The stock of the nation’s largest gold loan NBFC, Muthoot Finance declined almost 15% in the early hours of trading on Tuesday. As of 9:40 IST, the scrip hit its low of ₹1,009.30 per share, down 14.99% from its previous close of ₹ 1,187.
Muthoot Finance is a large-cap financial services company with a market value of ₹ 41,000 crores. It provides gold loans, housing finance, personal finance and insurance products to its customers. As of June 30, 2022, the Muthoot Group branch network stood at 5,667, an increase of 4% from 5,443 branches in Q1FY22.
The decline in share price is likely attributable to the subdued performance of the company in the June quarter. On a standalone basis, the net profit declined by 17.4% to ₹ 802 crores from ₹ 971 crores reported in the same quarter last fiscal year. Consequently, its Q1FY23 profit after tax dropped 16.5% to ₹ 802 crores from ₹ 960 crores in Q1FY22.
The consolidated gold loan assets under the management saw a decrease of 2%. They stood at ₹ 63,444 crores in June 2023 quarter compared to ₹ 64,494 crores for the quarter ending March 2022. The decline is noteworthy as it is in sharp contrast to the results of other financial services companies that saw a growth in their assets under management.
Despite this George Jacob Muthoot, Chairman of the Muthoot Group has an optimistic stance. Recently, the RBI also gave its approval for the opening of new 150 branches. This coupled with the reviving rural demand and huge untapped opportunity in the gold loan segment may bode well for the financier in the coming future.
After its weak results, Motilal Oswal revised its price target for the stock at ₹ 1,250 per share. This represents an upside of 20% from its trading price of ₹ 1,040 as of 12:00 IST.
Written by Vikalp Mishra
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