Select lenders shine in gold rush

An outlier Muthoot Finance has outperformed peers in FY25 so far, gaining from higher exposure to gold loans.

- Harsha Jethmalani

Gold is shining bright, with price above ₹80,000 per 10 gm. Rising price of the yellow metal means higher value of collateral for gold lenders and a boost to their assets under management (AUM). Muthoot Finance Ltd is the best placed. It's gold loan AUM surged 34% on-year and 8% sequentially in the December quarter (Q3FY25).

Higher gold prices and new customer additions led by transformation of Muthoot Money branches for gold loan disbursement helped.

It has maintained its AUM growth guidance for FY25 at 25%—a figure that was revised upwards from 15% in Q2.

In general, to beat cyclicality in gold lending, Muthoot and its peers are diversifying into microfinance (MFI), and vehicle and housing financing.

However, Muthoot's relatively higher exposure to gold lending (gold loan AUM is 84% of consolidated AUM) than rivals augurs well due to tailwinds from higher gold prices, subsiding competition from non-bank financial companies (NBFCs) and branch expansions.