While the guidance remains conservative, the business environment, customer demand, and branch-level performance indicate potential for stronger momentum as the year progresses, said George Alexander Muthoot, Managing Director of Muthoot Finance, in an interview with CNBC-TV18.
In the January–March quarter of 2025 (Q4FY25), Muthoot Finance reported net interest income of ₹3,355 crore, and net interest margins of 7.3%.
Muthoot also addressed concerns over gold price volatility, cost of funds, and growing competition in the gold loan space, reaffirming the company’s ability to maintain spreads and operational efficiency even amid evolving macroeconomic dynamics.
These are the verbatim excerpts of the interview.
Q: You are talking about a minimum growth of about 15% for 2025-26 (FY26). You have also kept the option open that you will revise it higher. But considering that you achieved a 40% growth last year, a minimum of 15% appears to be a bit conservative. Tell us what’s gone into this guidance, and what could be the realistic number? You are already halfway through April-June quarter 2025 (Q1FY26) .
A: Over the last maybe 10 years, we have always been giving a guidance of 15% only. But we have consistently achieved 20%, 25%, 30%, and last year, 40%. So it’s just a number that we give at the beginning of the year. Probably we will revisit it after July-September quarter 2025 (Q2FY26). But the market is good, the business is good, and we see good growth coming in this year as well.
Q: Are you worried that a lot of your AUM growth is driven by the rise in gold prices? If gold prices retreat—and we have already seen gold prices cool off a bit—is there a risk to your AUM growth? How are you seeing this volatility and the risk of a cool-off in gold prices? What could your AUM guidance be?
A: There are always fluctuations in gold prices. They may go up or down, but over the years, they have generally gone up. Of course, in the last six to seven months, prices have risen sharply, and they may cool off a bit. But we give only 75% of the current value, and that too is based on a 30-day moving average.
Today, if you look at our gold loan advances, it’s only 62% of today’s price. If you compare the value of the gold we have with us and today’s gold price, it’s only 62%. So that is the margin or headroom we have. Some correction in gold prices will not affect us.
We have seen many such cycles—like in 2013–14—and occasionally, you see some months of price correction. People don’t abandon their gold, so gold price is not a major factor. The business is growing mainly because of the demand for funding. People are not getting the money they require through unsecured loans, so they are turning to gold loans. Banks are also offering them. The pie is increasing, and more people are using gold loans for quick and easy finance. Of course, higher gold prices help, because with the same gold, they can get more money.
Q: So as of today’s prices, you are maintaining about a 62% LTV, right?
A: I think that’s not the exact number, but maybe around that—around 62-63%.
Q: Give us a sense—January-March quarter 2025 (Q4FY25) obviously looked like an outlier with 40% AUM growth because of the way gold prices moved. But steady-state, what is the AUM growth you are expecting in the gold loan book this year?
A: That’s what I said—we will get good business. But don’t be concerned with the ultra-conservative guidance we are giving. We have 5,000 to 6,000 branches. The people are there, the money is there, the requirement is there, our branches and staff are in place. This will only go up.
Q: A word on cost of funds as well. How is that moving? Because your net interest margins (NIM) saw a bit of pressure quarter-on-quarter. Now, with the RBI entering a rate cut regime, what are you expecting on cost of funds and NIMs over the next couple of quarters?
A: We have been maintaining our spread and NIM. NIM should be about 11%, and the spread should be around 9–9.5%. In the last four to five quarters, our spread has always been around 9.5%, and we have maintained it.
If the cost of funding goes up, we try to absorb it for one quarter or so. If it continues to go up, we increase our yield but maintain our spread. Today, the cost of funds is coming down slightly, so it will take a few months to stabilise. If it truly comes down, we will reduce our yield but maintain our spread. If there’s an advantage in borrowing cost, we pass it on to our customers.
Our spread and NIM have been almost constant in the last several quarters. Yes, the cost of operations is increasing due to new guidelines and compliance requirements. But the advantage is that our per-branch business is also going up. Last year, per branch was about ₹15 crores. Today, it is about ₹21 crores. That helps absorb some of the extra compliance costs.
Q: Can it go higher than ₹21 crores? If yes, what’s the outlook?
A: Definitely, it should go up. That’s why we are here.
Q: To what level, sir? Do you have a target? You’ve been ultra-conservative, stock is down 5%, you’re on the best business news channel, everyone is listening. Do you want to up the guidance?
A: Last year, per branch was ₹14–15 crore. This year it is ₹21 crores. I am sure we have branches with ₹50 crores, ₹60 crores, even ₹70 crores. So optimistically, all branches can reach ₹50–₹60 crores.
Q: You mentioned yields. There could be pressure because of competition. PSUs are eyeing gold loan market share. Manappuram Finance, too, could become more aggressive with Bain Capital coming in. Quick comment on competitive intensity—could yields come down from the current levels, which are around 18%?
A: I just mentioned that if the cost of funds goes up, we increase our yield. These are all small loans—₹20,000, ₹30,000, ₹50,000, ₹1 lakh. A 0.5% increase in yield will not change customer sentiment because these are short-term loans—two to four months. So in absolute terms, the interest payment is not much.
We have been maintaining our spread and net interest margin. A spread of about 9.5% has been consistent, and we should be able to maintain that.
Competitive intensity is there because it’s a good sector—everyone wants to enter. But the pie is growing. It’s not that we are growing at someone else’s cost. Banks are also reporting 20–40% growth in gold loans. If everyone is growing, the market is expanding.
Muthoot Finance’s current market capitalisation is ₹84,307 crore. The stock is currently trading at ₹2,099.50 as of 12:33 pm on the NSE and has gained 25% over the last year.
