ewsba.se
Muthoot Finance shares slid to a new 52-week low of ₹2,305 on the National Stock Exchange on Monday as investors tried to digest the asset quality deterioration in the September quarter (Q2FY27) with rising loan delinquencies. This was when its mainstay gold loan assets under management (AUM) increased by 43% year-on-year, backed by higher prices, improved tonnage and client additions.
Better yields led to a 152 basis points (bps) sequential rise in net interest margin (NIM) to 11.93%. On the flip side, credit costs increased, with risky stage-III assets soaring sequentially to ₹7,268 crore in Q2 from ₹3,926.5 crore in Q1, and stage-II assets surging to ₹23,466 crore from ₹1,876 crore in Q1 and ₹1,062 crore in Q4FY26.
Following implementation of the Reserve Bank of India’s revised regulations effective 1 April, Muthoot introduced structured monthly interest-servicing gold loan schemes. Earlier, it offered bullet repayment loans, wherein customers could pay interest at any point during the loan tenure without any prepayment penalty.
This transition led to missed payments and consequently, a sharp movement into stage-II and stage-III buckets. As customers get accustomed to the new repayment cycle, the management expects asset quality stress to ease. It doesn’t view this spike as an indication of underlying borrower stress.
But a pivot toward monthly interest repayment, which necessitates higher collection efforts, raises the risk of a structural compression in yields and NIM for NBFC gold financers. Motilal Oswal Financial Services noted that the RBI’s new regulations on gold lending have brought in a trade-off between growth and yields.
“In addition, the highly competitive intensity and aggressive foray of multiple deep-pocketed AAA (or AA+ rated) NBFC franchises into gold loans could result in market share losses for incumbents,” it said.
Muthoot raised its FY27 gold loan AUM growth guidance to 25% from 15% earlier. H1FY27 gold loan AUM is up 16%. NIM is seen in the 10.5%-11% range. However, with gold prices consolidating now, rising funding costs (with the RBI in tightening mode) and competitive pressures could weigh on the gold AUM growth trajectory.
While Muthoot should continue to deliver industry-leading profitability, with return on assets of 5.6-5.8% and return on equity of 26%, loan growth could moderate from the extraordinary levels in the previous year, said Nirmal Bang Institutional Equities.
Harsha Jethmalani is a Deputy Editor at Mint with over a decade of experience covering stock markets and corporate India. As a key member of the Mark to Market team, she specializes in delivering cutting-edge commentary on market trends, the economy, and corporate financial reports.<br><br>Born and raised in Mumbai, Harsha’s entry into business journalism was a serendipitous pivot. Graduating during the 2008–2009 financial crisis, her initial goal of becoming a research analyst at an MNC was rerouted. However, what began as a chance career move quickly became a conscious choice; she discovered that financial journalism is a powerful storytelling tool capable of influencing and empowering the financial decisions of a massive audience.<br><br>Harsha began her career in 2009 at IRIS Business Services (Myiris.com), tracking mutual funds and interviewing fund managers. In 2011, she joined the Network18 Group, writing extensively on equity market trends for Moneycontrol.com and hosting pre- and post-market audio updates. Following a stint covering personal finance at Dalal Times, she joined Mint in 2016 as a Content Producer, steadily rising through the ranks to her current editorial position.<br><br>A defining highlight of her tenure at Mint was her extensive coverage of India's historic Goods and Services Tax (GST) reform. She chronicled the massive indirect tax overhaul from its initial conceptual and execution hurdles to its eventual streamlining. Her impactful reporting earned official recognition when her article exposing a spike in gold smuggling ahead of the GST rollout was formally acknowledged by the Office of the Director General of Audit (Central), Kolkata. Currently, Harsha closely tracks the IT, cement, real estate, and paint sectors. Her sharp news sense and ability to spot emerging trends consistently bring fresh, actionable perspectives to market analysis.<br><br>She holds a postgraduate degree in financial markets from Indira Gandhi National Open University and a Bachelor of Management Studies from Vivekanand Education Society, Chembur, Mumbai.
Catch all the Business News , Market News , Breaking News Events, JIO IPO Listing Today LIVE and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.