Muthoot Finance shares: Two triggers behind the record rally today

Shares of Muthoot Finance Ltd rose to their record high on Wednesday after the gold loan provider increased its asset under management (AUM) growth guidance for the fiscal year 2025 to 40%. Another trigger for the rally in stock was that
S&P Global Ratings has upgraded the long term issuer rating of Muthoot Finance to ‘BB+/B’ with ‘Stable’ outlook from ‘BB/B’ with ‘Stable’ outlook

The stock rose 3.89% to a record high of Rs 2,410 on BSE today. Market cap of the firm stood at Rs 96,752 crore.

The company reported an AUM growth of 38% and expects to conclude the fiscal year hitting the revised target. As of March 14, Muthoot Finance announced that its gold loan AUM has surpassed the significant milestone of Rs 1 lakh crore. At the end of December 2024, the gold loan AUM was reported at Rs 92,964 crore, marking a 34.3% increase year-on-year and a 7.9% rise sequentially. The overall AUM, inclusive of non-gold segments, reached Rs 97,487 crore, achieving a 37% growth compared to the previous year.

According to a media report, Managing Director Alexander George Muthoot attributed the robust demand for gold loans to both rural and urban markets, highlighting the challenges borrowers face in securing microfinance and personal loans, which has increased the attraction towards gold loans. "We were conservative in guiding 25-30% AUM growth, but we will end the year at 40%," he stated.

Looking ahead to FY26, Muthoot Finance has set a more conservative AUM growth guidance of 15% but anticipates exceeding this target. The company projects its net interest margins (NIMs) to be around 10-11% for FY25 and 10-12% for FY26. Furthermore, Muthoot Finance is adjusting its microfinance portfolio due to short-term pressures but sees a promising growth potential in the gold loan segment.

Muthoot expressed confidence in the company's competitive pricing, saying, "We are well priced to grow the business." The gold loan division remains a primary driver of growth, while the company continues to moderate its microfinance activities. The solid performance has been reflected in the stock market, buoyed by the revised growth guidance and strong demand across various market segments.

On the rating upgrade, Muthoot stated, “The rating upgrade reflects our continued progress in strengthening our balance sheet, profitability, enhancing operational efficiencies, and executing sustainable growth strategies. It underscores the confidence that external stakeholders, including investors, partners, and customers, have in our ability to navigate dynamic market conditions while maintaining financial resilience and stability.”