IDBI Capital
Target: ₹4,060
CMP: ₹3,313.05
Muthoot Finance reported a remarkable financial performance for FY26, primarily fueled by robust demand for gold loans, increased yields, and significant improvements in profitability.
The company’s consolidated Assets Under Management (AUM) rose approximately 49 percent year-over-year, with gold loan AUM growing by around 54 percent. Standalone Profit After Tax (PAT) experienced a notable surge of nearly 95 percent compared to the previous year.
Management indicated that the business has entered a phase of structurally stronger growth, supported by elevated gold prices, rising average ticket sizes, and sustained demand from self-employed individuals and Micro, Small, and Medium Enterprises (MSMEs).
Yields increased to approximately 20.8 percent, aided by selective price adjustments and recoveries from auctions, which helped mitigate higher borrowing costs and bolster margins.
Despite a shift toward borrower-wise Non-Performing Asset (NPA) recognition due to regulatory changes, asset quality remains stable. The average Loan-to-Value (LTV) stands at around 57 percent, significantly below the Reserve Bank of India’s cap of 85 percent, providing solid collateral assurance.
The management clarified that recent gold duty hikes and restrictions on bullion imports are not expected to materially impact business growth. The firm primarily lends against household jewelry that is already available in India. Looking ahead, Muthoot Finance remains optimistic due to sustained demand for gold loans, healthy yield levels, strong collateral coverage, and ongoing branch expansion, all of which support potential market share growth.
IDBI Capital maintains a “Buy” rating for Muthoot Finance with a revised target price of ₹4,060, based on a price-to-book ratio of 2.7 times FY28E earnings.
Published on May 15, 2026.
