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Kerala-based gold-loan lender Muthoot Finance put up a stellar Q4 performance. That saw the shares of the company post a 20 per cent jump on Thursday. On the BSE, the stock hit a high of ₹1,200.2,, and closed at ₹1,177.3 against the previous day’s close of ₹1,000.2. Analysts attributed the show to robust growth in AUM and minimal impact of the Covid-19 pandemic on the company, rendering its shares a favoured pick among investors.
Akshay Agarwal, Managing Director, Acumen Capital Markets, said shares of Muthoot were trading up on the back of solid quarterly results and very positive management comments. Over 95 per cent of the company’s profits come from its gold loan business. The sharp rise in gold prices over the last quarter and the liquidity crunch being faced by households would have led to higher demand for gold loans.
The twin factors — demand for loans, and the fact that all loans are backed by gold, and hence, fully secure and liquid — bodes well for the company, he said. Given the already wide reach through its branch network and the aggressive expansion plans, the company is a good investment for the long term, he added.
It would be advisable to accumulate the stock on possible dips, he said.
Analysts pointed out that the company, with 88 per cent of its AUM in gold loans, is better off than other NBFCs. It is considered a safe bet under present conditions.
Good show in tough times
Jaikishan Parmar, Senior Equity Research Analyst, Angel Broking, said that Muthoot Finance reported a good set of numbers in Q4 despite tough market conditions. Net interest income grew by 29 per cent driven by strong AUM growth while NIM declined marginally to 15.78 per cent as yields declined at a faster pace compared to the cost of funds.
In this tough environment, the management is targeting a growth of 15 per cent in its core gold loan book for FY20. The stage III loan assets declined by 34 bps to 2.16 per cent with NPA never a worry for gold loans. The recent increase in gold prices also provides comfort on asset quality.
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