Antique Stock Broking has initiated coverage on two prominent Indian gold loan finance companies, Manappuram Finance Ltd and Muthoot Finance Ltd, with a more optimistic outlook for the former. The brokerage firm sees significant growth potential in the underpenetrated gold-financing market, which currently stands at approximately Rs 18.6 lakh crore, with only 9-10 percent of household gold pledged as collateral.
Manappuram Finance: Positioned for Growth
Antique has assigned a 'Buy' rating to Manappuram Finance, setting a target price of Rs 410 per share. This target implies a substantial 21 percent potential upside from its current report price of Rs 339.
The brokerage views Manappuram Finance at an 'inflection point', driven by several key factors:
- Business Recovery: The company is experiencing a strong business recovery. Its gold-loan assets under management (AUM) grew approximately 99 percent year-on-year in FY26, significantly aided by rising gold prices.
- Lower Funding Costs: Reduced funding expenses are expected to bolster profitability.
- Governance Reset: An investment by Bain Capital has led to a governance reset, addressing succession and capital allocation concerns, and prompting changes in senior management. This reset is seen as a potential catalyst for a re-rating of the stock.
- Digital Gold-Loan Franchise: Manappuram's digital strategy is yielding strong results, with around 92 percent of its gold-loan AUM originated online in FY26. This digital scale is translating into improved branch productivity, with AUM per branch reaching a record Rs 13.1 crore.
Antique projects Manappuram Finance's AUM to grow at approximately 23 percent annually between FY26 and FY29, with earnings per share (EPS) potentially growing at an impressive 55 percent annually over the same period.
Muthoot Finance: Strong but Limited Re-rating Potential
For Muthoot Finance, Antique Stock Broking has issued a 'Hold' rating, with a target price of Rs 3,110 per share. This suggests a more modest 6.5 percent potential upside from its report price of Rs 2,920.
While acknowledging Muthoot Finance as India's largest gold-loan non-banking financial company (NBFC) with a high-quality franchise (standalone AUM of Rs 1.7 lakh crore and consolidated AUM of Rs 1.9 lakh crore as of Q1 FY27), the brokerage sees limited scope for further valuation re-rating.
- Moderating Growth: After a 50 percent AUM increase in FY26 and 43 percent year-on-year growth in Q1 FY27, Antique anticipates this pace to normalize as the impact of sharp gold price rises fades.
- Yield Pressure: The yield on Muthoot Finance's AUM fell to 17.9 percent in the first quarter of FY27, partly due to the fading of unusually high interest recoveries and renewal income.
- Concentration in Gold Loans: Gold loans constitute around 91 percent of Muthoot Finance's consolidated AUM, indicating a continued concentration in the segment with limited genuine diversification expected in the near to medium term.
Antique estimates Muthoot Finance's gold-loan AUM growth to moderate to around 15 percent annually between FY27 and FY29, with future growth increasingly driven by the quantity of gold pledged rather than further price increases.
Sector Outlook and Competition
The brokerage's broader concern for the gold loan sector is that the exceptional growth witnessed during the recent gold-price rally may not be sustainable. Increased competition from banks and other lenders is also expected to exert pressure on lending yields across the industry.
Antique believes Manappuram Finance is better positioned for an earnings recovery due to its ongoing business and governance reset, while Muthoot Finance's strong franchise and branch productivity are already reflected in its current valuation.