George Alexander Muthoot, Managing Director, stated that the company maintains a conservative growth guidance of 15% for the upcoming year, despite achieving a 41% growth last year. He acknowledged the increasing competition but noted that the market is expanding, allowing room for growth for both existing and new players. Q: What is Muthoot Finance's stance on the draft gold lending guidelines, particularly regarding the Loan-to-Value (LTV) ratio? A: Mr. George Alexander Muthoot explained that the company, along with other industry players, has submitted suggestions to the regulator regarding the draft guidelines. The company is concerned that the proposed LTV changes could disadvantage NBFCs and potentially drive customers back to unorganized money lenders. They await the final guidelines and hope for a resolution that supports the organized sector. Q: Can you provide insights into the credit costs and asset quality, particularly the stage 3 loans in the gold and non-gold loan portfolios? A: The CFO, Mr. Oman Khaman, detailed that stage 3 loans in the gold loan portfolio amount to approximately 3,400 crores, while non-gold loans account for about 300 crores. The credit costs have been slightly elevated due to provisions for non-gold loans, but the company expects stabilization in collections. Q: How does Muthoot Finance plan to handle branch expansion, and are there any regulatory constraints? A: Mr. George Alexander Muthoot mentioned that the company has approval to open 115 new branches this year. The expansion will occur in both Muthoot Finance and Muthoot Money, with no significant regulatory constraints anticipated. The focus remains on growing the business through strategic branch openings. Q: What are the expectations for yields and interest spreads in the coming year, considering the competitive environment and potential interest rate changes? A: Mr. George Alexander Muthoot stated that the company aims to maintain an interest spread between 9% and 10%. If borrowing costs decrease, the company plans to pass on the benefits to customers by reducing rates, while any increase in borrowing costs will be absorbed initially before adjusting rates. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Time of India
14-05-2025
- Business
- Time of India
Muthoot Finance Q4 Results: Pcrofit jumps 22% YoY to Rs 1,444 crore; AUM grows 37% on gold demand
India's largest gold loan company Muthoot Finance reported a 22% year-on-year rise in fourth quarter consolidated net profit at Rs 1444 crore as compared with Rs 1182 crore in the year ago period, backed by robust business expansion. The Karala-headquartered group grew its consolidated assets under management 37% year-on-year to Rs 1.22 lakh crore. The annual net profit for the group rose 20% at Rs 5352 crore against Rs 4468 crore in the year ago period. On a standalone basis, Muthoot's net profit stood at Rs 1479 crore for the quarter under review, up 41% over Rs 1050 crore in the year ago period. Standalone AUM grew 41% year-on-year to Rs 1.06 lakh crore. All the subsidiaries taken together booked a Rs 35 crore net loss. 'The rising gold prices have attracted customers to monetise their gold, which has resulted in rising AUM for us. Customers have seen that getting personal loans has become difficult, so they have monetised their household gold," managing director George Alexander Muthoot told ET. "For customers, it has been less gold and more money. We have achieved the highest ever gold loan advance to new customers of Rs 21,888 crore in FY25," he said. The company declared its highest ever dividend of 260% on equity share of face value of Rs10 each, which translates into Rs 26 per equity share. Its micro loan subsidiary, Belstar MIcrofinance, has seen a 20% squeeze in AUM to Rs 7980 crore at the end of March from Rs 10023 crore a year back, mirroring the industry trend of slower disbursement as the sector is going through a rough patch facing high asset quality stress. This led to a fall in annual net profit at Rs 46 crore from Rs 340 crore earlier.
Economic Times
14-05-2025
- Business
- Economic Times
Muthoot Finance Q4 Results: Pcrofit jumps 22% YoY to Rs 1,444 crore; AUM grows 37% on gold demand
India's largest gold loan company Muthoot Finance reported a 22% year-on-year rise in fourth quarter consolidated net profit at Rs 1444 crore as compared with Rs 1182 crore in the year ago period, backed by robust business expansion. ADVERTISEMENT The Karala-headquartered group grew its consolidated assets under management 37% year-on-year to Rs 1.22 lakh crore. The annual net profit for the group rose 20% at Rs 5352 crore against Rs 4468 crore in the year ago period. On a standalone basis, Muthoot's net profit stood at Rs 1479 crore for the quarter under review, up 41% over Rs 1050 crore in the year ago period. Standalone AUM grew 41% year-on-year to Rs 1.06 lakh crore. All the subsidiaries taken together booked a Rs 35 crore net loss. 'The rising gold prices have attracted customers to monetise their gold, which has resulted in rising AUM for us. Customers have seen that getting personal loans has become difficult, so they have monetised their household gold," managing director George Alexander Muthoot told ET. "For customers, it has been less gold and more money. We have achieved the highest ever gold loan advance to new customers of Rs 21,888 crore in FY25," he said. ADVERTISEMENT The company declared its highest ever dividend of 260% on equity share of face value of Rs10 each, which translates into Rs 26 per equity micro loan subsidiary, Belstar MIcrofinance, has seen a 20% squeeze in AUM to Rs 7980 crore at the end of March from Rs 10023 crore a year back, mirroring the industry trend of slower disbursement as the sector is going through a rough patch facing high asset quality stress. This led to a fall in annual net profit at Rs 46 crore from Rs 340 crore earlier. ADVERTISEMENT (You can now subscribe to our ETMarkets WhatsApp channel)
