Home / Business and Economy / Gold Loans Surge: NBFCs Shine on Dalal Street
Gold Loans Surge: NBFCs Shine on Dalal Street
2 Jun
Summary
- Gold loans are crucial for business and emergency needs.
- Manappuram Finance trades at a 45% discount to Muthoot.
- Bain Capital acquired a 10% stake in Manappuram Finance.
Gold loans are increasingly meeting financial requirements for individuals and farmers, especially amidst employment challenges. This trend benefits gold loan-focused NBFCs, with both Manappuram Finance and Muthoot Finance showing strong stock performance. Manappuram Finance, despite aggressive AUM growth of 98% y-o-y in Q4FY26, trades at a notable 45% discount compared to Muthoot Finance. This valuation gap appears justified by the financial performance, as Manappuram's net profit declined 9.4% y-o-y due to rising impairments, contrasting with Muthoot's 104.8% net profit rise.
Over the FY23-FY26 period, Manappuram Finance's AUM grew faster at a CAGR of 37%, but its NII growth lagged behind Muthoot Finance. Manappuram's net profit saw a modest CAGR of 6.4%, while Muthoot's surged at 42.9%. Muthoot also demonstrates superior capital efficiency with a 30.6% RoE compared to Manappuram's 11%. However, the entry of Bain Capital, acquiring a 10% stake in Manappuram Finance, introduces a new dynamic, with expectations of operational enhancements.
Investors are watching to see if Manappuram can leverage this private equity backing to improve its performance and narrow the valuation gap with Muthoot Finance. The strong growth in the gold loan segment suggests continued opportunities for these NBFCs, making them stocks to watch in 2026.
