Morgan Stanley has highlighted that the three-month timeline given by the Reserve Bank of India (RBI) for lenders to address deficiencies could help prevent regulatory action but may lead to a slowdown in gold loan lending. Larger and older gold financiers like Muthoot Finance and Manappuram Finance (MGFL) are expected to be better positioned, as they have been under regulation for a longer period.
Among the two, Morgan Stanley sees a better margin of safety in Manappuram Finance, citing its much cheaper valuation. Manappuram is trading at 1.1x FY26 estimated price-to-book (P/B) ratio compared to Muthoot’s 2.5x. Its price-to-earnings (P/E) ratio is also significantly lower at 6x versus Muthoot’s 14x for FY26 estimates. Additionally, Manappuram has lower year-to-date returns (18% vs. Muthoot’s 38%) compared to the Sensex’s 17% gain.
While the regulatory review may create some overhang, Morgan Stanley believes Manappuram offers a more attractive risk-reward profile given its cheaper valuation and stronger margin of safety.
