Muthoot Finance stock tumbles on sudden demise of Chairman

The sudden demise of MG George Muthoot, chairman of Muthoot Finance, seems to have cast a shadow on the shares of the gold loan lender. On Monday, the stock went down 3.7 per cent and closed at ₹1,259.90 on the BSE, after opening the day 6.6 per cent lower at ₹1,205.

However, senior officials of the company did not want to comment on the market developments, saying that this is not a new phenomenon and there were instances in the past too when the shares had fallen.

‘Gold price impact’

Akshay Agarwal, Managing Director, Acumen Financial Services, said that a crash in gold prices, can however lead to pressure on the Muthoot stocks since loans are typically given with 25 per cent haircuts. Gold prices are down close to 20 per cent from the peak. The stock price of Muthoot Finance opened with a downward gap and was trading about 3-4 per cent lower due to the news of the Chairman's death.

According to him, Muthoot Finance is an extremely well-managed, diversified group of companies with interests in hospitals to finance. While the passing away of the Chairman is definitely a big emotional setback, it will not affect the business of the company in the long run, he added. The passing away of Chairman is unlikely to have any impact on the operations of the company, said CJ George, Managing Director, Geojit Financial Services. There are many Muthoot family members who are at board level and other senior executive positions, particularly under the leadership of George Alexander, who has been the Managing Director of the company for decades.

Financials have been doing well in 2021, and post budget, PSU banks have boomed followed by large private banks. Gold loan companies did not participate in the rally. Many commercial banks have been aggressively increasing their market share in gold loans. Muthoot Finance, in spite of good results, is languishing. The stock is down 10 per cent from the recent highs, George said.

The company’s Chairman died on Friday night following a fall from his fourth-floor house in New Delhi. He took charge as chairman in 1993 and is credited with growing the company into a pan-India entity.