Muthoot Finance Q3: 40% Growth

1. Executive Summary

Muthoot Finance Ltd, India’s largest gold loan NBFC, reported strong Q3 FY2025 results with robust growth in loan assets, profitability, and branch expansion. With a dominant presence in the gold loan segment and aggressive digitalization, Muthoot Finance is well-positioned to capitalize on the growing credit demand in India. However, increasing competition and regulatory uncertainties pose risks.

2. Q3 FY2025 Financial Highlights

Revenue

₹44,312 Cr

YoY growth: 40%

PAT

₹13,631 Cr

YoY growth: 33%

Loan AUM

₹97,487 Cr

YoY growth: 37%

Gold Loan AUM

₹92,964 Cr

YoY growth: 34%

Net Interest Margin

5.04%

Capital Adequacy Ratio

25.11%

ROE

17.9%

ROCE

13.2%

Debt-to-Equity

3.97x

Book Value per Share

₹673

Dividend Yield

1.10%

3. Future Growth Plans & Expansions

Branch Network

7,340 branches

+16% YoY

4,855 branches in India

Loan Disbursement

₹15,723 Cr

13.7 lakh new customers

Gold Holdings

202 tonnes

↑ from 184 tonnes YoY

Digital Transformation

Increased adoption of UPI, online gold loans, and AI-based chatbots

Subsidiary Growth

Muthoot Money: 265% YoY

Belstar Microfinance: 30% YoY

4. Products, Capital Expenditure & Strategic Rationale

Product Portfolio:

Gold Loans: Core business segment with strong growth and customer base.
Microfinance & Affordable Housing Loans: Expansion to semi-urban and rural India.
Vehicle Finance & Personal Loans: Growing segment with competitive interest rates.
Insurance Broking: Increasing cross-selling opportunities.

CapEx & Strategy:

Technology Investments: AI-driven customer onboarding & digital payments integration.
Branch Expansion: ₹2,000 Cr investment to scale physical branches & enhance rural penetration.
Diversification Strategy: Scaling non-gold loan segments to de-risk revenue dependence.

5. Competitive Landscape & Risks

Competitive Strengths:

Market Leadership

~40% market share

Strong brand equity in gold loans

High Liquidity

67% of loans

Repaid within 6 months

Low NPAs

Stage III loan assets: 1.65%

Controlled credit risk

Key Risks:

Competition from Banks & NBFCs: Players like Manappuram Finance & Federal Bank gaining ground.

Regulatory Risks: RBI’s evolving NBFC guidelines could impact lending norms.

Gold Price Volatility: Direct impact on LTV and collateral value.

Higher Borrowing Costs: Rising interest rates could pressure margins.

6. Valuation & Investment Thesis

Current Market Price

₹2,183

P/E Ratio

18.5x

Reasonable given strong earnings growth

Price to Book Value

3.2x

Expected FY26 Target Price

₹2,800-3,000

Upside: 28-38%

Muthoot Finance remains a strong long-term compounder, backed by stable growth, high margins, and expanding product lines. Given its dominance in gold loans, strong capital position, and digital push, the stock is attractive for long-term investors seeking steady compounding returns.

7. Conclusion

Muthoot Finance Ltd continues to deliver strong financial performance with consistent growth in revenue and profitability. The company’s strategic expansion, digital transformation, and increasing customer base reinforce its leadership in the gold loan industry. While competition and regulatory risks persist, Muthoot’s fundamentals remain solid.