Gold loan NBFC Muthoot Finance is confident of improving its loan growth guidance this year, currently projected at 15 percent, which the lender said will be reviewed after the second quarter and will likely be raised.
Speaking to CNBC-TV18 on August 14 following the June quarter results, George Alexander Muthoot, Managing Director of Muthoot Finance said, "We had said 15 percent but we will better it. We don't want to change right now, but it will be better than 15 percent. Let us not limit to 20 percent, it could be even better, we will discuss in the next quarter," Muthoot said, when asked the view on loan growth guidance.
Read More: Muthoot Finance shares hit 10% upper circuit on Q1 beat: Should you buy, sell, or hold?
The NBFC cited three key factors behind the strong quarterly show, which are, a healthy demand for gold loans, strong momentum in gold prices, and recent lending guidelines by RBI that were seen as business friendly by the industry. George Alexander Muthoot said the final guidelines gave a boost to the gold loan business, conveying a message that the Finance Ministry and the RBI is keen to support the gold loan business, as it serves the community well.
The lender said the worst for the gold loan business may be behind and all players have started lending responsibly. Muthoot Finance added that it is facing no issues in accessing capital from banks. The demand has been healthy as gold loan borrowers have had limited access to unsecured loans, Muthoot added.
The NBFC said it will aim to maintain the spread at 9.5 percent, and will pass on the benefits of lower borrowing rates to customers as banks start cutting MCLR.
Jefferies has maintained a Buy call on Muthoot Finance, raising target to Rs 2,950 per share. The NBFC's June quarter profit growth was stronger than expected, and credit cost along with NPAs fell compared to March quarter. The note added that strong growth in gold prices and the headroom to further raise its LTV should support healthy loan growth for Muthoot Finance.
Morgan Stanley has upgraded the stock to Overweight with a target price of Rs 2,920 per share, backed by strong ROE and EPS growth, along with an negligible asset quality risk, even amid the risk of rising bad loans at the group level, the note added.
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