Muthoot Finance Share Price Falls 9% After RBI’s Stricter Gold Loan Guidelines
Business and Industry Overview:
Muthoot Finance Limited is India’s largest gold loan non-banking financial corporation. It offers services like financing gold loans, insurance, housing loans, SME loans, and money transfer services. It is a gold financing company that provides loans against gold jewelry as collateral. The company is headquartered in Kochi, Kerala, and has over 5000 branches throughout the country. Outside India, Muthoot Finance is established in the UK, the US, and the United Arab Emirates. The company falls under the brand umbrella of the Muthoot Group. Its stocks have been listed on the BSE and NSE since its initial public offering in 2011. The target market of Muthoot Finance includes small businesses, vendors, farmers, traders, SME business owners, and salaried individuals. Non-Banking Financial Companies (NBFCs) have witnessed significant growth in India’s financial ecosystem, playing a crucial role in credit expansion and financial inclusion. Their market share in credit distribution increased from 12% in 2008 to 18% in 2019, before slightly declining to 16% in 2022 due to increased competition from banks. Muthoot Finance is a leader in the microfinance landscape in India.
Latest Stock News:
Muthoot Finance Ltd. has seen a lot of changes in its stock price recently. This happened because of new rules from the RBI and some company updates. On April 9, 2025, Muthoot’s share price fell by around 9%. It closed at ₹2,080. This fall came after the RBI said it would bring strict rules for gold loans. Gold loans are a big part of Muthoot’s business.
RBI said that co-lending rules will now apply to all regulated companies. RBI will also bring full rules for gold loans and non-fund-based loans. RBI Governor said these rules will help bring similar rules for all lenders. But the rules will also respect how much risk each lender can take. The new rules will make the loan process stricter. Lenders must follow better steps to check gold, give loans, and see how the borrower uses the money. RBI said gold loans must follow a 75% loan-to-value rule. Lenders must also set a limit on how much loan they give to one person or one group. Lenders must not give a loan if the gold is already used for another loan or if the gold ownership is not clear. Also, they must follow the same steps in all branches to check the weight and purity of the gold. They must also keep documents to show how the borrower is using the money. Loans can only be renewed or topped up if the old loan is not stressed and is within the allowed value. After RBI’s speech, shares of banks like Federal Bank and CSB Bank went up. Federal Bank gives 15% of its loans through gold loans. CSB Bank gives more than 40% through gold loans. For IIFL Finance, gold loans are 21% of total loans. For Manappuram it is 50%, and for Muthoot Finance it is 98%.
Even with the fall in share price, there was good news for Muthoot. On April 2, 2025, Moody’s changed Muthoot’s credit rating from ‘Ba2’ to ‘Ba1’. The outlook is stable. This shows the company is doing well financially. Also, Muthoot Finance will have a board meeting on April 21, 2025. In this meeting, they may announce an interim dividend for the year 2024-25. If they approve it, the record date will be April 25, 2025. This means shareholders on that date will get the dividend. The payment will be made within 30 days after the board approves it.
Potentials:
Muthoot Finance has many simple plans for the future. The company wants to grow its gold loan business. People are taking more gold loans now because gold prices are going up. In the second quarter of the year, Muthoot’s gold loan business grew by 28% compared to last year. So, the company changed its target. Earlier, it planned to grow by 15%, but now it wants to grow by 25%. Muthoot also wants to give other types of loans. It is adding microfinance, vehicle loans, and insurance. One of its companies, Muthoot Money Ltd., was giving vehicle loans. Now it will give gold loans only. This will help the group focus more on its main business. Muthoot is also using digital tools. Customers can apply for loans and pay money online. This will save time and make things easy. The company also wants to open more offices. It will open branches in places where banks are not easily available. Muthoot also wants to grow outside India. It wants to help Indian people who live in other countries. To do all this, Muthoot is raising money. In May 2024, it planned to sell bonds in US dollars. These bonds will end in around four years. The money will be used to give more loans and for other business needs. All these steps show that Muthoot wants to grow, give more services, and easily help more people.
Analyst Insights:
- Market capitalisation: ₹ 85,911 Cr.
- Current Price: ₹ 2,140
- 52-Week High/Low: ₹ 2,445 / 1,510
- P/E Ratio: 18.1
- Dividend Yield: 1.12%
- Return on Capital Employed (ROCE): 13.2%
- Return on Equity (ROE): 17.9%
Muthoot Finance did well in the October to December 2023 quarter, with 17.9%. Its income went up by 22% compared to last year. Profit also increased by 17%. More people took gold loans. The company kept its loan interest rates steady. So, it earned well. The company made a profit margin of 31%. This means it keeps a good part of its earnings after expenses. It also uses its money well. Its ROE is 18.6% and ROCE is 18.2%. These are good numbers for a finance company. In the last full year (FY23), Muthoot had negative cash flow from its main work. This is normal for NBFCs. It means the company gave more loans to people. This is not a big problem. Muthoot is a trusted gold loan company. It has more than 4,600 branches in India. People know and trust the brand. It also has high credit ratings (AA+ and A1+). So, it can borrow money at low cost. When we compare with Manappuram Finance, Muthoot is better. It earns more and is more stable. So, its stock price is higher too. There are some risks. If gold prices fall or new rules come, profit can be affected. But the company is strong. It grows steadily and makes a good profit. So, this stock looks good to buy and hold for long term. Or, you can buy when the price drops.