Shares of Muthoot Finance tumbled over 7 per cent in trade on May 15 despite reporting strong Q4 numbers
Muthoot Finance Share Price: Shares of gold financer Muthoot Finance tumbled as much as 7.7 per cent in early trade on May 15 after the company reported its fourth quarterly results for the fiscal year ended March 31, 2025 (Q4 FY25). The stock so far touched an intraday low of Rs 2,085 per share on the NSE.
The stock, along with its peers, came under pressure since the Reserve Bank of India (RBI) proposed changes in the guidelines for gold lending with the aim to standerdise the framework across all financial entities – banks, non-banking financial company (NBFC), co-operative banks, and regional rural banks (RRBs), whoever are involved in gold lending.
Since the releasing of RBI's draft guidelines on April 9, the stock has witnessed heightened volatility, swinging sharply in both directions. Over this period, it has registered a 9 per cent decline.
For Q4 FY25, the gold loan NBFC reported a standalone profit after tax (PAT) of Rs 1,508 crore, a growth of 43 per cent year-on-year (YoY) from Rs 1,056 crore in Q4 FY24. For the full FY25, it logged a PAT of Rs 5,201 crore as against Rs 4,050 crore in FY24, a growth of 28 per cent YoY.
Muthoot Finance's total income in Q4 increased 43 per cent YoY to Rs 4,888 crore as against Rs 3,418 crore. For the full year, its total income came in at Rs 17,156 crore, registering a growth of 35 per cent YoY from Rs 12,694 crore in FY24.
By FY25-end, the NBFC's standalone loan assets under management (AUM) stood at Rs 1,08,648 crore, increasing by 43 per cent from Rs 75,827 crore in FY24. However, its capital adequacy ratio (CAR) for the quarter under review stood at 23.71, declining by 666 basis points (bps) from 30.37 in Q4 FY24. The CAR reflects a lender's ability to absorb losses and maintain financial stability. A lower CAR means the bank has a smaller "cushion" to absorb losses.
It also opened 850 new branches opened during FY25. The NBFC's management also announced a dividend of Rs 26 per equity share, its highest-ever dividend so far.
Brokerage firm Elara Capital said, "Muthoot Finance's Q4 earnings reflected a strong operational performance, with business and asset quality metrics displaying notable strength, largely attributable to the ongoing increase in gold prices. However, higher interest and operational cost offset the positive impact of lower provisions."
The brokerage noted that the stock has jumped over 70 per cent in the last six months, driven by strong gains in the value of its underlying assets. However, with the stock now trading at 2.4 times its estimated FY27 price-to-book value—near the higher end of its valuation range—and uncertainty around how the new RBI rules will be implemented, the company may need to make some operational changes.
George Alexander Muthoot, Managing Director, Muthoot Finance, during an analyst call post earnings release, said the company has retained gold loan growth guidance of 15 per cent YoY for FY26.
"We have been giving a guidance of 15 per cent YoY. Last year, we grew by 41 per cent, and this year, we would like to stick to a conservative guidance of 15 per cent," Muthoot said.
He added that the NBFC may consider revising growth guidance after the end of the second quarter depending on market dynamics.
Regarding the RBI's proposed new guidelines on gold lending, Muthoot said that various lenders, including Muthoot Finance, and industry associations have shared their inputs with the regulator. They have also sought to meet with the RBI to discuss key pain points, especially about the disparity in loan-to-value (LTV) limits.
He said the overall tone of the proposed guidelines is constructive and is a positive for long-term sector health. However, he added, its true impact will only become clear after the regulations are finalised.
According to a report by the Economic Times, the company's management also said the proposed guidelines are not ideal for customers. "The tweak in LTV (loan-to-value) is not in the interest of customers. Due to this rule, customers may actually go back to money lenders," said the management during the analyst call.