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Gold financier – Near term increase in gold price acting as tailwind for AUM growth
- 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.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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