Gold loan lender Muthoot Finance reported strong March quarter results. Net profit surged 59% year-on-year and operating metrics were healthy too. Asset under management grew 22% and margins improved. The lender has benefited from the rise in gold prices during the pandemic. Gold is seen as a safety asset and even a liquid asset during crisis. The present coronavirus pandemic has made Indians opt for emergency funding through gold loans. Muthoot Finance is seeing demand for its gold loans owing to this. Also, given the price of gold has gone up, the loan-to-value ratio too has improved. Moreover, gold loans are short in tenure and therefore borrowers may not avail of moratorium. Unlike other NBFCs, Muthoot Finance hasn’t received a large number of moratorium requests. Further, the company reported improvement in asset quality as well. Analysts believe the company will benefit in the coming quarters too and growth in gold loans would be strong. Therefore analysts have raised their earnings per share estimates for the company. Muthoot Finance shares have outperformed the broad market on this optimism.
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