Muthoot Finance shares rise 7% on investor interest after AUM tops Rs 1 lakh crore as gold loans surge

Muthoot said rural India accounts for about two-third of the gold stock with its branches.

Shares of India's largest gold financier Muthoot Finance are higher by nearly 8% on November 18 on the back of a strong quarterly profit growth, the MFI crossing the Rs 1 lakh crore AUM milestone, and a robust demand for gold loans in light of RBI's restrictions on unsecured lending.

Muthoot Finance's AUM grew by 31% on year to reach Rs 1.04 lakh crore on a consolidated basis. Its gold loan AUM too is at a record high of Rs 86,164 crore, with a strong collection that has ensured that the majority of gold loans are repaid within the first six months.

George Alexander Muthoot told CNBC-TV18 in a conversation that the MFI is seeing a pickup in gold loans after the central bank tightened regulations around unsecured loans. The lender said it is not aggressive on micro finance, which has plateaued in the last two quarters.

What helped the share price was a note by Bernstein which has maintained Outperform call on the stock with a price target of Rs 2,000. Morgan Stanley in its latest note on the lender said the environment has been getting better for the MFI, which has led to an upgrade to Equal weight from Underweight. However, it sees some sectoral concerns

Muthoot Finance's September quarter saw a growth of 26% on year in Net Profit at Rs 1,250 crore, on top of a 35% YoY revenue growth at Rs 4,120 crore.

The MFI has also approved an additional fund infusion of Rs 500 crore in wholly-owned subsidiary Muthoot Money. The additional equity infusion is aimed to "strengthen the capital base and improve the capital adequacy ratio," Muthoot Finance said.

Muthoot said rural India accounts for about two-third of the gold stock with its branches.

Shares of Muthoot have recouped a large part of the sharp selloff seen in November, and are higher by 31% on a YTD basis.