Posted on February 13, 2025, by Niftynews
Shares of Muthoot Finance, the leading gold loan provider in India, surged by 7% in today’s trade, February 13, 2025, following a strong performance in the company’s Q3 2025 results. The Muthoot Finance share price hit a high of ₹2,335 on the BSE, marking a notable increase in investor interest. Over the past three months, the Muthoot Finance share has gained 31.07%, reflecting strong investor sentiment.
Key Performance Highlights
In its Q3 results, Muthoot Finance reported a 34% year-on-year (YoY) growth in its gold loan portfolio, with a 5 basis points expansion in its net interest margin (NIM) sequentially. The company’s gold tonnage and customer base also rose by 2% each, further strengthening its position in the market.
Despite these robust results, Muthoot Finance maintained a conservative growth guidance of 15% for gold loans for FY26. This has led to mixed analyst sentiments, with some brokerages maintaining a positive outlook, while others believe that much of the good news has already been priced into the stock.
Brokerage Views and Target Prices
Several brokerages have reviewed their estimates for Muthoot Finance after the Q3 results.
- Nirmal Bang Institutional Equities has maintained its ‘Buy’ rating on Muthoot Finance with a revised target price of ₹2,589. This is based on the company’s strong performance and a favorable gold price environment. The brokerage sees Muthoot Finance benefiting from consistent performance, with an anticipated 20% CAGR for AUM (assets under management) over the next few years. They’ve upgraded the stock, raising the target multiple to 3.1x FY26E BV.
- On the other hand, MOFSL (Motilal Oswal Financial Services) has reiterated a ‘Neutral’ rating on the stock, with a revised target price of ₹2,300. The brokerage has highlighted that the positive factors, such as rising gold prices and increased demand for gold loans, are already factored into the Muthoot Finance share price, which is trading at 2.2 times FY27 P/BV. MOFSL believes that while Muthoot Finance is one of the best gold loan franchises in India, the stock’s upside from here is limited.
Growth Prospects and Industry Dynamics
Muthoot Finance has benefited significantly from the rise in gold prices and the increase in gold loan demand, particularly in the context of the broader industry-wide rationing of unsecured credit. The company has also benefited from lower competitive intensity in the gold loan segment, further consolidating its market position.
However, concerns around regulatory changes have created some uncertainty in the industry. The Reserve Bank of India (RBI) has been looking at more stringent norms, including the possibility of moving from bullet loans to EMI-based loans, as well as maintaining Loan-to-Value (LTV) ratios of 75% throughout the life of the loan, not just at disbursement.
Muthoot Finance’s CEO has clarified that the company has not been directly instructed by the regulator to make changes, and its business remains as usual for now. However, if the regulations are enforced, it could have an impact on Muthoot Finance’s loan book and margins.
What’s Next for Muthoot Finance Shares?
While the stock has seen strong growth in the past few months, the question remains whether Muthoot Finance shares can continue their upward trajectory. Analysts are divided on the stock’s next move:
- Some believe that the stock has already factored in the positives, given the strong growth in gold loans and favorable industry trends. This has led to a Neutral rating from MOFSL, with a target price of ₹2,300.
- Others, like Nirmal Bang, remain optimistic and believe the stock has more room to grow, especially given the steady performance of Muthoot Finance and its dominant position in the gold loan sector. With their ‘Buy’ rating and a target of ₹2,589, Muthoot Finance could continue to see growth if its gold loan portfolio expands as expected.
Conclusion
The Muthoot Finance share price has surged to new heights following strong Q3 2025 results, but investor sentiment remains divided. With gold loan growth, a steady market position, and favorable macroeconomic conditions, Muthoot Finance remains a key player in India’s gold loan market. Whether the Muthoot Finance share continues to rise or stabilizes at current levels will depend on how the company navigates potential regulatory challenges and sustains its growth momentum. Investors should closely monitor these developments and weigh analyst recommendations before making any investment decisions.
