Bernstein has maintained its ‘Outperform’ rating on Muthoot Finance with a target price of ₹2,500, after the company reported strong Q4FY25 results and record-breaking AUM growth. The brokerage highlighted the combined benefit of rising gold prices and falling credit costs, which helped sustain return metrics despite some moderation in margins.
Muthoot Finance posted a 42.7% year-on-year increase in net profit to ₹1,508 crore for the March quarter, supported by a 36% YoY rise in net interest income (NII) to ₹2,904 crore. This performance capped a solid FY25, where standalone AUM grew over 40% YoY, significantly outperforming the broader NBFC sector.
Gold prices fuel AUM momentum
Bernstein attributed much of the AUM momentum to the sharp rally in gold prices — up 32% YoY and 17% QoQ during Q4FY25. As a result, gold loan AUM alone surged 41% YoY, marking one of the company’s best growth phases in recent years.
While net interest margins (NIMs) moderated during the quarter — owing to competitive lending rates and funding cost pressures — the impact was offset by a 40% QoQ decline in credit costs, reflecting continued strength in borrower quality and collection efficiency.
Return metrics remain healthy despite margin headwinds
Bernstein noted that despite margin compression, Muthoot maintained a return on assets (RoA) of 5.8%, underscoring the capital efficiency of its high-yield gold lending model. The company’s disciplined cost structure and low-risk credit underwriting continue to support robust profitability, especially in a high-rate environment.
The brokerage also pointed to Muthoot’s relatively insulated risk profile, as gold loans tend to be short-tenured and self-liquidating, which reduces delinquency risk during periods of macroeconomic stress.
With macro indicators turning favorable and gold prices maintaining strength, Bernstein expects Muthoot to remain one of the top-performing NBFCs through FY26.
Disclaimer: This article is based on the brokerage report by Bernstein. It does not constitute investment advice. Investors are advised to consult their financial advisors before making any investment decisions.
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