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Gold financier – Near term increase in gold price acting as tailwind for AUM growth

ICICIdirect Research 16 Aug 2024 DISCLAIMER
  • In Q1FY25, Muthoot Finance and Manappuram Finance have reported healthy growth in gold AUM. Continued accretion in customer coupled with increase in gold price acted as tailwind aiding strong credit off-take. While Muthoot Finance reported 23% YoY and 11% QoQ increase in gold loan AUM, Manappuram Finance delivered similar traction at 19.2% YoY uptick in gold portfolio, surpassing their annual guidance of ~15% growth for FY25.
  • Aggressive competition from banks which impacted margins in previous fiscal for gold financiers has started to subside, thus aiding support to NII growth ahead. Yields, which witnessed continuous decline in previous 3-4 quarters for gold financiers, have stabilised in Q1FY25.  
  • Decline in pace of unsecured lending by banks amid regulatory caution and increase in risk weights have increased attractiveness of gold loans as a effective alternative thereby supporting yields and enabling business growth for gold financiers.
  • Thus, several tailwinds are seen to aid business growth and profitability of gold financiers. Valuations seems to factor the positives with further upsides, though limited, ahead.
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