Shares of Muthoot Finance Ltd. dropped 4.86% to ₹2,035.95 in early trade on Friday, extending losses for a second session after the Reserve Bank of India (RBI) published draft guidelines on gold-backed lending. The stock had already slumped over 7% in Wednesday’s session following Governor Sanjay Malhotra’s hint of a regulatory overhaul during the monetary policy address.
The proposed norms aim to tighten oversight on gold loans — a core business for Muthoot — by capping the loan-to-value (LTV) ratio at 75%, restricting bullet repayment loans to a maximum tenure of 12 months, and directing NBFCs to impose internal caps on their gold loan books.
Brokerages are mixed in their reactions. Kotak Institutional Equities downgraded Muthoot to “add” from “buy” and slashed its target price to ₹2,250 from ₹2,400, citing a 10% cut in earnings estimates amid tighter growth and margin expectations. Jefferies, however, remained constructive, calling the rules “not as harsh as feared” and maintained its preference for Muthoot with a target price of ₹2,615.
Meanwhile, Morgan Stanley reiterated its “equalweight” rating but flagged near-term weakness due to persistent regulatory uncertainty.
With a market capitalization of ₹825.01 billion and shares trading near the lower end of their 52-week range, Muthoot Finance is expected to stay volatile in the coming weeks as investors await final clarity on RBI’s gold loan framework.
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