Finance company Muthoot Finance experiences a 10% surge, reaching new 52-week highs; three driving forces behind the expansion rally
Muthoot Finance, one of India's leading gold loan companies, has reported impressive financial results for the first quarter of the fiscal year 2026 (Q1 FY26). The company's strong performance has garnered attention from analysts, who have offered a mix of positive and cautious outlooks.
Impressive Financial Results
The consolidated Profit After Tax (PAT) of Muthoot Finance came in at an impressive Rs 1,974 crore, marking a 65% jump from the same period last year. This was accompanied by a 90% year-on-year jump in standalone PAT to Rs 2,406 crore. The company's gold loan Assets Under Management (AUM) surged 40% to Rs 1,13,194 crore, while standalone loan AUM climbed 42% YoY to Rs 1,20,031 crore.
The company's interest income jumped about 53%, supported by rising gold prices and tighter unsecured lending pushing demand toward gold loans. Notably, Muthoot Finance recorded its highest-ever quantity of gold held as security - 209 tonnes.
Analysts' Views
Analysts see strong growth and solid fundamentals underpinning Muthoot Finance’s stock. Morgan Stanley upgraded Muthoot Finance to an “overweight” rating from “equal weight,” raising their price target to ₹2,920 from ₹2,880. Fitch Ratings upgraded Muthoot Finance’s long-term credit rating to ‘BB+’ with a stable outlook.
However, Motilal Oswal retained a “neutral” rating with a price target of ₹2,790, indicating limited upside potential given that much of the positive momentum is already priced in. Nuvama gave Muthoot Finance a Buy rating with a revised target price of Rs 2,993.
Strategic Initiatives
Muthoot Finance announced strategic initiatives such as fresh equity infusion into subsidiaries and branch expansions, supporting future growth. Both Muthoot Money and Belstar, subsidiaries of Muthoot Finance, are ramping up gold lending, as per Nuvama.
Asset Quality and Recoveries
Asset quality in Muthoot Finance improved due to recoveries from non-performing assets, as per Motilal Oswal. Recoveries of Rs 3.5 billion, including Rs 1 billion from asset reconstruction companies, added a temporary boost to yields in Muthoot Finance, according to Nuvama.
Market Valuation and Outlook
While the market valuation analysis suggests the stock is currently considered overvalued with a PE ratio around 17.4 to 18 and an expensive valuation grade, the fundamentals are strong. The stock price reflects high growth expectations that may limit further upside.
In summary, analysts see strong growth and solid fundamentals underpinning Muthoot Finance’s stock but caution that valuations are elevated following recent price gains after Q1 results. Morgan Stanley’s upgrade and Fitch’s rating enhancement underscore confidence, while Motilal Oswal’s neutral stance reflects balanced risk-reward at current levels.
The share price of Muthoot Finance surged nearly 10% to new 52-week highs today, following the release of these impressive results. Muthoot Finance posted its best-ever quarterly numbers for the June 2025 quarter (Q1 FY26). Nuvama noted a near 90-basis-point improvement in net interest margins in Muthoot Finance. They also pointed out a sharp drop in credit costs in Muthoot Finance.
[1] [2] [3] [4] [5] - Sources for the above information.
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